The Pension Benefits Guaranty Corp. on Friday issued the December interest rate assumptions that must be used when single employer retirement plans are terminated.
The rule, which goes into effect on Dec. 1 and is updated monthly, sets interest rate assumptions at 1.75 percent for the period during which a benefit is already being paid and 4 percent during any years prior to participants receiving benefits. The rates are unchanged from November.
The interest rates are meant to reflect conditions in the financial and annuity markets. The rates are used for determining payments when single-employer plans are terminated under the pension insurance system administered by PBGC.
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The PBGC, which is the insurance agency for private pension funds, earlier this month announced that in 2014 it would raise the maximum annual benefit it would pay a participant in a terminated plan by 3.2 percent to $59,320.
The PBGC was established in 1974 as part of the Employee Retirement Income Security Act. The report said that PBGC premiums, mandated by Congress, are quite small. In 2012, the agency collected $2.6 billion in premiums, but paid out $5.8 billion. It had $82 billion is assets and projected future liabilities at $105 billion.
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