A lump-sum window can be an effective way for a sponsor to protect the defined benefit plan from market volatility and reduce administrative expenses. By offering lump sums to certain participants during a temporary period of time, plan sponsors are able to do a “controlled burn” of their pension liabilities. A lump-sum window can reduce volatility caused by fluctuating interest rates and can also reduce the insurance premiums paid to the Pension Benefit Guaranty Corporation.
This article was originally published in Money Management Intelligence.