Furthermore, plan sponsors would need to include the following information:
- A summary of available benefit options.
- An estimate of the monthly benefit that will be received at retirement age.
- Details of any subsidized early retirement option.
- Whether the plan’s stream of payments can be replicated by cashing it in and buying a retail annuity.
- A breakdown of relevant investment risks and longevity risks.
- Details of protections offered by the Pension Benefit Guaranty Corporation [PBGC].
- Explanation of the tax implications.
- The relative value of the lump sum option compared to the plan’s lifetime annuity.
“No one should ever have to make a decision that could seriously affect their plans to securely retire without being given all the information they need to understand the consequences,” commented senator Murray.*
As INFORM stands, pension plan sponsors would be obliged to inform participants, including plan beneficiaries, of the information within 90 days of the day on which they will be able elect to take their annuity as a lump sum. In addition, they would also be required to notify the U.S. Secretary of Labor within 30 days of the day on which the participant is able to take the lump-sum.
Murray’s bill follows a period in which the Trump administration was criticised for abandoning an Obama-era Treasury Department plan to curtail certain kinds of risky lump-sum buyouts. Murray has said that this action gave the “green-light to offload pension liabilities and transfer risk to retirees through buyouts.” *
The Obama administration move followed a 2015 Government Accountability Office report, in which it was reported that many companies were pursuing lump-sum buyouts without providing participants with the necessary information.
Whatever a person decides to do, it is important to remember that the Employee Retirement Income Security Act (ERISA) and the Pension Benefit Guaranty Corp. protect pensions; whereas lump-sum buyouts have no such safety nets.
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Blacktower in the US specialises in helping cross-border individuals optimise their retirement and pension plans.
Whether you are looking at issues related to a possible lump-sum buyout, the future management of your UK pensions or you require education, health or inheritance planning guidance, we can help you.
For more information, contact us today.
* https://www.planadviser.com/inform-act-seeks-pension-lump-sum-buyout-transparency/ Accessed 20-03-20
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.