Compliance September 30, 2019

PBGC Issues Proposed Rules About Benefit Payments

The agency will consider payments prior to plan terminations when calculating benefits, and it proposed to change its assumptions for determining lump-sum payments, which means a change for plans that currently use the PBGC’s assumptions.

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The Pension Benefit Guaranty Corporation (PBGC) has issued two proposed rules related to benefit payments.

One addresses Benefits Payable in Terminated Single-Employer Plans and Allocation of Assets in Single-Employer Plans, and the other concerns the assumptions PBGC uses to determine de minimis lump sum benefits in PBGC-trusteed terminated single-employer defined benefit (DB) pension plans.

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Proposed changes to PBGC’s regulations on Benefits Payable in Terminated Single-Employer Plans and Allocation of Assets in Single-Employer Plans would make clarifications and codify policies involving payment of lump sums, changes to benefit form, partial benefit distributions, and valuation of plan assets.

Major provisions of the proposed rule would:

  • Clarify that PBGC’s rules on payment of a lump sum are unaffected by election of a lump-sum distribution before plan termination.
  • Change wording that refers to the dollar amount currently subject to cashout by statute ($5,000) so it refers instead to the statutory provision that specifies that dollar amount.
  • 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 preretirement 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  • Clarify that accumulated mandatory employee contributions may not be withdrawn if benefits are in pay status when a plan becomes trusteed.
  • Clarify that the form of benefit in pay status when a plan becomes trusteed will not be changed.
  • Clarify that pre-trusteeship partial distributions are considered in determining benefits.
  • Require that fair market value or fair value, as appropriate, be used for purposes of valuing assets to be allocated to participants’ benefits and in determining employer liability and net worth.

The second proposed rule would modify the assumptions the PBGC uses to determine de minimis lump sum benefits in PBGC-trusteed terminated single-employer defined benefit pension plans and would discontinue monthly publication of PBGC’s lump sum interest rate assumption.

The agency says it is aware that a relatively small number of defined benefit (DB) plans use its interest rates as computed using its historical methodology (legacy interest rates) to determine the lump sum equivalents of annuity benefits. It notes that actuarial practice, with the help of technology, has moved toward a yield-curve approach where future benefits are discounted to the measurement date based on yields on bonds of similar duration. By associating an interest rate with a specific time horizon, a yield curve better approximates the present value of future benefits. As a result, the immediate and deferred structure of PBGC’s legacy interest rates has become increasingly obsolete.

Additionally, PBGC notes that the methodology it uses to compute each month’s immediate and deferred interest rates, which was established at a time when computing resources were limited, is simplistic and typically results in interest rates significantly lower than the rates most private-sector plans use to determine lump sums.

“Given that the legacy interest rates’ structure and methodology have become increasingly obsolete, PBGC concluded that continued publication of the legacy interest rates for any use would be inappropriate,” the proposed rule says. “Instead, PBGC proposes to publish a final set of interest rates in appendix C for private-sector plans to use for valuation dates on or after the effective date of the final rule equal to the average immediate and deferred rates for the 120-month period ending in July 2019, rounded to the nearest quarter percent.”

The agency also warns plans sponsors that once the appendix C rates are no longer identical to the rates used by the PBGC, the plan terms may have an ambiguity that should be resolved. “Resolving this ambiguity would not necessarily mean that such a plan would have to start using the ‘applicable interest rate’ for that purpose (which could result in smaller lump sums). Rather, unclear provisions in such a plan could be amended to specify the use of the interest rates in appendix C, provided that the resulting lump sum is no less than the minimum amount determined in accordance with section 417(e)(3) of the Code and that any other applicable requirements are satisfied,” the proposed rule states.

The PBGC is requesting comments about both proposed rules.
Reader Responses September 30, 2019

SURVEY SAYS: Working Beyond Regular Hours

PLANSPONSOR NewsDash readers reveal how much they work beyond regular office hours and when they prefer to do so.

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Last week, I asked NewsDash readers, “Do you work beyond your company’s regular work hours and if so, do you prefer to do so by coming in early, staying late or in some other way?”

The majority of responding readers indicated they work beyond their company’s regular work hours, and responses were nearly even split about how often. One-third said they do all the time, 31.8% said they do much of the time, and 30.3% said they do sometimes. Only 4.5% reported they do no work beyond regular hours.

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As for when they prefer to work beyond regular work hours (if they have to or need to), “Earlier than the regular start time, either remotely or in the office” was selected by 38.5% of respondents, and “Later than the regular end time, either remotely or in the office” was chosen by 43.1%. Only 6.1% said they prefer to work on weekends, either remotely or in the office, and 12.3% have no preference and just work extra when they have time.

While readers selected their preference in the second question of the survey, in verbatim comments many noted they work at other times as well. Some point out that working outside of regular hours can be more productive due to less distractions. Editor’s Choice goes to the reader who said: “I feel like it all depends on the culture. If there is so much work that you are staying late all the time, then there is something else that needs to be done. Here and there, then you are just doing normal catch up.”

Thanks to all who participated in the survey!

Verbatim

As I see it, there are “office hours,” and there are work hours. The former is anywhere from 37.5-40 hours each week. The latter is also (an additional) 37.5-40 hours each week…

You didn’t give the option to say I prefer to start earlier than regular time AND later than regular time. Lots of time needed to get it all done

Regulatory and seasonal deadlines drives some of the working beyond regular work hours to the planned completion dates for projects.

I work through lunch every day and stay late as well.

This shouldn’t happen, but reality is it does. No matter how well I managed, due to the fact I know how to do a lot of things well I was given way more than could be handled in a normal work day. I know I don’t row this boat alone. Organizations need to stop overworking the good workers and start holding all accountable for their work product. This is how organizations lose good/top performers.

Working weekends and on vacations remotely is a common practice to keep up.

Work hours have changed with the workforce demographics, enabling a flexible work schedule. It’s on us workers to make sure it doesn’t overtake our “personal time.”

When you work outside regular hours so much that when you don’t you feel guilty that’s just crazy.

My time is my time and I try really hard to keep it that way!

With cell phones, we are now “connected” to the office 24/7. Unfortunately, this makes it difficult to “unplug,” even on weekends, holidays and vacations!

I am able to adjust my time as I see fit. I work whatever hours it takes to get the job done on a timely basis.

When I worked at a law firm, my typical schedule was 7 am to 7 pm, Monday through Friday. I tried very hard not to work weekends because I needed that time to recharge and spend time with my family. I now work for a publishing company and am almost always able to limit my hours to my standard workday: 7 am to 4 pm. Occasionally, I extend my workday. I can’t really start any earlier than 7 because my brain doesn’t work that early!

I can usually get twice as much work done if I stay past 4 or come in early than I do all day with meetings, constant interruptions, etc. I hate to work on the weekends but one Saturday morning a month can go a long way in keeping up.

With the downward trend in plan fees, we have to run more lean in providing recordkeeping and compliance services so staffing levels are tough, therefore extra hours is not even optional; it’s mandatory during certain times of the year

The typical person does not work 9-5; the normal day is 9:15 (time to get coffee) to 4:45 (time to pack up).

Work ebbs and flows. I never mind putting in the extra hours when needed because I know I can be flexible when things are a bit slower. Management appreciates and recognizes our dedication. I am very lucky!

Not sure when the work/life balance changed here in the U.S., but we need to be more like our ROW [rest of world] counterparts.

Compared to the 90’s, I find myself working overtime less frequently than I did back then. Maybe it was all the grunge, but I prefer the 2010’s much more.

It’s amazing what I can accomplish on a Friday afternoon in the Summer after all of my chatty co-workers have left early 😉

Our company has flex hours, so there aren’t any set times. I come in at 5 am. Some employees come in at 9:30 am. So no one really knows when someone else is working extra. And if you are salary, there are no clock in’s for payroll

Early, Late, and Weekends. Whatever it takes to stay afloat.

I’ve really scaled down the amount of OT I do since I’m getting older (and possibly wiser). Funny thing is, whatever you didn’t get done is still waiting for you the next day!

I prefer to come into the office earlier, mostly to avoid traffic. I start at 6:15-6:30 and leave the office between 3:30 and 4PM. Traffic is the main reason for my hours being what they are. When I work remotely, I work from 7 to 4:30. I usually work more hours when working remotely (working through lunch and most times past 4:30). I also tend to read my work emails after hours to get a jump on the next day’s work.

Where I work regular work hours are a thing of the past. You are expected to work sufficient hours to get your job done.

I would probably work more if I did not always experience technology hurdles every time I try to do so.

There has been an assumption that since technology allows us constant access, we should have constant availability. Being a more senior worker, I can recall the workday starting at 9, then 8:30, then 8. We used to actually take a coffee break and go to lunch. Oh, the bygone days of yore!

The opposite of the masses is best so there are fewer distractions.

I do both, come in early and leave late. I’d rather not have to work extra hours, but there is always too much to do. On the rare occasion that I work a regular day, I feel like a part-time employee!

Actually the answer to #2 is all of the above – but there was not a choice for that.

I feel like it all depends on the culture. If there is so much work that you are staying late all the time, then there is something else that needs to be done. Here and there, then you are just doing normal catch up.

I don’t like to leave loose ends, and there is an abundance of work, so working just a bit late helps with two issues and reduce my stress, which to me is worth the time given.

I start an hour earlier than most of my coworkers, so when I stay late, I still get out at a reasonable hour. If I need to work on the weekends, which I do a lot at year end, I work from home.

I used to leave work at night and go home and work more. It made no difference so I stopped. Much happier now.

Both later than regular end time and on the weekends

Unfortunately, I am in early and often work late (though I am trying to do that remotely now so I can at least be home). Yep, I am tired.

Office hours are 7:00 to 5:00, but I am usually in before 6:00. I like to be there when the night shift is leaving in case they have any questions. It can also be a quiet time to get things done.

 

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Institutional Shareholder Services (ISS) or its affiliates.

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