Minimum Lump Sums Under Standard Terminations

[Andy the Actuary]

The PBGC issued Technical Update 08-04 that specified what interest/mortality basis to apply when determining a lump sum in a standard termination. Perhaps I'm just getting too old and confused to digest the morass of published words. So, I looked to ASPPA ASAP explanation and find that it distills the PBGC TU with the same legalese.

Is the TU simply saying determine the lump sum as if the Plan were ongoing? I.e., you don't really do anything different.

Let's do what I had hoped ASAP would have done -- use an example. Suppose we have a calendar year plan with a calendar year stability period and a two month look back. The Plan is terminated December 31, 2008 and distribution is made in December 2009.

Consequently, I interpret that we would use the segment rates for November 2008 (distribution in 2009). Thus, we would use 5.24%, 5.69%, and 5.37%. We would use the applicable mortality table for distributions with stability periods in 2009 (not 2008) as published in IRS Notice 2008-85.

Is there more to the PBGC TU than I have understood? If so, then what interest/mortality basis is it saying we should to determine lump sums in the above example?

[Mike Preston]

I think you've got it.

[Andy the Actuary]

I think you've got it.

Thank you.