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News & Policy

PBGC Seeks Comments On Benefits Valuation

March 18, 1997

The Pension Benefit Guaranty Corporation (PBGC) today asked for public comments on whether it should amend its regulation covering the valuation of benefits in terminating pension plans. At the same time, the agency announced the assumptions it will use to calculate the 1997 list of 50 companies with the largest underfunded pension plans.

In an advance notice of proposed rulemaking in the March 19, 1997 Federal Register, PBGC said it was considering incorporating new mortality tables into its regulations for valuing benefits.

PBGC currently uses a mortality assumption based on the 1983 Group Annuity Mortality Table. The combination of PBGC's mortality and interest assumptions is intended to reflect the market price of purchasing annuities to cover workers' pensions in the event a plan is terminated.

In 1995, a task force formed by the Society of Actuaries recommended new mortality tables for a new Group Annuity Reserve Valuation Standard and a new Group Annuity Mortality Valuation Standard. In 1996, the National Association of Insurance Commissioners adopted the new tables as models for determining reserve requirements for group annuities.

PBGC invites comments on its adoption of the new tables and any need for modifications. PBGC also invites comments on any other issues relating to its valuation and allocation regulations. In particular, PBGC would like to hear what steps it could take to simplify the valuation and allocation process. It is also interested in learning what additional annuity pricing information is available that PBGC could use in reviewing its valuation assumptions.

Comments must be received on or before May 19, 1997. In addition to comments mailed or delivered to PBGC's Office of the General Counsel, comments may also be sent by Internet e-mail to

In the meantime, the current mortality table and accompanying interest rate will be used in valuing the liabilities of underfunded pension plans. In a Technical Update (97-3) issued today, PBGC announced it will adjust plan liabilities using the GAM-83 mortality table and an interest rate of 5.8 percent, which reflect the cost of purchasing an annuity at the end of 1996 using PBGC's current valuation methodology.

PBGC is a federal agency created by the Employee Retirement Income Security Act of 1974 to guarantee payment of basic pension benefits earned by workers. It covers nearly 42 million American workers and retirees participating in about 55,000 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 by investment returns.

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PBGC No. 97-18