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July 13, 2015 at 09:56 AM
The Treasury Department and Internal Revenue Service amended Treasury regulations last week to stop companies from offering lump-sum buyouts to retirees who already receive a monthly pension.
The agencies’ new guidance will apply to plans going forward and not to employers that have amended their plans to make lump-sum buyout offers to retirees prior to July 9, 2015.
Norman Stein, senior policy advisor to the Pension Rights Center and a law professor at Drexel University, said that the Center is “gratified that Treasury has moved to stop these lump-sum buyouts, which are truly among the most cynical and dangerous pension abuses we’ve seen.”
The Pension Rights Center has criticized these so-called “de-risking” transactions, which it says “erase the federal private pension protections of [the Employee Retirement Income Security Act], turn guaranteed lifetime retirement income into a onetime chunk of money that can easily be outlived, and often result in a significant loss of retirement wealth for elderly Americans.”
Earlier this year Stein authored a policy paper on lump-sum buyouts and annuity transfers — another form of so-called “de-risking” activities. The paper asks whether pension plan de-risking is bad, whether it’s legal, and whether it can be stopped, slowed or moderated.
