The recordkeeping business continues to consolidate, with the Sept. 8 announcement of a definitive agreement for Empower to acquire the MassMutual retirement plan business.
According to a press release, the acquisition will “capitalize on both firms’ expertise, provide technological excellence and deep product capabilities, and create scale to the benefit of retirement plan participants and their employers.”
Based on the terms of the agreement and subject to regulatory approvals, Empower will acquire the retirement plan business of MassMutual in a reinsurance transaction for a ceding commission of $2.35 billion. In addition, the balance sheet of the transferred business would be supported by $1 billion of required capital when combined with Empower’s existing U.S. business.
The MassMutual retirement plan business comprises 26,000 workplace savings plans through which approximately 2.5 million participants have saved $167 billion in assets. It also includes approximately 2,000 employees affiliated with MassMutual’s retirement plan business who provide a full range of support services for financial professionals, plan sponsors and participants.
The transaction, which is expected to close in the fourth quarter of 2020 (pending customary regulatory approvals), will increase Empower’s participant base to more than 12.2 million and retirement services recordkeeping assets to approximately $834 billion administered in approximately 67,000 workplace savings plans. As of June 30, Empower administered $667 billion in assets on behalf of 9.7 million American workers and retirees through approximately 41,000 workplace savings plans. For its part, the MassMutual retirement plan business at June 30 included servicing more than 2.5 million participants, with assets under management more than quadrupling over the past decade, from $34 billion to more than $160 billion.
The combined firm will serve retirement plans sponsored by a broad spectrum of employers, ranging from mega, large, midsize and small corporate 401(k) plans to government plans ranging in scale from state-level plans to municipal agencies, not-for-profits such as hospital and religious organization 403(b) plans, and collectively bargained Taft-Hartley plans. The transaction will also bring MassMutual’s defined benefit business under the umbrella of plans Empower serves.
Empower and MassMutual intend to enter into a strategic partnership through which digital insurance products offered by Haven Life Insurance Agency and MassMutual’s voluntary insurance and lifetime income products will be made available to customers of Empower Retirement and Personal Capital.
Through this transaction, business written by MassMutual will be reinsured by Great-West Life & Annuity Insurance Company. Concurrently, MassMutual will retrocede business it reinsures from a cedent, which MassMutual assumed in a previous transaction. Any New York business will be reinsured by Great-West Life & Annuity Insurance Company of New York.
Eversheds Sutherland served as legal counsel, and Goldman Sachs and Rockefeller Capital Management served as financial advisors to Empower. Skadden, Arps, Slate, Meagher & Flom LLP served as legal counsel, and Lazard served as exclusive financial advisor to MassMutual.
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