PBGC Issues Final Rule on Benefits Payable in Terminated Single-Employer Pension Plans

On July 11, 2023, the Pension Benefit Guaranty Corporation (PBGC) issued a final rule on benefits administration for terminated single-employer pension plans. The final rule aims to increase transparency of benefits administration for terminated plans while also clarifying and simplifying regulatory language.

Key updates include clarification on the following:

• PBGC’s rules on payment of a lump sum are unaffected by the election of a lump-sum distribution before plan termination.
• 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.
• Benefits will be paid to estates only as a lump sum.
• Accumulated mandatory employee contributions may not be withdrawn if benefits are in pay status when the plan becomes trusteed.
• The form of benefit in pay status when a plan becomes trusteed will not be changed.

Additionally, the final rule:

• Changes wording that refers to the current statutory dollar amount subject to cash out ($5,000) to instead refer to the statutory provision that specifies the maximum dollar amount to avoid the need for annual regulatory updates.
• Requires that 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 final rule is effective August 10, 2023, and applies to plan terminations thereafter. However, PBGC notes that the final rule codifies practices PBGC has followed for many years and will continue to follow in the interim. Employers who sponsor single-employer pension plans should be aware of this final rule.

Federal Register: Benefit Payments and Allocation of Assets »