More companies have been making the move as administrative costs rise and as pension liabilities become more transparent on corporate balance sheets. Getty Images By Rachel L. Sheedy, Editor From Kiplinger's Retirement Report Hearing that your piece of the pension pie is migrating to an insurance company may be unsettling. While change can be scary, this news doesn’t need to frighten you. But it may present you with the unexpected choice of whether to take a lump sum of cold hard cash now or choose a future stream of guaranteed payments in retirement.SEE ALSO: Put Your Pension to Work Known as a “pension risk transfer,” this move allows a private-sector company to move pension liabilities off its books by using pension assets to buy a group annuity from an insurer. The process is government regulated, and a company must follow strict rules in selecting a financially sound insurer. “A plan sponsor can’t just go out to Bob’s Insurance Shop and take the cheapest insurance option,” says Matt McDaniel, the U.S. head of defined benefit risk at consulting firm Mercer. In recent years, more companies have been making the move as administrative costs rise and as pension liabilities become more transparent on corporate balance sheets and thus more scrutinized by investment analysts. This year, an estimated $18 billion, or about 10% of total corporate pension liabilities, will be transferred, says Ari Jacobs, global retirement solutions leader at consulting firm Aon Hewitt. In some cases, companies may just carve out certain groups. Retirees already receiving checks may be moved to an insurer, for instance. In such cases, the name on the check will switch from the company plan to the insurer, but payments remain the same. Advertisement Vested but terminated workers are usually the first group offered a lump sum. When a plan is terminated, current workers may get a window to take one, too. Those whose lump sum is valued at $5,000 or less will be cashed out. The money can be rolled into a 401(k) or an IRA or taken as a taxable distribution. Employees with larger vested amounts may be given the option to take an annuity instead of a lump sum—and it’s an irrevocable decision. “Usually, participants get around one to three months to make a decision,” says Mike Clark, senior consulting actuary at Principal. The insurance company taking over a company plan must honor the rules of the plan document, so any features and options available to a participant must remain the same. “Those cannot change,” says Ross Krinsky, a senior vice president at Fidelity Investments. If the company plan offers incentives for early or late retirement, for example, those same incentives must carry over to the insurer’s group annuity. Advertisement Deciding Which Route to Take When making the lump sum or annuity decision, a good place to start is to ask yourself if you have enough guaranteed income to cover essential expenses in retirement, says Robert Steen, advice director for retirement and complex planning for USAA. Add up expected Social Security benefits, annuity income and other pension income. If those sources cover your basic costs, then you might consider the lump sum. It might be tempting to think you can invest that lump sum and earn a high rate of return. But, Steen says, “there’s a big difference between having income and the possibility of income.” If your essential expenses aren’t covered by a foundation of income, then planning to earn stellar investment returns with a lump sum is likely not the best choice. Another big factor is your health and how long you expect to live. If you are in good health and your family has a history of longevity, you may be better off with the pension that lasts a lifetime. But if you are in poor health and your family tends to die young, then you might take the lump sum, so money can go to heirs. SEE ALSO: 5 Big Retirement Money Mistakes to Avoid Married couples need to consider not just the pensioner’s health and life expectancy, but that of the spouse, too. Find out what the survivor payout is, and figure whether that income is needed for the spouse who lives the longest.