[Federal Register Volume 61, Number 136 (Monday, July 15, 1996)]
[Rules and Regulations]
[Pages 36968-36969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17792]



[[Page 36967]]


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Part II





Pension Benefit Guaranty Corporation





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29 CFR Part 4044



Allocation of Assets in Single-Employer Plans; Interest Rates and 
Assumptions Used in Making Benefits Valuations; Final Rule and Notice

  Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules 
and Regulations  

[[Page 36968]]



PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4044


Allocation of Assets in Single-Employer Plans; Interest Rate for 
Valuing Benefits

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This final rule amends the Pension Benefit Guaranty 
Corporation's regulation on Allocation of Assets in Single-Employer 
Plans. The regulation prescribes interest assumptions for valuing 
benefits under terminating single-employer plans. This rule adopts 
interest assumptions for plans with valuation dates in August 1996 and 
advises the public of the new assumptions. These interest assumptions 
are also used under the PBGC's regulation on Duties of Plan Sponsor 
Following Mass Withdrawal.

EFFECTIVE DATE: August 1, 1996.

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 August 1996 interest 
assumptions to be used in benefit valuations for terminating single-
employer plans. Before July 1996, the interest assumptions used for 
such benefit valuations were contained in PBGC regulations codified at 
29 CFR part 2619. In a final rule effective July 1, 1996 (61 FR 34001), 
the PBGC reorganized and renumbered its regulations. The single-
employer benefit valuation provisions are now codified in the PBGC's 
regulation on Allocation of Assets in Single-Employer Plans at 29 CFR 
part 4044, and this rule amends that regulation. As discussed in a 
notice published elsewhere in today's Federal Register, these interest 
assumptions are also used in valuations of multiemployer plans 
following mass withdrawal.
    Part 4044 prescribes actuarial assumptions for valuing plan 
benefits of terminating single-employer plans covered by title IV of 
the Employee Retirement Income Security Act of 1974. Under ERISA 
section 4041(c), a single-employer plan administrator wishing to 
terminate the plan 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) in accordance with part 4044. 
(Benefit liabilities may also be valued in accordance with part 4044 
for purposes of the Standard Termination Notice filed with the PBGC by 
a plan terminating in a standard termination, although this is not 
required.) In addition, when the PBGC terminates an underfunded plan 
involuntarily pursuant to ERISA section 4042(a), it values benefits in 
accordance with part 4044 to determine the amount of the plan's 
underfunding.
    Among the actuarial assumptions prescribed in part 4044 are 
interest rates and factors, which are set forth in appendix B to part 
4044. Because these interest 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.
    Two sets of interest rates and factors are prescribed, one set for 
the valuation of benefits to be paid as annuities and one set for the 
valuation of benefits to be paid as lump sums. This amendment adds to 
appendix B to part 4044 the two sets of interest rates and factors for 
valuing benefits in plans with valuation dates during August 1996.
    For annuity benefits, the interest rates will be 6.30 percent for 
the first 20 years following the valuation date and 4.75 percent 
thereafter. For benefits to be paid as lump sums, the interest 
assumptions to be used by the PBGC will be 5.25 percent for the period 
during which benefits are in pay status, 4.50 percent during the seven-
year period directly preceding the benefit's placement in pay status, 
and 4.00 percent during any other years preceding the benefit's 
placement in pay status. The annuity interest assumptions represent an 
increase (from those in effect for July 1996) of 0.10 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 July 1996) of 0.25 percent for the period 
during which benefits are in pay status and the seven years directly 
preceding that period and are otherwise unchanged.
    Generally, the interest rates and factors under part 4044 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 are normally 
published in the Federal Register on or about the 15th of the preceding 
month.
    The PBGC has determined that notice and public comment on this 
amendment 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 plans with valuation dates during August 1996, 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 in 29 CFR Part 4044

    Pension insurance, Pensions.

    In consideration of the foregoing, part 4044 of chapter XL, title 
29, Code of Federal Regulations, is hereby amended as follows:

PART 4044--[AMENDED]

    1. The authority citation for part 4044 continues to read as 
follows:

    Authority: 29 U.S.C. 1301(a), 1302(b)(3), 1341, 1344, 1362.

Appendix B to Part 4044--[Amended]

    2. In appendix B, a new entry is added to Table I, and Rate Set 34 
is added to Table II, as set forth below. The introductory text of each 
table is republished for the convenience of the reader and remains 
unchanged.

Appendix B to Part 4044--Interest Rates Used to Value Annuities and 
Lump Sums

[[Page 36969]]



                                          Table I.--Annuity Valuations                                          
  [This table sets forth, for each indicated calendar month, 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]              
----------------------------------------------------------------------------------------------------------------
                                                                The values of it are:                           
 For valuation dates occurring in  -----------------------------------------------------------------------------
            the month--                  it         for t=         it         for t=         it         for t=  
----------------------------------------------------------------------------------------------------------------
                                                                                                                
*                  *                  *                  *                  *                  *                
August 1996.......................        .0630         1-20        .0475          >20          N/A          N/A
----------------------------------------------------------------------------------------------------------------


                                                             Table II.--Lump Sum Valuations                                                             
  [In using this table: (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 (where y is an integer and 0 < y  n1), interest rate i1 
   shall apply from the valuation date for a period of y years, and thereafter the immediate annuity rate shall apply; (3) For benefits for which the   
 deferral period is y years (where y is an integer and n1 < 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, and thereafter the immediate annuity rate shall apply; (4) For benefits for which
the deferral period is y years (where 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, and thereafter the immediate 
                                                                annuity rate shall apply]                                                               
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                   For plans with a valuation date     Immediate                                 Deferred annuities (percent)                           
    Rate set     ----------------------------------   annuity rate  ------------------------------------------------------------------------------------
                    On or after         Before         (percent)            i1               i2               i3               n1               n2      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
                   *                  *                  *                  *                  *                  *                  *                  
34..............        08-1-96          09-1-96             5.25             4.50             4.00             4.00                7                8  
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    Issued in Washington, DC, on this 5th day of July 1996.
Martin Slate,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 96-17792 Filed 7-12-96; 8:45 am]
BILLING CODE 7708-01-P