"Expecting a Lump-Sum Pension? Read This" in the November 5, 2007 issue of BusinessWeek contains this little bit of news:
Starting next year, companies won't be able to make lump-sum distributions if their pension plans are more than 40% underfunded.
Congress is understandably concerned that the growing wave of baby boomers nearing retirement coupled with underfunded pension plans will put the plans underwater if many retirees take a lump-sum distribution (as most do). It would be like a run on the bank. Prohibiting lump-sum distributions from underfunded plans gives the company time to fix the pension fund.
This is probably only of interest to folks young enough to still be working, but old enough to have a pension plan and thinking of taking the money and running. Many high-tech companies either never had a pension plan, or quietly froze their plan some years ago.
Still, when I cashed out of a company that I had been with for a decade, the lump-sum distribution I got from their frozen pension plan was nothing to sneeze at. It is now earning interest in an Individual Retirement Account that I control.
If you're thinking of retiring, or just thinking of leaving and cashing out like I did, the article suggests ways you might be able to determine the health of your company's pension fund.