On June 6, 2024, the Pension Benefit Guarantee Corporation (the “PBGC” or the “Agency”) finalized proposed amendments to its benefits valuation regulations on Allocation of Assets in Single Employer Plans (“benefits valuation regulation”). Located at 29 CFR part 4044, the final regs revise the interest, mortality, and expense assumptions used to determine the present value of benefits for single-employer pension plans ending in a distress or involuntary termination. Those same assumptions are also used for determinations of multiemployer withdrawal liability, 4010 reporting, and several other purposes under the Employee Retirement Income Security Act of 1974 (“ERISA”). Key changes to the assumptions include increased transparency, a shift toward a generational approach for mortality, and required use of a yield curve approach for interest calculations.

The PBGC’s Role in Protecting Pension Benefits

The PBGC is a federal agency formed under ERISA to protect pension benefits in private sector pension plans. One of the Agency’s main purposes is to ensure that these plans—which include both single-employer and multiemployer plans—have sufficient assets to pay all benefits in the event of a plan termination. If a covered plan terminates (or an employer sponsoring a covered plan goes bankrupt) without sufficient assets to pay all benefits owed to plan participants and beneficiaries, the PBGC can provide financial assistance (up to a set statutory amount) under one of its insurance programs.

PBGC Insurance Programs

The PBGC administers two insurance programs under title IV of ERISA: a single-employer plan termination program and a multiemployer plan insolvency program. The PBGC also maintains a special financial assistance program for certain “financially distressed” multiemployer plans.

Single Employer Program: Under the single-employer plan termination insurance program, covered single-employer plans lacking sufficient funds to pay guaranteed benefits may terminate in either a distress termination or an involuntary termination (i.e., a termination initiated by the PBGC). To terminate its plan in a distress termination under ERISA § 4041(c), an employer must meet certain tests to prove that it and members of its “controlled group” are financially incapable of supporting the plan. An involuntary (or PBGC-initiated) termination occurs when certain factors described in ERISA § 4042 are present, and allows the PBGC to terminate the subject plan even if the sponsoring company has not filed to terminate on its own initiative. In both types of terminations, the PBGC will be appointed as statutory trustee of the terminated plan and will use its own assets (as well as the remaining assets of the terminated plan) to ensure that plan participants and beneficiaries receive their guaranteed benefits.

Multiemployer Program: Under its multiemployer insurance program, the PBGC provides financial assistance under ERISA § 4261 to plans that are insolvent and unable to pay guaranteed benefits. The PBGC generally makes this assistance in the form of periodic loans which allow plans to pay benefits when they become due.

Special Financial Assistance Program: In addition to the assistance provided under its single-employer and multiemployer programs, the PBGC may also provide special financial assistance under ERISA § 4262 to qualifying multiemployer plans that are severely underfunded or “financially distressed.” To receive assistance under this program, a distressed plan must (a) demonstrate its eligibility under the program, (b) calculate the amount of assistance it requires in an application to the PBGC, and (c) comply with certain additional terms, conditions and reporting requirements on a go-forward basis.

Benefit Valuation Regulations & Assumptions

When the PBGC steps in as trustee under the single-employer insurance program, it assumes the responsibility of paying benefits to plan retirees in accordance with the provisions of title IV of ERISA. To faithfully discharge its duties, the PBGC must make several important determinations, including: (a) the extent to which participants’ benefits are funded under the benefits valuation rules; (b) whether a terminated plan has sufficient assets to pay guaranteed benefits; and (c) sponsor liability under ERISA § 4062 (i.e., how much the plan sponsor and its controlled group owe the PBGC as a result of plan termination), all of which require the PBGC to value a plan’s benefit liabilities.

To value a terminated plan’s benefit liabilities, the PBGC uses assumptions prescribed in its benefits valuation regulation. The PBGC’s longstanding policy in this regulation has been to use assumptions that produce valuations similar to the premiums charged by private-sector insurance companies for group annuities that provide similar benefits.

These assumptions are not just limited to single-employer plans; they also apply to situations where it is appropriate for liabilities to reflect private-sector group annuity prices, and as such are incorporated by reference in several other PBGC regulations. These regulations include: Annual Financial and Actuarial Information Reporting (29 CFR part 4010); Missing Participants (29 CFR part 4050); Notice, Collection and Redetermination of Withdrawal Liability (29 CFR part 4219); Special Financial Assistance by the PBGC (29 CFR part 4262); and Duties of Plan Sponsor Following Mass Withdrawal (29 CFR part 4281) (which provides that these assumptions are used to value liabilities for purposes of determining withdrawn employers’ reallocation liability in the event of a mass withdrawal from a multiemployer plan).

The Proposed Rule

On August 18, 2023, the PBGC issued a proposed rule designed to update the benefit valuation regulation’s interest, mortality, and expense assumptions. During the sixty-day notice-and-comment period, the Agency received five comment letters which generally supported the Agency’s efforts to modernize its assumptions.

The Final Rule

Following the notice-and-comment period, the PBGC issued a final rule amending its assumptions on June 6, 2024. Except for conforming changes and minor technical alterations, the final rule is substantially the same as the proposed rule. The updated assumptions, which apply to both the single-employer program and the multiemployer program, include revisions designed to:

  • 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 benefit valuation date;
  • adopt a more recent mortality table as well as a generational mortality improvement projection; and
  • simply the expense assumption.

The final regs will become effective thirty days after their publication in the Federal Register, and the updated assumptions will apply to determinations with a valuation date on or after July 31, 2024.


This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

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