Just guessing, but, lump sum may be more than the current amount that the person has contributed, but less than what the pension guarantees but may not be able to attain. That is, person may have put in 100k; and a payout is 150k. That seems like a loss, except the pension may also be built around assumptions of 7% growth in that 100k per year; in reality it may be seeing only 3% growth. Better to get it off the books than have to service it in 30 years. And for the individual, better to get more and be able to invest it elsewhere, than to risk it in a pension that may go under or otherwise be unable to meet the level of return you expect. So, win/win.
Defined benefit were typically paid in by the company. That's the thing that makes them attractive. As an employee you do nothing and, when you retire, you potentially get a nice check every month. I've known people I worked with in a past life who had even totally forgotten about the benefit.
But you're probably basically correct. It's a lump sum that's likely a significant payout but less than the computed actuarial value that would have to be paid out.
