Lump Sum Problems

[Guest wgfbackdraft]

I would like to know any information on financial problems caused to any Defined Benefit Public pension funds because a lump sum payment was put into the plan?

[Guest CVCalhoun]

I haven't seen a lot of information on problems caused to public plans themselves by instituting a lump sum option. The two contexts in which I have seen them causing problems are (a) in private plans, which have a very limited ability to modify the interest rate used to calculate the lump sum option, and (B) for employees, who may spend the lump sum and then have no resources for retirement. It is my understanding that at least one state considered the second problem sufficiently likely to be a drain on its welfare system that it instituted a lump sum option only for those retirees who became residents of other states.

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