Understanding the Difference
Plain-English Notices Required Before Certain Payouts
A Treasury Department regulation requires plans to tell employees about dollar differences in payout options. Some pension plans that offer special early retirement benefits pay smaller amounts to employees who take their payments as lump sums rather than as annuities.
In some cases taking a "subsidized early retirement benefit" as a lump sum payment rather than in the form of lifetime monthly payments can result in the forfeiture of more than half the monetary value of the lifetime monthly pension. For this reason, plans are now required to disclose any differences in value between the two forms of payment. The ruling also applies if there are differences in the dollar values of different survivor benefit payout options.
The new regulation provides specific requirements for the information a plan must disclose to employees enabling employees to make informed decisions. This regulation applies to all annuities with payments starting on or after October 1, 2004.
Looking for help with your retirement plan?
If you have a problem with your retirement plan, free help may be available from the U.S. Administration on Aging's network of Pension Counseling and Information Projects. Find help now.
PensionHelp America connects people who need help with their pension, 401(k), and other retirement plans with the pension counseling projects, legal services providers, and government agencies that can help answer their questions. Visit www.pensionhelp.org.
Retirement USA is a national initiative that is working for a new retirement system that, along with Social Security, will provide universal, secure, and adequate income for future retirees. Visit the website.