Compliance December 21, 2017

PBGC Expands Missing Participants Program

Beginning in January, terminating DC plans will have the option of transferring missing participants’ benefits to PBGC instead of establishing an individual retirement account (IRA) at a financial institution.

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The Pension Benefit Guaranty Corporation (PBGC) is expanding its Missing Participants Program to terminated defined contribution (DC) and other plans in an effort to connect more people to their retirement savings.

“PBGC’s expanded Missing Participants Program addresses an important problem and meets the needs of our stakeholders,” says PBGC Director Tom Reeder. “We look forward to working with employers, practitioners, and participants to help connect people to their retirement benefits.”   

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PBGC is slated to publish a final rule in the Federal Register on December 22, 2017, that opens the current program to terminated DC plans and small professional service defined benefit plans.

PBGC adopted the final regulation after first issuing a request for information to assess interest in an expanded program, and then obtaining public comments on a proposed regulation. PBGC coordinated closely with other government agencies to ensure that the final regulation is in accordance with guidance from the Department of Labor (DOL) and the Internal Revenue Service (IRS).

The expanded program is voluntary for DC and small professional service plans and will be available for plans that terminate on or after January 1, 2018. Before the expansion, the program was open only to terminated PBGC-insured single-employer defined benefit plans.

Beginning in January, terminating DC plans will have the option of transferring missing participants’ benefits to PBGC instead of establishing an individual retirement account (IRA) at a financial institution. Participant accounts will not be diminished by ongoing maintenance fees or distribution charges, and PBGC will pay out benefits with interest when participants are found. When implemented, the enhanced program will make it easier for people to locate their retirement benefits after their plan terminates.

Because the expanded program is only open to plans that terminate on or after January 1, 2018, PBGC expects it will be several months before new missing participant names are added to the existing online directory.

To reduce burden and enhance effectiveness, the final rule also changes the way the program works for PBGC-insured single-employer plans. The changes relate primarily to how plans determine the amount of money to transfer to PBGC, better protection of key features of participants’ benefits, and easing the transfer of benefits to PBGC. The expanded program also covers PBGC-insured multiemployer pension plans that terminate and pay out all remaining benefits.

For more information, see PBGC’s Expanded Missing Participants Program webpage.
Compliance December 20, 2017

PBGC Amends Regulation on Allocation of Assets in Single-Employer Plans

A final rule provides a new table for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2018.

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The Pension Benefit Guaranty Corporation (PBGC) has issued a 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 pension plans undergoing distress or involuntary termination with valuation dates falling in 2018.

The 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 agency explains that under Section 4044.51(b) of the asset-allocation regulation, early retirement benefits 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. Sections 4044.55 through 4044.57 set forth rules for determining the expected retirement ages for plan participants entitled to early retirement benefits.

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 new rule amends appendix D to replace Table I–17 with Table I–18 to provide an updated correlation, appropriate for calendar year 2018, between the amount of a participant’s benefit and the probability that the participant will elect early retirement. The rule is effective January 1.

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