The Pension Benefit Guaranty Corporation (PBGC) on Dec. 15 issued the interest assumptions under the asset allocation regulation for plans with valuation dates in the first quarter of 2024.
The assumptions are contained in a final rule that amends the PBGC’s regulation on Allocation of Assets in Single-Employer Plans. These interest assumptions are used for valuing benefits under terminating single-employer plans and for other purposes.
The assumptions. The first quarter 2024 interest assumptions will be 5.45% for the first 20 years following the valuation date and 5.22% thereafter.
Compared to the interest assumptions in effect for the fourth quarter of 2023, the interest assumptions for the first quarter of 2024 represent no change in the select period (the period during which the select rate (the initial rate) applies), an increase of 0.39 percentage points in the select rate, and an increase of 0.85 percentage points in the ultimate rate (the final rate).
The rates for the first quarter of 2024 will be the highest since the second quarter of 2023, when they stood at 5.38% for the first 20 years following the valuation date and 5.09% thereafter. Both rates fell from the second to the third quarter of 2023 and from the third to the fourth quarter.
The rates for the first quarter of 2024 are noticeably higher than those the PBGC set for the first quarter of last year.
The use of the assumptions. The PBGC uses the interest assumptions in Appendix B to Part 4044 to determine the present value of annuities in an involuntary or distress termination of a single-employer plan under the asset allocation regulation. The assumptions are also used to determine the value of multiemployer plan benefits and certain assets when a plan.
Effective date. These interest rate assumptions will be effective Jan. 1, 2024.
Finding Out More
The interest rate assumptions appear in the Federal Register of Dec. 18, 2023.
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