Today, the U.S. Department of the Treasury and the Internal Revenue Service released Notice 2019-18 stating that the agencies no longer intend to provide guidance stating that the inclusion of retirees in lump-sum window programs violates the Internal Revenue Code. Despite initially approving this practice in private letter rulings, the IRS announced in 2015 that it would issue regulations finding that lump-sum offers to retirees violate Code section 401(a)(9). Consequently, plan sponsors have since been excluding retirees from these lump-sum windows.
Today’s announcement reverses the 2015 statement and opens the door for the inclusion of retirees again. Please note, however, that the agencies will continue to study the issue of retiree lump-sum windows and may issue future guidance.
We will further discuss the implications of this guidance at our Spring Policy Conference on April 3-4. I hope to see you there!
Article by Aliya Robinson, Senior Vice President of Retirement Policy