§ 4022.21 Limitations; in general. ( a ) ( 1 ) Subject to paragraphs (b), (c), (d), and (e) of this section, the PBGC will not guarantee that part of an installment payment that exceeds the dollar amount payable as a straight life annuity commencing at normal retirement age, or thereafter, to which a participant would have been entitled under the provisions of the plan in effect on the termination date, on the basis of his credited service to such date. If the plan does not provide a straight life annuity either as its normal form of retirement benefit or as an option to the normal form, the PBGC will for purposes of this paragraph convert the plan's normal form benefit to a straight life annuity of equal actuarial value as determined by the PBGC.
( 2 ) The limitation of paragraph (a)(1) of this section shall not apply to: ( i ) A survivor's benefit payable as an annuity on account of the death of a participant that occurred on or before the plan's termination date and before the participant retired;
( ii ) A disability pension described in § 4022.6 of this part; or
( iii ) A benefit payable in non-level installments that in combination with Social Security, Railroad Retirement, or workman's compensation benefits yields a substantially level income if the projected income from the plan benefit over the expected life of the recipient does not exceed the value of the straight life annuity described in paragraph (a)(1) of this section.
( b ) The PBGC will not guarantee the payment of that part of any benefit that exceeds the limitations in section 4022(b) of ERISA and this subpart B.
( c ) ( 1 ) Except as provided in paragraph (c)(2) of this section, the PBGC does not guarantee a benefit payable in a lump sum (or substantially so) upon the death of a participant or his surviving beneficiary unless that benefit is substantially derived from a reduction in the pension benefit payable to the participant or surviving beneficiary.
( 2 ) Paragraphs (a) and (c)(1) of this section do not apply to that portion of accumulated mandatory employee contributions payable under a plan upon the death of a participant, and such a benefit is a pension benefit for purposes of this part.
( d ) The PBGC will not guarantee a joint-life annuity benefit payable to other than— ( 1 ) Natural persons; or
( 2 ) A trust or estate for the benefit of one or more natural persons.
( e ) *PPA 2006 bankruptcy termination* — ( 1 ) *Substitution of bankruptcy filing date.* In a PPA 2006 bankruptcy termination, “bankruptcy filing date” is substituted for “termination date” each place that “termination date” appears in paragraph (a)(1) of this section.
( 2 ) *Examples* — ( i ) *Straight-life annuity.* A plan provides for normal retirement at age 65. If a participant terminates employment at or after age 55 with 25 years of service, the plan will pay an unreduced early retirement benefit, plus a temporary supplement of $400 per month until the participant reaches age 62. When the plan's contributing sponsor files a bankruptcy petition in 2008, a participant who is still working has a vested, accrued benefit of $1,500 per month (as a straight-life annuity) and has satisfied the age and service requirements for the unreduced early retirement benefit. The participant retires eight months later, when his vested, accrued benefit is $1,530 per month (as a straight-life annuity). He elects to receive his benefit as a straight-life annuity, and begins receiving a total benefit of $1,930: His $1,530 accrued benefit plus the $400 temporary supplement. The plan terminates six months later, during the sponsor's bankruptcy. No Title IV limitations apply to the participant's benefit, other than the limitation in paragraph (a)(1) of this section. PBGC will guarantee $1,500, the amount of the participant's accrued benefit (as a straight-life annuity) as of the bankruptcy filing date.
( ii ) *Joint-and-survivor annuity.* The facts are the same as Example (i) (paragraph (e)(2)(i) of this section), except that the participant elects to receive his benefit as a 50% joint-and-survivor annuity. Before plan termination, the participant was receiving a total benefit of $1,777: His $1,530 accrued benefit, reduced by 10% for the survivor benefit, plus the $400 temporary supplement. From the termination date until the participant reaches age 62, PBGC will guarantee $1,500: The $1,500 accrued benefit (as a straight-life annuity) as of the bankruptcy filing date, reduced to $1,350 to reflect the 10% reduction for the survivor benefit, plus $150 of the temporary supplement that, in combination with the $1,350, does not exceed the $1,500 accrued-at-normal limit. When the participant reaches age 62, his guaranteed benefit is reduced to $1,350, because under plan provisions the temporary supplement ceases at that time.
[61 FR 34028, July 1, 1996, as amended at 67 FR 16956, Apr. 8, 2002; 76 FR 34602, June 14, 2011; 88 FR 44052, July 11, 2023]