U.S. corporate defined benefit plan participants need to be given better information when offered a window to accept lump-sum payments to replace their lifetime benefits, a report from the Government Accountability Office said.
The report is a response to a request by Rep. Sander M. Levin, D-Mich., ranking member of the House Ways and Means Committee.
GAO reviewed informational materials from 2012 provided by U.S. corporate defined benefit plans to their participants when offering lump-sum windows, representing as many as 248,000 participants, the report said.
Among the information the GAO found lacking in communications to participants — which represented either terminated vested participants who have yet to retire, or, in fewer cases, retirees — were information about benefit protections they would keep by refusing the lump sum and remaining in the plan, the interest rate and mortality assumptions used to calculate the lump sum, and how the “value of the lump sum compared to the value of the lifetime monthly benefit provided by the plan.”
“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,” Mr. Levin said in a committee news release. “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 derisking 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.”
Mr. Levin was not available for comment by press time.
The full report is available on the GAO’s website.