PBGC Updates Table for Terminating Plans’ Valuations

Clients with pension plans undergoing distress or involuntary termination should know the agency issued a new table for determining expected retirement ages for participants.

Defined benefit plan sponsor clients undergoing distress or involuntary termination with valuation dates falling in 2016 have a new table for determining expected retirement ages for participants.

This table is needed in order to compute the value of early retirement benefits and, thus, the total value of benefits under a plan.

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The Pension Benefit Guaranty Corporation (PBGC) explains that guaranteed benefits and benefit liabilities under a plan that is undergoing a distress termination must be valued in accordance with subpart B of part 4044 of the Employee Retirement Income Security Act (ERISA). Appendix D of part 4044 contains tables to be used in determining the expected early retirement ages.

Table I in appendix D (Selection of Retirement Rate Category) is used to determine whether a participant has a low, medium, or high probability of retiring early. The determination is based on the year a participant would reach “unreduced retirement age” (i.e., the earlier of the normal retirement age or the age at which an unreduced benefit is first payable) and the participant’s monthly benefit at unreduced retirement age. The table applies only to plans with valuation dates in the current year and is updated annually by the PBGC to reflect changes in the cost of living, among other things.

Plan sponsors use Tables II-A, II-B, and II-C (Expected Retirement Ages for Individuals in the Low, Medium, and High Categories respectively) to determine the expected retirement age after the probability of early retirement has been determined using Table I. This expected retirement age is used to compute the value of the early retirement benefit and, thus, the total value of benefits under the plan.

The agency issued a final rule amending appendix D to replace Table I-15 with Table I-16 in order to provide an updated correlation, appropriate for calendar year 2016, between the amount of a participant’s benefit and the probability that the participant will elect early retirement.

The text of the final rule is here.

Mercer BenefitsCentral Gets DB Upgrade

Mercer expands defined benefit capabilities within BenefitsCentral participant website.

Mercer’s participant website, Mercer BenefitsCentral, now allows clients to “initiate, manage, and commence their pension plan benefit completely online.”

The new capabilities are targeted at large market defined benefit (DB) plans, Mercer says, providing participants with an alternative approach to joining the pension plan and managing/understanding benefit payments.

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Website features help participants track their savings progress and compare available payment types within the DB plan. Participants are able to manually set how and where their payments should be sent, and they can upload any required documents or submit their commencement request for processing.

The firm notes the online tools already went live for 55,000 plan participants in October. In addition, Mercer BenefitsCentral is being made available to 189,000 health and benefits plan participants.

Matt Benjamin, participant experience leader for Mercer’s Benefits Administration Practice, highlights the participant website’s intuitive design, advanced personalization, and strategically developed education and decision support tools.

“Our online retirement functionality enables retirees to enjoy a seamless, hassle-free commencement experience,” he explains, “so that they can spend less time on their benefits and more time enjoying this stage of life with family and friends.”

More information is available here

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