[Federal Register Volume 60, Number 157 (Tuesday, August 15, 1995)]
[Rules and Regulations]
[Pages 42037-42040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20141]



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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 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 September 1995, and to multiemployer plans with 
valuation dates in September 1995. The effect of these amendments is to 
advise the public of the adoption of these assumptions.

EFFECTIVE DATE: September 1, 1995.

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).

SUPPLEMENTARY INFORMATION: This rule adopts the September 1995 interest 
assumptions to be used under the Pension Benefit Guaranty Corporation'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. 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 September 1995 and multiemployer plans 
that have undergone mass withdrawal and have valuation dates during 
September 1995.
    For annuity benefits, the interest rates will be 6.40% for the 
first 20 years following the valuation date and 5.75% thereafter. For 
benefits to be paid as lump sums, the interest assumptions to be used 
by the PBGC will be 5.00% for the period during which benefits are in 
pay status, 4.25% during the seven-year period directly preceding the 
benefit's placement in pay status, and 4.0% during any other years 
preceding the benefit's placement in pay status. The above annuity 
interest assumptions represent an increase (from those in effect for 
August 1995) of .20 percent for the first 20 years following the 
valuation date and are otherwise unchanged. The lump sum interest 
assumptions represent an increase (from those in effect for August 
1995) of .25 percent of 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, 

[[Page 42038]]
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 September 1995, and in multiemployer plans that have undergone 
mass withdrawal and have valuation dates during September 1995, 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 
spector 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 23 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 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 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 n1 y1+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 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                  rate        i1         i2         i3         n1         n2   
                            after      Before   (percent)                                                       
----------------------------------------------------------------------------------------------------------------
                                                                                                                
*                  *                  *                  *                  *                  *                
                                                        *                                                       
23......................     9-1-95    10-1-95       5.00       4.25       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.

                                                                                                                

[[Page 42039]]
                                                     Table I                                                    
                                              [Lump sum valuations]                                             
----------------------------------------------------------------------------------------------------------------
                                     For                              The values of it are:                     
                                  valuation  ----------------------------------------------------------------------
                                    dates                                                                       
                                  occurring                                                                    for
                                    in the         it        for t =         it        for t =         it      t =
                                   month--                                                                      
------------------------------------------------------------------------------------------------------------- -----
                                                                                                                
*                  *                  *                  *                  *                  *                
                                                        *                                                       
September 1995.................        .0640         1-20        .0575          >20          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 23 is added to Table I, and a new entry 
is added to Table II, as set forth below. The introductory text of both 
table 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 formula 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 il 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 
il shall apply for the following nl years; thereafter the 
immediate annuity rate shall apply.

                                                                         Table I                                                                        
                                                                  [Lump sum valuations]                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   For plans                                               Deferred annuities (percent)                 
                                                     with a                  Immediate  ----------------------------------------------------------------
                                                   valuation                  annuity                                                                   
                    Rate set                          date        Before        rate                                                                    
                                                 -------------               (percent)        i1           i2           i3           n1           n2    
                                                  On or after                                                                                           
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
                   *                  *                  *                  *                  *                  *                  *                  
23..............................................       9-1-95      10-1-95         5.00         4.25         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 =  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
*                  *                  *                  *                  *                  *                
                                                        *                                                       
September 1995....................        .0640         1-20        .0575          >20          N/A          N/A
----------------------------------------------------------------------------------------------------------------


[[Page 42040]]

    Issued in Washington, DC, on this 8th day of August 1995.
Martin Slate,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 95-20141 Filed 8-14-95; 8:45 am]
BILLING CODE 7708-01-M