PBGC Sets New Interest Rate Assumptions

November 15, 2010 (PLANSPONSOREurope.com) – The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule updating the benefit payments interest assumptions for terminated, single-employer plans for December 2010.

The December 2010 interest assumptions under the benefit payments regulation will be 2.25% for the period during which a benefit is in pay status and 4% during any years preceding the benefit’s placement in pay status. In comparison with the interest assumptions in effect for November 2010, these interest assumptions represent an increase of 0.50% in the immediate annuity rate and are otherwise unchanged.  

The agency said interest assumptions are intended to reflect current conditions in the financial and annuity markets. Assumptions under the benefit payments regulation are updated monthly.  

The agency’s regulation on Benefits Payable in Terminated Single-Employer Plans (29 CFR part 4022) prescribes actuarial assumptions—including interest assumptions—for paying plan benefits under terminating single-employer plans covered by title IV of the Employee Retirement Income Security Act. PBGC uses the interest assumptions to determine whether a benefit is payable as a lump sum and to determine the amount to pay.   

The agency said Appendix C to Part 4022 contains interest assumptions for private-sector pension practitioners to refer to if they wish to use lump-sum interest rates determined using PBGC’s historical methodology.   

The final rule is here.