The Pension Benefit Guaranty Corporation (PBGC) on Sept. 15 issued a final rule that amends its regulations on benefits payable in terminated single-employer plans and allocation of assets in single-employer plans. It amends the regulations to prescribe interest assumptions under the benefit payments regulation for valuation dates in October 2016 and interest assumptions under the asset allocation regulation for valuation dates in the fourth quarter of 2016. The amendments are effective Oct. 1, 2016.
The fourth quarter 2016 interest assumptions under the allocation regulation will be 1.98% for the first 20 years following the valuation date and 2.67% thereafter. Compared with the interest assumptions in effect for the third quarter, these interest assumptions represent no change in the select period (the period during which the select rate (the initial rate) applies), a decrease of 0.52% in the select rate, and a drop of 0.18% in the ultimate rate (the final rate).
The October 2016 interest assumptions under the benefit payments regulation will be 0.50% for the period during which a benefit is in pay status and 4% during any years preceding the benefit's placement in pay status. These interest assumptions are unchanged from those in effect for September 2016.
The interest assumptions are used for valuing and paying benefits under terminating single-employer plans covered by the pension insurance system the PBGC administers. They are intended to reflect current conditions in the financial and annuity markets.
The PBGC updates assumptions under the asset allocation regulation quarterly; it updates assumptions under the benefit payments regulation monthly.
The fourth quarter 2016 interest assumptions under the allocation regulation will be 1.98% for the first 20 years following the valuation date and 2.67% thereafter. Compared with the interest assumptions in effect for the third quarter, these interest assumptions represent no change in the select period (the period during which the select rate (the initial rate) applies), a decrease of 0.52% in the select rate, and a drop of 0.18% in the ultimate rate (the final rate).
The October 2016 interest assumptions under the benefit payments regulation will be 0.50% for the period during which a benefit is in pay status and 4% during any years preceding the benefit's placement in pay status. These interest assumptions are unchanged from those in effect for September 2016.
The interest assumptions are used for valuing and paying benefits under terminating single-employer plans covered by the pension insurance system the PBGC administers. They are intended to reflect current conditions in the financial and annuity markets.
The PBGC updates assumptions under the asset allocation regulation quarterly; it updates assumptions under the benefit payments regulation monthly.
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