PBGC Issues Guidance on Present Value of Maximum Guaranteed Benefit

The Pension Benefit Guaranty Corporation (PBGC) on Nov. 7 posted a table showing the applicable present values of the maximum PBGC guaranteed benefit for 2020 plan years.

The table shows the present value of the maximum PBGC guaranteed benefit under Code Section 436(d)(3)(A)(ii) and ERISA Section 206(g)(3)(C)(i)(II).

Code Section 436(d)(3) and ERISA section 206(g)(3)(C) provide that if the adjusted funding target attainment percentage is at least 60%, but less than 80%, a plan generally may not pay a prohibited payment to the extent the payment exceeds the lesser of:

• 50% of the amount of the payment that would be paid if the restriction did not apply, or
• the present value, determined under PBGC guidance, of the maximum guarantee under ERISA Section 4022. These amounts are determined each year by the PBGC in accordance with methodology provided in PBGC Technical Update 07-4.  

The PBGC developed the 2020 table using the Code Section 417(e) segment rates for August 2019 (2.09%, 3.00% and 3.61%, respectively) for plan years beginning in 2020 and the Section 417(e) applicable mortality table for 2020.

A two-column spreadsheet version of the table is available here.