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PBGC Issues Q4 2021 Interest Rate Assumptions

Government Affairs

The Pension Benefit Guaranty Corporation (PBGC) issued a final rule Sept. 14 that amends its regulation on Allocation of Assets in Single-Employer Plans to prescribe interest assumptions under the asset allocation regulation for plans with valuation dates in the fourth quarter of 2021. These interest assumptions are used for valuing benefits under terminating single-employer plans and for other purposes.

The fourth quarter 2021 interest assumptions will be 2.40% for the first 20 years following the valuation date and 2.11% thereafter. The new rates compare to those of the 3rd quarter of 2020 as follows:

The fourth quarter 2021 rates compare to those of the third quarter as follows: 

Measure Change, Q3 to Q4
Select rate     + 0.27%
Ultimate (final) rate    - 0.12%

 

And the rates for the fourth quarter of 2021 compare to those of the fourth quarter of 2020 as follows: 

 

Measure Q4 2020 Q4 2021  Change, Q4 2020 to Q4 2021
Interest assumptions for the first 20 years following the valuation date   1.69% 2.40%    +0.71%
Interest assumptions for years after the first 20 years following the valuation date    1.66% 2.11%    +0.45%

 

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. It also uses the assumptions to determine the value of multiemployer plan benefits and certain assets when a plan terminates by mass withdrawal in accordance with its regulation on Duties of Plan Sponsor Following Mass Withdrawal (29 CFR part 4281).

Effective Date

The first quarter 2021 interest assumptions will be effective Oct. 1, 2021. They appear in the Federal Register of Sept. 15, 2020.