In the circumstances of profit margins taking a hit from both falling interest rates and the recession, it’s ultimately going to be challenging for Kaiser Permanente to continuously provide the full pension payments. In other words, the consortium is eventually going to have to sacrifice something. Various companies have taken the action to halt their defined benefit plans in order to minimize their risk. For example, General Electric made the decision to pause their pension plan for 20,000 workers.

After the Paycheck Protection Act of 2006 was put into place, it essentially eliminated the provision of having to utilize the 30-year Treasury rate in a corporation’s lump-sum computations. This permits them to utilize an spiked corporate bond rate to diminish the forecasted increases in payouts as an effect of expanding mortality tables. The Paycheck Protection Act also established limitations on lump-sum dispensations on contingence of the pension plan’s funding percentage. If a defined benefit plan was to be funded lower than 60%, people would not be allowed to select a lump-sum. In another scenario, during a bankruptcy lump-sum distributions are forbidden unless the pension plan is 100% funded.

In conclusion, Kaiser Permanente enacting a suspension of the lump-sum option is a likelihood, and if it actually is administered, it could dramatically alter people’s retirement plans.