PBGC to Continue to Make Lump Sum Interest Rates Available
FOR IMMEDIATE RELEASE
March 16, 2000
The Pension Benefit Guaranty Corporation (PBGC) announced today that it intends to continue to calculate and publish lump sum interest rates using its current methods (or a surrogate for those rates) indefinitely. Many ongoing pension plans use these PBGC rates to determine the amounts of lump sum pension benefits they pay to workers and retirees.
In a final rule, PBGC commits to making these rates available indefinitely and provides plans with a simple way to refer to these "historical" rates, regardless of whether PBGC in the future changes the rates it uses for its own purposes. Currently, PBGC has no plans to make such changes. In developing the rule, PBGC reviewed comments from practitioners on whether PBGC should continue to make these rates available in light of statutory changes. Responding to an October 26, 1998 Federal Register notice, commenters expressed an ongoing need for these rates.
"Our customers told us they need these rates and we're delighted to meet their needs," said PBGC Executive Director David M. Strauss.
A related final rule, also issued today, simplifies PBGC's assumptions for valuing benefits when an underfunded plan terminates. The valuation affects the amount of PBGC's employer liability claim and worker benefit entitlements that exceed guaranteed benefits. PBGC has been using two sets of assumptions for these valuation purposes -- one for benefits to be paid as annuities and another for benefits payable as lump sums. Under the final rule, PBGC would use the annuity assumptions regardless of the form in which the payment is made.
Both final rules will be published in the March 17, 2000 Federal Register and will take effect on May 1, 2000.
PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974 (ERISA) to guarantee payment of basic pension benefits earned by about 42 million American workers and retirees participating in more than 44,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.
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PBGC No. 00-18