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ARTICLE · 17 JULY 2015

IRS Flip Flops DeRisking Pension Plan Options

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The volatility and unpredictability of an employer's obligations under a defined benefit pension plan can have a significant impact on its bottom line.

United StatesEmployment and HR
Jason D. Flaherty
Jason D. Flaherty
Patricia Anglin
Patricia Anglin
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​The volatility and unpredictability of an employer's obligations under a defined benefit pension plan can have a significant impact on its bottom line.  This is especially true of plans with liabilities for pension benefits earned decades ago and being paid as annuities.  Companies faced with this volatility have implemented various "de-risking" methods for their pension plans in order to reduce or eliminate the volatility associated with pension obligations and their impact on the balance sheet.

For the last several years, the IRS has issued Private Letter Rulings to pension plans allowing retirees to convert their annuities to lump sums.  This de-risking option first hit the news in 2012 when General Motors offered lump sum conversions to 44,000 retirees.

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