Updates

IRS PLRs Allow Lump-Sum Distributions After Lifetime Payouts Have Begun

08/07/2012


August 7, 2012 – The IRS has issued two private letter rulings (PLRs) in which the IRS allows retired former employees receiving lifetime payouts from defined benefit (DB) plans to elect to receive lump-sum distributions. General Motors and Ford Motor Company are using the strategy to relieve their DB plans of future financial liability for those retirees who elect lump-sum distributions. One PLR grants a one-time election “window” not to exceed 60 days, the other a period from 60 to 90 days. These rulings are significant not only because they offer a portability option for retirees’ benefits to be moved to an IRA or another employer plan, but—ironically—because they run counter to the well-publicized efforts of Congress and regulatory agencies to promote and enable lifetime income options. PLR 201228045 and PLR 201228051 are found at the following URLs.

http://www.irs.gov/pub/irs-wd/1228045.pdf

http://www.irs.gov/pub/irs-wd/1228051.pdf


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