[Federal Register Volume 63, Number 206 (Monday, October 26, 1998)]
[Proposed Rules]
[Pages 57229-57231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28627]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4022, 4044, 4050

RIN 1212-AA91


Valuation of Benefits; Use of Single Set of Assumptions for All 
Benefits

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: The Pension Benefit Guaranty Corporation solicits public 
comment on its proposal to amend its regulations to provide for the use 
of a single set of valuation assumptions--those currently used by the 
PBGC to value benefits to be paid as annuities--for purposes of 
allocating assets to benefits under section 4044 of ERISA.
    While the PBGC is proposing to discontinue using its lump sum 
valuation assumptions for purposes of allocating assets to benefits, it 
intends to continue using its existing lump sum assumptions for lump 
sum payment purposes at least through 2000. The PBGC is considering 
replacing its lump sum payment assumptions, sometime after 2000, with a 
modified version of its annuity assumptions. In a separate notice 
published elsewhere in today's Federal Register, the PBGC is soliciting 
public comment on this possible change.

DATES: Comments must be received on or before December 28, 1998.

ADDRESSES: Comments may be mailed to the Office of the General Counsel,

[[Page 57230]]

Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, 
DC 20005-4026, or delivered to Suite 340 at the above address. Comments 
also may be sent by Internet e-mail to [email protected]. Comments 
will be available for inspection at the PBGC's Communications and 
Public Affairs Department in Suite 240 at the above address during 
normal business hours.

FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General 
Counsel, or James L. Beller, Attorney, Pension Benefit Guaranty 
Corporation, Office of the General Counsel, Suite 340, 1200 K Street, 
NW., Washington, DC 20005-4026, 202-326-4024. (For TTY/TTD users, call 
the Federal relay service toll-free at 1-800-877-8339 and ask to be 
connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION:

Background

    In the case of a distress or involuntary termination, the PBGC's 
regulations prescribe the benefit valuation assumptions used to 
allocate assets to benefits under section 4044 of ERISA. These 
regulations currently provide for the use of two sets of assumptions--
one for benefits to be paid as annuities and another for benefits 
payable as lump sums. Whether a benefit is to be paid as an annuity or 
is payable as a lump sum is determined under section 4022 of ERISA and 
the PBGC's implementing regulations. (A more detailed discussion of 
these aspects of the PBGC's regulations is provided in a separate 
notice published elsewhere in today's Federal Register.)

Amendment to Part 4044--Assumptions for Allocation of Assets

    The proposed amendments simplify the PBGC's valuation rules by 
providing that all benefits will be valued for plan asset allocation 
purposes under ERISA section 4044 by using the PBGC's annuity 
assumptions, regardless of the form in which payment may be made under 
section 4022. These amendments will apply to any plan with a 
termination date on or after the effective date of the final rule. For 
plans with termination dates before the effective date of the final 
rule, benefits will continue to be valued for purposes of allocating 
assets to benefits under the existing regulations.

Amendment to Part 4022--Assumptions for Lump Sum Payments

    While the PBGC will no longer use its existing lump sum interest 
rates (and other assumptions) for purposes of section 4044, it will 
continue to use them for lump sum payment purposes under section 4022 
at least through 2000. (In a separate notice published elsewhere in 
today's Federal Register, the PBGC is soliciting public comment on 
possible changes after 2000.) Accordingly, the amendment moves these 
assumptions from part 4044 to part 4022. The PBGC expects that plan 
lump sum provisions referring to the PBGC's lump sum interest rates 
under part 4044 will be interpreted as referring to the assumptions 
used by the PBGC to value lump sums for payment purposes (those 
proposed to be moved to part 4022).

Part 4050--Missing Participant Assumptions

    The PBGC is making non-substantive changes to the definition of 
``missing participant lump sum assumptions'' and ``missing participant 
annuity assumptions'' in its Missing Participants regulation (Part 
4050) to conform to the amendments to parts 4022 and 4044.

E.O. 12866 and the Regulatory Flexibility Act

    The PBGC has determined that this proposed rule is not a 
``significant regulatory action'' under the criteria set forth in 
Executive Order 12866. The PBGC certifies that, if adopted, the 
amendment will not have a significant economic effect on a substantial 
number of small entities. The amendments generally affect only the 
valuation of de minimis benefits and will have an immaterial effect on 
liabilities associated with plan termination. Accordingly, as provided 
in section 605(b) of the Regulatory Flexibility Act, sections 603 and 
604 do not apply.

List of Subjects

29 CFR Part 4022

    Pension insurance, Pensions, Reporting and recordkeeping 
requirements.

29 CFR Part 4044

    Pension insurance, Pensions.

29 CFR Part 4050

    Pensions, Reporting and recordkeeping requirements.

    For the reasons set forth above, the PBGC proposes to amend parts 
4022, 4044, and 4050 of 29 CFR chapter XL as follows:

PART 4022--BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS

    1. The authority citation for part 4022 continues to read as 
follows:

    Authority: 29 U.S.C. 1302 and 1322.

    2. In Sec. 4022.7, paragraph (d) is revised to read as follows:


Sec. 4022.7  Benefits payable in a single installment.

* * * * *
    (d) Determination of lump sum amount. For purposes of paragraph 
(b)(1)(i)-(iii) of this section, the lump sum value of a benefit shall 
be calculated by valuing the monthly annuity benefits payable in the 
form determined under Sec. 4044.51(a) of this chapter and commencing at 
the time determined under Sec. 4044.51(b) of this chapter. The 
actuarial assumptions used shall be those described in Sec. 4044.52, 
except that--
    (1) Loading for expenses. There shall be no adjustment to reflect 
the loading for expenses;
    (2) Mortality rates and interest assumptions. The mortality rates 
in appendix A to this part and the interest assumptions in appendix B 
to this part shall apply; and
    (3) Date for determining lump sum value. The date as of which a 
lump sum value is calculated is the termination date, except that in 
the case of a subsequent insufficiency it is the date described in 
section 4062(b)(1)(B) of ERISA.

Appendix to Part 4022--[Redesignated as Appendix C to part 4022]

    3. The Appendix to Part 4022 is redesignated as Appendix C to part 
4022, and its heading is revised to read ``Appendix C'' to part 4022--
Maximum Guaranteeable Monthly Benefit''.

PART 4044--ALLOCATION OF ASSETS IN SINGLE-EMPLOYER PLANS

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

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

    5. Section 4044.52 is revised to read as follows:


Sec. 4044.52  Valuation of benefits.

    The plan administrator shall value all benefits as of the valuation 
date by--
    (a) Using the mortality assumptions prescribed by Sec. 4044.53 and 
the interest assumptions prescribed in appendix B to this part;
    (b) Using interpolation methods, where necessary, at least as 
accurate as linear interpolation;
    (c) Using valuation formulas that accord with generally accepted 
actuarial principles and practices;
    (d) Taking mortality into account during the deferral period of a 
deferred joint and survivor benefit only with

[[Page 57231]]

respect to the participant (or other principal annuitant); and
    (e) Adjusting the values to reflect loading expenses in accordance 
with appendix C to this part.
    6. In Sec. 4044.53, the section heading and paragraph (a) are 
revised to read as follows:


Sec. 4044.53  Mortality assumptions.

    (a) General rule. Subject to paragraph (b) of this section 
(regarding certain death benefits), the plan administrator shall use 
the mortality factors prescribed in paragraphs (c), (d), and (e) of 
this section to value benefits under Sec. 4044.52.
* * * * *


Sec. 4044.54  [Removed and Reserved]

    7. Section 4044.54 is removed and reserved.

Appendix A to Part 4044--[Amended]

    8. In appendix A to part 4044, Table 3--Lump Sum Mortality Table is 
redesignated as appendix A to part 4022 with the heading ``Appendix A 
to part 4022--Lump Sum Mortality Rates''.

Appendix B to Part 4044--[Amended]

    9. In appendix B to part 4044, the appendix heading is revised to 
read ``Appendix B to Part 4044--Interest Rates Used to Value 
Benefits''; the heading of Table I (``Table I--[Annuity Valuations]'') 
is removed; and Table II--[Lump Sum Valuations] is redesignated as 
appendix B to part 4022 with the heading ``Appendix B to part 4022--
Lump Sum Interest Rates''.

Appendix C to Part 4044--[Amended]

    10. In appendix C to part 4044, the table is amended by removing 
the reference to ``Table I of appendix B for the valuation of 
annuities'' and replacing it with a reference to ``appendix B for the 
valuation of benefits''.

PART 4050--MISSING PARTICIPANTS

    11. The authority citation for part 4050 continues to read as 
follows:

    Authority: 29 U.S.C. 1302(b)(3), 1350.

    12. In Sec. 4050.2, the definitions of missing participant annuity 
assumptions and missing participant lump sum assumptions are revised to 
read as follows:


Sec. 4050.2  Definitions.

* * * * *
    Missing participant annuity assumptions means the interest rate 
assumptions and actuarial methods for valuing benefits under 
Sec. 4044.52 of this chapter, applied----
    (1) As if the deemed distribution date were the termination date;
    (2) Using the mortality rates prescribed in Revenue Ruling 95-6, 
1995-1 C.B. 80;
    (3) Without using the expected retirement age assumptions in 
Secs. 4044.55 through 4044.57 of this chapter;
    (4) Without making the adjustment for expenses provided for in 
Sec. 4044.52(e) of this chapter; and
    (5) By adding $300, as an adjustment (loading) for expenses, for 
each missing participant whose designated benefit without such 
adjustment would be greater than $5,000.
* * * * *
    Missing participant lump sum assumptions means the interest rate 
and mortality assumptions and actuarial methods for determining the 
lump sum value of a benefit under section 4022.7(d) of this chapter 
applied --
    (1) As if the deemed distribution date were the termination date; 
and
    (2) Without using the expected retirement age assumptions in 
Secs. 4044.55 through 4044.57 of this chapter.
* * * * *
    Issued in Washington, D.C., this 21st day of October, 1998.
David M. Strauss,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 98-28627 Filed 10-23-98; 8:45 am]
BILLING CODE 7708-01-P