PBGC Issues Benefits Payable and Allocation Guidance for Single-Employer Plans

The Pension Benefit Guarantee Corporation (PBGC) has issued a final rule updating regulations regarding benefits payable in terminated single-employer plans and allocation of assets in single-employer plans. The PBGC notes that the changes make clarifications and formalize policies involving payment of lump sums, changes to benefit form, and valuation of plan assets. The PBGC further notes that most of the amendments codify policies and practices that it has followed for many years.

Key provisions include the following.

  • Clarifies that the PBGC’s rules on payment of a lump sum are unaffected by election of a lump-sum distribution before plan termination.
  • Changes wording that refers to the current statutory dollar amount subject to cashout ($5,000) to instead refer to the statutory provision that specifies the maximum dollar amount.
  • Clarifies that a de minimis benefit of a married participant who dies after plan termination will be paid as an amount due a decedent, not as a qualified preretirement survivor annuity.
  • Clarifies that benefits will be paid to estates only as lump sums.
  • Clarifies that accumulated mandatory employee contributions may not be withdrawn if benefits are in pay status when a plan becomes trusteed.
  • Clarifies that the form of benefit in pay status when a plan becomes trusteed will not be changed.
  • Requires that the 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.

The amendments under this final rule apply to plan terminations initiated at least 30 days after publication in the federal register.