The Growing Pension Risks Facing Boomers and Gen Xers
The pension they were expecting to receive every month from their former employer might not be coming from that employer. Instead, it may be turned over to an insurance company hired to manage the pension plan and turn it into monthly annuity payments. If that happens, the pension benefits will no longer be guaranteed by the federal Pension Benefit Guaranty Corp. (PBGC), but by a state insurance guaranty agency.
Alternatively, your employer may try to get your pension off its books by letting you take it as a lump sum rather than in monthly installments. If you do this, you’ll then have to figure out how and where to invest the money in retirement.
What Pension De-Risking Is
All of these possibilities are part of a growing trend known as pension “de-risking,” “risk transfer,” “pension stripping” or “risk dumping.” They’re designed to transfer some or all of the risks of what are known as defined-benefit pensions over to retirees; they don’t apply to 401(k)-type programs known as defined-contribution plans.
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