ERISA Industry Committee asks IRS, Treasury for lump-sum clarifications

The ERISA Industry Committee on Thursday asked officials at the Department of Treasury and the IRS to clarify their July 9 decision to no longer permit lump-sum payments to people already receiving benefits.

“We want them to clarify that there are situations that still would allow a plan sponsor to offer a lump-sum payment,” said Kathryn Ricard, ERIC senior vice president for retirement policy, in an interview. ERIC members would like to be able to continue offering lump sums to people who have been terminated and future retirees.

The IRS notice did not address terminated plans, employees on the verge of retiring or younger retirees who have not reached the age where minimum distributions are required. “Our members would not go forward without that (clarification),” Ms. Ricard said.

In July, IRS Notice 2015-49 amended required minimum distribution rules to make lump-sum payments no longer permitted for people already receiving benefits. Until then, the IRS had allowed the offer of lump sums to defined benefit plan retirees on a case-by-case basis, through private letter rulings.

ERIC members are also concerned that the ruling became effectively immediately, while the IRS considers possible future rule-making. “By taking this approach to rulemaking, it appears that the eventual outcome of the regulation has been determined before comments have been provided,” ERIC said in a letter to the Treasury Department and IRS. “An immediate effective date was not justified.”