Good morning. There’s more than one way to get pension liabilities off the books, but a recent tax-policy decision has increased interest in one particular tactic. In recent years, some firms have opted to offload their pension plans to insurance companies, but now, a decision by the Internal Revenue Service to stick with its current life-expectancy calculations has companies including Newell Rubbermaid Inc. and E.W. Scripps Co.aiming for a different target for the plans: the pensioners themselves, via a lump-sum buyout, CFO Journal’s Emily Chasan and Kristin Lin report.
The IRS helped to fuel the trend toward lump-sum offers when it said in July that it would put off using new mortality-rate calculations based on longer lifespans until 2017. That suddenly made it cheaper for companies to offer pension buyouts now than in the future. The new assumptions that people will live longer will make lump-sum offers more expensive to companies. “We’re warning clients that if you want to shed this liability, do it now or by the end of 2016, because it is just going to be a different ballgame in 2017,” said Amy Gentile, senior actuarial consultant at Findley Davies, who advises corporations on pension benefits.Gmail
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