Mark Miller: Remaking Retirement

When Do Lump Sum Pension Buyouts Make Sense?

Mark Miller

Corporate pension-plan sponsors have been pursuing so-called "de-risking” for some time now--strategies that typically involve transferring defined-benefit pension obligations to insurance companies that replace them with annuities or offering lump-sum payouts to beneficiaries.

One of the most controversial strategies has been in the news lately--the practice of offering lump-sum buyouts to retirees. The Internal Revenue Service and U.S. Department of the Treasury announced last month that they are dropping plans to ban this type of pension buyout. That marks a reversal of policy under the Obama Administration, which said in 2015 that it planned to amend regulations to ban the practice.