PBGC Proposes Updated Rules Concerning Benefits Payments

The Pension Benefit Guaranty Corporation (PBGC) has issued two proposed rules related to its ERISA Section 4022 Benefits Payment Regulation.

The first proposal would do the following.

• Modernize the assumptions the PBGC uses to determine de minimis lump sum benefits in PBGC-trusteed terminated single-employer plans; Specifically, under this proposed rule, PBGC would adopt the interest and mortality assumptions from of Internal Revenue Code Section 417(e)(3) for this purpose.
• Provide a fixed set of immediate and deferred interest rates for use by private-sector plans that use the current PBGC lump sum interest rates to determine lump sums.
• Discontinue the PBGC’s monthly calculation and publication of the interest rates used for this purpose. Because some private-sector plans use PBGC’s lump sum interest rates, the proposal would provide a final interest rate set for private-sector plans to use for valuation dates on or after the effective date of the final rule.

The second proposal would change the PBGC’s regulations on Benefits Payable in Terminated Single-Employer Plans and Allocation of Assets in Single-Employer Plans. The changes would make clarifications and codify policies involving payment of lump sums, changes to benefit form, partial benefit distributions and valuation of plan assets.

More specifically, this proposed rule would:

• Clarify that PBGC’s rules on payment of a lump sum are unaffected by election of a lump-sum distribution before plan termination.
• Change wording that refers to the dollar amount currently subject to cashout by statute ($5,000) so it refers instead to the statutory provision that specifies that dollar amount.
• Clarify that a de minimis benefit of a participant who dies after plan termination will be paid as an amount due a decedent, not as a qualified preretirement survivor annuity.
• Clarify that benefits will be paid to estates only as lump sums.
• Clarify that accumulated mandatory employee contributions may not be withdrawn if benefits are in pay status when a plan becomes trusteed.
• Clarify that the form of benefit in pay status when a plan becomes trusteed will not be changed.
• Clarify that pre-trusteeship partial distributions are considered in determining benefits.
• Require that fair market value or fair value, as appropriate, be used for purposes of valuing assets to be allocated to participants’ benefits and in determining employer liability and net worth.

Both proposed rules will be published in the Federal Register on Sept. 30, with a 60-day public comment period.

Making Comments

Comments about the first proposal may be submitted by any of the following methods:

• Through the federal eRulemaking Portal: https://www.regulations.gov.
• By sending an email to: [email protected]. Refer to RIN 1212–AB41 in the subject line.
• By mail or hand delivery to: Regulatory Affairs Division, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW, Washington, DC 20005–4026.

All submissions must include the agency’s name (Pension Benefit Guaranty Corporation or PBGC) and the Regulation Identifier Number for this rulemaking (RIN 1212–AB41).

Comments about the second proposal may be submitted by any of the following methods:

• Through the federal eRulemaking Portal: https://www.regulations.gov.
• By sending an email to: [email protected].
• By mail or hand delivery to: Regulatory Affairs Division, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW, Washington, DC 20005–4026.

All submissions must include the agency’s name (Pension Benefit Guaranty Corporation or PBGC) and the Regulation Identifier Number for this rulemaking (RIN 1212–AB27).