[Federal Register Volume 60, Number 126 (Friday, June 30, 1995)]
[Rules and Regulations]
[Pages 34412-34417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16196]




[[Page 34411]]

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Part V





Pension Benefit Guaranty Corporation





_______________________________________________________________________



29 CFR Part 2627



Disclosure to Participants; Final Rule

  Federal Register / Vol. 60, No. 126 / Friday, June 30, 1995 / Rules 
and Regulations  

[[Page 34412]]


PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 2627

RIN 1212-AA77


Disclosure to Participants

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Pension Benefit Guaranty Corporation is amending its 
regulations to implement a new notice requirement under section 4011 of 
the Employee Retirement Income Security Act of 1974, as amended by the 
Retirement Protection Act of 1994. Section 4011 requires plan 
administrators of certain underfunded plans to provide notice to plan 
participants and beneficiaries of the plan's funding status and the 
limits on the PBGC's guarantee.

EFFECTIVE DATE: July 31, 1995.

FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General 
Counsel, or Catherine B. Klion, Attorney, Office of the General 
Counsel, PBGC, 1200 K Street NW., Washington, DC 20005-4026, 202-326-
4024 (202-326-4179 for TTY and TDD).

SUPPLEMENTARY INFORMATION: On March 28, 1995, the PBGC published in the 
Federal Register (60 FR 16026) a proposed rule implementing a new 
notice requirement under section 4011 of ERISA, which was added by 
section 775 of the Retirement Protection Act of 1994 (subtitle F of 
title VII of the Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 
Stat. 4809 (1994)). Under section 4011, plan administrators of certain 
underfunded plans must provide notice to plan participants and 
beneficiaries of the plan's funding status and the limits on the PBGC's 
guarantee.
    The proposed rule prescribes which plans are subject to the notice 
requirement, who is entitled to receive the notice, and the time, form, 
and manner of issuance of the notice. The proposed rule includes a 
model notice plan administrators could use.
    The PBGC received 14 comments from plan sponsors, organizations 
representing participants and plan sponsors, and pension practitioners. 
PBGC has made changes in the final regulation pursuant to these 
comments.

Form of Notice

    Some commenters questioned the rule limiting the items that could 
be in the Participant Notice. Some objected to the rule that additional 
information be in a document separate from the Participant Notice, and 
others suggested specific information they thought should be permitted 
to be part of the Participant Notice. The regulation (Sec. 2627.10(d)) 
allows a plan administrator to provide additional information with the 
Participant Notice. To allow the additional information to be in the 
same document as the Participant Notice would run counter to the 
Congressional purpose of making the Participant Notice clear, concise, 
and focused. The final rule does include in the Participant Notice some 
of the specific information suggested by commenters.
    Commenters thought that certain information required in the 
Participant Notice might generate undue concerns about benefit 
availability and suggested ways to revise the notice. Congress mandated 
plan administrators to provide participants with information on 
underfunding and PBGC guarantees. To see that this information is 
provided without raising undue concerns, the PBGC has revised the model 
notice and certain requirements of the rule.
    Three commenters objected to the requirement that the Participant 
Notice include information on funding waivers and missed contributions, 
noting that the information is not specified in section 4011 and is 
subject to other disclosure requirements. Information on funding 
waivers and missed contributions is relevant to participants' 
understanding of a plan's funding status.
    One of these commenters suggested that these Participant Notice 
disclosure requirements be coordinated with the other disclosure 
requirements. The final rule clarifies and limits the Participant 
Notice disclosure requirements relating to funding waivers and missed 
contributions.
    The final rule makes clear that minimum funding waivers that have 
been fully repaid as of the end of the prior plan year are not required 
to be included. A waiver will be treated as fully repaid before the end 
of the statutory amortization period only where the employer has made 
contributions in excess of the minimum funding requirements and the 
resulting credit balance is precluded from being used to satisfy future 
minimum funding requirements by a waiver condition or contractual 
obligation.
    The final rule limits the circumstances in which participants must 
be informed of missed contributions to the type of circumstances in 
which notice to participants is required under section 101(d) of ERISA. 
For the Participant Notice, plan administrators must disclose missed 
contributions if (1) the plan had a funding deficiency at the end of 
any prior plan year (taking into account contributions made before the 
Participant Notice is issued and within the eight-and-one-half month 
grace period after the plan year), or (2) a quarterly contribution or 
other payment was overdue for more than 60 days. The plan administrator 
must inform participants if the missed payment has or has not been made 
and (if made) the date of the payment. Missed contributions for prior 
plan years that have previously been disclosed to participants must be 
included only if the contributions still have not been paid.
    For example, assume that the last three quarterly payments for the 
1995 calendar plan year (due July 15, 1995, October 15, 1995, and 
January 15, 1996) were missed, but paid on September 15, 1996, along 
with any remaining 1995 contributions needed to satisfy the minimum 
funding standard. The Participant Notice for the 1995 plan year, issued 
on November 15, 1995, would disclose the July 15 delinquency, but not 
the October 15 or January 15 delinquencies (because neither would then 
be overdue by more than 60 days). The Participant Notice for the 1996 
plan year, issued on November 15, 1996, would not need to redisclose 
the July 15 delinquency (since it has been paid), but would need to 
disclose the October 15 and January 15 delinquencies unless they had 
previously been disclosed to participants under Title I of ERISA.
    The Department of Labor has advised PBGC that, in the absence of 
final regulations implementing section 101(d) of ERISA (requiring 
notice of failure to meet minimum funding standards), it will treat a 
plan administrator that provides a Participant Notice as having 
satisfied section 101(d) with respect to any missed contributions 
identified in the Participant Notice.
    The final regulation requires the Participant Notice to specify the 
date as of which the Notice Funding Percentage is determined 
(Sec. 2627.10(b)(2)). The PBGC expects many plans to determine the 
Notice Funding Percentage using data from the prior plan year because 
that will be the most current data available at the time the 
Participant Notice is issued.
    One commenter objected to the requirement that the Participant 
Notice include, in addition to the name, address, and telephone number 
of the plan administrator, the name, address and telephone number of an 
individual who can answer questions about the plan's funding, pointing 
out that communicating information on plan funding orally would be 
burdensome and could lead to misunderstanding. 

[[Page 34413]]
The final regulation eliminates the requirement that the plan 
administrator be identified in all cases, and allows the Participant 
Notice to identify any person(s) (including the plan administrator) who 
will provide further information about the plan's funding. The 
information need not be provided orally, and need not go beyond that 
required to be given under Title I of ERISA.
    One commenter suggested a minimum type size. Rather than specifying 
a type size, the final regulation (Sec. 2627.10(a)) makes clear that 
the Participant Notice not only has to be understandable, but also 
readable (e.g., in a sufficiently large type size). The final 
regulation (Sec. 2627.10(e)) also revises the foreign language 
requirements to make clear that in lieu of providing a notice of 
assistance in the applicable foreign language, plan administrators may 
provide the Participant Notice itself in that language.

Model Notice

    One commenter suggested that the PBGC subject the model notice to a 
readability test. The model notice was subjected to readability tests 
and focus group review by workers and retirees. Based on the results of 
these reviews, the PBGC made changes to further simplify the model 
notice.
    Some commenters read the model notice as requiring information that 
may not apply to particular plans and as limiting information on the 
maximum guaranteed benefit to ages 55 and 65. The final regulation 
revises the model notice so that plan administrators who wish to use it 
may tailor it to fit particular plans. With respect to the maximum 
guaranteed benefit, the final rule requires all plans to provide 
information for age 65 (the age on which PBGC guarantees are based). A 
plan that allows early retirement benefits must specify the maximum 
guaranteed benefit for at least one early retirement age. A plan that 
provides for normal retirement before age 65 must include the normal 
retirement age.

Manner of Issuance

    Commenters both supported and opposed the requirement that the 
Participant Notice be in a separate document from the summary annual 
report. Supporters expressed concern that the information in the 
Participant Notice would be lost if combined with the summary annual 
report, while those opposing the requirement suggested that combining 
the two documents would be convenient or would reduce administrative 
costs. The regulation (Sec. 2627.9) allows plans to issue the 
Participant Notice with the summary annual report to minimize cost. 
However, combining the two documents could obscure the information in 
the Participant Notice. In making the disclosure provisions part of 
Title IV of ERISA, Congress clearly signalled that information on 
underfunding and PBGC guarantees not be entangled with other 
information.
    One commenter addressed the requirement that the Participant Notice 
be issued by using measures reasonably calculated to ensure actual 
receipt. The commenter suggested incorporating the Department of Labor 
regulation on furnishing the summary annual report (29 CFR 2520.104b-
1(b)(1)) verbatim in the final Participant Notice regulation. The 
examples specified in the DOL regulation, as well as any other methods 
that DOL determines are acceptable under its regulation, are acceptable 
for issuance of the Participant Notice. (Posting a notice of 
availability of the Participant Notice at worksite locations is not an 
acceptable method of issuance.) However, other methods of issuance may 
be acceptable for the Participant Notice.
    One commenter urged that the final regulation specify that posting 
the Participant Notice on an electronic computer network does not 
satisfy the notice requirement because few retirees, and even fewer 
lower-income participants, have access to electronic mail. In certain 
limited circumstances, issuance by electronic mail to employees may be 
reasonably calculated to ensure actual receipt. However, issuance by 
electronic mail to recipients who may not have access to or familiarity 
with electronic mail or the ability to print out the notice easily 
would not be acceptable.

Mergers, Consolidations, and Spin-offs

    In the proposed rule, the PBGC invited comments on how the 
Participant Notice requirement should apply where a plan has been 
involved in a merger, consolidation, or spinoff transaction since the 
prior plan year. No comments on this issue were received.
    The final rule (Sec. 2627.6) requires plan administrators of plans 
involved in those transactions to apply the requirements of section 
4011 and of this regulation in a reasonable manner to accomplish the 
statutory purpose of the Participant Notice. The PBGC may address what 
is a reasonable means to accomplish the statutory purpose in future 
guidance.
Miscellaneous Issues

    Two commenters proposed that plans otherwise subject to the 
Participant Notice requirement should be exempt if they represent a 
minimal portion of the current liability of all of the contributing 
sponsor's defined benefit plans. Another commenter suggested that all 
small plans be exempt from the Participant Notice requirement. 
Participants in these underfunded plans have the same need for the 
information contained in the Participant Notice as do participants in 
other underfunded plans.
    The PBGC received several comments supporting or opposing the 
requirement that the Participant Notice be issued to alternate payees 
not in pay status and employee organizations representing participants 
for purposes of collective bargaining. To ensure that the Participant 
Notice serves its intended purpose of providing timely and useful 
information to interested parties, the final rule retains the 
requirement that the Participant Notice be issued to alternate payees 
and unions. The regulation has been modified to make clear that an 
alternate payee is entitled to receive the Participant Notice only if 
an applicable qualified domestic relations order (as defined in section 
206(d)(3) of ERISA) is on file with the plan.
    One commenter wrote that the deadline for issuing the Participant 
Notice should be no later than seven months after the end of the 
preceding plan year so that participants will not have to wait as long 
for the information. The rules seek to strike a balance between meeting 
participants' need for timely information and minimizing burden on plan 
administrators. To that end, the PBGC is retaining its proposed time 
limit of two months after the deadline for filing the annual report for 
the prior plan year to enable plans to distribute the Participant 
Notice with the summary annual report. (The final rule specifies that 
the plan administrator may change the date of issuance from one plan 
year to the next, provided that the effect of any change is not to 
avoid disclosing a minimum funding waiver under Sec. 2627.10(b)(5) or a 
missed contribution under Sec. 2627.10(b)(6).)
    That same commenter requested that the Department of Labor not 
treat a plan administrator as having complied with the requirement to 
disclose a plan's funding percentage in the summary annual report if 
the plan administrator provides the Participant Notice under section 
4011 (see 60 FR 16027). The Department of Labor advises PBGC that it 
continues to believe that the duplicative reporting would impose an 
unnecessary burden on plan administrators. 

[[Page 34414]]

    The PBGC expects most plan administrators to provide the 
Participant Notice in compliance with this regulation. Any plan 
administrator who does not comply with this regulation may be assessed 
penalties under section 4071 of ERISA. If a plan administrator issues a 
Participant Notice for the 1995 plan year that meets the requirements 
of the proposed rule, the PBGC will not assess section 4071 penalties 
based on a failure to comply with any different requirements in the 
final rule.

E.O. 12866, the Regulatory Flexibility Act, and the Paperwork 
Reduction Act

    The PBGC has determined that this action is not a ``significant 
regulatory action'' under the criteria set forth in Executive Order 
12866 because the rule 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.
    Under section 605(b) of the Regulatory Flexibility Act, the PBGC 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities. Accordingly, as provided in 
section 605 of the Regulatory Flexibility Act (5 U.S.C. 601, et seq.), 
sections 603 and 604 do not apply.
    Small plans are exempt from the Participant Notice requirement for 
the 1995 plan year. For subsequent plan years, neither the cost of 
determining whether a plan is subject to the Participant Notice 
requirement nor the cost of preparing and issuing the Participant 
Notice is expected to be significant for a substantial number of small 
entities. The regulation contains special rules designed to simplify 
the Participant Notice requirement for small plans.
    The Paperwork Reduction Act of 1995, which generally becomes 
effective on October 1, 1995, will apply to the disclosure requirements 
in this final rule. The PBGC intends in the near future to submit to 
the Office of Management and Budget a request for approval of these 
disclosure requirements and to publish in the Federal Register a notice 
advising the public of its request.

List of Subjects in 29 CFR Part 2627

    Employee benefit plans, Pension Insurance, Pensions.

     For the reasons set forth above, the PBGC is amending subchapter 
C, chapter XXVI of 29 CFR by adding a new part 2627 to read as follows:
Part 2627--DISCLOSURE TO PARTICIPANTS

Sec.
2627.1  Purpose and scope.
2627.2  Definitions.
2627.3  Notice requirement.
2627.4  Small plan rules.
2627.5  Exemption for new and newly-covered plans.
2627.6  Mergers, consolidations, and spinoffs.
2627.7  Persons entitled to notice.
2627.8  Time of notice.
2627.9  Manner of issuance of notice.
2627.10  Form of notice.
Appendix A to part 2627--Model participant notice.
Appendix B to part 2627--Table of maximum guaranteed benefits.

    Authority: 29 U.S.C. 1302(b)(3), 1311.


Sec. 2627.1  Purpose and scope.

    (a) Purpose. This part prescribes rules and procedures for 
complying with the requirements of section 4011 of the Act.
    (b) Scope. This part applies for any plan year beginning on or 
after January 1, 1995, with respect to any single-employer plan that is 
covered by section 4021 of the Act.


Sec. 2627.2  Definitions.

    For purposes of this part:
    Act means the Employee Retirement Income Security Act of 1974, as 
amended.
    Participant has the meaning in Sec. 2617.2 of this chapter.
    Participant Notice means the notice required pursuant to section 
4011 of the Act and this part.
    Plan administrator means the administrator, as defined in section 
4001(a)(1) of the Act.


Sec. 2627.3  Notice requirement.

    (a) General. Except as otherwise provided in this part, the plan 
administrator of a plan must provide a Participant Notice for a plan 
year if--
    (1) A variable rate premium is payable for the plan under section 
4006(a)(3)(E) of the Act and part 2610 of this chapter for that plan 
year; and
    (2) The plan does not meet the Deficit Reduction Contribution 
(``DRC'') Exception Test in paragraph (b) of this section (which may be 
applied using the Small Plan DRC Exception Test rules in 
Sec. 2627.4(b), where applicable) for that plan year or for the prior 
plan year.
    (b) DRC Exception Test--(1) Basic rule. A plan meets the DRC 
Exception Test for a plan year if it is exempt from the requirements of 
section 302(d) of the Act for that plan year by reason of section 
302(d)(9), without regard to the small plan exemption in section 
302(d)(6)(A).
    (2) 1994 plan year. A plan satisfies the DRC Exception Test for the 
1994 plan year if, for any two of the plan years beginning in 1992, 
1993, and 1994 (whether or not consecutive), the plan satisfies any 
requirement of section 302(d)(9)(D)(i) of the Act.
    (c) Penalties for non-compliance. If a plan administrator fails to 
provide a Participant Notice within the specified time limit or omits 
material information from a Participant Notice, the PBGC may assess a 
penalty under section 4071 of the Act of up to $1,000 a day for each 
day that the failure continues.


Sec. 2627.4  Small plan rules.

    (a) 1995 plan year exemption. A plan that is exempt from the 
requirements of section 302(d) of the Act for the 1994 or 1995 plan 
year by reason of section 302(d)(6)(A) is exempt from the Participant 
Notice requirement for the 1995 plan year.
    (b) Small Plan DRC Exception Test. In determining whether the 
Participant Notice requirement applies for a plan year beginning after 
1995, the plan administrator of a plan that is exempt from the 
requirements of section 302(d) of the Act by reason of section 
302(d)(6)(A) for the plan year being tested may use any one or more of 
the following rules in determining whether the plan meets the DRC 
Exception Test for that plan year:
    (1) Use of Schedule B data. For any plan year for which the plan is 
exempt from the requirements of section 302(d) of the Act by reason of 
section 302(d)(6)(A), provided both of the following adjustments are 
made--
    (i) The market value of the plan's assets as of the beginning of 
the plan year (as required to be reported on Form 5500, Schedule B) may 
be substituted for the actuarial value of the plan's assets as of the 
valuation date; and
    (ii) The plan's current liability for all participants' total 
benefits as of the beginning of the plan year (as required to be 
reported on Form 5500, Schedule B) may be substituted for the plan's 
current liability as of the valuation date.
    (2) Pre-1995 plan year 90 percent test. A plan that is exempt from 
the requirements of section 302(d) of the Act for a pre-1995 plan year 
by reason 

[[Page 34415]]
of section 302(d)(6)(A) satisfies the requirements of section 
302(d)(9)(D)(i) for that pre-1995 plan year if the ratio of its assets 
to its current liability for that plan year is at least 90 percent. For 
this purpose, the plan's assets are valued without subtracting any 
credit balance under section 302(b) of the Act, and its current 
liability is determined using the highest interest rate allowable for 
the plan year under section 302(d)(7)(C).
    (3) Interest rate adjustment. If the interest rate used to 
calculate current liability for a plan year is less than the highest 
rate allowable for the plan year under section 302(d)(7)(C) of the Act, 
the current liability may be reduced by one percent for each tenth of a 
percentage point by which the highest rate exceeds the rate so used.


Sec. 2627.5  Exemption for new and newly-covered plans.

    A plan (other than a plan resulting from a consolidation or 
spinoff) is exempt from the Participant Notice requirement for the 
first plan year for which the plan must pay premiums under part 2610 of 
this chapter.


Sec. 2627.6  Mergers, consolidations, and spinoffs.

    In the case of a plan involved in a merger, consolidation, or 
spinoff transaction that becomes effective during a plan year, the plan 
administrator shall apply the requirements of section 4011 of the Act 
and of this part for that plan year in a reasonable manner to ensure 
that the Participant Notice serves its statutory purpose.


Sec. 2627.7  Persons entitled to receive notice.

    The plan administrator must provide the Participant Notice to each 
person who is a participant, a beneficiary of a deceased participant, 
an alternate payee under an applicable qualified domestic relations 
order (as defined in section 206(d)(3) of the Act), or an employee 
organization that represents any group of participants for purposes of 
collective bargaining. To determine who is a person that must receive 
the Participant Notice for a plan year, the plan administrator may 
select any date during the period beginning with the last day of the 
previous plan year and ending with the day on which the Participant 
Notice for the plan year is due, provided that a change in the date 
from one plan year to the next does not exclude a substantial number of 
participants and beneficiaries.


Sec. 2627.8  Time of notice.

    The plan administrator must issue the Participant Notice for a plan 
year no later than two months after the deadline for filing the annual 
report for the previous plan year (see Sec. 2520.104a-5(a)(2) of this 
title). The plan administrator may change the date of issuance from one 
plan year to the next, provided that the effect of any change is not to 
avoid disclosing a minimum funding waiver under Sec. 2627.10(b)(5) or a 
missed contribution under Sec. 2627.10(b)(6). When the President of the 
United States declares that, under the Disaster Relief Act of 1974, as 
amended (42 U.S.C. 5121, 5122(2), 5141(b)), a major disaster exists, 
the PBGC may extend the due date for providing the Participant Notice 
by up to 180 days.


Sec. 2627.9  Manner of issuance of notice.

    The Participant Notice shall be issued by using measures reasonably 
calculated to ensure actual receipt by the persons entitled to receive 
it. It may be issued together with another document, such as the 
summary annual report required under section 104(b)(3) of the Act for 
the prior plan year, but must be in a separate document.


Sec. 2627.10  Form of notice.

    (a) General. The Participant Notice (and any additional information 
under paragraph (d) of this section) shall be readable and written in a 
manner calculated to be understood by the average plan participant and 
not to mislead recipients. The Model Participant Notice in the Appendix 
to this part (when properly completed) is an example of a Participant 
Notice meeting the requirements of this section.
    (b) Content. The Participant Notice for a plan year shall include--
    (1) Identifying information (the name of the plan and the 
contributing sponsor, the employer identification number of the 
contributing sponsor, the plan number, the date (at least the month and 
year) on which the Participant Notice is issued, and the name, title, 
address and telephone number of the person(s) who can provide 
information about the plan's funding);
    (2) A statement to the effect that the Participant Notice is 
required by law;
    (3) The Notice Funding Percentage for the plan year, determined in 
accordance with paragraph (c) of this section, and the date as of which 
the Notice Funding Percentage is determined;
    (4) A statement to the effect that--
    (i) To pay pension benefits, the employer is required to contribute 
money to the plan over a period of years;
    (ii) A plan's funding percentage does not take into consideration 
the financial strength of the employer; and
    (iii) The employer, by law, must pay for all pension benefits, but 
benefits may be at risk if the employer faces a severe financial crisis 
or is in bankruptcy;
    (5) If, for any of the five plan years immediately preceding the 
plan year, the plan has been granted a minimum funding waiver under 
section 303 of the Act that has not (as of the end of the prior plan 
year) been fully repaid, a statement identifying each such plan year 
and an explanation of a minimum funding waiver;
    (6) For any payment subject to the requirements of this paragraph, 
a statement identifying the due date for the payment and noting that 
the payment has or has not been made and (if made) the date of the 
payment. Once participants have been notified (under this part or Title 
I of the Act) of a missed contribution that is subject to the 
requirements of this paragraph, the delinquency need not be reported in 
a Participant Notice for a subsequent plan year if the missed 
contribution has been paid in full by the time the subsequent 
Participant Notice is issued. The payments subject to the requirements 
of this paragraph are--
    (i) Any minimum funding payment necessary to satisfy the minimum 
funding standard under section 302(a) of the Act for any plan year 
beginning on or after January 1, 1994, if not paid by the earlier of 
the due date for that payment (the latest date allowed under section 
302(c)(10)) or the date of issuance of the Participant Notice; and
    (ii) An installment or other payment required by section 302 of the 
Act for a plan year beginning on or after January 1, 1995, that was not 
paid by the 60th day after the due date for that payment;
    (7) A statement to the effect that if a plan terminates before all 
pension benefits are fully funded, the PBGC pays most persons all 
pension benefits, but some persons may lose certain benefits that are 
not guaranteed;
    (8) A summary of plan benefits guaranteed by the PBGC, with an 
explanation of the limitations on such guarantee; and
    (9) A statement that further information about the PBGC's guarantee 
may be obtained by requesting the booklet ``Your Guaranteed Pension'' 
from Box YGP, Pueblo, Colorado 81009, along with the current price of 
the booklet. The Participant Notice may include a statement that the 
booklet may be obtained through electronic access to the Consumer 
Information Center via 

[[Page 34416]]
the World Wide Web at http://www.gsa.gov/staff/pa/cic/money.htm.
    (c) Notice Funding Percentage--(1) General Rule. The Notice Funding 
Percentage that must be included in the Participant Notice for a plan 
year is the ``funded current liability percentage'' (as that term is 
defined in section 302(d)(9)(C) of the Act) for that plan year or the 
prior plan year.
    (2) Small plans. A plan that is exempt from the requirements of 
section 302(d) of the Act for a plan year by reason of section 
302(d)(6)(A) may determine its funded current liability percentage for 
that plan year using the Small Plan DRC Exception Test rules in 
Sec. 2627.4(b).
    (d) Additional information. The plan administrator may include with 
the Participant Notice any information not described in paragraph (b) 
of this section only if it is in a separate document.
    (e) Foreign languages. In the case of a plan that (as of the date 
selected under Sec. 2627.7) covers the numbers or percentages specified 
in Sec. 2520.104b-10(e) of this title of participants literate only in 
the same non-English language, the plan administrator shall provide 
those participants either--
    (1) An English-language Participant Notice that prominently 
displays a legend, in their common non-English language, offering them 
assistance in that language, and clearly setting forth any procedures 
participants must follow to obtain such assistance, or
    (2) A Participant Notice in that language.

Appendix A to Part 2627--Model Participant Notice

    The following is an example of a Participant Notice that satisfies 
the requirements of Sec. 2627.10 when the required information is 
filled in (subject to Secs. 2627.10(d)-(e), where applicable).

Notice to Participants of [Plan Name]

    The law requires that you receive information on the funding 
level of your defined benefit pension plan and the benefits 
guaranteed by the Pension Benefit Guaranty Corporation (PBGC), a 
federal insurance agency.

YOUR PLAN'S FUNDING

    As of [DATE], your plan had [INSERT NOTICE FUNDING PERCENTAGE] 
percent of the money needed to pay benefits promised to employees 
and retirees.
    To pay pension benefits, your employer is required to contribute 
money to the pension plan over a period of years. A plan's funding 
percentage does not take into consideration the financial strength 
of the employer. Your employer, by law, must pay for all pension 
benefits, but your benefits may be at risk if your employer faces a 
severe financial crisis or is in bankruptcy.

[INCLUDE THE FOLLOWING PARAGRAPH ONLY IF, FOR ANY OF THE PREVIOUS 
FIVE PLAN YEARS, THE PLAN HAS BEEN GRANTED AND HAS NOT FULLY REPAID 
A FUNDING WAIVER.]

    Your plan received a funding waiver for [LIST ANY OF THE FIVE 
PREVIOUS PLAN YEARS FOR WHICH A FUNDING WAIVER WAS GRANTED AND HAS 
NOT BEEN FULLY REPAID]. If a company is experiencing temporary 
financial hardship, the Internal Revenue Service may grant a funding 
waiver that permits the company to delay contributions that fund the 
pension plan.

[INCLUDE THE FOLLOWING WITH RESPECT TO ANY UNPAID OR LATE PAYMENT 
THAT MUST BE DISCLOSED UNDER 29 CFR 2627.10(b)(6):]

    Your plan was required to receive a payment from the employer on 
[LIST APPLICABLE DUE DATE(S)]. That payment [has not been made] [was 
made on [LIST APPLICABLE PAYMENT DATE(S)]].
PBGC GUARANTEES

    When a pension plan ends without enough money to pay all 
benefits, the PBGC steps in to pay pension benefits. The PBGC pays 
most people all pension benefits, but some people may lose certain 
benefits that are not guaranteed.
    The PBGC pays pension benefits, up to certain maximum limits.
     The maximum guaranteed benefit is [INSERT FROM TABLE IN 
APPENDIX B] per month or [INSERT FROM TABLE IN APPENDIX B] per year 
for a 65-year-old person in a plan that terminates in [INSERT 
APPLICABLE YEAR].
     The maximum benefit may be reduced for an individual 
who is younger than age 65. For example, it is [INSERT FROM TABLE IN 
APPENDIX B] per month or [INSERT FROM TABLE IN APPENDIX B] per year 
for an individual who starts receiving benefits at age 55. [IN LIEU 
OF AGE 55, YOU MAY SUBSTITUTE ANY AGE(S) RELEVANT UNDER THE PLAN. IF 
THE PLAN PROVIDES FOR NORMAL RETIREMENT BEFORE AGE 65, YOU MUST 
INCLUDE THE NORMAL RETIREMENT AGE. IF THE PLAN DOES NOT PROVIDE FOR 
COMMENCEMENT OF BENEFITS BEFORE AGE 65, YOU MAY OMIT THIS 
PARAGRAPH.]
     The maximum benefit will also be reduced when a benefit 
is provided for a survivor.
    The PBGC does not guarantee certain types of benefits. [INCLUDE 
THE FOLLOWING GUARANTEE LIMITS THAT APPLY TO THE BENEFITS AVAILABLE 
UNDER YOUR PLAN.]
     The PBGC does not guarantee benefits for which you do 
not have a vested right when a plan ends, usually because you have 
not worked enough years for the company.
     The PBGC does not guarantee benefits for which you have 
not met all age, service, or other requirements at the time the plan 
ends.
     Benefit increases and new benefits that have been in 
place for less than a year are not guaranteed. Those that have been 
in place for less than 5 years are only partly guaranteed.
     Early retirement payments that are greater than 
payments at normal retirement age may not be guaranteed. For 
example, a supplemental benefit that stops when you become eligible 
for Social Security may not be guaranteed.
     Benefits other than pension benefits, such as health 
insurance, life insurance, death benefits, vacation pay, or 
severance pay are not guaranteed.
     The PBGC does not pay lump sums exceeding $3,500.

WHERE TO GET MORE INFORMATION

    Your plan, [EIN-PN], is sponsored by [CONTRIBUTING SPONSOR(S)]. 
If you would like more information about the funding of your plan, 
contact [INSERT NAME, TITLE, BUSINESS ADDRESS AND PHONE NUMBER OF 
INDIVIDUAL OR ENTITY].
    For more information about the PBGC and the benefits it 
guarantees, you may request a copy of ``Your Guaranteed Pension'' 
for $1.25 by writing to Box YGP, Pueblo, Colorado 81009.
    [THE FOLLOWING SENTENCE MAY BE INCLUDED:]
    ``Your Guaranteed Pension'' is also available through electronic 
access to the Consumer Information Center via the World Wide Web at 
http://www.gsa.gov/staff/pa/cic/money.htm.
    Issued: [INSERT AT LEAST MONTH AND YEAR]

                          Appendix B to Part 2627--Table of Maximum Guaranteed Benefits                         
----------------------------------------------------------------------------------------------------------------
                     The maximum guaranteed benefit for an individual starting to receive benefits at the age   
                                   listed below is the amount (monthly or annual) listed below:                 
    If a plan    -----------------------------------------------------------------------------------------------
 terminates in--          Age 65                  Age 62                  Age 60                  Age 55        
                 -----------------------------------------------------------------------------------------------
                    Monthly     Annual      Monthly     Annual      Monthly     Annual      Monthly     Annual  
----------------------------------------------------------------------------------------------------------------
1995............   $2,573.86  $30,886.32   $2,033.35  $24,400.20   $1,673.01  $20,076.12   $1,158.24  $13,898.88
----------------------------------------------------------------------------------------------------------------

 
[[Page 34417]]


    The maximum guaranteed benefit for an individual starting to 
receive benefits at ages other than those listed above can be 
determined by applying the PBGC's regulation on computation of 
maximum guaranteeable benefits (29 CFR 2621.4).

    Issued in Washington, DC, this 27th day of June, 1995.
Robert B. Reich,
Chairman, Board of Directors, Pension Benefit Guaranty Corporation.

    Issued on the date set forth above pursuant to a resolution of 
the Board of Directors authorizing its Chairman to issue this final 
rule.
James J. Keightley,
Secretary, Board of Directors, Pension Benefit Guaranty Corporation.
[FR Doc. 95-16196 Filed 6-28-95; 8:45 am]
BILLING CODE 7708-01-P