[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    
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
                                                 *        *        *        *        *        *        *                                                
26..............................................      12-1-95      01-1-96         4.50         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 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]                                              
----------------------------------------------------------------------------------------------------------------
                                                                The values of it are:                           
 For valuation dates occurring in  -----------------------------------------------------------------------------
            the month--                  it        for t =         ii        for t =         it        for t =  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
        *                  *                  *                  *                  *                  *        
                                                        *                                                       
December 1995.....................        .0600         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 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]                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      For plans with a       Immediate                    Deferred annuities  (percent)                 
                                                       valuation date         annuity   ----------------------------------------------------------------
                    Rate set                     --------------------------     rate                                                                    
                                                  On or after     Before     (percent)        i1           i2           i3           n1           n2    
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
                                                 *        *        *        *        *        *        *                                                
26..............................................      12-1-95      01-1-96         4.50         4.00         4.00         4.00            7            8
--------------------------------------------------------------------------------------------------------------------------------------------------------

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]                                              
----------------------------------------------------------------------------------------------------------------
                                                                The values of it are:                           
 For valuation dates occurring in  -----------------------------------------------------------------------------
            the month--                  it        for t =         it        for t =         it        for t =  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                             *        *        *        *        *        *        *                            
December 1995.....................        .0600         1-20        .0575          >20          N/A          N/A
----------------------------------------------------------------------------------------------------------------

    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