New Notice and Disclosure Requirements with Respect to Lump Sums

In particular, notices of an ability to obtain a lump sum, instead of future monthly payments, must be provided to affected participants and beneficiaries, the Department of Labor (DOL), and the Pension Benefit Guaranty Corporation (PBGC). A description that is written in a manner reasonably calcula...

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Bibliographic Details
Published inJournal of pension benefits Vol. 30; no. 3; pp. 43 - 46
Main Authors Mayo, Kelsey, Pratt, David
Format Journal Article
LanguageEnglish
Published New York Aspen Publishers, Inc 01.04.2023
Subjects
Beneficiaries
Defined benefit plans
Defined contribution plans
Disclosure
Early retirement
ERISA
Lump sum
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Summary:In particular, notices of an ability to obtain a lump sum, instead of future monthly payments, must be provided to affected participants and beneficiaries, the Department of Labor (DOL), and the Pension Benefit Guaranty Corporation (PBGC). A description that is written in a manner reasonably calculated to be understood by the average participant and that includes the following information is a reasonable attempt to comply with the requirements of Section 1102(b)(2)(B) of PPA: (a) In the case of a defined benefit plan, a description of how much larger benefits will be if the commencement of distributions is deferred; (b) In the case of a defined contribution plan, a description indicating the investment options available under the plan (including fees) that will be available if distributions are deferred; and (c) The portion of the summary plan description that contains any special rules that might materially affect a participant's decision to defer. All available benefit options, including (i) the estimated monthly benefit that the individual would receive at normal retirement age; (ii) whether there is a subsidized early retirement option or qualified joint and survivor annuity (OJSA) that is fully subsidized in accordance with Code Section 417(a)(5); (iii) the monthly benefit amount if payments began immediately; and (iv) the lump sum amount available. In a manner consistent with how a written explanation is required to be given under Code Section 417(a)(3), the relative value of the lump sum option for a terminated vested participant,compared to the value of (i) the single life annuity or other standard form of benefit; and (ii) the QJSA, as defined in ERISA Section 205(d)(1).
ISSN:1069-4064