Private pensions, lump sum offers, and sponsor de-risking : implications and analysis / James G. Hughes, editor.

Format:

Book

Contributor:

Hughes, James G., editor.

Series:

Retirement issues, plans and lifestyles.

Retirement Issues, Plans and Lifestyles

Language:

English

Subjects (All):

Lump sum distributions (Pensions)--United States.

Lump sum distributions (Pensions).

Pension trusts--United States--Finance.

Pension trusts.

Pensions--United States.

Pensions.

Physical Description:

1 online resource (131 p.)

Place of Publication:

New York : Nova Publishers, 2015.

Summary:

Little public data are available to assess the extent to which sponsors of defined benefit plans are offering participants immediate lump sums to replace their lifetime annuities, but certain laws and regulations provide incentives for use of this practice. Although the U.S. Department of Labor (DOL) has primary responsibility for overseeing pension sponsors' reporting requirements, it does not require sponsors to report such lump sum offers, making oversight difficult. Pension experts generally agree that there has been a recent increase in these types of offers. Since 2012, a number of large pension plan sponsors have given selected participants a limited-time option of receiving their retirement benefits in the form of a lump sum. Although sponsors' decisions to make certain lump sum "window" offers may be permissible by law, questions have been raised about participants' understanding of the financial tradeoffs associated with their choice. This book focuses on the prevalence of lump sum offers and sponsors' incentives to use them; the implications for participants; and the extent to which selected lump sum materials provided to participants include key information.

Contents:

PRIVATE PENSIONS, LUMP SUM OFFERS, AND SPONSOR DE-RISKING IMPLICATIONS AND ANALYSIS ; PRIVATE PENSIONS, LUMP SUM OFFERS, AND SPONSOR DE-RISKING IMPLICATIONS AND ANALYSIS ; Library of Congress Cataloging-in-Publication Data; CONTENTS ; PREFACE; Chapter 1 PRIVATE PENSIONS: PARTICIPANTS NEED BETTER INFORMATION WHEN OFFERED LUMP SUMS THAT REPLACE THEIR LIFETIME BENEFITS*; WHY GAO DID THIS STUDY ; WHAT GAO RECOMMENDS; WHAT GAO FOUND ; ABBREVIATIONS; BACKGROUND ; Pension De-risking and Risk Transfers ; ERISA and Federal Oversight

LITTLE IS KNOWN ABOUT THE EXTENT OF LUMP SUM WINDOWS, THOUGH COST-SAVING INCENTIVES MAY BE ENCOURAGING SPONSOR USE Full Extent of Lump Sum Offers Is Unknown ; Cost Savings Provide Incentive for Sponsors to Offer Lump Sum Windows ; Recent and Impending Rule Changes That Provide Incentives for Lump Sum Windows ; Switch to More Favorable Interest Rates ; Current Mortality Tables ; Rising PBGC Premiums ; Longstanding Rules That Provide Incentives for Lump Sum Windows; Ability to Choose a "Lookback" Rate ; Ability to Exclude Certain Additional Plan Benefits ; Other Considerations

Disincentives to Offering a Lump Sum Window LUMP SUM PAYMENTS CAN LOSE VALUE FOR PARTICIPANTS IN VARIOUS WAYS ; Annuitizing a Lump Sum Payment May Not Fully Replace the Value of the Plan's Annuity ; Differences between Retail and Plan Annuities ; Differences in Actuarial Factors ; Differences Based on Gender; Differences in Pricing ; Certain Participants Contacted about Purchasing Annuities ; Rolling Over a Lump Sum into an IRA Brings Added Control, but also Management Risks and Challenges ; Risks and Challenges of Asset Management ; Outliving Assets

Managing Assets Prior to and through Retirement Finding Trusted Professional Advice ; Reasons Participants May Choose Rollover IRAs ; Using Lump Sums for Immediate Expenditures May Have Benefits but also Consequences for Retirement ; LUMP SUM WINDOW MATERIALS WE REVIEWED OFTEN LACKED KEY INFORMATION PARTICIPANTS NEED TO MAKE AN INFORMED DECISION ; Participants Need Information in Eight Key Areas to Make an Informed Decision ; Materials Provided by Sponsors Lacked Key Information That Could Have Helped Participants ; Key Factor #1: Benefit Options ; Key Factor #2: Lump Sum Calculation

Key Factor #3: Relative Value of a Lump Sum versus an AnnuityKey Factor #4: Positive and Negative Ramifications of Accepting a Lump Sum ; Key Factor #5: Tax Implications ; Key Factor #6: PBGC Protection ; Key Factors #7 and #8: Instructions and Assistance ; Fear of Plan Default and of Outliving Assets Were Cited As Main Reasons for Accepting or Rejecting a Lump Sum Offer ; CONCLUSION ; RECOMMENDATIONS FOR EXECUTIVE ACTION ; AGENCY COMMENTS ; APPENDIX I: OBJECTIVES, SCOPE, AND METHODOLOGY ; Literature Review and Legal Analysis ; Data Collection for Pension Risk Transfer Actions

Data Collection for Participant Disclosure Materials and Participant Experiences

Notes:

Includes index.

Description based on print version record.

ISBN:

1-63483-264-7