As of July 1, 2012, Ford Motor Company is offering all salaried employees the option to receive their accrued pension benefits in a lump sum payment upon retirement. Previously, as part of a special pension buyout program, the company offered the lump sum option to roughly 90,000 retirees, former employees, and surviving spouses in a rollout process that was completed in 2013. Visteon also offered approximately 10,000 retirees and former employees that had not yet started collecting their pension benefit the option for a one-time pension lump sum payment.

Mainstay Capital Management is committed to assisting our clients and others in determining which pension payment option is best for their individual situation. We have conducted several workshops on the pension lump sum payment options for retirees of Ford, Visteon, and other companies. These workshops have generated many questions. Below is a list of questions that were brought to us by our Ford and Visteon clients, as well as others, through our workshops, webinars, and other discussions.

Information contained herein has been compiled from sources believed to be reliable, but its accuracy and completeness are not guaranteed and Mainstay Capital Management assumes no responsibility for errors or omissions.

As an active Ford employee, will I need to make an election regarding the lump sum distribution option immediately following retirement?

Ford retirees that elect a benefit commencement date that is within 180 days of their termination date will have the option to elect a lump sum distribution. After the 180 day period only a monthly benefit payment option will be available.

Can I split a lump sum distribution into two parts – half to the annuity (pension payments) and half as a lump sum distribution?

This option is not available for Ford or Visteon retirees.

Once I receive the lump sum distribution payment, can I switch to receiving monthly payments if I change my mind?

No. Once a lump sum distribution has been paid (or monthly benefits commence) you cannot revoke or change your election.

Do I have the ability to take a lump sum distribution while I am an active employee?

Ford and Visteon employees do not have an option to take a lump sum distribution of their pension benefit until the time of retirement. Currently, Ford salaried employees have the lump sum distribution option available to them at retirement.

What are the tax implications of taking a lump sum distribution?

There are no tax implications for those taking a lump sum distribution and rolling it into an IRA or another qualified plan that accepts rollover distributions. However, if the lump sum distribution is taken and rolled into a qualified plan at age 70½ or older, the distribution will be used in calculating any future Required Minimum Distributions (RMDs). Taken as cash, the lump sum is fully taxable as ordinary income.

Can you address the different risks associated with electing a lump sum pension payment?

Please review our "Pension Lump Sum Special Report" for information on investment, tax, and longevity risk due to inflation, among others.