[Federal Register Volume 59, Number 50 (Tuesday, March 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5968]


[[Page Unknown]]

[Federal Register: March 15, 1994]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 2619 and 2676

 

Valuation of Plan Benefits in Single-Employer Plans; Valuation of 
Plan Benefits and Plan Assets Following Mass Withdrawal; Amendments 
Adopting Additional PBGC Rates

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This final rule amends the Pension Benefit Guaranty 
Corporation's (``PBGC's'') regulations on Valuation of Plan Benefits in 
Single-Employer Plans and Valuation of Plan Benefits and Plan Assets 
Following Mass Withdrawal. The former regulation contains the interest 
assumptions that the PBGC uses to value benefits under terminating 
single-employer plans. The latter regulation contains the interest 
assumptions of valuations of multiemployer plans that have undergone 
mass withdrawal. The amendments set out in this final rule adopt the 
interest assumptions applicable to single-employer plans with 
termination dates in April 1994, and to multiemployer plans with 
valuation dates in April 1994. The effect of these amendments is to 
advise the public of the adoption of these assumptions.

EFFECTIVE DATE: April 1, 1994.

FOR FURTHER INFORMATION CONTACT:
Harold J. Ashner, Assistant General Counsel, Office of the General 
Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW., 
Washington, DC 20005, (202) 326-4024 (202-326-4179 for TTY and TDD). 
(These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: This rule adopts the April 1994 interest 
assumptions to be used under the Pension Benefit Guaranty Corporation's 
(``PBGC's'') regulations on Valuation of Plan Benefits in Single-
Employer Plans (29 CFR part 2619, the `'single-employer regulation'') 
and Valuation of Plan Benefits and Plan Assets Following Mass 
Withdrawal (29 CFR part 2676, the ``multiemployer regulation'').
    Part 2619 sets forth the methods for valuing plan benefits of 
terminating single-employer plans covered under title IV of the 
Employee Retirement Income Security Act of 1974, as amended 
(``ERISA''). Under ERISA section 4041(c), all single-employer plans 
wishing to terminate in a distress termination must value guaranteed 
benefits and ``benefit liabilities'', i.e., all benefits provided under 
the plan as of the plan termination date, using the formulas set forth 
in part 2619, subpart C. (Plans terminating in a standard termination 
may, for purposes of the Standard Termination notice filed with PBGC, 
use these formulas to value benefit liabilities, although this is not 
required). In addition, when the PBGC terminates an underfunded plan 
involuntarily pursuant to ERISA section 4042(a), it uses the subpart C 
formulas to determine the amount of the plan's underfunding. Part 2676 
prescribes rules for valuing benefits and certain assets of 
multiemployer plans under sections 4219(c)(1)(D) and 4281(b) of ERISA.
    Appendix B to part 2619 sets forth the interest rates and factors 
under the single-employer regulation. Appendix B to part 2676 sets 
forth the interest rates and factors under the multiemployer 
regulation. Because these rates and factors are intended to reflect 
current conditions in the financial and annuity markets, it is 
necessary to update the rates and factors periodically.
    The PBGC issues two sets of interest rates and factors, one set to 
be used for the valuation of benefits to be paid as annuities and one 
set for the valuation of benefits to be paid as lump sums. The same 
assumptions apply to terminating single-employer plans and to 
multiemployer plans that have undergone a mass withdrawal. This 
amendment adds to appendix B to parts 2619 and 2676 sets of interest 
rates and factors for valuing benefits in single-employer plans that 
have termination dates during April 1994 and multiemployer plans that 
have undergone mass withdrawal and have valuation dates during April 
1994.
    For annuity benefits, the interest rates will be 6.20% for the 
first 25 years following the valuation date and 5.25% thereafter. For 
benefits to be paid as lump sums, the interest assumptions to be used 
by the PBGC will be 4.75% for the period during which benefits are in 
pay status and 4.0% during the period preceding the benefit's placement 
in pay status. (ERISA section 205(g) and Internal Revenue Code section 
417(e) provide that provide sector plans valuing lump sums under 
$25,000 must use interest assumptions at least as generous as those 
used by the PBGC for valuing lump sums (and for lump sums exceeding 
$25,000 are restricted to 120% of the PBGC interest assumptions).) The 
above annuity interest assumptions represent an increase (from those in 
effect for March 1994) of .40 percent for the first 25 year following 
the valuation date are otherwise unchanged; the lump sum interest 
assumptions represent an increase (from those in effect for March 1994) 
of .25 percent of the period during which benefits are in pay status 
and are otherwise unchanged.
    Generally, the interest rates and factors under these regulations 
are in effect for at least one month. However, the PBGC publishes its 
interest assumptions each month regardless of whether they represent a 
change from the previous month's assumptions. The assumptions normally 
will be published in the Federal Register by the 15th of the preceding 
month or as close to that date as circumstances permit.
    The PBGC has determined that notice and public comment on these 
amendments are impracticable and contrary to the public interest. This 
finding is based on the need to determine and issue new interest rates 
and factors promptly so that the rates and factors can reflect, as 
accurately as possible, current market conditions.
    Because of the need to provide immediate guidance for the valuation 
of benefits in single-employer plans whose termination dates fall 
during April 1994, and in multiemployer plans that have undergone mass 
withdrawal and have valuation dates during April 1994, the PBGC finds 
that good cause exists for making the rates and factors set forth in 
this amendment effective less than 30 days after publication.
    The PBGC has determined that this action is not a ``significant 
regulatory action'' under the criteria set forth in Executive Order 
12866, because it will not have an annual effect on the economy of $100 
million or more or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities; create a serious inconsistency or otherwise 
interfere with an action taken or planned by another agency; materially 
alter the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof; or raise 
novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in Executive Order 
12866.
    Because no general notice of proposed rulemaking is required for 
this amendment, the Regulatory Flexibility Act of 1980 does not apply. 
See 5 U.S.C. 601(2).

List of Subjects

29 CFR Part 2619

    Employee benefit plans, Pension insurance, and Pensions.

29 CFR Part 2676

    Employee benefit plans and Pensions.

    In consideration of the foregoing, parts 2619 and 2676 of chapter 
XXVI, title 29, Code of Federal Regulations, are hereby amended as 
follows:

PART 2619--[AMENDED]

    1. The authority citation for part 2619 continues to read as 
follows:

    Authority: 29 U.S.C. 1301(a), 1302(b)(3), 1341, 1344, 1362.

    2. In appendix B, Rate Set 6 is added to Table I, and a new entry 
is added to Table II, as set forth below. The introductory text of 
Table I is amended by revising both references to ``2619.43'' to read 
``2619.49'', and the introductory text of both tables is republished 
for the convenience of the reader.

Appendix B to Part 2619--Interest Rates Used to Value Lump Sums and 
Annuities

Lump Sum Valuations

    In determining the value of interest factors of the form 
v0:n (as defined in Sec. 2619.49(b)(1)) for purposes of 
applying the formulas set forth in Sec. 2619.49 (b) through (i) and 
in determining the value of any interest factor used in valuing 
benefits under this subpart to be paid as lump sums (including the 
return of accumulated employee contributions upon death), the PBGC 
shall employ the values of i1 set out in Table I hereof as 
follows:
    (1) For benefits for which the participant or beneficiary is 
entitled to be in pay status on the valuation date, the immediate 
annuity rate shall apply.
    (2) For benefits for which the deferral period is y years (y is 
an integer and 0n1), interest rate i1 shall 
apply from the valuation date for a period of y years; thereafter 
the immediate annuity rate shall apply.
    (3) For benefits for which the deferral period is y years (y is 
an integer and n1n1+n2), interest rate 
i2 shall apply from the valuation date for a period of 
y-n1 years, interest rate i1 shall apply for the following 
n1 years; thereafter the immediate annuity rate shall apply.
    (4) For benefits for which the deferral period is y years (y is 
an integer and y>n1+n2), interest rate i3 shall apply 
from the valuation date for a period of y-n1-n2 years, 
interest rate i2 shall apply for the following n2 years, 
interest rate i1 shall apply for the following n1 years; 
thereafter the immediate annuity rate shall apply.

                                                                         Table I                                                                        
                                                                  [Lump Sum Valuations]                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      For plans with a       Immediate                     Deferred annuities (percent)                 
                                                       valuation date         annuity   ----------------------------------------------------------------
                    Rate set                     --------------------------     rate                                                                    
                                                  On or after     Before     (percent)        i1           i2           i3           n1           n2    
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
                                                                      * * * * * * *                                                                     
6...............................................       4-1-94       5-1-94         4.75         4.00         4.00         4.00            7            8
--------------------------------------------------------------------------------------------------------------------------------------------------------

Annuity Valuations

    In determining the value of interest factors of the form 
v0:n (as defined in Sec. 2619.49(b)(1)) for purposes of 
applying the formulas set forth in Sec. 2619.49 (b) through (i) and 
in determining the value of any interest factor used in valuing 
annuity benefits under this subpart, the plan administrator shall 
use the values of it prescribed in Table II hereof.
    The following table tabulates, for each calendar month of 
valuation ending after the effective date of this part, the interest 
rates (denoted by i1, i2, * * *, and referred to generally 
as it) assumed to be in effect between specified anniversaries 
of a valuation date that occurs within that calendar month; those 
anniversaries are specified in the columns adjacent to the rates. 
The last listed rate is assumed to be in effect after the last 
listed anniversary date.

                                                    Table II                                                    
                                              [Annuity Valuations]                                              
----------------------------------------------------------------------------------------------------------------
                                                                The values of it are:                           
 For valuation dates occurring in  -----------------------------------------------------------------------------
            the month--                  it         for t=         it         for t=         it         for t=  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                                                  * * * * * * *                                                 
April 1994........................        .0620         1-25        .0525          >25          N/A          N/A
----------------------------------------------------------------------------------------------------------------

PART 2676--[AMENDED]

    3. The authority citation for part 2676 continues to read as 
follows:

    Authority: 29 U.S.C. 1302(b)(3), 1399(c)(1)(D), 1441(b)(1).

    4. In appendix B, Rate Set 6 is added to Table I, and a new entry 
is added to Table II, as set forth below. The introductory text of both 
tables is republished for the convenience of the reader and remains 
unchanged.

Appendix B to Part 2676--Interest Rates Used to Value Lump Sums and 
Annuities

Lump Sum Valuations

    In determining the value of interest factors of the form 
V0:n (as defined in Sec. 2676.13(b)(1)) for purposes of 
applying the formulas set forth in Sec. 2676.13 (b) through (i) and 
in determining the value of any interest factor used in valuing 
benefits under this subpart to be paid as lump sums, the PBGC shall 
use the values of it prescribed in Table I hereof. The interest 
rates set forth in Table I shall be used by the PBGC to calculate 
benefits payable as lump sum benefits as follows:
    (1) For benefits for which the participant or beneficiary is 
entitled to be in pay status on the valuation date, the immediate 
annuity rate shall apply.
    (2) For benefits for which the deferral period is y years (y is 
an integer and 0n1), interest rate i1 shall 
apply from the valuation date for a period of y years; thereafter 
the immediate annuity rate shall apply.
    (3) For benefits for which the deferral period is y years (y is 
an integer and n1n1+n2), interest rate 
i2 shall apply from the valuation date for a period of 
y-n1 years, interest rate i1 shall apply for the following 
n1 years; thereafter the immediate annuity rate shall apply.
    (4) For benefits for which the deferral period is y years (y is 
an integer and y>n1+n2), interest rate i3 shall apply 
from the valuation date for a period of y-n1-n2 years, 
interest rate i2 shall apply for the following n2 years, 
interest rate i1 shall apply for the following n1 years; 
thereafter the immediate annuity rate shall apply.

                                                                         Table I                                                                        
                                                                  [Lump Sum Valuations]                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    For plans with a                                       Deferred annuities (percent)                 
                                                     valuation date         Immediate   ----------------------------------------------------------------
                   Rate set                    --------------------------    annuity                                                                    
                                                On or after     Before    rate(percent)       i1           i2           i3           n1           n2    
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
                                                                      * * * * * * *                                                                     
6.............................................       4-1-94       5-1-94          4.75          4.00         4.00         4.00            7            8
--------------------------------------------------------------------------------------------------------------------------------------------------------

Annuity Valuations

    In determining the value of interest factors of the form 
v0:n (as defined in Sec. 2676.13(b)(1)) for purposes of 
applying the formulas set forth in Sec. 2676.13(b) through (i) and 
in determining the value of any interest factor used in valuing 
annuity benefits under this subpart, the plan administrator shall 
use the values of it prescribed in the table below.
    The following table tabulates, for each calendar month of 
valuation ending after the effective date of this part, the interest 
rates (denoted by i1, i2, * * *, and referred to generally 
as It) assumed to be in effect between specified anniversaries 
of a valuation date that occurs within that calendar month; those 
anniversaries are specified in the columns adjacent to the rates. 
The last listed rate is assumed to be in effect after the last 
listed anniversary date.

                                                    Table II                                                    
                                              [Annuity Valuations]                                              
----------------------------------------------------------------------------------------------------------------
                                                               The values of it are:                            
 For valuation dates occurring in  -----------------------------------------------------------------------------
            the month--                 it          for t=         it         for t=         it         for t=  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                                                  * * * * * * *                                                 
April 1994........................        .0620         1-25        .0525          >25          N/A          N/A
----------------------------------------------------------------------------------------------------------------

    Issued in Washington, DC, on this 10th day of March 1994.

Martin Slate,

Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 94-5968 Filed 3-14-94; 8:45 am]

BILLING CODE 7708-01-M