The Pension Benefits Guaranty Corporation (PBGC) issued proposed regulations for the allocation of assets in defined benefit plans and for distributions from terminated plans. The changes clarify certain portions of the existing regulations, and formalize policies involving payments of lump sum and partial benefit distributions, changes to forms of benefits, and valuation of plan assets. PBGC will accept public comments through November 29, 2019.
These proposed regulations include the following changes.
- Clarify that PBGC’s rules on lump-sum payment are unaffected by election of a lump-sum distribution before plan termination. PBGC does not pay benefits in a lump sum except in certain limited circumstances
- Clarify that a de minimis benefit under the regulations is linked to the definition found in ERISA 203(e)(1), rather than a fixed amount of $5,000
- Clarify that a de minimis benefit of a participant who dies after plan termination will be paid as an amount due a decedent, not as a qualified pre-retirement survivor annuity
- Clarify that benefits will be paid to estates only as lump sums
- Clarify that accumulated mandatory employee contributions may not be withdrawn if benefits are in pay status when a plan becomes trusteed by PBGC
- Clarify that the form of benefit in pay status when a plan becomes trusteed by PBGC will not be changed
- Clarify that pre-trusteeship partial distributions are considered in determining benefits
- Require that fair market value be used for purposes of valuing assets to be allocated to participants’ benefits and in determining employer liability and net worth. The current regulations do not specify this requirement.
Watch Ascensus.com for any further information about this guidance.