Deals and People March 16, 2021

Experts Say Apollo’s Athene Acquisition Will Position It for More Deals

Athene has been a leader in both pension risk transfers and annuities.

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Apollo Global Management is merging with Athene Holding in an $11 billion stock deal that expands Apollo’s current 27% stake in Athene.

Under the terms of the deal, each outstanding Class A common share of Athene will be exchanged for a fixed ratio of 1.149 shares of Apollo common stock. Apollo says the deal will greatly broaden its distribution channels.

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In a statement, Apollo co-founder and incoming CEO Marc Rowan said, “This merger is all about alignment between Apollo and Athene, amongst Apollo’s stockholders and with our limited partners. For Apollo and Athene, we will have total alignment to optimize our strategy and allocate capital efficiently, which will include rapidly scaling our capability to originate attractive risk/reward assets, which are the limiter of growth for both firms—and it further aligns interests with our fund investors, giving us a bigger balance sheet to invest alongside clients in our various fund products.”

Apollo said it expects the deal will more than double its earnings in 2021.

Indeed, Mark Paracer, assistant research director at LIMRA’s Secure Retirement Institute (SRI), tells PLANSPONSOR the deal should add to the work Athene has done in the pension risk transfer (PRT) market.

“Athene is one the leading companies in pension risk transfer sales over the past few years, primarily focused on the large/jumbo end of the market,” Paracer says. “Sales for PRT have nearly doubled in past five years, from $13.6 billion in 2015 to over $25 billion in 2020. The Apollo deal should provide additional capital, allowing it to continue to pursue PRT transactions.”

The deal will also add to the work Athene has done in annuity market, says Todd Giesing, senior director, annuity research at the Secure Retirement Institute.

“In looking at Athene’s annuity business, Athene has been in growth mode while the industry experienced headwinds in 2020,” Giesing says. “Athene experienced an increase of its overall annuity business by 16%, while the industry was down 9% in 2020. This moved Athene to become a top 10 annuity carrier in 2020. It’s our opinion the deal with Apollo will provide efficiencies and a source of capital to continue to grow their individual annuity business in the U.S.”

The transaction is expected to close in January 2022.

Ask the Experts March 16, 2021

Can Systematic Withdrawals Be Taken From 457(b) Plans?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

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“I work with a public higher education institution that sponsors both a 403(b) and a 457(b) plan. A retiring employee, who is a participant in both plans, wants to take systematic withdrawals (monthly payments) from both. I didn’t think she can do so for a 457(b) plan, since it is a plan of deferred compensation. However, the plan’s recordkeeper is saying that systematic withdrawals are permitted from under both plans. Is the recordkeeper correct?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

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The Experts can certainly understand your hesitancy, since the general concept of deferred compensation is that it is taxable when such compensation is no longer deferred. However, a governmental 457(b) plan is a special type of deferred compensation plan, where the distribution rules are much more akin to a 403(b) plan than to, say, a traditional deferred compensation plan. In fact, a governmental 457(b) plan may elect to permit systematic withdrawals and rollovers out of the plan. Now, if this were a 457(b) plan of a PRIVATE tax-exempt (such as a private university), the distribution rules would be much more restrictive, and systematic withdrawals (or any other non-lump-sum distribution option) for those plans would need to be carefully structured to maintain the unfunded status of such deferred compensation plan and avoid immediate taxation under constructive receipt rules.  Of course, in both cases it is important to look at the plan document—what may be permissible could be more narrowly proscribed in the actual plan terms.

One word of caution, though; early retirees (those retiring prior to age 55) often use the systematic withdrawal option to avoid the 10% premature distribution penalty that might normally apply to distributions taken following a pre-55 retirement. However, there is no 10% premature distribution penalty applicable to 457(b) plans (governmental or private nonprofit), so it is not necessary to take a systematic withdrawal in order to avoid such a penalty.

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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