lump sum offerings

The IRS issued a notice today stating that it intends to amend regulations to prohibit a pension plan from offering a lump sum distribution to participants who are receiving annuity payments. The new guidance would take effect today, except for certain lump sum offers already in progress. While de-risking through lump sum offers becomes more limited, one state’s legislature made de-risking through annuity purchase a little more attractive: Connecticut passed legislation shielding annuity benefits from creditors of retirees when paid under a group annuity contract that replaced an ERISA-covered pension.
Continue Reading Pension De-Risking Gets New Rules: IRS Shuts Down Lump Sum Offers to Retirees While Connecticut Increases Safety of Group Annuity Contracts

The ERISA Advisory Council held a hearing last week on “Model Notices and Disclosures for Pension Risk Transfers.”  The Council, which advises the Secretary of Labor on the Labor Department’s administration of ERISA, is working to develop model disclosures to participants who receive lump sum offers in connection with de-risking transactions.  While the Council is focused on lump sums offered in connection with limited election windows, the model disclosures might apply any time an individual is offered a lump sum distribution in lieu of an annuity benefit.

The Council heard testimony from several witnesses, many of whom proposed text or offered suggestions to be included in model disclosures—including testimony by our own Robert Newman of Covington & Burling LLP.  While the Council deliberates, employers conducting lump sum windows might wish to consider some of the disclosures suggested at the hearing.
Continue Reading ERISA Advisory Council Considers Model Lump Sum Window Disclosures