MAP21 and PBGC

[Calavera]

I was tracking down the references and something is not clear for me. It appears that the amendment of 4006(a)(3)(E) refers to the standard calculation of the variable premium and not the alternative calculation. The alternative calculation is mentioned under the PBGC regulations only and it seems that you can use the reduced funding target under MAP21 if you elect the alternative method of the variable premium calculations.

What am I missing?

[david rigby]

Look at 4006(a)(3)(E)(iv). I think it is unchanged by MAP21, and no change is needed.

[Calavera]

I think 4006(a)(3)(E)(iv) talks about the standard method and not the alternative method. It appears that before MAP21 the meaning was to ignore 24 months average and after MAP21 it also ignores 25 years averaging.

The alternative method is described under the PBGC § 4006.5(g) as:

A plan's alternative premium funding target is the vested portion of the plan's funding target under ERISA section 303(d)(1) that is used to determine the plan's minimum contribution under ERISA section 303 for the premium payment year, that is, the amount that would be determined under ERISA section 303(d)(1) if only vested benefits were taken into account.

[Andy the Actuary]

It is wishful thinking but doubtful that allowing for the alternate was Congress's intent. Here's a blurb from the "Joint Explanation of the Committee of the Conference:"

The change in the method of determining segment rates generally applies for the purposes for which segment rates are used under present law, except for purposes of determining minimum and maximum lump-sum benefits, limits on deductible contributions to single employer defined benefit plans, and PBGC variable-rate premiums.

[Calavera]

It is wishful thinking and I doubt it was intended. Nevertheless as it exists right now (reference in PBGC § 4006.5(g) to the target liability used to determine the plan's minimum contribution), it appears you can use it for the alternative method unless PBGC will come up with some clarification and/or technical correction.

[Andy the Actuary]

Well, we can close this board now. PBGC just issued technical release that ixnayed using MAP-21 rates to determine the alternative Funding Target for calculating the variable rate premium:

http://www.pbgc.gov/res/other-guidance/tu/tu12-1.html

[tymesup]

Faster than the COPA board by 2 minutes!

[Andy the Actuary]

Faster than the COPA board by 2 minutes!

All of the credit to Dave Baker who captured it in Benefits Link Retirement Plan Newsletter. All I did was post what he sent out because I wanted to tag it to the particular discussion.

[Calavera]

Who knew that "corporation" means "Pension Benefit Guaranty Corporation".