Participants in defined contribution plans can combine those assets with their defined benefit plans without exceeding federal guarantee limits set by the Pension Benefit Guaranty Corp., under a rule to be finalized Tuesday.
To encourage lifetime income, PBGC officials in April proposed that benefits earned from a DC plan rollover not be counted when they calculate maximum guarantee limits for terminated plans, nor would DC benefits trigger PBGC phase-in limits on benefit changes in such cases. In 2015, the maximum guaranteed annual benefit for a 65-year-old retiree will be $60,000.
“PBGC believes that rollovers to defined benefit plans may provide lifetime-annuity protection at a competitive cost,” the final rule states, which could encourage more rollovers. “We hope that employers that offer both kinds of plans will make this option available to their employees,” said PBGC spokesman Marc Hopkins in an interview.
“Having a seamless system for retaining or rolling over retirement monies is critical to workers’ longtime retirement security,” said David Certner, AARP legislative counsel and policy director of government affairs, in a June comment letter on the proposal.
The AARP and AFL-CIO also encouraged PBGC officials to work with other regulators on promoting rollovers. “It might be helpful for the agencies to consider how best to encourage plan sponsors to adopt provisions allowing for direct rollovers,” wrote Karin Feldman, a benefits specialist with the AFL-CIO, in a separate comment letter in June.
The rule becomes effective 30 days after it is published in the Federal Register, which is scheduled for Tuesday.
