With changes in the mortality tables pending, along with lower interest rates, many plan sponsors may decide to go ahead with a lump-sum sweep of a defined benefit plan for vested terminated participants. Having helped a number of organizations with their lump-sum sweeps, we can offer a few tips that may make a lump-sum sweep more successful. These five important organizational and administrative items should be taken into account by any plan sponsor conducting a lump-sum sweep for vested terminated participants:

1) Communicate, communicate, communicate. Build lots of communication into lump-sum projects. Lump-sum projects that see the most success are those that include communications, such as a postcard mailing to announce the beginning of the lump-sum window and alert participants to look out for the benefit election packet to come in the mail. Midway through the project, a reminder postcard to those who have not returned benefit election paperwork is helpful to remind participants that the deadline is rapidly approaching. Once a participant returns benefit election paperwork, either a confirmation that it has been received and is complete, or a letter describing what is missing and still needs to be completed, can go out next. When the deadline of the lump-sum project is close, a call to participants with incomplete paperwork is beneficial to get everything completed.

2) Prepare employees to make the right decision. The U.S. Government Accountability Office (GAO) recommends increasing communications. In addition to the typical benefit election information sent to employees, additional communications may be useful, discussing the pros and cons of electing a lump sum, as well as information on how defined benefits are insured through the Pension Benefit Guaranty Corporation (PBGC). This helps explain to employees that they don t need to take a lump sum because of a belief that their pensions benefits may be going away.

3) Establish a timeline with a grace period following the deadline. Sweeps that enjoy the most success are those that build in a grace period following the cutoff date of the lump-sum window. Inevitably, a large number of elections will arrive on or near the cutoff date. Some forms will be missing either information or proof of age. A grace period allows time to work with the participants who want a lump sum in order to get all of their information completed on time, expediting payout of lump sums (this step also cuts down on denials).

4) Spend time on the design of benefit election forms. Even if your benefit election forms are super clear, reject rates may be higher than expected. Most employees don t work with these forms every day so they may not understand how to fill them out, given the length and large amounts of information required (often 20+ pages). Add small touches to ease filling them out, such as simple and easy-to-understand instructions and deadline information on each page. Also, be clear about the forms for proof of age that the employee needs to provide.

5) Work with your trustee's timeline. As the end of the year approaches, be sure to confirm with the trustee that the number of checks can be fully executed before year end, because they will be the ones actually cutting the checks. Note that the values of payouts typically change on the first of the month, so trustees will need enough time to cut and mail the checks before the amounts have to be recalculated and reissued.