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Lump sum distributions.


Guest Thornton

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Guest Thornton

Does anyone have, or know where to find, information concerning the percentage of DB plans that offer lump sum distribution options?

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Need more info.

My experience is that 100% of DB plans offer a lump sum, although most of these are the involuntary cashout rule (now $5000).

Also, the prevalence of lump sums of larger amounts (perhaps even without limit) is guided by many factors, such as nature of the industry (for example, I have seen many hospital plans with lump sum limits of $7000 to $10,000). The single most significant factor is the desire of the owner.

Is the DB plan sponsored by a sole owner, or possibly a family business? If so, much higher likelihood that the plan will include an unlimited lump sum option. Another factor might be the nature of the workforce; for example, a plan covering primarily attorneys or achitects.

Another factor is the management / owner philosphy and level of paternalism. If management is concerned that a blue collar workforce may squander lump sums, then the lump sum limit will be set low.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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