More Companies Offering New Way to Lower Taxes on Pensions

More Companies Offering New Way to Lower Taxes on Pensions

More Companies Offering New Way to Lower Taxes on Pensions

By Alan Olsen

It used to be that many, if not most, companies offered the benefit of a pension fund to those employees who eventually retired with the company after many years of service. As times have changed, benefit packages have become less attractive or disappeared altogether, as companies are continually looking to save more money in whatever ways they can, including their tax bill. But what about all those employees who have already retired and who will be starting to collect on their pension soon? How can companies change their tax bill with their former employees that have already hung up their working boots, so-to-speak?

Lump-Sum Payment

There is a way for companies to save on their tax bill and it is becoming used to be that many, if not most, companies offered the benefit of a pension fund to those employees who eventually retired with the company after many years of service.g increasingly popular. Over the coming months many employers will be offering their former workers lump-sum pension buyouts as an alternative to receiving their pension in a series of payments over an extended period of time. The reason behind this being that the employers can take advantage of current tax policies that allow them to decrease their pension obligations and reduce their costs. This would remove those pension liabilities from their books and would also help reduce the cost of managing their pension plans.

Increasing Costs Hurting Employers

There are several reasons that more companies are moving in this direction. First, because of low interest rates for many years, S&P 500 companies’ pension liabilities are surging. According to the S&P, the difference between the amounts employers will owe retirees and their pension assets had jumped to more than $389 billion last year, compared to just $224.5 billion in 2013. That’s not all. Servicing costs are also jumping, such as the cost of premiums that employers have to pay to the government’s pension insurer. That jumped from $49 for each employee participating in the plan in 2014 to $57 this year. What’s more the number will rise to $64 in 2016.

Things Are Expected to Get Worse

To make matters worse, companies are getting even less on their market returns, which have dropped to just 7 percent compared to 9.1 percent in 1999. Therefore, more and more companies are looking to take advantage of the IRS’s decision to keep its current life-expectancy calculations, which at the moment will make these lump-sum buyouts more attractive to employers until 2017 when the IRS is expected to change to longer lifespan calculations. In July of this year, the IRS helped give the lump-sum buyout a boost by announcing that it would wait to adjust to the new mortality-rate calculations, which indicate longer lifespans. That means offering the lump-sum payment is much cheaper right now for employers than it would be in the future, because people are expected to live longer in the future.

Rubbermaid On Board

One company that has already announced that it will offer lump-sum buyouts this year is Newell Rubbermaid. The company said it would give 3,300 employees the lump-sum option as it hopes to lower its pension obligation by about $120 million. The company gave 5,700 former employees the same option last year. About half of all employees take the offer, according to the company. As for employees, it can often be a bad choice to take the lump-sum buyout, but if invested right it could provide a nice payout. It’s always a good idea to talk to a wealth management professional or tax advisor, like GROCO for example, before making a decision.


We hope you found this article about “More Companies Offering New Way to Lower Taxes on Pensions” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at  Unfortunately, we no longer give advice to other tax professionals gratis.

To receive our free newsletter, contact us here.

Subscribe our YouTube Channel for more updates.

Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.


Alan L. Olsen, CPA, Wikipedia Bio is a proud sponsor of The American Dreams Show.



The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.

Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.

The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.

They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..

American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:

Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…

Untitled_Artwork copy 4 (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness.  It’s mission statement:

In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.

Our mission at is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.

Posted in
5 Best and Worst States for Wealthy Retirees

5 Best and Worst States for Wealthy Retirees

Determining The Best & Worst States for Wealthy Retirees Can be Subjective Retirement marks a significant phase in life, offering a new world of opportunities and choices. One critical decision for affluent retirees is selecting the right state to enjoy their golden years. In this post, we’ll explore the 5 best and worst states for…

Building Extraordinary Family Legacy 101

Family Legacy 101

The family “Legacy Builder” conference was a huge success!  The next conference will be in mid-May… This was the inaugural “how to” strategically build a family legacy event. On January 25, 2024, single and multi-family offices and high-net-worth individuals from around the world learned how to create a family legacy. Legacy Builder guests shared examples…

Chris Maxson Ignites Fireplace Innovation

Chris Maxson Ignites Fireplace Innovation

Chris Maxson, owner of Acucraft Fireplace Systems and Managing Partner, Maxson family’s business ventures discusses igniting innovation in the fireplace industry with Alan Olsen. Below are some of the key aspects of Chris Maxson’s influence on the fireplace industry and his unique approach with Acucraft Fireplace Systems. They indicate the rich legacy and innovation themes discussed.…

14 Best Accounting Jokes and Financial Humor

The Best Accounting Jokes for Financial Experts in 8 Laughs & Ledgers: Welcome to the lighter side of accounting! Yes, you read that right. While debits, credits, and balance sheets are serious business, who says accountants can’t have a sense of humor? Today, we’re diving into the funniest accounting jokes that even your auditor can’t…