The Pension Benefit Guaranty Corporation (PBGC) on Nov. 28 published a final rule amending its regulation on Allocation of Assets in Single-Employer Plans by substituting a new table for selecting the retirement rate category.
The new table will be used to determine the applicable expected retirement age for participants in single-employer plans that are in distress or that are being involuntarily terminated and have valuation dates in 2024. The table is used to compute the value of early retirement benefits, as well as the total value of a plan’s benefits.
The final rule will be effective Jan. 1, 2024.
Appendix D of ERISA Section 4044
This final rule amends Appendix D to replace Table I-23 with Table I-24 to provide an updated correlation, appropriate for calendar year 2024, between the amount of a participant's benefit and the probability that the participant will retire early. Table I-24 will be used to determine the value of benefits in plans with valuation dates during calendar year 2024.
Table I in Appendix D (Selection of Retirement Rate Category) 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 the unreduced retirement age. The table applies only to plans with valuation dates in the current year; the PBGC updates it annually to reflect changes in the cost of living.
Tables II-A, II-B, and II-C (Expected Retirement Ages for Individuals in the Low, Medium, and High Categories, respectively) are used to determine the expected retirement age after the probability of early retirement has been determined using Table I. Those tables establish, by probability category, the expected retirement age based on the earliest age a participant could retire under the plan and the unreduced retirement age. This expected retirement age is used to compute the value of the early retirement benefit and the total value of benefits under the plan.
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