[Federal Register Volume 60, Number 220 (Wednesday, November 15, 1995)]
[Rules and Regulations]
[Pages 57339-57341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28200]
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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 December 1995, and to multiemployer plans with
valuation dates in December 1995. The effect of these amendments is to
advise the public of the adoption of these assumptions.
EFFECTIVE DATE: December 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 December 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 December 1995 and multiemployer plans
that have undergone mass withdrawal and have valuation dates during
December 1995.
For annuity benefits, the interest rates will be 6.00% 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 4.50% for the period during which benefits are in
pay status, and 4.0% during all years preceding the benefits' placement
in pay status. The above annuity interest assumptions represent a
decrease (from those in effect for November 1995) of .20 percent for
the first 20 years following the valuation date and are otherwise
unchanged. The lump sum interest assumptions represent a decrease (from
those in effect for November 1995) of .25 percent for 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 December 1995, and in multiemployer plans that have undergone
mass withdrawal and have valuation dates during December 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 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:
[[Page 57340]]
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 to part 2619, Rate Set 26 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
Annuitites
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
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 0 < y n1), 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 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 Immediate Deferred annuities (percent)
valuation date annuity ----------------------------------------------------------------
Rate set -------------------------- rate
On or after Before (percent) i1 i2 i3 n1 n2
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* * * * * * *
26.............................................. 12-1-95 01-1-96 4.50 4.00 4.00 4.00 7 8
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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 rate
(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 = ii for t = it for t =
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* * * * * *
*
December 1995..................... .0600 1-20 .0575 >20 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 to part 2676, Rate Set 26 is added to Table I, and
a new entry is added to Table II, as set forth below. The 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 0 < y n1), interest rate is 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
[[Page 57341]]
< y n1 + 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 Immediate Deferred annuities (percent)
valuation date annuity ----------------------------------------------------------------
Rate set -------------------------- rate
On or after Before (percent) i1 i2 i3 n1 n2
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* * * * * * *
26.............................................. 12-1-95 01-1-96 4.50 4.00 4.00 4.00 7 8
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Annuity Valuations
In determining the value of interest factors of the form
von (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]
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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 =
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* * * * * * *
December 1995..................... .0600 1-20 .0575 >20 N/A N/A
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Issued in Washington, DC, on this 9th day of November 1995.
Martin Slate,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 95-28200 Filed 11-14-95; 8:45 am]
BILLING CODE 7708-01-M