In a move that represents a major shift in policy, the IRS will no longer allow employers to buy out defined pension plans of beneficiaries that are already taking distributions. The new regulation is in response to moves by many corporations, such as Ford and General Motors, to reduce future liabilities by making lump sum payments to current and future retirees. Under the new rule, employees that are part of a defined retirement plan, but not yet receiving distributions, may be bought out with all lump sum buyout offers to current recipients of retirement funds now banned. However, any outstanding offers made current payees before the announcement of this new regulation may still be processed. Pension buyout plans have been heavily criticized by employee groups as they often leave those receiving the lump sum with far less than they would have received over the life of the pension.
See Ashlea Ebeling, Treasury Curtails Lump Sum Pension Payouts, Forbes, July 14, 2015.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
