Compliance December 13, 2018

PBGC Updates Regulation for 2019 Distressed and Terminating DB Plans

A new table will be used for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2019.

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The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule amending its regulation on Allocation of Assets in Single-Employer Plans by substituting a new table for determining expected retirement ages for participants in defined benefit (DB) plans undergoing distress or involuntary termination with valuation dates falling in 2019.

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

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The PBGC explains that under the asset allocation regulation, early retirement benefits for plans undergoing distress or involuntary termination are valued based on the annuity starting date, if a retirement date has been selected, or the expected retirement age, if the annuity starting date is not known on the valuation date. The table 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 is updated annually by the PBGC.
Data and Research December 12, 2018

Empower Finds Small Businesses Interested in Open MEPs

Of the 66% who responded in favor of the plans, 55% stated the likelihood of lowered costs for themselves is their top reason for supporting MEPs, while 54% said they were interested in reduced fees for employees.

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A recent Empower survey found that small business owners are likely to consider open multiple employer plans (MEPs).

The majority of small business owners agreed that offering a retirement plan for employees is “the right thing to do,” and cited this as their primary reason for offering a plan, reports Empower. This outnumbered ‘employee retention’ and ‘attracting talent,’ as both placed second and third in reasons for retirement plan implementation.

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Of the 66% who responded in favor of the plans, 55% stated the likelihood of lowered costs for themselves is their top reason for supporting MEPs, while 54% said they were interested in reduced fees for employees. Forty-nine percent stated the variety of plan and fund options to meet employee needs was their top interest, and 29% indicated this as the most important thing when considering an MEP. In fact, the research makes a point that while MEP expansion would benefit small business owners, it can only succeed should it offer multiple plan and fund options for employees, and lessened costs.

According to the survey, 89% of small business owners agreed that positive outcomes associated in adding retirement plans for employees overshadowed potential downsides, and 86% said their company feels a “strong sense” of responsibility in providing financial education. Eighty-five percent indicated how significant an employee’s retirement readiness is to overall retirement benefits success.

While MEPs continuously receive support from the retirement industry, policymakers have failed so far to pass legislation allowing for them. In October , the Department of Labor’s (DOL)’s Employees Benefits Security Administration (EBSA) proposed regulations to expand access to MEPs, but industry stakeholders were disappointed the proposal does not address open MEPs.

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