Updated July 30, 2026. Quick answer: A buyout offer asks you to convert a monthly benefit into one payment, and the decision is normally irrevocable once the annuity starting date passes. Most of what decides it is not the projected investment return. It is six questions with answers already fixed by your plan document and the Internal Revenue Code — the conversion rate you were quoted, the survivor form, your spouse’s signature, whether the plan is even permitted to pay you, whether the monthly benefit could be rolled over, and what happens if the plan fails.
The six questions, and where each one is actually answered
A buyout offer arrives as a single comparison: this many dollars now, or this many dollars a month for life. The comparison is real, but it is the last question rather than the first. Five things ahead of it are already determined, and each has a page that quotes the governing provision rather than summarising it.
| The question | Where it is decided | Why it can change the answer |
|---|---|---|
| What produced the number you were quoted? | IRC §417(e)(3) | The statutory floor is built from a mortality table and three segment rates tied to a stated month. The offer is a function of when it was struck |
| Which annuity form are you comparing against? | IRC §401(a)(11), §417 | Comparing a lump sum to the single-life figure when your household needs the survivor form compares it to a benefit you were never going to take |
| Has your spouse consented, in the form the statute names? | IRC §417(a)(2) | Three conjunctive conditions, one of which is a witness. A signature on its own does not satisfy it |
| Is the plan permitted to pay a lump sum at all? | IRC §436(d) | Funding level and sponsor bankruptcy can bar or halve it. The offer may not survive to the date you would accept it |
| Could you roll the monthly benefit over later? | IRC §402(c)(4)(A) | A life annuity is excluded from the definition of an eligible rollover distribution. This is the door that closes |
| What is the downside you are insuring against? | ERISA §4022 | The federal guarantee is real and capped. Whether the cap binds you is checkable in one step |
The asymmetry that should drive the decision. Take the monthly annuity and you can generally change your mind about how to SPEND it but not about whether to have taken it. Take the lump sum and the monthly benefit is gone. Pension elections are made once, at a stated annuity starting date, and the plan is not obliged to let you unwind one afterwards. That is why the questions worth the most attention are the ones on this page rather than the projected-return arithmetic — the arithmetic can be redone next year, and the election cannot.
The order to take them in
Questions four and three come first, because they are gates rather than trade-offs. If §436(d) bars the payment, there is nothing to decide. If your spouse will not consent in the statutory form, the single-life comparison is hypothetical. Only once those are settled does the break-even arithmetic start to matter — and that arithmetic uses two numbers your plan has already given you in writing, not an assumed rate of return.
What this site will not tell you. Not the interest rate used, not your plan’s conversion factor, and not a break-even age. Those are specific to your plan and your birth date, and a number borrowed from someone else’s pension is worse than no number at all. Every page here shows you which figure to demand and what it governs.
One more thing worth knowing before you sign anything: taking the money before age 59½ raises a separate question with a statutory answer that most summaries get backwards — the age-55 exception does not survive a rollover to an IRA.
Sources
IRC §§417(a), 417(e)(3), 402(c)(4), 3405(c), 436(d) and 72(t), each quoted verbatim on the linked page that turns on it. Retrieved from the United States Code, July 2026.
This states what the cited authority says. It is not tax, legal or investment advice. A pension election turns on your own plan document, your own health and marital situation, and figures your plan must give you in writing — and this site states no interest rate, no conversion factor and no break-even age, because every one of those is specific to your plan and a borrowed number is worse than none.