What term describes paying the remaining pension payments as a lump-sum when there is no eligible spouse for a post-retirement death?

• A. Annuity
• B. Withdrawal
• C. Survivor benefit
• D. Commuted lump-sum

Answer: (D)

The idea here is converting a stream of future pension payments into a single upfront amount. When there’s no eligible spouse to receive survivor benefits after retirement, the plan may offer to “commute” the remaining lifetime payments into one lump-sum. That upfront payment is called a commuted lump-sum. The word “commuted” signals exchanging many future payments for a single payment today, based on actuarial assumptions like life expectancy and interest rates plus the plan’s rules. This option gives the retiree immediate access to the remaining value of the benefit, which can sometimes be rolled into an RRSP or similar vehicle, subject to tax and plan provisions. It contrasts with continuing monthly annuity payments, taking a general withdrawal, or providing a survivor benefit to a spouse.