Annual maximum guaranteed benefits for terminated single-employer plans will stay the same in 2016, the Pension Benefit Guaranty Corp. announced Wednesday.
Benefit maximums are linked to Social Security cost-of-living adjustments, which will not be made next year, so the PBGC maximum of $60,136 for a 65-year-old retiree does not change. Multiemployer plan guarantees are not indexed to inflation, and do not change year to year.
The maximum represents the cap on what PBGC guarantees, but the agency in some cases pays more if there are sufficient plan assets or the PBGC can recover other assets from the plan sponsor. People retiring before age 65, or designated beneficiaries, have reduced guarantee amounts that vary by age and other factors. “In most cases, the single-employer guarantee is larger than the pension earned,” the PBGC said in a statement.
In 2016, the present value of the maximum guarantee, which some defined benefit pension plans that are restricted by funding levels use to calculate lump-sum or annuity offerings, will be lower than in 2015, due to a change in segment rates. Plans between 60% and 80% funded can pay lump sums only up to the PBGC maximum guarantee present value, or 50% of the benefit present value, whichever is lower. Plans restricted by funding levels also use the PBGC’s present value tables for annuities starting in 2016. Those tables are available on the PBGC’s website.