New rules will mean smaller pension payouts next year. Get it right the first time. There are no do-overs.
If you’re entitled to a pension from a former employer, don't be surprised if you receive a letter offering you a lump sum payout. New rules that will take full effect next year allow plan administrators to calculate lifetime benefits assuming higher interest rates than were previously used. Plan sponsors have eagerly anticipated the rule changes, which allow them to offer smaller lump sum payouts. Some sponsors anxious to trim their pension obligations are expected to offer lump sums to vested former employees as well as current workers on the verge of retirement. (Employees who continue to work for a company that offers a pension are not eligible for a payout until they leave or retire.)