The Pension Benefit Guaranty Corporation (PBGC) on March 12 issued the interest assumptions under the asset allocation regulation for plans with valuation dates in the second quarter of 2024.
The assumptions are contained in a final rule that amends the PBGC’s regulation on Allocation of Assets in Single-Employer Plans and are used for valuing benefits under terminating single-employer plans. “The rates are issued for the specific purpose of determining the present value of annuities in involuntary and distress terminations of single-employer plans and for certain multiemployer plan purposes,” says Kelsey Mayo, the American Retirement Association’s (ARA) Director of Regulatory Policy.
The assumptions. The first quarter 2024 interest assumptions will be 5.50% for the first 20 years following the valuation date and 4.83% thereafter.
Compared to the interest assumptions in effect for the first quarter of 2024, the interest assumptions for the first quarter of 2024 represent no change in the select period (the period during which the select rate (the initial rate) applies), an increase of 0.05 percentage points in the select rate, and an increase of 0.39 percentage points in the ultimate rate (the final rate).
The rates for the second quarter of 2024 continue the trend that began with the first quarter of 2024, when the rates were the highest since the second quarter of 2023. However, the interest assumption rate for years after the first 20 years after the valuation date fell sharply from the first quarter. Mayo says that since the rates moved separately, she is uncertain how the actual valuation of benefits would be impacted, although she suspects that the impact would be small.
The use of the assumptions. The PBGC uses the interest assumptions in Appendix B to Part 4044 to determine the present value of annuities in an involuntary or distress termination of a single-employer plan under the asset allocation regulation. The assumptions are also used to determine the value of multiemployer plan benefits and certain assets when a plan.
Effective date. These interest rate assumptions will be effective April 1, 2024.
Finding Out More
The interest rate assumptions appear in the Federal Register of March 13, 2024. It is available here.
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