PBGC Proposed Rule on Valuation Assumptions and Methods for Single-Employer Pension Plans; Comments Due October 17

The Pension Benefit Guaranty Corporation (PBGC) released a proposed rule to amend its regulation on allocation of assets in single-employer plans to update the interest, mortality, and expense assumptions used to determine the present value of benefits for a single-employer pension plan ending in a distress or involuntary termination. The assumptions are also used for certain multiemployer withdrawal liability calculations and for other purposes.

The proposed rule would:

• Modernize the interest assumption structure by adopting a yield curve approach;
• Enable the use of market interest rates as of the date of liability measurement (i.e., the valuation date) as the basis for the interest assumption;
• Increase transparency by using a procedure based on publicly available yield curves as of the valuation date;
• Adopt a more recent mortality table along with a generational mortality improvement projection; and
• Simplify the expense assumption.

The PBGC is also publishing a draft white paper describing the valuation methodology used to determine the ERISA 4044 yield curve. Once the rule is finalized, PBGC will modify the draft, as needed.

Comment are due October 17, 2023.