PBGC Amends its Regulations on Benefits Payable in Terminated Single-Employer Plans and Allocation of Assets in Single-Employer Plans

The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule that amends its regulations on benefits payable in terminated single-employer plans and allocation of assets in single-employer plans. 

The PBGC has amended the regulations to prescribe certain interest assumptions under the benefit payments regulation for plans with valuation dates in October 2020 and interest assumptions under the asset allocation regulation for plans with valuation dates in the fourth quarter of 2020. Those interest assumptions are used for valuing benefits and paying certain benefits under terminating single-employer plans covered by the pension insurance system the PBGC administers. Some private-sector pension plans use these interest rates to determine lump sum amounts payable to plan participants.

This final rule updates appendices B and C of the benefit payments regulation to provide the rates for October 2020 measurement dates. Unlike the interest assumptions in effect for September 2020, the October 2020 assumptions represent no change in the immediate rate and are otherwise unchanged. The October 2020 lump sum interest assumptions will be 0.00% for the period during which a benefit is (or is assumed to be) in pay status and 4.00% during any years preceding the benefit’s placement in pay status.

Effective Date

The amended regulations are effective Oct. 1, 2020.

The PBGC says that it will not be seeking public comment on this final rule and will be making the assumptions it is setting forth effective less than 30 days after publication because of the need to provide immediate guidance for the valuation and payment of benefits under plans with valuation dates during October 2020.

The PBGC notes that it updates appendix B of the asset allocation regulation each quarter and appendices B and C of the benefit payments regulation each month. It adds that it considers notice and public comment on this amendment impracticable because: (1) the new interest assumptions need to be issued promptly so that they are available to value benefits and (2) plans that rely on the PBGC to publish them each month or each quarter so they can calculate lump sum benefit amounts.