§ 4022.7 Benefits payable in a lump sum. ( a ) *Alternative benefit.* Except as provided in this part, PBGC pays benefits only in annuity form. If a benefit that is guaranteed under this part is payable in a lump sum or substantially so under the terms of the plan, including an option elected under the plan by the participant before plan trusteeship, PBGC will not guarantee the benefit in such form. Instead, PBGC will guarantee the alternative benefit, if any, in the plan which provides for the payment of equal periodic installments for the life of the recipient. If the plan does not provide such an annuity, PBGC will guarantee an actuarially equivalent life annuity.
( b ) *Payment by PBGC* — ( 1 ) *Payment in lump sum.* Notwithstanding paragraph (a) of this section: ( i ) *In general.* If the lump-sum value of a benefit (or of an estimated benefit) payable by PBGC and calculated as of the termination date does not exceed the dollar amount specified in section 203(e)(1) of ERISA in effect as of the termination date and the benefit is not yet in pay status as of the date PBGC becomes trustee, the benefit (or estimated benefit) may be paid in a lump sum.
( ii ) *Annuity option.* If PBGC would otherwise make a lump-sum payment in accordance with paragraph (b)(1)(i) of this section and the monthly benefit (or the estimated monthly benefit) is equal to or greater than $25 (at normal retirement age and in the normal form for an unmarried participant), PBGC will provide the option to receive the benefit in the form of an annuity.
( iii ) *Deceased participants after plan termination.* If the lump-sum value of a participant's benefit calculated as of the termination date does not exceed the dollar amount specified in section 203(e)(1) of ERISA in effect as of the termination date, and the participant dies after the plan's termination date and before the benefit is in pay status, PBGC will treat the benefit as owed to the participant at the time of death and the rules in subpart F of this part apply.
( iv ) *Payment of de minimis QPSA as lump sum or annuity.* If the lump-sum value of a participant's benefit calculated as of the termination date exceeds the dollar amount specified in section 203(e)(1) of ERISA in effect as of the termination date, the lump-sum value of annuity payments under the qualified preretirement survivor annuity (or under an estimated qualified preretirement survivor annuity) does not exceed that amount, and the participant dies after the plan's termination date and before the benefit is in pay status, then the qualified preretirement survivor annuity (or the estimated qualified preretirement survivor annuity) may be paid in a lump sum, or as an annuity, if available, and if elected by the surviving spouse.
( v ) *Payments to estates.* PBGC will pay any annuity payments payable to an estate in a lump sum without regard to the threshold in paragraph (b)(1)(i) of this section. PBGC will discount the annuity payments using the Federal mid-term rate (as determined by the Secretary of the Treasury pursuant to section 1274(d)(1)(C)(ii) of the Code) applicable for the month the participant died based on monthly compounding.
( 2 ) *Return of employee contributions* — ( i ) *In general.* Notwithstanding any other provision of this part, PBGC will pay as a lump sum instead of as an annuity, the value of the portion of an individual's basic-type benefit derived from accumulated mandatory employee contributions, if payment in a lump sum is consistent with the plan's provisions and if the individual elects such payment either before or at the time the individual starts receiving annuity payments from PBGC for the remainder of the individual's benefit. For purposes of this part, the portion of an individual's basic-type benefit derived from accumulated mandatory employee contributions is determined under § 4044.12 of this chapter (priority category 2 benefits), and the value of that portion is computed under the applicable rules contained in part 4044, subpart B of this chapter.
( ii ) *Benefits in pay status.* If an individual is in pay status with an annuity as of the date the plan becomes trusteed, and if the individual did not elect to withdraw any accumulated mandatory employee contributions, PBGC will not allow the individual to withdraw any portion of the benefit derived from accumulated mandatory employee contributions as a lump sum.
( c ) *Death benefits* — ( 1 ) *General.* Notwithstanding paragraph (a) of this section, a benefit that would otherwise be guaranteed under the provisions of this subpart, except for the fact that it is payable solely in a lump sum (or substantially so) upon the death of a participant, shall be paid by the PBGC as an annuity that has the same value as the lump sum. The PBGC will in each case determine the amount and duration of the annuity based on all the facts and circumstances.
( 2 ) *Exception.* Except in the case of accumulated mandatory employee contributions resulting from rollover amounts (as determined under § 4044.12(c)(4)(i) of this chapter), upon the death of a participant the PBGC may pay in a lump sum (or a series of installments) that portion of the participant's accumulated mandatory employee contributions that is payable under the plan in a lump sum (or a series of installments) upon the participant's death.
( d ) *Determination of lump sum amount.* For purposes of paragraph (b)(1) of this section— ( 1 ) *Benefits disregarded.* In determining whether the lump-sum value of a benefit does not exceed the dollar amount specified in section 203(e)(1) of ERISA, the PBGC may disregard the value of any benefits the plan or the PBGC previously paid in lump-sum form or the plan paid by purchasing an annuity contract, the value of any benefits returned under paragraph (b)(2) of this section, and the value of any benefits the PBGC has not yet determined under section 4022(c) of ERISA.
( 2 ) *Actuarial assumptions.* PBGC will calculate the lump sum value of a benefit by valuing the monthly annuity benefits payable in the form determined under § 4044.51(a) of this chapter and commencing at the time determined under § 4044.51(b) of this chapter. The actuarial assumptions used will be those described in § 4044.52 of this chapter, except as follows: ( i ) *Loading for expenses.* There will be no adjustment to reflect the loading for expenses.
( ii ) *Mortality assumption.* The “applicable mortality table” specified in section 205(g)(3)(B)(i) of ERISA and section 417(e)(3)(B) of the Code for the year containing the termination date will apply.
( iii ) *Interest rate assumption.* The “applicable interest rate” specified in section 205(g)(3)(B)(ii) of ERISA and section 417(e)(3)(C) of the Code for the month containing the termination date will apply.
( iv ) *Date for determining lump sum value.* The date as of which a lump sum value is calculated is the termination date, except that in the case of a subsequent insufficiency it is the date described in section 4062(b)(1)(B) of ERISA.
( e ) *Private-sector lump sum rates.* PBGC provides lump sum interest rates for private-sector payments in appendix C to this part.
[61 FR 34028, July 1, 1996, as amended at 63 FR 38306, July 16, 1998; 65 FR 14752, 14755, Mar. 17, 2000; 67 FR 16954, Apr. 8, 2002; 79 FR 70094, Nov. 25, 2014; 85 FR 55591, Sept. 9, 2020; 88 FR 44051, July 11, 2023]