PBGC Finalizes Changes to Assumptions Used in Certain Valuations

The Pension Benefit Guaranty Corporation (PBGC) has released a final rule titled Valuations Assumptions and Methods. The final rule would amend subpart B of the PBGC’s regulation Allocation of Assets in Single-Employer Plans and update the interest, mortality, and expense assumptions used to determine the present value of benefits for a single-employer pension plan ending in a distress or involuntary termination. The assumptions are also used for certain multiemployer withdrawal liability calculations and for other purposes.

Consistent with the proposed rule issued last year, major provisions of the proposal include the following.

  • Modernizing the interest assumption structure by adopting a yield curve approach
  • Enabling the use of market interest rates as of the date of liability measurement (i.e., the valuation date) as the basis for the interest assumption
  • Increasing transparency by using a procedure based on publicly available yield curves as of the valuation date
  • Adopting a more recent mortality table along with a generational mortality improvement projection
  • Simplifying the expense assumption

PBGC asserts that there are no notable changes from the proposed rule, which was issued August 18, 2023. The PBGC released a white paper, describing the methodology that will be used in determining the ERISA 4044 Yield Curve. The final rule applies to calculations where the valuation date is on or after July 31, 2024.