PBGC fixes plan termination calculation, makes other changes
Plan termination expense load
PBGC’s 2024 final Section 4044 regulations updated the interest, mortality and expense assumptions prescribed for calculating liabilities for terminating plans. These assumptions are also used for other purposes, including to value benefit liabilities for Section 4010 filings made by employers with significantly underfunded pension plans. Prior to the 2024 regulation, the expense assumption was based on the number of participants and the total present value of plan benefits. Under the 2024 rule, to bring the assumption more in line with the private-sector annuity market, the expense load is based on the number of participants and includes an annual inflationary adjustment.
The new expense load is $400 per participant for the first 100 participants, plus $250 per participant for the remaining participants. However, as initially published in 2024, the inflationary adjustment was made after the $400/$250 amounts were applied to the plan’s participant count. The result was then rounded to the nearest dollar. This meant that PBGC could not publish inflation-adjusted per-participant dollar amounts each year, since the amount subject to rounding would depend on each plan’s participant count.
In response to commenters, the new final rule revises the methodology so the $400/$250 amounts are adjusted for inflation and then rounded. The rounded loads are then applied to the plan’s participant counts. This makes it possible for PBGC to publish the inflation-adjusted amounts annually.
The revised methodology will take effect for calculations with a valuation date on or after Jan. 31, 2026. The inflation-adjusted amounts for 2026 will be determined after the September CPI is published in October.
Changes to due dates for terminating plans
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Due date for standard termination notice
The plan administrator for a terminating plan must send a notice of intent to terminate (NOIT) to participants, beneficiaries and other affected parties and the Form 500 to PBGC. Before the final regulation, the NOIT was due at least 60 days and no more than 90 days before the proposed termination date, and the Form 500 was due no later than 180 days after the proposed plan termination date. The proposed termination date is usually specified in either the NOIT or Form 500. However, plan administrators sometimes fail to specify a proposed termination date. Under the old rules, when this happened, the due date for the Form 500 was unclear. The final regulation fixes this by setting a due date for the Form 500 that doesn’t depend on the plan administrator declaring a proposed termination date. Under the new rules, the Form 500 is due by the earlier of:
- The 180th day after the proposed termination date specified in the Form 500, or
- The 60th day before any plan termination distributions (lump sums or annuity purchases) begin
As under the old rules, a Form 500 will automatically be late if filed with a proposed termination date earlier than 180 days before the filing. In that case, PBGC may assess penalties for a missed filing from 180 days after the proposed termination date. If a plan administrator fails to file the Form 500, penalties will be assessed from 60 days before distributions begin. Additionally, under the final regulation, the 90-day grace period for filing a late post-distribution certification (Form 501) without penalties is available only to plan administrators that filed the Form 500 within 180 days of the proposed determination date.
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Final premium for terminating plansThe regulation revises the due date for the final premium for terminating plans to be the earlier of the normal premium due date or 45 days after the Form 501 is filed with PBGC. Previously, the due date was the earlier of the normal premium due date or the date the post-distribution certification was filed.
Other changes
The final rule makes several “housekeeping” amendments. Along with other minor changes, the rule:
- Revises the definition of “new plan” to include plans established retroactively, in accordance with the Setting Every Community Up for Secure Retirement Enhancement (SECURE) Act of 2019 (Div. O of Pub. L. No. 116-94)
- Conforms the premium calculation regulations applicable to cooperative and small employer charity (CSEC) pension plans for changes made by the SECURE Act
- Conforms the regulations to previously issued guidance that community newspaper plans electing funding relief under SECURE Act — as modified by the American Rescue Plan Act of 2021 (Pub. L. No. 117-21) — may not use the special relaxed funding rules to calculate the premium funding target
- Tightens the criteria for individuals to be considered majority owners who may voluntarily waive their benefits to enable a plan to undergo a standard termination or in the event of a distress termination. PBGC is concerned that individuals may be given ownership options in advance of a plan termination and then be coerced to waive their benefits so that the termination may proceed.)
- Requires electronic filing of standard termination filings, missing participant filings and coverage determination forms
- Clarifies that PBGC may upon request or its own initiative reconsider its determination of the appropriateness of a multiemployer plan’s allocation method for calculating withdrawal liability, but that a plan sponsor doesn’t have a right to such reconsideration
Effective and applicability dates
Related resources
Non-Mercer resources
- Final rule (Federal Register, Aug. 15, 2025)
Mercer Law & Policy resources
- PBGC finalizes rule on asset valuation and benefit payments (July 13, 2023)