Cole: During the first half of 2025, the marketplace only posted sales of $11.5 billion on 252 transactions - a 56% decrease from first half 2024 sales and a 24% decrease in the number of total transactions. The industry has been facing a perfect storm - market volatility, escalating trade wars, the threat of a recession and elevated litigation concerns. These challenges persisted into the third quarter, causing many plan sponsors to wait to make any de-risking moves, leading to a drop in industry activity.

However, the funded status of the largest corporate defined benefit (DB) plans continued to increase this quarter, marking the seventh consecutive month of positive performance in October. Corporate DB plans increased to 107.1% in October from 106.5% in September, according to the Milliman 100 Pension Funding Index - making PRT transactions like buy-ins particularly attractive.

Cole: First, let's talk about the difference between buy-ins and buy-outs. In a buy-in, plan sponsors purchase an annuity contract from an insurer that is held by the pension plan as an asset while liabilities remain on the plan sponsor's balance sheet. Buy-ins offer plan sponsors with well-matched assets and liabilities the ability to lock in current pricing, taking advantage of the industry's record-setting pension funded statuses. In a buy-out, plan sponsors transfer all or a portion of a pension plan, including assets and liabilities, to an insurer who issues an annuity contract directly to participants and pays benefits, removing liabilities from a company's balance sheet.

While we won't see buy-ins completely overshadow the buy-out market, I do anticipate 2025 to be the largest buy-in market we've seen to date. As they become more popular, plan sponsors who are not ready for a full buy-out may view them as a good opportunity to leverage their fully funded pension status. With today's economic uncertainty not expected to relent any time soon, plan sponsors will be looking to lock in rates as soon as they can, making buy-ins an attractive option in today's economy.

Cole: Much of the uncertainty that emerged in the first three quarters of the year will still be present at the end of 2025 and into 2026. Lingering market volatility, the risk of a recession and ongoing interest rate cuts do have the potential to decrease pension funding, leaving plan sponsors with fewer de-risking options. As expected, the Fed cut interest rates by a quarter point on Wednesday, lowering borrowing costs for the third time this year.

Additionally, several different lawsuits regarding PRT providers are still working their way through the legal system. While these suits target specific features of some carriers or unique transactions, we believe in the continued strength and security of the PRT market under the guidance of the Department of Labor.

Cole: Now is the perfect time to help plan sponsors prepare for de-risking in 2026. It's too late in the year to try for a PRT in 2025, but preparing for 2026 now means you'll be ready to go as soon as the new year hits.

First, focus on data management. Insurers responding to requests for proposals for a group annuity need accurate plan participant data to price their product. Help plan sponsors verify benefit amounts, primary and contingent annuitants and key information. If possible, help them digitize their information for more seamless future transactions. The better the data, the better the experience when it comes to de-risking.

Next, start reviewing the people who will be involved in a PRT. Plan sponsors need to have a strong team of actuaries, legal counsel, record keepers and plan administrators to process the transaction and reduce risk for the company. PRTs also require issuing an RFP to insurers to find the best group annuity contract. Help your clients review insurers and choose the right group annuity for their participants by reminding them of the six factors laid out by the DOLwhen reviewing RFP responses.

Lastly, talk your clients through the different types of PRT strategies. As I mentioned before, buy-outs and buy-ins are more common, but plan sponsors may also be interested in lump-sum windows or plan terminations. Several factors can impact their decisions, so talk to them about their level of funding and the DB plan's benefit formula to help them make the most informed choice.

There are additional considerations for plan sponsors who aren't able to provide future associates with robust pension benefits, but still want to ensure they have access to lifetime income. In addition to researching PRT strategies, they can consider working with a recordkeeper to ensure they modernize their employer-sponsor retirement plan with the latest features, which could include offering Protected Retirement Solutions.These are funds that can be offered in a retirement plan's investment lineup that can help offer pension-like¹ income in retirement. This way plan sponsors can rest assured that their participants have access to the tools they need to plan for retirement income in more ways than one.

^{1 This term refers to the similarity between Nationwide's Protected Retirement income solutions and a traditional pension plan in the sense that both can provide a stream of income for participants' lives. However, it's important to note that these solutions are not pensions. The term "pension-like" is used solely to illustrate the income feature of the solutions and does not imply any other characteristics typically associated with pensions.}