2024 Social Security, PBGC, projected covered compensation figures
Social Security and Supplemental Security Income (SSI) amounts
PBGC premiums, guaranteed benefits and maximum present value
On Oct. 13, PBGC announced inflation-adjusted 2024 premium rates and the variable-rate premium cap. The SECURE 2.0 Act of 2022 (Division T of Pub. L. No. 117-328) eliminated inflationary indexing on the variable-rate premium, but all other premium amounts — including the per-participant variable-rate premium cap — are indexed annually for wage inflation.
On Oct. 7, PBGC announced that the maximum guaranteed benefit at age 65 for terminating plans will rise to $85,295 in 2024 from $81,000 in 2023. This amount is determined using the Social Security “old law” contribution and benefit base (see Social Security and SSI amounts). The maximum guaranteed benefit is adjusted if benefit payments start before (or after) age 65 or are paid in a form other than a single-life annuity. Some of the guaranteed amount may be paid from the plan’s assets, and participants may receive more if the plan is better funded or PBGC can recover other amounts from the plan sponsor.
PBGC published the 2024 present value of the maximum guarantee table on Oct. 30. These values are used to administer Internal Revenue Code (IRC) Section 436 restrictions on lump sums and other accelerated payments from underfunded plans. Plans at least 60% but less than 80% funded may only pay lump sums (or other accelerated distributions) up to the lesser of (i) 50% of the present value of the benefit otherwise payable or (ii) the present value of the participant's PBGC maximum guarantee. Plans subject to the restrictions must use the 2024 table for annuity starting dates in 2024, regardless of the plan year.
The present values will decrease significantly from 2023 levels despite the increase in the age-65 maximum guaranteed benefit. The drop in present value resulted mainly from the increase in interest rates (August 2023 IRC Section 417(e) lump sum segment rates of 5.45%, 5.52%, and 5.43% vs. the August 2022 rates of 3.79%, 4.62%, and 4.69%) and to a lesser extent from the update in the Section 417(e) mortality table.
The next table shows the present values for 2024 and the two prior years. Tables of present values for every year back to 2008 are available on the PBGC website, along with downloadable Excel tables.
Projected covered compensation
Qualified defined benefit (DB) pension plans use covered compensation to determine “permitted disparity” under Section 401(l) design-based safe harbor rules and “imputed disparity” under Section 401(a)(4) general nondiscrimination testing rules. Covered compensation is the average Old-Age, Survivors and Disability Insurance (OASDI) contribution and benefit base for the 35 years ending with the year the employee reaches Social Security retirement age. Qualified plans have the option to determine permitted or imputed disparity using either actual or rounded covered compensation.
IRS has not yet issued 2024 covered compensation tables, but Mercer has projected these amounts based on the increase in the taxable wage base to $168,600 for 2024 from $160,200 for 2023. The next table shows covered compensation amounts for individuals who have already reached Social Security full retirement age. (At that age, covered compensation becomes fixed and is no longer affected by annual changes in the OASDI contribution and benefit base.)
Related resources
Non-Mercer resources
- Present value of PBGC maximum guarantee (PBGC, Oct. 30, 2023)
- Maximum guaranteed benefit tables (PBGC, Oct. 20, 2023)
- Premium rates for 2024 and earlier years (PBGC, Oct. 13, 2023)
- Press release on Social Security COLA for 2024 (SSA, Oct. 13, 2023)
- Automatic determinations (SSA)