I have a friend who is eligible for a monthly lifetime annuity at age
55 as part of retirement from a company. However, he is told that he cannot take it in lumpsum until age 65. Is there any mechanism or market for selling the rights to this monthly income in return for a lump sum. Is this something that is done?Thank you.
Winter
I worked with defined benefit plans for a number of years. And while some pension plans will allow a retiree to take the lump sum value of their pension in cash or allow them to purchase an annuity through an insurance company, e.g. Metropolitan, I don't know of any pension plan that would allow a retiree to sell the stream of payments he was actually receiving from the pension trust fund and pay them to a third party. There would be issues with the guaranteed joint and survivor option for the spouse. The pension plan would be counting on the return on mortality in its funding of the plan, etc. I believe there is even a statement in the plan documents that the funds cannot be assigned to someone else. The plan may risk being disqualified and lose its tax deductible status for assigning payments.
I can only see this "sale" happening if the retirement plan actually allowed the retiree to take the lump sum directly to do whatever the retiree wanted to do with it. And then there is no need for a "sale".
If the retiree can only get an annuity paid from the pension plan assets, the only way the retiree could "sell" it would be to endorse the checks that are made payable to him every month to the person he sold it to. The plan isn't going to write out the checks to anyone else.
Now an annuity puchased from an insurance company might be able to be sold, just like a life insurance policy can be "sold"(a viatical).
But a stream of payments from a pension trust fund, that doesn't sound right......
Frank
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