PBGC Lump Sum Cap for Restricted Plans Falls at Every Age Under 65

On October 22 the Pension Benefit Guaranty Corporation posted its 2027 table of the present value of the maximum guaranteed benefit, and the value fell at every age from 25 to 64, by $14,261 to $598,517 at age 55 and by $20,255 to $811,678 at 60, according to the table on the agency's website. At 65 the value rose $801 to $1,138,348, and the values rise from there, by 1.4% at 75.

It sets the lump sum ceiling for plans in the middle funding band. Under IRC section 436(d)(3) and ERISA section 206(g)(3)(C), a plan whose adjusted funding target attainment percentage is at least 60% but less than 80% "generally may not pay a prohibited payment to the extent the payment exceeds the lesser of" half the payment that would otherwise be made or "the present value, determined under guidance provided by PBGC, of the maximum guarantee," the agency's page says.

PBGC had posted its 2027 maximum monthly guarantee table three days earlier, raising the age-65 straight-life figure 4.16% to $8,113.64 from $7,789.77, AI-CIO reported on October 22, and had set the 2027 flat-rate premium at $116 per participant on October 14. That guarantee follows the Social Security index. A lump sum ceiling derived from it moved the other way for every working-age participant.

Key Takeaways

PBGC's 2027 present value of the maximum guarantee is $598,517 at age 55, down 2.3% from $612,778, and $811,678 at 60, down 2.4%, per PBGC's October 22 table.
At 65 the value is $1,138,348, up 0.1%; at 70 it is up 0.7% and at 75 up 1.4%, to $2,626,317.
PBGC built the table on the August 2026 417(e) segment rates of 4.65%, 5.75% and 6.73%, up 45, 46 and 65 basis points from August 2025.
PBGC's maximum monthly guarantee at 65 rose 4.16% to $8,113.64 for 2027, so the benefit being valued grew while the rates discounting it rose faster.
A plan with an AFTAP of at least 60% but under 80% may not pay a lump sum above the lesser of half the full amount or this present value.

Three segment rates against one index

PBGC states the inputs on the page: "The 2027 table was developed using the 417(e) segment rates for August 2026 (4.65%, 5.75% and 6.73%, respectively) for plan years beginning in 2027 and the 417(e) applicable mortality table for 2027." Its 2026 table used the August 2025 rates of 4.20%, 5.29% and 6.08%. All three segments rose, the third by 65 basis points.

Technical Update 07-4, dated December 17, 2007, set the method and the August rule. Section 436(d)(3)(A)(ii) requires the present value to be computed with the "applicable interest rate" and "applicable mortality table" under section 417(e), and PBGC uses the preceding August's rate for each calendar year's table so it can publish before year-end, the update says. Notice 2026-27, issued by the IRS in May and covered by the site in June, supplies the 2027 applicable mortality table.

At the same time, the benefit being discounted grew. PBGC's monthly maximum at 65 rose 4.16% for 2027, and its guarantee page says the figure "is determined using a formula in federal law tied to the Social Security index." At 55 the 2027 monthly maximum is $3,651.14, against $8,113.64 at 65, paid over a longer expected lifetime, so more of the stream sits in the second and third segments, where the rates rose 46 and 65 basis points. At 65 and above the stream is short enough that the larger benefit outweighs the higher discount.

Age at annuity starting date	2026 present value	2027 present value	Change
25	$160,350	$154,802	-3.5%
35	$233,810	$226,937	-2.9%
45	$370,339	$362,223	-2.2%
55	$612,778	$598,517	-2.3%
60	$831,933	$811,678	-2.4%
62	$953,870	$950,804	-0.3%
65	$1,137,547	$1,138,348	+0.1%
70	$1,668,229	$1,680,604	+0.7%
75	$2,589,858	$2,626,317	+1.4%

Sources: PBGC, Present Value of the Maximum PBGC Guaranteed Benefit under IRC Section 436(d)(3)(A)(ii), 2026 and 2027 tables, page last updated October 22, 2026. Percent changes are computed from the published dollar values. PBGC's 2027 table runs from age 25 to 85.

What the ceiling does to a restricted plan's lump sums

For a plan in the 60% to 80% band, the restriction is applied payment by payment. Half of the participant's full lump sum is compared with the table value at the participant's age, and the plan may pay no more than the smaller. In 2027 the table binds for a 55-year-old whose unrestricted lump sum exceeds $1,197,034, twice $598,517; below that, the 50% test binds. In 2026 the same participant's ceiling was $612,778.

An age rule in the update explains the shape of the table. For each age, PBGC takes the greater of two present values: the maximum guarantee payable immediately as a single-life annuity, or the same guarantee commencing at age 65. Only the limit under ERISA section 4022(b)(3)(B) is valued; phase-in limits and the accrued-at-normal limit are disregarded. Each table applies by the calendar year of the annuity starting date "regardless of when the plan year begins," so a plan with a July plan year uses the 2027 column for starting dates from January 1.

Technical Update 07-4 does not require the table. It says the table reduces the burden on plan administrators who would otherwise compute the value themselves, and that a plan may use an alternative approach that satisfies the statute and regulations. Treasury's benefit restrictions regulations govern the definition of a prohibited payment and the effective dates, the PBGC page notes.

The plans the ceiling reaches

An AFTAP is measured on the funding target under the stabilized segment rates, so it sits above the accounting funded ratio for most plans, and even on the accounting measure corporate plans are well clear of the band. Milliman's Pension Funding Index put the 100 largest corporate plans at 112.2% funded at August 31, from 104.9% a year earlier, on a 6.00% discount rate and a $141 billion surplus, the firm said on September 10. PBGC's single-employer program, which stands behind the guarantee, closed fiscal 2025 with a $62.2 billion net position on $152.3 billion of assets against $90 billion of liabilities, PBGC said in January.

For a sponsor that is in the band, the two October tables move in opposite directions. Its participants' monthly guarantee from PBGC after a termination is 4.16% larger, and the lump sum the plan may pay a 55-year-old while restricted is 2.3% smaller. Restrictions lift when a certified AFTAP reaches 80%; until then no lump sum may exceed the table value at the participant's age.

Premiums had moved eight days earlier. PBGC's rates page, updated October 14, sets the 2027 single-employer flat rate at $116 per participant from $111 and the variable-rate cap at $783 from $751, with the variable rate at $52 per $1,000 of unfunded vested benefits, where it has sat since 2023 and "is no longer indexed." Multiemployer plans pay $42, from $40. AI-CIO reported that the sources it spoke to did not expect the premium increase to change sponsors' pension risk transfer decisions by much, with plan administration costs still the driver.

PBGC's 2026 values apply to annuity starting dates through December 31. On January 1 the 2027 column takes over, and the 2028 table, under the update's rule, will be built on the August 2027 segment rates.

PBGC Lump Sum Cap for Restricted Plans Falls at Every Age Under 65

Key Takeaways

Three segment rates against one index

What the ceiling does to a restricted plan's lump sums

The plans the ceiling reaches

Further Reading

Sources