New PBGC Pension Valuation Spreads Take Effect for Terminating Plans

The Pension Benefit Guaranty Corporation’s latest interest-rate adjustments for valuing certain pension obligations take effect October 31, 2026, changing the assumptions used when financially troubled single-employer pension plans terminate. The update sets the spreads used in PBGC’s valuation formula for dates through January 30, 2027.

The new figures are part of a recurring quarterly update, not a change to the pension benefits promised to workers or a new interest rate paid on retirement savings. They affect how actuaries measure the present value of future benefits in specific regulatory calculations, including the allocation of assets when a plan ends in distress or through PBGC intervention.

PBGC’s final rule, published October 14, amends the interest assumptions in 29 CFR part 4044. It updates one component of the agency’s market-based yield curve rather than replacing the valuation framework. The distinction is important because the interest-rate spreads vary by the time remaining until a pension payment is due.

Shorter-term spreads rise as the 30-year adjustment falls

At the six-month maturity point, the spread increases to 0.78% for the fourth quarter of 2026, from 0.71% in the third quarter. The one-year figure also rises to 0.78% from 0.71%, and the 10-year spread moves to 0.57% from 0.52%. These are adjustments expressed in percentage points, not the complete interest rates used to value benefits.

The longest maturities follow a different pattern. PBGC’s 30-year spread falls to minus 0.13% from minus 0.11%, and the 25-year adjustment moves to minus 0.06% from minus 0.05%. At the 20-year point, meanwhile, the spread edges up to 0.12% from 0.11%. The change therefore cannot be described accurately as a uniform rise or fall in pension valuation rates.

In basis-point terms, the six-month adjustment is seven basis points higher than the prior quarter, while the 30-year adjustment is two basis points lower. A negative spread at a long maturity does not mean the final discount rate is negative. It means the specified adjustment is subtracted from the underlying blended bond yield at that maturity.

The effect on any plan’s measured liabilities depends on the full yield curve and the timing of its expected benefit payments. A plan with a greater share of payments due far into the future has a different exposure from one paying most benefits relatively soon. Changes in the market yields underlying the calculation also matter; the quarterly spread figures alone do not establish whether an entire plan’s liabilities have increased or decreased.

A monthly market curve with quarterly annuity adjustments

The 4044 interest assumption has been tied to a market yield curve since a regulatory change that began applying to valuation dates on July 31, 2024. Under the methodology explained by PBGC, actuaries start with a blended market yield curve built from publicly available Treasury data, then apply the quarterly spreads. The earlier system used a different structure of select and ultimate rates.

The blend gives a two-thirds weight to a high-quality corporate bond yield curve and a one-third weight to a nominal Treasury yield curve. PBGC uses the spread adjustments to make the resulting valuation rates better reflect the prices private insurers charge when they assume responsibility for groups of pension payments through annuity contracts.

Those spreads come from quarterly information on group annuity pricing. PBGC’s published methodology describes a survey of insurers and an averaging process intended to reduce random swings in the results. The purpose is to keep the valuation of promised benefits reasonably aligned with the cost of buying insurance-company annuities, rather than relying solely on government bond yields or a fixed benchmark.

Quarterly spreads and monthly yield curves operate on different timetables. The new rule supplies the spread adjustments for curves dated October 31, November 30 and December 31, 2026. PBGC generally publishes each completed month-end curve after the necessary market data become available, and actuaries can also calculate it from the public inputs specified in the regulation.

The date convention matters around month boundaries. For a valuation date that is not the final day of a month, the applicable 4044 yield curve comes from the end of the preceding month. For example, a January 15, 2027, valuation would use the December 31, 2026, curve, which incorporates the fourth-quarter spreads. January 31 itself is outside the valuation-date period covered by this particular rule.

The discount rates help translate a future stream of pension payments into a present-day liability figure. Other prescribed actuarial assumptions, including mortality and expected retirement timing, also enter that calculation. Updating the spread schedule does not by itself reset a plan’s assets, change the benefits already earned by employees or dictate the price an insurer will quote for a specific annuity purchase.

Where the revised assumptions apply and what comes next

The rule’s clearest application is to single-employer defined benefit pension plans undergoing distress or involuntary termination. In a distress termination, an employer seeks to end an underfunded plan under statutory financial distress conditions. PBGC can also initiate termination when circumstances require it to protect participants or the pension insurance program. In those settings, part 4044 supplies assumptions for determining the present value of annuity benefits as plan assets are allocated.

That is different from a standard termination, in which a plan must have enough assets to meet all benefit obligations and arrange payment through annuities or other permitted distributions. PBGC oversees aspects of that process but does not ordinarily take over responsibility for paying the benefits. The latest spread schedule should not be read as a general change to all pension payouts or all standard-termination settlement amounts.

The regulatory reach is wider than the central termination calculation. PBGC says part 4044 assumptions are used for specified liability measurements involving multiemployer plans after a mass withdrawal. Certain multiemployer plans that received special financial assistance must use the 4044 interest assumption when calculating withdrawal liability during a prescribed period. These applications are governed by separate rules, not by a blanket requirement for every multiemployer plan.

Other uses identified in the October rule include selected annual financial and actuarial reporting under PBGC’s section 4010 requirements and determining some amounts transferred to the agency’s Missing Participants Program. The assumptions can also be relevant to evaluating certain pension plan spinoffs. For each use, the applicable regulation determines which assumptions must be applied; the latest quarterly spreads do not independently expand those obligations.

PBGC describes the revision as technical and says it issued the rule without the usual advance notice-and-comment process to keep valuations aligned with group annuity prices as market data become available. The agency also determined that the amendment is not a significant regulatory action under Executive Order 12866. The rule was published October 14, with the effective date set 17 days later.

For pension actuaries working on covered valuations, the immediate task is to use the appropriate month-end 4044 yield curve and the newly prescribed fourth-quarter spreads rather than carrying forward the third-quarter table. The current regulation covers valuation dates through January 30, 2027; the next calendar month-end, January 31, begins the following quarterly valuation period.