What choices come with a pension lump-sum offer?

If your pension plan offers a lump sum, you are usually choosing among a handful of paths. The exact menu depends on your plan and on your situation: retiring, leaving with a deferred benefit, or answering a limited-time offer.

• Keep the monthly pension, paid for your life, or for your life and a survivor's.
• Take the lump sum and roll it directly into an IRA or another employer plan that accepts rollovers.
• Take the lump sum in cash and pay income tax on it.
• Roll the lump sum into an IRA and use part of it to buy an annuity from an insurance company.
• Leave a deferred benefit in the plan and decide later, if the plan allows it.

How is the lump sum calculated?

The lump sum is the present value of the monthly pension you would otherwise receive. Federal law requires the plan to pay at least the amount produced by the IRS minimum present value segment rates and the mortality table the IRS prescribes for the year. Higher interest rates mean a smaller lump sum, and lower rates mean a bigger one. Plans lock in the rates for a stability period, which can be a month, a quarter, or a plan or calendar year, so ask which period your payout date falls in.

If your benefit is a cash balance account, the lump sum is generally the account balance instead, and it does not move with the IRS rates in the same way.

How do taxes work for each option?

Monthly pension checks are taxed as ordinary income as you receive them. A lump sum is generally an eligible rollover distribution, so a direct rollover to an IRA or plan defers income tax until you withdraw the money. If the plan pays the lump sum to you, it must withhold 20% for federal income tax, and you have 60 days to roll the payment over, replacing the withheld amount from other funds if you want the whole sum to stay tax-deferred.

The taxable part of a payout taken before age 59 1/2 can face an additional 10% tax unless an exception applies. Leaving your job in or after the year you turn 55 is one exception for workplace plan payouts, but it does not follow the money into an IRA. Rolled-over money becomes subject to required minimum distributions at age 73, or 75 if you were born in 1960 or later.

If you are married, a lump sum generally needs your spouse's written consent, witnessed by a notary public or plan representative, because the default form for a married participant is a joint and survivor annuity.

What does it mean when an employer buys annuities for its pension?

Some employers transfer part of their pension obligations to an insurance company, a deal often called a pension risk transfer. In a "buyout," the plan buys a group annuity contract and the insurer takes over paying the covered retirees directly; in a "buy-in," the plan buys the contract as an investment and keeps paying retirees itself.

In a buyout, the monthly amount and payment form you already have generally carry over to the insurer. What changes is who stands behind the payment. Once the plan buys an irrevocable annuity that covers your benefit, PBGC coverage for that benefit ends. State insurance guaranty associations back the annuity if the insurer fails, up to limits that vary by state but are at least $250,000 in present value of annuity benefits everywhere.

Plan fiduciaries choosing the insurer are held to federal standards set out in Labor Department Interpretive Bulletin 95-1, which tells them to weigh the insurer's claims-paying ability and financial strength. If you receive a notice that your benefit is moving to an insurer, keep it, along with the insurer's name and contact details.

What about buying your own annuity with a lump sum?

You can roll a lump sum into an IRA and buy an immediate annuity from an insurance company with some or all of it. This turns the lump sum back into monthly income, but the price an insurer charges for a given monthly amount may be higher or lower than the value your plan's annuity gives you, so get quotes before you give up the plan's monthly option. An annuity you buy yourself is backed by the insurer and the state guaranty association, not by PBGC.

What does PBGC cover if you keep the plan's annuity?

For a single-employer plan, PBGC can take over an underfunded plan that ends and pay benefits up to legal limits. For a plan ending in 2026, the most PBGC can pay a retiree starting at age 65 is $7,789.77 a month as a straight-life annuity, or $7,010.79 a month as a joint and 50% survivor annuity when both spouses are the same age. PBGC says most of the benefits it pays fall below that limit.

What should you compare before deciding?

• The lump sum next to the monthly amount for each payment form, including the survivor options.
• The interest rates and mortality table behind the lump sum, and how long the quote is good for.
• What an insurer would charge for the same monthly income, from at least two quotes.
• Your health, your other savings and income, and what your spouse would need if you die first.
• The tax cost of each path, including whether a direct rollover fits your plans.

Does General Mills' pension pay a lump sum or an annuity?

The paths open to you at General Mills depend on which pension formula and plan actually cover your years there. General Mills' Retirement Income Plan (RIP) benefit structure, covering nonunion employees in the General Mills Pension Plan and General Mills Pension Plan I, pays only annuity forms: a life annuity, a life annuity with a 10-year certain period, or a 50, 75 or 100 percent joint-and-survivor annuity, with no lump sum among the optional forms. A married RIP participant's normal form is a 50 percent joint-and-survivor annuity, and a spouse of a participant who dies before retiring while already eligible under the plan's Rule of 70 instead receives the survivor portion of a 100 percent joint-and-survivor annuity.

Has General Mills bought annuities for its pension?

General Mills' fiscal 2026 10-K reports a $6.7 million settlement or curtailment loss on its defined benefit pension plans that year, after none in fiscal 2025 and a $4.0 million settlement gain in fiscal 2024, and the same filing lists insurance and annuity contracts among the plans' holdings, meant to give retirees a stable stream of income. Ask the plan which formula covers your own benefit and whether that settlement activity touched it.