[Federal Register Volume 71, Number 240 (Thursday, December 14, 2006)]
[Rules and Regulations]
[Pages 75115-75117]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-21280]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4050 and 4281

RIN 1212-AB08


Mortality Assumptions

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Direct final rule.

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SUMMARY: This document makes changes to the mortality assumptions under 
parts 4050 (Missing Participants) and 4281 (Duties of Plan Sponsor 
Following Mass Withdrawal) of PBGC's regulations. In a final rule 
published in the Federal Register on December 2, 2005, PBGC amended 
part 4044 (Allocation of Assets in Single-employer Plans) of its 
regulations to update mortality tables used for certain valuations for 
single-employer plans. Because of the dependence of certain valuations 
under part 4050 on part 4044, amendments updating the mortality 
assumptions under part 4050 are needed. This rule also makes a minor 
conforming amendment to the mortality assumptions in part 4281.

DATES: Effective February 27, 2007, without further notice, unless PBGC 
receives significant adverse comment by January 16, 2007. For a 
discussion of applicability of this rule, see SUPPLEMENTARY 
INFORMATION.

ADDRESSES: Comments, identified by RIN number 1212-AB08, may be 
submitted by any of the following methods:

[[Page 75116]]

     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the Web site instructions for submitting comments.
     E-mail: [email protected].
     Fax: 202-326-4224.
     Mail or Hand Delivery: Legislative and Regulatory 
Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW., 
Washington, DC 20005-4026.

All submissions must include the Regulatory Information Number for this 
rulemaking (RIN number 1212-AB08). Comments received, including 
personal information provided, will be posted to www.pbgc.gov. Copies 
of comments may also be obtained by writing to Disclosure Division, 
Office of the General Counsel, Pension Benefit Guaranty Corp., 1200 K 
Street, NW., Washington, DC 20005-4026 or calling 202-326-4040 during 
normal business hours. (TTY and TDD users may call the Federal relay 
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4040.)

FOR FURTHER INFORMATION CONTACT: Catherine B. Klion, Manager, or James 
L. Beller, Jr., Attorney, Regulatory and Policy Division, Legislative 
and Regulatory Department, Pension Benefit Guaranty Corp., 1200 K 
Street, NW., Suite 1200, Washington, DC 20005-4026; 202-326-4024. (TTY/
TDD users may call the Federal relay service toll-free at 1-800-877-
8339 and ask to be connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION: PBGC is publishing this rule without prior 
proposal because we view it as a non-controversial amendment and expect 
no significant adverse comment. The rule is expected to have minimal 
economic impact on plans and participants. Unless we receive 
significant adverse comment by January 16, 2007, this rule will be 
effective on February 27, 2007 without further notice.
    For the reasons stated herein, PBGC for good cause finds that prior 
proposal and opportunity for public comment are unnecessary. However, 
in the ``Proposed Rules'' section of today's Federal Register, we are 
publishing a separate document that will serve as a notice of proposal 
to amend parts 4050 and 4281 as described in this direct final rule in 
case we receive significant adverse comment. If that happens, PBGC will 
publish, in a timely manner, a document in the Rules category of the 
Federal Register withdrawing the direct final rule. We will then 
address public comments in a subsequent final rule based on the 
proposed rule. We will not institute a second comment period on this 
rule. Any parties interested in commenting must do so at this time.

Part 4050--Missing Participants

    Under part 4050 (Missing Participants), a plan terminating in a 
standard termination (or a sufficient distress termination) may pay a 
``designated benefit'' to PBGC on behalf of a missing participant. For 
participants with non-de minimis benefits, the designated benefit is 
equal to or based on the participant's most valuable annuity benefit 
determined using the ``missing participant annuity assumptions'' as 
defined in Sec.  4050.2.
    The term ``missing participant annuity assumptions'' is defined 
with reference to valuation assumptions under part 4044 (Allocation of 
Assets in Single-Employer Plans), including part 4044 interest 
assumptions, but the use of a different mortality table is required 
(i.e., a unisex rather than a sex-distinct mortality table). For this 
purpose, the current regulation specifies the use of the mortality 
table prescribed by the Internal Revenue Service under Revenue Ruling 
95-6 (the ``95-6 Mortality Table'').
    On December 2, 2005, at 70 FR 72205, PBGC published a final rule 
modifying part 4044 of its regulations to update the mortality tables 
in Appendix A. PBGC uses these updated mortality tables to derive the 
interest factors it prescribes under part 4044. In deriving these 
interest factors, PBGC attempts to match market annuity prices. The new 
mortality tables result in interest factors that are higher than they 
would have been using the old tables.
    Before the part 4044 mortality tables were updated, the 95-6 
Mortality Table reasonably approximated a unisex blend of the part 4044 
healthy-life mortality tables and, when combined with the part 4044 
interest factors (as is required under part 4050), produced values that 
reasonably matched the market prices of annuities. However, the 95-6 
Mortality Table no longer approximates a unisex blend of the part 4044 
mortality tables and, when combined with the part 4044 interest 
factors, will tend to produce values that are lower than market annuity 
prices.
    Therefore, PBGC is amending part 4050 to update the mortality rates 
used to value annuity benefits. The updated rates will be a fixed blend 
of 50 percent of the healthy male mortality rates under part 4044 and 
50 percent of the healthy female mortality rates under part 4044.
    This amendment is applicable to plans terminating on or after the 
effective date of this amendment.
    In addition, PBGC is correcting the cross-reference in paragraph 
(4) of the definition of ``missing participant annuity assumptions.'' 
The current reference to Sec.  4044.52(e) should be to Sec.  
4044.52(d).

Part 4281--Duties of Plan Sponsor Following Mass Withdrawal

    PBGC is amending Sec.  4281.14 by adding a new paragraph (f), which 
provides that, for valuing deferred annuities, the mortality of the 
contingent annuitant during the deferral period is disregarded. This is 
because a contingent annuitant who dies during the deferral period may 
be replaced with a different contingent annuitant. This amendment 
conforms to the assumptions used for single-employer plans. This 
amendment is applicable to valuations with valuation dates on or after 
the effective date of this rule.
    On July 12, 2006, at 71 FR 39205, PBGC published a Technical 
Amendment to part 4281 making conforming changes to paragraphs (c), 
(d), and (e) of Sec.  4281.14 that were inadvertently omitted from the 
final rule amending part 4044, published on December 2, 2005, at 70 FR 
72205. PBGC is restating Sec.  4281.14 in its entirety to incorporate 
those technical amendments into this rulemaking.

Compliance With Rulemaking Guidelines

    PBGC has determined, in consultation with the Office of Management 
and Budget, that this rule is a not a ``significant regulatory action'' 
under Executive Order 12866, and, therefore, is not subject to OMB 
review.
    PBGC certifies under section 605(b) of the Regulatory Flexibility 
Act that this rule will not have a significant economic impact on a 
substantial number of small entities. The economic impact on a 
particular plan of these amendments is expected to be minimal. The 
adjustment for each benefit valuation will generally be small. In 
addition, the change to part 4050 will affect only a small number of 
participants (i.e., missing participants). The change to 4281 also will 
affect only a small number of participants (i.e., deferred annuitants 
in multiemployer plans experiencing mass withdrawal). Therefore, this 
rule is not expected to have a significant economic impact on a 
substantial number of entities of any size. Accordingly, sections 603 
and 604 of the Regulatory Flexibility Act do not apply.

[[Page 75117]]

List of Subjects for 29 CFR Parts 4050 and 4281

    Employee benefit plans, Pension insurance, Reporting and 
recordkeeping requirements.

0
For the reasons set forth above, PBGC amends parts 4050 and 4281 of 29 
CFR chapter XL as follows:

PART 4050--MISSING PARTICIPANTS

0
1. The authority citation for part 4050 continues to read as follows:

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


0
2. Amend Sec.  4050.2, by revising paragraphs (2) and (4) of the 
definition of Missing participant annuity assumptions 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) * * *
    (2) Using mortality rates that are a fixed blend of 50 percent of 
the healthy male mortality rates in Sec.  4044.53(c)(1) of this chapter 
and 50 percent of the healthy female mortality rates in Sec.  
4044.53(c)(2) of this chapter;
    (3) * * *
    (4) Without making the adjustment for expenses provided for in 
Sec.  4044.52(d) of this chapter; and
* * * * *

PART 4281--DUTIES OF PLAN SPONSOR FOLLOWING MASS WITHDRAWAL

0
3. The authority citation for part 4281 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1341a, 1399(c)(1)(D), and 1441.


0
4. Revise Sec.  4281.14 to read as follows:


Sec.  4281.14  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), (e), and (f) 
of this section to value benefits under Sec.  4281.13.
    (b) Certain death benefits. If an annuity for one person is in pay 
status on the valuation date, and if the payment of a death benefit 
after the valuation date to another person, who need not be 
identifiable on the valuation date, depends in whole or in part on the 
death of the pay status annuitant, then the plan administrator shall 
value the death benefit using--
    (1) The mortality rates that are applicable to the annuity in pay 
status under this section to represent the mortality of the pay status 
annuitant; and
    (2) The mortality rates applicable to annuities not in pay status 
and to deferred benefits other than annuities, under paragraph (c) of 
this section, to represent the mortality of the death beneficiary.
    (c) Mortality rates for healthy lives. The mortality rates 
applicable to annuities in pay status on the valuation date that are 
not being received as disability benefits, to annuities not in pay 
status on the valuation date, and to deferred benefits other than 
annuities, are,--
    (1) For male participants, the rates in Table 1 of Appendix A to 
part 4044 of this chapter projected from 1994 to the calendar year in 
which the valuation date occurs plus 10 years using Scale AA from Table 
2 of Appendix A to part 4044 of this chapter; and
    (2) For female participants, the rates in Table 3 of Appendix A to 
part 4044 of this chapter projected from 1994 to the calendar year in 
which the valuation date occurs plus 10 years using Scale AA from Table 
4 of Appendix A to part 4044 of this chapter.
    (d) Mortality rates for disabled lives (other than Social Security 
disability). The mortality rates applicable to annuities in pay status 
on the valuation date that are being received as disability benefits 
and for which neither eligibility for, nor receipt of, Social Security 
disability benefits is a prerequisite, are,--
    (1) For male participants, the lesser of--
    (i) The rate determined from Table 1 of Appendix A to part 4044 of 
this chapter projected from 1994 to the calendar year in which the 
valuation date occurs plus 10 years using Scale AA from Table 2 of 
Appendix A to part 4044 of this chapter and setting the resulting table 
forward three years, or
    (ii) The rate in Table 5 of Appendix A to part 4044 of this 
chapter.
    (2) For female participants, the lesser of--
    (i) The rate determined from Table 3 of Appendix A to part 4044 of 
this chapter projected from 1994 to the calendar year in which the 
valuation date occurs plus 10 years using Scale AA from Table 4 of 
Appendix A to part 4044 of this chapter and setting the resulting table 
forward three years, or
    (ii) The rate in Table 6 of Appendix A to part 4044 of this 
chapter.
    (e) Mortality rates for disabled lives (Social Security 
disability). The mortality rates applicable to annuities in pay status 
on the valuation date that are being received as disability benefits 
and for which either eligibility for, or receipt of, Social Security 
disability benefits is a prerequisite, are--
    (1) For male participants, the rates in Table 5 of Appendix A to 
part 4044 of this chapter; and
    (2) For female participants, the rates in Table 6 of Appendix A to 
part 4044 of this chapter.
    (f) Contingent annuitant mortality during deferral period. If a 
participant's joint and survivor benefit is valued as a deferred 
annuity, the mortality of the contingent annuitant during the deferral 
period will be disregarded.

    Issued in Washington, DC, this 8th day of December, 2006.
Elaine L. Chao,
Chairman, Board of Directors, Pension Benefit Guaranty Corporation.
    Issued on the date set forth above pursuant to a resolution of 
the Board of Directors authorizing its Chairman to issue this final 
rule.
Judith R. Starr,
Secretary, Board of Directors, Pension Benefit Guaranty Corporation.
 [FR Doc. E6-21280 Filed 12-13-06; 8:45 am]
BILLING CODE 7709-01-P