A few summers ago, many retired auto employees faced a tough financial decision.

First Ford Motor Co., and then General Motors Co., decided to offer former employees and salaried retirees the option of forgoing their monthly pension payments in favor of a lump-sum payout. These two offers were the first of their kind on such a large scale. At the time, several commentators noted that this possibly represented the death knell for defined benefit retirement plans, though such plans had already long been out of favor in the private sector. And while Ford and GM’s offers were the first, the companies were not the only ones turning to lump-sum payout offers to reduce risk. Once Ford and GM opened the door, many other large employers followed suit.

Now, however, any company that does not already have permission from the IRS has lost this option.

In a notice issued in early July, the Service and the Treasury Department together banned lump-sum pension payout offers to retirees already receiving benefits. Unless a company already has a private letter ruling or a determination from the IRS, it can’t ask its retirees to consider accepting a payout.

David Levine, a principal at Groom Law Group Chartered, explained to Bloomberg BNA that the notice grew out of concerns held by the IRS, the Labor Department and the Pension Benefit Guaranty Corporation (PBGC) about such offers. The notice essentially says, “Sorry, effective now, you can’t do it anymore,” Levine stated. (1)

The concerns that the notice addresses are not unfounded. There are real hazards to taking such a payout, and some retirees may not have the tools to properly evaluate them. The Wall Street Journal reported that 45 to 65 percent of workers take a lump sum when offered (2); it is unlikely that all of those decisions are made with the full financial picture in mind. For instance, it may not always be obvious how to determine the relative value of the lump sum versus the monthly annuity. The retiree, not the company, will bear investment risk for the lump sum, and it is the retiree, not the company, who will have to make guesses about health and longevity in the future. There may also be certain perks in the pension that would be sacrificed by taking the one-time sum, such as spousal benefits. And in some situations, there could be tax consequences, depending on how the lump sum is handled.

These risks are real, and shouldn’t be dismissed. But the new regulations assume that they mean there is no situation in which accepting a lump sum is the better option for the retiree. This simply is not true.

Retirees with a sophisticated understanding of their finances, or who work with sophisticated financial advisers, are more likely to have the tools to properly evaluate such an offer. If the company providing the pension is faltering, for instance, it may make more sense to take a lump sum and avoid the risk of a potential haircut if the business’ finances get worse. While the PBGC is poised to cover any shortfalls in the plans it covers, it is also running a serious deficit – approximately $62 billion as of fiscal 2014. In other cases, retirees may find themselves in situations where they prefer greater control over their finances. Or they need immediate access to a greater portion of their funds. In some cases, such concerns may legitimately outweigh the upside of a guaranteed income stream.

The risks that retirees, especially older ones, face when making a major financial decision are very real. Predatory practices in a variety of scenarios, not only a lump-sum pension payout, can wipe out a nest egg with no time or resources to rebuild.

Yet while many retirees are vulnerable to bad advice, that does not mean every retiree is. Given the wide range of ages, mental capacities, life circumstances and financial backgrounds among them, it is misguided to think that none of them can make an informed decision in this situation. In the wrong hands, mundane objects can become deadly weapons; that doesn’t mean we should ban scissors or baseball bats from public life.