PBGC Valuation Assumptions Rule a Highlight of Regulatory Agenda

The Office of Management and Budget (OMB) has released the Fall 2023 Pension Benefit Guaranty Corporation (PBGC) regulatory agenda, an update that enumerates proposed rules as well as those in final form. 

Valuation Assumptions Rule

A highlight of the fall update is the movement of the rule on valuation assumptions and methods, which had been proposed earlier in 2023 and now is in final form. 

The PBGC had proposed amendments to its regulation on allocation of assets in single-employer plans. It sought to make the changes in order to update the actuarial assumptions—the  interest, mortality, and expense assumptions—used to determine:

• the present value of a single-employer plan’s benefits under subpart B of the PBGC’s Regulation on Allocation of Assets in Single-Employer Plans (29 CFR part 4044) when it terminates in a distress or involuntary termination; and 
• the present value of multiemployer plan benefits in certain withdrawal liability calculations.

The PBGC argued that (1) the structure of its interest assumption under the benefits valuation regulation had become increasingly obsolete, and (2) a yield curve approach would better reflect the term structure of the fixed income investments that underlie the price of group annuities and better represent the present value of future benefits. The PBGC also sought to eliminate the lag between when data used to set its interest assumption are observed and the interest rate environment on the valuation date.

The PBGC had issued a notice of proposed rulemaking on Aug. 18, 2023; the period during which the PBGC would accept comments on it ended on Oct. 17. 

Other Final Rules 

Adjustment of Civil Penalties. This final rule is issued annually to amend the PBGC's civil penalty regulations to adjust the maximum penalty under ERISA for inflation. 

Actuarial Assumptions for Determining an Employer's Withdrawal Liability. The PBGC issued this final rule on Nov. 7. It prescribes actuarial assumptions which a multiemployer plan actuary may use in determining an employer’s withdrawal liability. It responds to public comments the PBGC received when it was in proposed form. 

Proposed Rules 

The OMB lists the following proposed rules on the Fall 2023 PBGC regulatory agenda. 

Multiemployer Plan Guaranteed Benefits. This proposed rule would clarify and codify policies on the determination of guaranteed benefits for participants in multiemployer plans.

Improvements to Rules on Recoupment of Benefit Overpayments. This proposed rule would improve PBGC's recoupment rules.

Penalties for Failure to Provide Certain Notices or Other Material Information. This proposed rule would codify PBGC's policies for assessing and waiving monetary penalties for failure provide certain required notices or other material information on time.

Miscellaneous Updates, Clarifications, and Improvements. This proposed rule would update, clarify, and improve these sections of the PBGC's regulations:

• Part 4006, to address SECURE Act changes affecting premium rates for CSEC plans;
• Part 4022, concerning benefits payable in terminated single-employer plans;
• Part 4041, concerning termination of single-employer plans; and 
• Part 4044, concerning allocation of assets in single-employer plans.