IRS No Longer Prohibits Lump Sum Payouts To Retirees In Pay Status

Laner Muchin, Ltd.
Contact

Laner Muchin, Ltd.

The IRS previously issued several Private Letter Rulings permitting defined benefit plans to offer lump sum windows during which retirees receiving annuity payments could elect to receive the actuarial equivalent of their future stream of payments in a lump sum.

This practice, known as “de-risking, can reduce the liabilities of pension plans by reducing the number of installment payments of the plan. In 2015, the IRS issued guidance explaining its intention to adopt regulations prohibiting the practice of offering lump sum windows to retirees in pay status. However, in recently issued Notice 2019-18, the IRS changed its position, providing that it no longer intends to issue regulations prohibiting this practice.

As a result, defined benefit plan sponsors may once again utilize this de-risking option if doing so is found to be prudent. Contact your employee benefits attorney if you are interested in learning more about what needs to be done to offer lump sums to current retirees.   

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Laner Muchin, Ltd. | Attorney Advertising

Written by:

Laner Muchin, Ltd.
Contact
more
less

Laner Muchin, Ltd. on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide