While pension plans as a whole are heading toward extinction, many employers haven’t been able to terminate their plans for a variety of reasons – including collective bargaining mandates and underfunding status which precludes termination. Employers in this situation are left confronting the pressure to move the risk from the corporation’s balance sheet to the individuals covered by the plan. This risk mitigation concept is generally referred to in the industry as pension “de-risking”. One common de-risking strategy has been to offer a limited time period during which individuals in pay status can elect to forego future annuity payments and receive an accelerated lump sum payment that is the actuarial equivalent of their remaining annuity payments (sometimes referred to as a “lump sum risk transferring program”).
De-risking has been met with resistance from Congress and the agencies tasked with overseeing pension matters – PBGC, IRS, Treasury and DOL; these governmentalRead More