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Both annuity purchase interest rates declined by an average of 16 basis points entering the month of March. As a result, plan sponsors experienced some pressure on pension funding levels, as lower interest rates increased liabilities. Since the start of the month, the 10-year and 30-year Treasury rates, which closely correlate with annuity purchase rates, have shown some upward movement, suggesting this decline could be temporary. With many pension plans still in a healthy funded position and interest rates remaining above historical averages, plan sponsors have an opportunity to stay proactive. As we move into the second quarter of 2026, insurer participation and pricing remain competitive, presenting plan sponsors with an ideal window to explore de-risking strategies and manage pension risk effectively.
For plan sponsors exploring de-risking opportunities, a critical first step is ensuring plan data is accurate, complete, and current. High-quality data allows insurers to more accurately and aggressively price transactions. Plan sponsors that prepare clean, well-organized data in advance are better positioned for more efficient and streamlined transaction experience.
Terminating a pension plan requires coordinating complex steps such as actuarial calculations, regulatory filings, participant communications, lump-sum elections, and annuity purchases, all of which depend on accurate data and aligned timing. October Three provides a comprehensive turnkey solution integrating actuarial services, administration, and annuity consulting in one place, thereby streamlining the plan termination and reducing demands on plan sponsors. By bundling all aspects of the termination, October Three terminates plans in roughly 4–6 months rather than the typical 12–18 months, often saving plan sponsors a year’s worth of additional administrative expenses, reducing costs compared to engaging multiple service providers for each aspect of the termination, and making the transition as seamless as possible for the participants.
Insurers in the Pension Risk Transfer (PRT) marketplace rely on corporate bonds as a benchmark when pricing transactions, mirroring the valuation of pension liabilities. As a result, movements in interest rates directly influence the PRT annuity pricing: when annuity purchase interest rates decline, PRT annuity prices rise, and when rates increase, prices fall. Over the past four months, annuity purchase interest rates have been trending upward. However, this month we observed a shift, with rates beginning to ease slightly. The annuity purchase duration 7 rate declined to 4.56%, while the duration 15 rate moved to 4.76%. Daily fluctuations and volatility of the annuity purchase interest rates make these short-term dips normal, and rates can recover as quickly as they decline. Given this uncertainty, plan sponsors should consider acting sooner rather than later. Many pension plans benefited from the strong equity market performance in 2025, which improved funding status overall for several plans. Plan sponsors who experienced some funding improvements are well-positioned to leverage the current marketplace environment and capitalize by mitigating balance sheet risk and initiating de-risking strategies for their plans.
As noted in the Pension Finance Update, pension finances slipped last month as lower interest rates pushed liabilities higher. The 10-year and 30-year Treasury rates opened the month slightly below last month’s levels but have started to climb as the month progressed. At the start of March, the 10-year Treasury rate was approximately 4.05% and has since increased to around 4.21%. Similarly, the 30-year Treasury rate started at about 4.70% and has since risen to roughly 4.86%. With Treasury rates showing signs of trending upwards, plan sponsors should connect with annuity search firms and ensure their data is in good order, so they are well-positioned to act when market conditions become most favorable.
The graph below shows the spread between the annuity purchase price and the GAAP projected benefit obligation (PBO), also referred to as the accounting book value. This month, the spreads of Annuity Plan 1 and Annuity Plan 2 have spread slightly. For Annuity Plan 1, the spread is sitting at around -0.31% while Annuity Plan 2’s spread is approximately 5.34%. As annuity purchase rates increase, purchase prices drop relative to the PBO. Please note that the PBO figures shown do not include future overhead costs—such as administrative expenses and PBGC premiums—that plan sponsors would incur by retaining participants in the plan.
Terminating a pension plan involves several complex and interrelated steps, including actuarial calculations, required IRS and PBGC regulatory filings, participant communications, the implementation of a lump-sum election window, and the purchase of annuities to settle remaining plan liabilities. Each stage depends on consistent and accurate data and coordinated timing. Because of these many intricacies, plan sponsors looking to terminate their plan should consider a turnkey structure in which these services are integrated and delivered by one provider. October Three offers a turnkey plan termination service that integrates all major aspects of the termination process, including actuarial support, lump-sum window administration, and the annuity purchase transaction. By bringing actuarial services, administration, which includes call center support and mailing fulfillment, and annuity consulting together under one roof, October Three serves as a true one-stop shop for plan sponsors. This bundled approach typically reduces costs compared to engaging multiple providers for different parts of the process, while also creating greater efficiency because all teams work closely together within the same organization. As a result, we can better coordinate key elements such as maximizing lump-sum window elections and ensuring participant data is complete and accurate, which is critical for achieving favorable annuity pricing. In addition, having one firm manage all aspects of the process gives participants the best possible experience and ensures that the transaction is as seamless and painless as possible. Lastly, October Three streamlines what many firms estimate will take 12–18 months and completes the termination process in just 4–6 months, helping plan sponsors avoid the added administrative expenses associated with maintaining the plan for an additional year, including extra PBGC premiums, recordkeeping, filings, and related compliance costs. Having one firm like October Three oversee the full termination process greatly reduces the demands on plan sponsors. Centralized coordination helps maintain consistent data throughout the project, allows communication between the vendor and plan sponsor to remain clear and streamlined, reduces the plan sponsor’s need to reconcile assumptions, timelines, and data across multiple service providers. The turnkey plan termination can also allow for plan sponsors to terminate their plan within the same plan year, reduce costs compared to engaging multiple service providers, and give participants a seamless experience. As a result of these advantages, many plan sponsors evaluating pension risk transfer strategies should look toward October Three as the benchmark provider offering a comprehensive turnkey approach to completing a plan termination efficiently and seamlessly.
For additional information or inquiries about the pension risk transfer marketplace, contact Mark Unhoch: munhoch@octoberthree.com.
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*October Three advises plan sponsors through every step of the Pension Risk Transfer (PRT) process. Through long-established relationships with insurers in the PRT marketplace, October Three collects annuity purchase rates for Duration 7 years and Duration 15 years every month. We have constructed 2 hypothetical annuity plans, which have been valued using the latest mortality tables and mortality improvement scales. Annuity Plan 1 contains retirees only and has a liability duration of 7 years. Annuity Plan 2 contains 70% retirees and 30% deferreds and has a liability duration of 15 years. Monthly annuity rates are determined by taking the average Duration 7 and Duration 15 interest rates provided by the insurers. Annuity Plan 1 was valued using the average of the Duration 7-year interest rates collected from insurers and Annuity Plan 2 was valued using the average of the Duration 15-year interest rates collected from insurers. Using the collected annuity purchase rates and 2 hypothetical annuity plans, we have produced the following graphs representative of actual PRT market activity and the corresponding impact on pension plans.