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PBGC Amends Regulation on Allocation of Assets in Single-Employer Plans

The Pension Benefit Guaranty Corporation (PBGC) has amended its regulation on allocation of assets in single-employer plans by substituting a new table for determining expected retirement ages for participants in pension plans that are distressed or are being involuntarily terminated and that have valuation dates falling in 2016. This table is used to compute the value of early retirement benefits and the total value of benefits under a plan.

The table the PBGC has replaced, Table I in appendix D (Selection of Retirement Rate Category) to 29 CFR Part 4044, is used to determine whether a participant has a low, medium or high probability of retiring early. The determination is based on the year a participant would reach “unreduced retirement age” (i.e., the earlier of the normal retirement age or the age at which an unreduced benefit is first payable) and the participant’s monthly benefit at unreduced retirement age.

The table applies only to plans with valuation dates in the current year and is updated annually by the PBGC to reflect changes in the cost of living and other relevant factors. Accordingly, the amendments to the regulation go into effect on Jan. 1, 2016.