NRLN Engages Coalition to Oppose Treasury’s Reversal on Lump Sum Pension Payments
The NRLN played a leadership role in engaging three other advocacy organizations to send the attached letter urging Treasury Secretary Steven T. Mnuchin to retract Treasury Notice 2019-18 and restore guidance preventing employers from offering a lump sum payment to retirees in lieu of their remaining pension annuity.
The Notice 2015-49, issued on July 9, 2015, will undercut lifetime retirement security for vulnerable retirees and surviving spouses. A little background on this issue: On July 9, 2015 the Treasury Department and the Internal Revenue Service announced that it would amend its ERISA regulations to no longer allow sponsors of defined benefit pension plans to offer lump sum payments to replace pension annuity payments to pension plan participants who are in “pay status” (already receiving a monthly pension check).
It is evidence that federal government officials understand what we have been saying, ”…the NRLN urges you to consider our proposals in order to provide pension plan participants the security of knowing that the framework within which they made their retirement financial plans and lifestyle elections will not be unfairly altered without reasonable protections.”
A March 7, Forbes article said of Treasury’s reversal, “It’s a backtrack in a big way, and it may reopen the door to the problematic lump-sum offers.” The article quoted J. Mark Iwry, who was in charge of the retirement policy at Treasury when the 2015 Notice was issued. He said, “After all our efforts until 2017 to encourage lifetime income and help restore pensions to the private pension system, here is another step backward by the Trump Treasury.”
The opening paragraph of a CNN Business article on March 20 stated, “Traditional pensions are disappearing in America, and the federal government just made it easier for employers to get rid of them.” When the CNN Business reporter called for a quote to use in the article, I said, "People get blinded by the amount of money. We'll offer you $400,000, and they're age 65. It's not that much money at all. But they don't think about it that way." The article closed with a comment from Josh Gotbaum, the Director of the Pension Benefit Guaranty Corporation (PBGC) from 2010 until 2014. "You're taking a group of people who are retirees who are already living their lives on a pension, and you are saying to them, ‘instead of the pension, why don't you take this big check,' and they don't bother to tell them that this big check is worth less than your pension. And that's what Treasury said you can go back and do."
On March 28, Washington Senators Patty Murray and Ron Wyden sent letters to Treasury Secretary Mnuchin and Internal Revenue Service (IRS) Commissioner Charles Rettig and issued a press release requesting an explanation for the “alarming decision” to reverse course from a 2015 notice and give employers across the country the green light to offload pension liabilities and transfer risk to retirees by offering them a one-time lump-sum payment in lieu of the pensions they were promised.
We hope our attached letter along with the Senators’ letters and negative press coverage will result in Notice 2015-49 being restored to protect Americans currently receiving a pension.
Bill Kadereit, President - National Retiree Legislative Network