The Pension Benefit Guaranty Corporation (PBGC) published a final rule (Final Rule) on September 9 providing that effective January 1, 2021, it will use the interest and mortality assumptions under Internal Revenue Code (Code) Section 417(e)(3) when determining de minimis lump sum benefits for single-employer defined benefit plans undergoing distress or involuntary terminations. The Final Rule does not apply to multiemployer plans.
This change is part of the PBGC’s ongoing modernization initiative. To that end, the Final Rule also discontinues the PBGC’s monthly calculation and publication of interest rate assumptions. Acknowledging that many plans use the PBGC’s lump sum interest rates in the calculation of their own lump sum distributions, the Final Rule provides a table for plans to use to determine interest assumptions in accordance with the PBGC’s historical methodology.