The Pension Protection Act of 2006 provides that, generally beginning in 2008, single-employer plans that are between 60 and 80 percent funded may not pay lump sums or other accelerated distribution forms with values in excess of: (1) 50 percent of the amount that would be paid absent the restriction or, if smaller (2) the present value of PBGC’s maximum guarantee computed under PBGC guidance. Technical Update 07-04 describes the methodology used to determine the present value of PBGC’s maximum guarantee and explains that a table will be posted for each calendar year. On December 22, 2009 PBGC posted the 2009 table,
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Section 103(a) of the Pension Protection Act of 2006 (PPA 2006) limits the amount of benefits that ongoing plans can pay in prohibited payment forms (e.g., a lump sum) in certain situations. On August 31, 2007 (at 72 FR 50544), Treasury published a proposed rule on “Benefit Restrictions for Underfunded Pension Plans.” This proposed rule provides guidance on the IRC section 436 benefit restrictions, including the definition of “prohibited payment” and the relevant effective dates.
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