Under current law, actuarial assumptions, in combination, must offer the actuary’s best estimate of anticipated experience under the plan. Actuaries have used interest rates ranging from PBGC settlement rates (currently 3.0% to 4.0%) to funding rates (currently 6.5% to 7.5% for most plans) for years. However, the use of rates lower than the funding rate has been a topic of much recent litigation.
The proposed rule makes clear that the use of any interest rate between PBGC rates and funding rates (including a “blended rate”) is a valid approach in determining withdrawal liability, reaffirming decades of actuarial practice. The selection of such an interest rate for withdrawal liability purposes would not be subject to the “actuary’s best estimate” standard.
The PBGC has requested comments on the proposed rule, which are due November 14, 2022. Since the rule is in the proposed stage, it is subject to change.
A more detailed summary can be viewed at the link below.