PBGC Amends Benefit Payment Rules

The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule amending its regulations on guaranteed benefits and asset allocation. The amendments incorporate changes the Pension Protection Act of 2006 (PPA) made to the rules for participants with certain ownership interests.
 

Before the PPA was enacted, the owner-participant provisions applied to any participant who was a “substantial owner” at any time within the 60 months preceding the date on which the determination was made. The PPA revised the owner-participant provisions, in large part, by

making them applicable to “majority owners” instead of substantial owners.

The final rule:
 

• replaces the guarantee limitations applicable to substantial owners with a new limitation applicable to majority owners;

 

• amends the PBGC's asset allocation regulation by prioritizing funding of all other benefits in priority category 4 ahead of those benefits that would be guaranteed but for the new limitation;

 

 

• clarifies that plan administrators may continue to use the simplified calculation in the existing rule to estimate benefits funded by plan assets;

 

 

• adds clarifying language concerning bankruptcy terminations under the PPA; and

 

 

• provides new examples to aid in implementation.

Like the PPA provisions that this rule incorporates, the amendments are applicable to plan terminations:

 

 

 

• under Section 4041(c) of ERISA regarding which notices of intent to terminate are provided under Section 4041(a)(2) of ERISA after Dec. 31, 2005; and

 

 

 

• under Section 4042 of ERISA regarding which notices of determination are provided under that section after Dec. 31, 2005.

The PBGC is not amending its regulation on termination of single-employer plans.

The amended rule is effective Nov. 2, 2018.