A private held pension buyout isn't a withdrawal from a retirement account so your employer is correct. There is no 10% early withdrawal penalty on this money. You would only pay regular income tax.
Technically this is your employer paying you a bonus in exchange for not having to manage the pension for you in the future. The buyout would be included on your W2 and just be taxed the same as your salary.
Before you accept the buyout it is a good idea to review all of the pros and cons - you're giving up retirement income in exchange for a lump sum payment now. Best to consult with a financial advisor.
@siriustock
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