Pension Buyout

A pension buyout occurs when an employer offers a lump-sum payment or transfer to a retiree or employee in exchange for giving up future pension benefits. The goal is often to reduce the company’s pension liabilities by transferring risk to the employee or to a third-party insurance company. Pension buyouts provide retirees with immediate access to a larger sum of money but come with the trade-off of losing guaranteed monthly payments.

Example

A manufacturing company offers its retirees a pension buyout of $100,000 each, allowing them to take the money now instead of receiving monthly pension checks.