Defined Benefit Lump Sum Changes

On July 9, 2015, the IRS issued Notice 2015-49, Use of Lump Sum Payments to Replace Lifetime Income Being Received By Retirees Under Defined Benefit Pension. This IRS Notice banned lump sum payments as a benefit option for retirees already receiving benefits (called in pay status). Plan sponsors can continue to provide the lump sum window payments for participants that are not in pay status (or considered deferred vested participants).

Based upon discussions with defined benefit actuarial consultants, there seems to be some further clarification needed from the IRS on different scenarios that might get included or excluded in this lump sum ban category. We would recommend having a discussion with your plan’s actuarial consultant to discuss further how this impacts your defined benefit plan.

If you read the effective date information on the following link to the IRS Notice 2015-49, it further explains the implementation of this Notice with on-going de-risking programs. Please give us a call if you would like to discuss further.

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Scott A. Esworthy, CPA


Scott is a Principal with BSSF, specializing in the audits of property and casualty insurance entities (P&C) and employee benefit plans. His expertise in these areas extends beyond the Central PA region. Scott and his team serve clients in the Mid-Atlantic Region, with a focus in Pennsylvania, New Jersey, Maryland, Delaware, Virginia, Ohio, and New York.