View all text of Part 1 [§ 1021 - § 1032]
§ 1032. Notice and disclosure requirements with respect to lump sums
(a) In generalA plan administrator of a pension plan that amends the plan to provide a period of time during which a participant or beneficiary may elect to receive a lump sum, instead of future monthly payments, shall furnish notice—
(1) to each participant or beneficiary offered such lump sum amount, in the manner in which the participant and beneficiary receives the lump sum offer from the plan sponsor, not later than 90 days prior to the first day on which the participant or beneficiary may make an election with respect to such lump sum; and
(2) to the Secretary and the Pension Benefit Guaranty Corporation, not later than 30 days prior to the first day on which participants and beneficiaries may make an election with respect to such lump sum.
(b) Notice to participants and beneficiaries
(1) ContentThe notice required under subsection (a)(1) shall include the following:
(A) Available benefit options, including the estimated monthly benefit that the participant or beneficiary would receive at normal retirement age, whether there is a subsidized early retirement option or qualified joint and survivor annuity that is fully subsidized (in accordance with section 417(a)(5) of title 26,1
1 So in original. A closing parenthesis probably should precede the comma.
the monthly benefit amount if payments begin immediately, and the lump sum amount available if the participant or beneficiary takes the option.(B) An explanation of how the lump sum was calculated, including the interest rate, mortality assumptions, and whether any additional plan benefits were included in the lump sum, such as early retirement subsidies.
(C) In a manner consistent with the manner in which a written explanation is required to be given under 417(a)(3) of title 26, the relative value of the lump sum option for a terminated vested participant compared to the value of—
(i) the single life annuity, (or other standard form of benefit); and
(ii) the qualified joint and survivor annuity (as defined in section 1055(d)(1) of this title);
(D) A statement that—
(i) a commercial annuity comparable to the annuity available from the plan may cost more than the amount of the lump sum amount, and
(ii) it may be advisable to consult an advisor regarding this point if the participant or beneficiary is considering purchasing a commercial annuity.
(E) The potential ramifications of accepting the lump sum, including longevity risks, loss of protections guaranteed by the Pension Benefit Guaranty Corporation (with an explanation of the monthly benefit amount that would be protected by the Pension Benefit Guaranty Corporation if the plan is terminated with insufficient assets to pay benefits), loss of protection from creditors, loss of spousal protections, and other protections under this Act that would be lost.
(F) General tax rules related to accepting a lump sum, including rollover options and early distribution penalties with a disclaimer that the plan does not provide tax, legal, or accounting advice, and a suggestion that participants and beneficiaries consult with their own tax, legal, and accounting advisors before determining whether to accept the offer.
(G) How to accept or reject the offer, the deadline for response, and whether a spouse is required to consent to the election.
(H) Contact information for the point of contact at the plan administrator for participants and beneficiaries to get more information or ask questions about the options.
(2) Plain language
(3) Model notice
(c) Notice to the Secretary and Pension Benefit Guaranty CorporationThe notice required under subsection (a)(2) shall include the following:
(1) The total number of participants and beneficiaries eligible for such lump sum option.
(2) The length of the limited period during which the lump sum is offered.
(3) An explanation of how the lump sum was calculated, including the interest rate, mortality assumptions, and whether any additional plan benefits were included in the lump sum, such as early retirement subsidies.
(4) A sample of the notice provided to participants and beneficiaries under subsection (a)(1), if otherwise required.
(d) Post-offer report to the Secretary and Pension Benefit Guaranty Corporation
(e) Public availability
(f) Biennial report
(Pub. L. 93–406, title I, § 113, as added Pub. L. 117–328, div. T, title III, § 342(a), Dec. 29, 2022, 136 Stat. 5376.)