When a defined benefit pension plan is terminated, partially terminated, or involved in a pension risk transfer “lift-out,” eligible participants may be offered the opportunity to take the actuarial value of their pension benefit as an immediate lump-sum payment.

For participants, this can be a difficult decision to evaluate based on the plan’s election materials alone. A lump sum may appear attractive because it offers immediate access, flexibility, and control. But accepting the lump sum also generally means giving up some or all future monthly pension payments, including the value of guaranteed lifetime income.

For smaller benefits, the decision may be relatively straightforward. But when the lump sum represents a meaningful portion of a participant’s retirement resources, the choice deserves careful consideration. 

It’s difficult to determine the best option from the notification letter provided by the plan alone, which normally comes down to a few options to decide from. 
 
These options boil down to the following:

1. Keep the pension "as-is"
2. Take a lump-sum equivalent benefit

 
Sometimes, additional options are offered which amount to relatively minor adjustments to the pension benefit.

Plan sponsors can play an important role by giving participants access to clear, objective education and decision-support tools.

​The rGPS-AI Lump Sum Analyzer helps participants better understand the tradeoffs between preserving a pension income stream and electing a lump sum, all within the context of their broader retirement picture.

The rGPS-AI Lump Sum Analyzer is designed to help participants better understand these choices and evaluate how each option may fit their broader retirement picture.

To learn more about the Lump Sum Analyzer click here.