[Federal Register Volume 59, Number 135 (Friday, July 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17251]
[[Page Unknown]]
[Federal Register: July 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 for 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 August 1994, and to multiemployer plans with
valuation dates in August 1994. The effect of these amendments is to
advise the public of the adoption of these assumptions.
EFFECTIVE DATE: August 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 August 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 August 1994 and multiemployer plans that
have undergone mass withdrawal and have valuation dates during August
1994.
For annuity benefits, the interest rates will be 7.00% 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 5.75% for the period during which benefits are in
pay status, 5.00% during the seven years directly preceding the
benefit's placement in pay status, and 4.0% during any other years
preceding the benefit's placement in pay status. (ERISA section 205(g)
and Internal Revenue Code section 417(e) provide that private sector
plans valuing lump sums not in excess of $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 must use interest
assumptions at least as generous as 120% of the PBGC interest
assumptions).) The above annuity interest assumptions represent an
increase (from those in effect for July 1994) of .10 percent for the
first 25 years following the valuation date and are otherwise
unchanged. The lump sum interest assumptions represent an increase
(from those in effect for July 1994) of .25 percent for the period
during which benefits are in pay status and the seven years directly
preceding that period; they 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 August 1994, and in multiemployer plans that have undergone mass
withdrawal and have valuation dates during August 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 10 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 2619--Interest Rates Used To Value Lump Sums and
Annuities
Lump Sum Valuations
In determining the value of interest factors of the form V:
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 value of it 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]
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For plans with a Deferred annuities (percent)
valuation date Immediate ---------------------------------------
Rate set ---------------------- annuity
On or rate i1 i2 i3 n1 n2
after Before (percent)
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* * * * * * *
10.................................... 8-1-94 9-1-94 5.75 5.00 4.00 4.00 7 8
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Annuity Valuations
In determining the value of interest factors of the form V:
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]
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The values of it are:
For valuation dates occurring in the month-- -----------------------------------------------------------
it for t= it for t= it for t=
----------------------------------------------------------------------------------------------------------------
* * * * * * *
August 1994......................................... .0700 1-25 .0525 >25 N/A N/A
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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 10 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 V:
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 n1 n1+n2), interest rate
i2 shall apply from the valuation date for a period of
y-n1 years, interest rate ii 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]
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For plans with a Deferred annuities (percent)
valuation date Immediate ---------------------------------------
Rate set ---------------------- annuity
On or rate i1 i2 i3 n1 n2
after Before (percent)
----------------------------------------------------------------------------------------------------------------
* * * * * * *
10.................................... 8-1-94 9-1-94 5.75 5.00 4.00 4.00 7 8
----------------------------------------------------------------------------------------------------------------
Annuity Valuations
In determining the value of interest factors of the form V:
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=
----------------------------------------------------------------------------------------------------------------
* * * * * * *
August 1994......................................... .0700 1-25 .0525 >25 N/A N/A
----------------------------------------------------------------------------------------------------------------
Issued in Washington, DC, on this 11th day of July 1994.
Martin Slate,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 94-17251 Filed 7-14-94; 8:45 am]
BILLING CODE 7708-01-M