How to Estimate PBGC Immediate Lump Sum Interest Rate

The PBGC insures the funds in private defined benefit retirement plans.

The U.S. Pension Benefit Guaranty Corporation (PGBC) is a government agency that protects the pension benefits in the defined benefit retirement plans of private companies. If a private pension plan terminates without funds to pay the benefits owed, the PBGC's insurance program pays beneficiaries, up to certain limits set by law. The PBGC publishes an interest rate that can be used to calculate the lump sum benefit paid after the first of any month. You can obtain the rate from the PBGC website.

Instructions

1. Determine the date for which the value of the lump sum payment needs to be calculated, which is the date on which the immediate lump sum payment will be made, for example June 15, 2010.

2. Navigate to the lump sum interest rate table on the PBGC website at http://www.pbgc.gov/prac/interest/vls.html.

3. Determine the correct table entry based on the valuation date. For example, the rate for June 15, 2010, is taken from the 2010 table and corresponds to the line "on or after 6-1-10" and "before 7-1-10."

4. Look up the interest rate under the "Immediate" column. For example, the interest rate for June 15, 2010, is 2.75 percent.

References

• PBGC: Lump Sums

Resources

• Pension Benefit Guaranty Corporation