Perhaps more significantly for employers, the PBGC has announced that the per-participant flat-rate premium for plan year 2008 is $33.00 (up from $31.00 for Plan Year 2007) for single-employer plans and $9.00 (up from $8.00 for Plan Year 2007) for multiemployer plans. The premium rates are adjusted for inflation each year based on changes in the national average wage index, as required by the Deficit Reduction Act of 2005. These new rates are expected to be updated within PBGC’s e-filing application called My Plan Administration Account (My PAA) in January 2008. When My PAA is ready, filers will be able to prepare and submit Estimated F i lings for plan year 2008 (for which February 29, 2008 is the earliest filing due date for calendar year plans).
The per participant benefit figure was included in data released Tuesday by the Pension Benefit Guaranty Corporation detailing annual and monthly maximum benefit guarantees for retirees from age 45 to 75.
Impact of Early Retirements
The agency pointed out that the limit is higher for
those who retire later and lower for those who retire
earlier or elect survivor benefits. If a pension plan
terminates in 2008 but a participant does not begin
collecting benefits until after 2008, the 2008 maximum
insurance limits still apply.
The PBGC announcement said participant benefit levels are also affected by a prohibition against the agency guaranteeing benefits greater than the amount payable at the plan’s normal retirement age and limiting PBGC’s guarantee of benefit increases made within the five years before plan termination.
According to the announcement, the “overwhelming majority” of participants in plans taken over by the PBGC face no reduction in benefits from the legally imposed benefit limits, PBGC research shows. The largest reductions occur where participants earn pensions that significantly exceed the maximum insurance benefit or provide generous early retirement subsidies.
Under the PBGC’s single-employer insurance program, retirees sometimes can receive more than the maximum guaranteed benefit if the participant earned a benefit in excess of the maximum guaranteed amount; the participant retired or was eligible to retire three years prior to plan termination; and the plan had sufficient assets to pay benefits above the guaranteed amount.
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