IRS Changes Course on Lump Sums to Retirees

In Notice 2019-18, the Internal Revenue Service (the “IRS”) changed its position and now will permit employers to offer lump sum payments to retirees who are currently receiving annuity payments from a defined benefit plan.  This is a reversal from its position in Notice 2015-49, in which the Treasury Department and the IRS stated that they intended to propose amendments to the required minimum distribution regulations to address the payment of lump sums to replace ongoing annuity payments under a defined benefit plan.  Prior to the issuance of Notice 2015-49, a number of defined benefit plans started offering retirees who were receiving annuities an opportunity to elect to convert their annuities into lump sum benefits during a limited period of time in what became known as “de-risking” transactions.  Read More ›

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Now You Can Have Your Cake and Eat It Too: New Pension Distribution Rules Allow More Flexibility

If you are one of the lucky few employees who participate in an employer’s defined benefit retirement plan, you previously had to choose between receiving your benefits in a lump sum or in annuity payments. However, in the final rule adopted by the Treasury Department, defined benefit plans are allowed to offer participants the choice of taking a portion of their benefit in a lump sum and the remainder in annuity payments.

These new rules are designed to increase a participant’s flexibility in designing his or her retirement income. As Treasury explained, on the one hand, for plans that permitted a distribution of either lump sum or annuity payments, many participants were reluctant to take the annuity payments and instead chose a lump sum to maximize their flexibility.  Read More ›

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