New GAO Report Recommends Private Pension Plans Provide More Information When Offering Lump Sum Payments

WASHINGTON – In response to a request by Ways and Means Committee Ranking Member Sander Levin, the Government Accountability Office today issued a report that lays out recommendations for the Labor Department, Treasury Department, Pension Benefit Guaranty Corporation and pension plans to ensure that pension plan participants have better information when offered lump sums that replace their lifetime benefits. Offering lump-sum payments is one of several steps that private pension plans are pursuing to reduce their pension liability exposure – commonly called "de-risking." According to the GAO, one pension firm estimated that nearly 200 plan sponsors implemented lump sum windows during 2012, and tens and maybe hundreds more plans were looking to de-risk through lump sum windows in the coming years.

The GAO report, "Private Pensions: Participants Need Better Information When Offered Lump Sums that Replace Their Lifetime Benefits," is available on GAO's website (here). Additional information from the GAO regarding de-risking strategies is anticipated in the coming months as it pursues its investigation into the trend of companies to de-risk their pension plan liabilities by either offering lump sum payments to plan participants or by transferring those liabilities to private companies who would in turn provide a replacement retirement annuity. The request that GAO investigate the issue was made jointly by Ranking Member Levin and former Education and Workforce Ranking Member George Miller in 2013.

"We must ensure that workers who have saved for their retirement are adequately protected in compliance with existing rules and that all pension decisions are made with the fullest of information and with the best interests of future retirees at the fore." said Rep. Levin. "Plan participants must have all the information they need to make an informed decision about the long-term impact of a lump sum payment instead of a defined benefit on their retirement. I look forward to working with my colleagues on the Ways and Means Committee and on the other relevant Committees to ensure that both internal and external de-risking actions are undertaken with care and with the interest of future retirees at the forefront of the employers' decision-making process. We will also be in touch with the federal agencies involved to ensure they have the necessary authority to take the steps recommended in the report to protect workers. Hard-working Americans who save for their retirement shouldn't have to worry that they won't get every penny they save in their retirement."

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