Converting Defined Contribution Plan Benefits To Annuities Through Rollovers To A Defined Benefit Plan: Practical Considerations For Employers

Employers who sponsor both a 401(k) or other defined contribution plan and a defined benefit pension plan may be able to offer participants a lifetime income benefit that is already largely in place. Such employers can permit terminating employees who are covered under both plans to roll all or a portion of their defined contribution benefits over to the pension plan to receive a greater life annuity benefit from the pension plan. This approach may be beneficial for retirees and other terminating employees, while still helping to minimize the employer's administrative burdens.

For retirees, this rollover feature is a convenient (and tax-deferred) means to convert lump-sum defined contribution plan benefits into a guaranteed stream of retirement income. It is an optional feature that would not create any burdens for participants who wish to receive their defined contribution benefits in a lump sum. From the employer's perspective, all defined benefit plans are subject