Pension Lump Sums to Use IRS Interest Rates Under New Rule

Retirees owed lump sum payments from terminated single-employer pensions will get their money based on IRS rates, the federal pension insurer announced Tuesday.

The Pension Benefit Guaranty Corp.’s new rule, which takes effect Jan. 1, 2021, will replace the legacy interest rates and mortality assumptions it now uses to calculate minimum lump sum benefits (typically, less than $5,000) with the rates set in Section 417(e)(3) of the tax code by the Retirement Protection Act of 1994.

PBGC officials wrote that the update was warranted because the current system “typically results in interest rates significantly lower than the rates most ...