[Code of Federal Regulations] [Title 29, Volume 9] [Revised as of July 1, 2005] From the U.S. Government Printing Office via GPO Access [CITE: 29CFR4022.23] [Page 794-796] TITLE 29--LABOR CHAPTER XL--PENSION BENEFIT GUARANTY CORPORATION PART 4022_BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS--Table of Contents Subpart B_Limitations on Guaranteed Benefits Sec. 4022.23 Computation of maximum guaranteeable benefits. (a) General. Where a benefit is payable in any manner other than as a monthly benefit payable for life commencing at age 65, the maximum guaranteeable monthly amount of such benefit shall be computed by applying the applicable factor or factors set forth in paragraphs (c)- (e) of this section to the monthly amount computed under Sec. 4022.22. In the case of a step-down life annuity, the maximum guaranteeable monthly amount of such benefit shall be computed in accordance with paragraph (f) of this section. (b) Application of adjustment factors to monthly amount computed under Sec. 4022.22. (1) Each percentage increase or decrease computed under paragraphs (c), (d), and (e) of this section shall be added to or subtracted from a base of 1.00, and the resulting amounts shall be multiplied. (2) The monthly amount computed under Sec. 4022.22 shall be multiplied by the product computed pursuant to paragraph (b)(1) of this section in order to determine the participant's and/or beneficiary's maximum benefit guaranteeable. (c) Annuitant's age factor. If a participant or the beneficiary of a deceased participant is entitled to and chooses to receive his benefit at an age younger than 65, the monthly amount computed under Sec. 4022.22 shall be reduced by the following amounts for each month up to the number of whole months below age 65 that corresponds to the later of the participant's age at the termination date or his age at the time he begins to receive the benefit: For each of the 60 months immediately preceding the 65th birthday, the reduction shall be \7/12\ of 1%; For each of the 60 months immediately preceding the 60th birthday, the reduction shall be \4/12\ of 1%; For each of the 120 months immediately preceding the 55th birthday, the reduction shall be \2/12\ of 1%; and For each succeeding 120 months period, the monthly percentage reduction shall be \1/2\ of that used for the preceding 120 month period. (d) Factor for benefit payable in a form other than as a life annuity. When a benefit is in a form other than a life annuity payable in monthly installments, the monthly amount computed under Sec. 4022.22 shall be adjusted by the appropriate factors on a case-by-case basis by PBGC. This paragraph sets forth the adjustment factors to be used for several common benefit forms payable in monthly installments. (1) Period certain and continuous annuity. A period certain and continuous annuity means an annuity which is payable in periodic installments for the participant's life, but for not less than a specified period of time whether or not the participant dies during that period. The monthly amount of a period certain and continuous annuity computed under Sec. 4022.22 shall be reduced by the following amounts for each month of the period certain subsequent to the termination date: [[Page 795]] For each month up to 60 months deduct \1/24\ of 1%; For each month beyond 60 months deduct \1/12\ of 1%. (i) A cash refund annuity means an annuity under which if the participant dies prior to the time when he has received pension payments equal to a fixed sum specified in the plan, then the balance is paid as a lump-sum death benefit. A cash refund annuity shall be treated as a benefit payable for a period certain and continuous. The period of certainty shall be computed by dividing the amount of the lump-sum refund by the monthly amount to which the participant is entitled under the terms of the plan. (ii) An installment refund annuity means an annuity under which if the participant dies prior to the time he has received pension payments equal to a fixed sum specified in the plan, then the balance is paid as a death benefit in periodic installments equal in amount to the participant's periodic benefit. An installment refund annuity shall be treated as a benefit payable for a period certain and continuous. The period of certainty shall be computed by dividing the amount of the remaining refund by the monthly amount to which the participant is entitled under the terms of the plan. (2) Joint and survivor annuity (contingent basis). A joint and survivor annuity (contingent basis) means an annuity which is payable in periodic installments to a participant for his life and upon his death is payable to his beneficiary for the beneficiary's life in the same or in a reduced amount. The monthly amount of a joint and survivor annuity (contingent basis) computed under Sec. 4022.22 shall be reduced by an amount equal to 10% plus \2/10\ of 1% for each percentage point in excess of 50% of the participant's benefit that will continue to be paid to the beneficiary. If the benefit payable to the beneficiary is less than 50 percent of the participant's benefit, PBGC shall provide the adjustment factors to be used. (3) Joint and survivor annuity (joint basis). A joint and survivor annuity (joint basis) means an annuity which is payable in periodic installments to a participant and upon his death or the death of his beneficiary is payable to the survivor for the survivor's life in the same or in a reduced amount. The monthly amount of a joint and survivor annuity (joint basis) computed under Sec. 4022.22 shall be reduced by an amount equal to \4/10\ of 1% for each percentage point in excess of 50% of the participant's original benefit that will continue to be paid to the survivor. If the benefit payable to the survivor is less than 50 percent of the participant's original benefit, PBGC shall provide the adjustment factors to be used. (e) When a benefit is payable in a form described in paragraph (d)(2) or (3) of this section, and the beneficiary's age is different from the participant's age, by 15 years or less, the monthly amount computed under Sec. 4022.22 shall be adjusted by the following amounts: If the beneficiary is younger than the participant, deduct 1% for each year of the age difference; If the beneficiary is older than the participant, add \1/2\ of 1% for each year of the age difference. In computing the difference in ages, years over 65 years of age shall not be counted. If the difference in age between the beneficiary and the participant is greater than 15 years, PBGC shall provide the adjustment factors to be used. (f) Step-down life annuity. A step-down life annuity means an annuity payable in a certain amount for the life of the participant plus a temporary additional amount payable until the participant attains an age specified in the plan. (1) The temporary additional amount payable under a step-down life annuity shall be converted to a life annuity payable in monthly installments by multiplying the appropriate factor based on the participant's age and the number of remaining years of the temporary additional benefit by the amount of the temporary additional benefit. The factors to be used are set forth in the table below. The amount of the monthly benefit so calculated shall be added to the level amount of the monthly benefit payable for life to determine the level-life annuity that is equivalent to the step-down life annuity. [[Page 796]] Factors for Converting Temporary Additional Benefit Under Step-Down Life Annuity ---------------------------------------------------------------------------------------------------------------- Age of participant \1\ at the Number of years temporary additional benefit is payable under the plan as of later of the date the temporary the date of plan termination \2\ additional benefit commences or ------------------------------------------------------------------------------- the date of plan termination 1 2 3 4 5 6 7 8 9 10 ---------------------------------------------------------------------------------------------------------------- 45.............................. 0.060 0.117 0.170 0.220 0.268 0.315 0.355 0.395 0.435 0.475 46.............................. .061 .119 .173 .224 .273 .321 .362 .403 .444 .485 47.............................. .062 .121 .176 .228 .278 .327 .369 .411 .453 .495 48.............................. .063 .123 .179 .232 .283 .333 .376 .419 .462 .505 49.............................. .064 .125 .182 .236 .288 .339 .383 .427 .471 .515 50.............................. .065 .127 .185 .240 .293 .345 .390 .435 .480 .525 51.............................. .066 .129 .188 .244 .298 .351 .397 .443 .489 .535 52.............................. .067 .131 .191 .248 .303 .357 .404 .451 .498 .545 53.............................. .068 .133 .194 .252 .308 .363 .411 .459 .507 .555 54.............................. .069 .135 .197 .256 .313 .369 .418 .467 .516 .565 55.............................. .070 .137 .200 .260 .318 .375 .425 .475 .525 .575 56.............................. .072 .141 .206 .268 .328 .387 .439 .491 .543 ...... 57.............................. .074 .145 .212 .276 .338 .399 .453 .507 ...... ...... 58.............................. .076 .149 .218 .284 .348 .411 .467 ...... ...... ...... 59.............................. .078 153 .224 .292 .358 .423 ...... ...... ...... ...... 60.............................. .080 .157 .230 .300 .368 ...... ...... ...... ...... ...... 61.............................. .082 .161 .236 .308 ...... ...... ...... ...... ...... ...... 62.............................. .084 .165 .242 ...... ...... ...... ...... ...... ...... ...... 63.............................. .086 .169 ...... ...... ...... ...... ...... ...... ...... ...... 64.............................. .088 ...... ...... ...... ...... ...... ...... ...... ...... ...... ---------------------------------------------------------------------------------------------------------------- \1\ At last birthday. \2\ If the benefit is payable for less than 1 yr, the appropriate factor is obtained by multiplying the factor for 1 yr by a fraction, the numerator of which is the number of months the benefit is payable, and the denominator of which is 12. If the benefit is payable for 1 or more whole years, plus an additional number of months less than 12, the appropriate factor is obtained by linear interpolation between the factor for the number of whole years the benefit is payable and the factor for the next year. (2) If a participant is entitled to and chooses to receive a step- down life annuity at an age younger than 65, the monthly amount computed under Sec. 4022.22 shall be adjusted by applying the factors set forth in paragraph (c) of this section in the manner described in paragraph (b) of this section. (3) If the level-life monthly benefit calculated pursuant to paragraph (f)(1) of this section exceeds the monthly amount calculated pursuant to paragraph (f)(2) of this section, then the monthly maximum benefit guaranteeable shall be a step-down life annuity under which the monthly amount of the temporary additional benefit and the amount of the monthly benefit payable for life, respectively, shall bear the same ratio to the monthly amount of the temporary additional benefit and the monthly benefit payable for life provided under the plan, respectively, as the monthly benefit calculated pursuant to paragraph (f)(2) of this section bears to the monthly benefit calculated pursuant to paragraph (f)(1) of this section. [61 FR 34028, July 1, 1996; 61 FR 36626, July 12, 1996]