§1032 Notice and disclosure requirements with respect to lump sums

Summary

Plan administrators must give people a clear notice when they add a short time to choose a lump‑sum payment instead of future monthly pension checks. The plan must send that notice to each person offered the lump sum at least 90 days before the first day people can choose. The plan must also tell the Secretary of Labor and the Pension Benefit Guaranty Corporation (PBGC) at least 30 days before that first choice day. The notice to participants must explain the benefit choices (such as monthly amounts at normal retirement age, the amount if payments start now, and the lump sum), how the lump sum was figured (interest rate, mortality assumptions, and any extra benefits like early retirement subsidies), and give a simple comparison of the lump sum’s value to a single life annuity and a qualified joint and survivor annuity. It must warn that a similar commercial annuity can cost more, list risks of taking the lump sum (like outliving the money, loss of PBGC protection with the monthly benefit PBGC would cover if the plan fails, loss of creditor and spousal protections, and other lost legal protections), summarize basic tax rules and rollover and early‑withdrawal penalties, tell how to accept or reject the offer, state the deadline and whether a spouse must agree, and give a contact at the plan. The notice must be written so an average participant can understand it, and the Secretary will provide a model notice covering key items. The notice the plan sends to the Secretary and PBGC must give the total number of people eligible, how long the offer lasts, how the lump sum was calculated (interest rate, mortality, and any extra benefits), and a copy of the participant notice if required. Within 90 days after the offer period ends, the plan sponsor must report how many people accepted and any other information the Secretary asks for. The Secretary will publish the information while protecting private details. No later than the last day of the second calendar year after the calendar year that includes the applicability date of the final rules under section 342(e) of the SECURE 2.0 Act of 2022, and every 2 years after that so long as notices and reports are received, the Secretary must send Congress a summary of these notices and reports. The applicable reporting period for each summary starts on the first day of the second calendar year before the year the report is sent and ends on the last day of the calendar year before the year the report is due.