PBGC Guaranteed Benefit

Question 1

Definition of Earliest PBGC Retirement Date

Answer 1

Earliest date an employee could separate from service and receive an immediate annuity. If early than age 55, then set to age 55.

Question 2

Requirements for a benefit to be guaranteeable.

Answer 2

1. Nonforfeitable
2. Pension benefit
3. Participant is entitled
4. Benefit can’t exceed accrued benefit payable as life annuity at NRA (i.e. Social Security Supplement)

Question 3

PBGC Maximum Guaranteed Benefit Limit

Answer 3

1. Lesser of highest 5 years consecutive average pay and the Dollar amount

Question 4

What is default FOP/Age for Maximum Guaranteed Benefit Limit? How is it adjusted?

Answer 4

1. SLA at 65

2. Using the tables provided on the exam for FOP and age.

Question 5

How does the 5 year phase-in for the PBGC Guaranteed Benefits work?

Answer 5

1. Calculated Vested accrued benefit subject to maximum guaranteed amount under each plan in the past 5 years
2. Phase in the benefit improvements based on the full years that the plan has been in effect
3. Min(Ben. Increase, Max($20Years, 20%Years))

Question 6

For the 5 year phase in calculation, what do you start the phase in with if there was no plan 5 years ago?

Answer 6

$0

Question 7

How do you phase in benefits if the plan existed 5 years ago, but the participant was hired 3 years ago?

Answer 7

No change, phase in depends on plan existence no participant’s hire date.

Question 8

PBGC Majority Owner

Answer 8

Owns >=50% of company within 5 years of DOPT (if unincorporated company, then must own 100%)

Question 9

How does the calculation change for a majority owner?

Answer 9

They have an additional reduction that applies last. For a plan that has been in effect for less than 10 years (full years only), their benefit is multiplied by (#years in effect)/10

Question 10

Multiemployer Guaranteed Benefit

Answer 10

100% of first $11/month
75% of next $33/month

Ignore all benefit increases 5 years before DOPT

Question 11

When converting an old plan for age/FOP, do you normalize the $20 floor? Which factors do you use?

Answer 11

1. No

2. You use the older plan’s factors. (If missing, then use PBGC factors)

Question 12

When determining the dates for guaranteed benefits 5-year phase in, do you use the effective date or adoption date?

Answer 12

Later of the two

Question 13

How does the guaranteed benefit calculation change for plans in bankruptcy

Answer 13

Treat bankruptcy date as DOPT

Question 14

How do you phase in benefit changes mandated by law?

Answer 14

You don’t. They just apply.

Question 15

If a plan change occurs on 1/1/2018, the DOPT is 12/31/2018, then how many years has the amendment been in effect?

Answer 15

1 Year, PBGC grants a one day waiver.

Question 16

A retiree retires with a 50% JnS with his spouse as bene. The spouse dies, then the plan terminates. What is his FOP for PBGC calculations?

Answer 16

SLA

Question 17

If the benefit is to be paid after DOPT, which maximum guaranteeable limit should you use?

Answer 17

The one in effect at DOPT

Question 18

How are COLAs phased into the Maximum Guaranteed Benefit?

Answer 18

Treated as if effective when COLA applies and phased in from there.

Question 19

When using the PBGC maximum guaranteed tables, what is the difference between the Joint and Survivor and Joint and Contingent tables?

Answer 19

JnS - reduce upon first death

JnC - reduce upon ptp death

Question 20

For PBGC optional factors table, how are ptps over 65 with a JnS treated?

Answer 20

They are treated as if 65.

Question 21

T/F an increase in benefit due to age/service needs to be phased into the guaranteed benefit.

Answer 21

False

Question 22

T/F a ptp retires on 15 C&L. They get a benefit increase 2 years later. You need to adjust the 15C&L to 13C&L.

Answer 22

False

Question 23

If a plan has no amendments then it must be 100% phased in for the PBGC’s Maximum Guaranteed Limit.

Answer 23

False - Plan may not have been around for 5 years