Near-Retirees Dodge Bullet on Lump-Sum Pensions
By: Source: AARP Bulletin Today Date Posted: 2003-11-05 13:51:00-05:00
Soon-to-be-retirees who want the lump-sum pension amount they believe they have earned can breathe a sigh of relief, at least for now.
Congress is under the gun to do something about pension funding by the end of 2003, but the stopgap legislation isn't expected to reduce lump-sum payments to retirees, as pension advocates originally feared.
Pressed by business interests, lawmakers are trying to ease pension funding needs by changing the interest rate used to calculate how much employers must invest to cover their pension obligations.
That rate—historically based on 30-year U.S. Treasury bonds—is also used to figure lump sums. But those bonds were discontinued in 2001, and a temporary higher rate expires next month.
Earlier bills before Congress proposed a new rate, based on corporate bonds, that would cut employers' obligations but—if applied to lump sums—would reduce benefits as well.
Last month the House passed an alternative measure that would give companies temporary funding relief without affecting retirees' lump sums. If the Senate agrees to that plan, lump sums will hold their value at least for the next two years.
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