
Quoting
hr for me
If they roll the cash lump sum to an IRA, there are no current tax ramifications. If they take the cash lump sum directly, yes they would generally owe the 10% early withdrawal penalty (assuming they are around 40 since they said they had 25 more years of work) plus federal and state income taxes. That's why I asked the question on whether they had the fortitude to not touch the IRA until the same retirement age...
As for investing many pension plans for many many years made interest rate assumptions that were much more than 6% and when the market has dropped, those pension plans have become underfunded and some haven't paid out even close to what they have promised, even with PBGC backing.