Low Interest Rates Can Translate Into Higher Lump-Sum Payments
USA Today (08/08/03) Vol. 162, No. 6 p.B1; Dugas, Christine

Low interest rates have increased the popularity of lump-sum pension payments, because pensions must calculate such payments based on the 30-year Treasury bond yield, and the lower the rate of the bond, the higher the payment. But the Treasury Department no longer issues the bond, so Congress is searching for alternatives, and using a higher-rate corporate bond-index as a temporary measure has been suggested. Lump-sum popularity has also affected 401(k) plans, because they usually provide retirees with a lump sum that can be placed into an IRA or used to buy an annuity, though some 401(k)s also offer annuities.


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