Paying lump sums to current retirees may reduce volatility risk in pension plans

HRS Insight
Recent press reports have described the efforts of two large companies with significant pension obligations to "de-risk" defined benefit pension plans by offering retirees in pay status a one-time opportunity to receive a lump sum payment in lieu of continuing annuity payments. The companies are seeking to reduce the volatility of future pension obligations for both funding and financial statement purposes. The IRS recently issued private letter rulings to each company confirming that offering a one-time opportunity for a lump sum payment to individuals who are currently receiving annuity payments does not violate the requirements for required minimum payments under the Internal Revenue Code ("Code").

Return to Tax research and insights
HRS Insight archive