PBGC Updates Table for Distressed and Terminating DB Plan Valuations

The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule amending its regulation on Allocation of Assets in Single-Employer Plans by substituting a new table for determining expected retirement ages for participants in defined benefit (DB) plans undergoing distress or involuntary termination with valuation dates falling in 2019.

This table is needed to compute the value of early retirement benefits and, thus, the total value of benefits under a plan.

The PBGC explains that under the asset allocation regulation, early retirement benefits for plans undergoing distress or involuntary termination are valued based on the annuity starting date, if a retirement date has been selected, or the expected retirement age, if the annuity starting date is not known on the valuation date. The table is used to determine whether a participant has a low, medium, or high probability of retiring early. The determination is based on the year a participant would reach “unreduced retirement age” (i.e., the earlier of the normal retirement age or the age at which an unreduced benefit is first payable) and the participant’s monthly benefit at unreduced retirement age.