In a Trump-era twist, the Treasury Department has backtracked on lump sum pension rules meant to protect retirees
, a retraction of intent to propose regulations on the topic: “Offering a Lump-Sum Payment Option to Retirees Currently Receiving Annuity Payments under a Defined Benefit Plan.”
The 2015 Notice made clear that the government’s position was that offering lump sums to retirees in pay status was not intended to be permitted. “We were trying to protect older people from company efforts to get them to sell back their no-cost defined benefit pensions for the company’s financial reasons,” Iwry says.
While the lump sum may seem like a windfall, it often short changes the retiree. That’s a problem because of complicated formulas including interest rates and mortality tables. Norman Stein, a professor at Drexel University, calculates that people lose 15% to 20% on average when taking the lump sum.
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