Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
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Updated July 30, 2026. Quick answer: No — and not as a matter of plan policy. IRC §402(c)(4)(A) excludes from the definition of an eligible rollover distribution “any distribution which is one of a series of substantially equal periodic payments … made— (i) for the life (or life expectancy) of the employee … or (ii) for a specified period of 10 years or more.” A monthly pension is precisely that series. The lump sum is rollable and the annuity is not, which makes the election a one-way door in a way the monthly figures do not show.
The exclusion, in the statute’s own words
IRC §402(c)(4) defines an eligible rollover distribution as “any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except that such term shall not include— (A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made— (i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary, or (ii) for a specified period of 10 years or more, (B) any distribution to the extent such distribution is required under section 401(a)(9), and (C) any distribution which is made upon hardship of the employee.”
Clause (i) is your pension. It is not that the plan declines to process a rollover — the payment is outside the definition, so there is nothing to roll.
Coordinate this with the rest of your retirement plan
A pension election is usually a one-time choice you cannot revisit, and an adviser can weigh it against your other income, your spouse’s position and how long the money has to last, though that does not replace the numbers in your own plan documents.
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What that actually costs you, stated plainly
| Lump sum | Monthly annuity | |
|---|---|---|
| Eligible rollover distribution? | Yes | No — excluded by §402(c)(4)(A)(i) |
| Can be moved to an IRA | Yes | No |
| Can be left to heirs as a balance | Yes, as an IRA balance | Only through whatever survivor form you elected |
| Subject to the §3405(c) 20 percent held back if paid to you — that is withholding, not tax | Yes, unless paid directly | No — it is not an eligible rollover distribution |
| Reversible later | No | No |
The asymmetry, and it runs one way only. Take the lump sum and you can buy a lifetime income later with some or all of it, on your own timing and from a seller you choose. Take the annuity and you cannot convert back — not through a rollover, because §402(c)(4)(A)(i) says it is not one. That is a real option with real value, and it does not appear anywhere in the monthly comparison. It also cuts against a common framing: the annuity is not the safe default you can revisit later. It is the more final of the two choices.
The clause people trip on next
Clause (ii) excludes a series “for a specified period of 10 years or more” as well. So a plan that offers a fixed-term payout rather than a lifetime one has not thereby created something rollable, if the term reaches that length. The test is the shape of the series, not the label the plan puts on it.
None of this argues for the lump sum. Optionality is worth something and longevity insurance is worth something, and which is worth more is exactly what the break-even arithmetic and your household’s survivor need decide. The point of this page is narrower: know which door closes behind you.
Sources
IRC §402(c)(4), quoted verbatim, including subparagraph (A) clauses (i) and (ii); IRC §402(c)(1). 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.