Treasury and IRS Notice 2019-18 Regarding DB Lump Sum Payments
Mar 19, 2019
Notice 2019-18: Offering a Lump-Sum Payment Option to Retirees Currently Receiving Annuity Payments under a Defined Benefit Plan
The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have issued Notice 2019-18, allowing plan sponsors of defined benefit plans to offer a lump-sum payment to retirees already in pay status in lieu of the remaining monthly payments due to those retirees. This notice reverses the stance outlined in Notice 2015-49, which stated that the Treasury Department and IRS would be issuing amendments to regulations clarifying that offering a lump-sum or other accelerated payment to retirees already in pay status would conflict with the intention of Code Section 401(a)(9).
Notice 2019-18 Summary:
- The Treasury Department and IRS “no longer intend” to amend the regulations to clarify that a lump-sum can not be offered to retirees in pay status.
- The Treasury Department and IRS will continue to study this issue.
- However, in the meantime, they will not consider a retiree lump-sum window as a violation.
- Private letter rulings will not be issued on the topic.
- For plan sponsors eligible for a determination letter, the IRS will not include a caveat regarding the topic of a lump-sum window offered to retirees.
Please reach out to your BPAS consultant with any questions regarding offering a lump-sum option to retirees currently in pay status.