[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Rules and Regulations]
[Pages 79362-79363]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30768]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4044


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

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: Pension Benefit Guaranty Corporation's regulation on 
Allocation of Assets in Single-Employer Plans prescribes interest 
assumptions for valuing benefits under terminating single-employer 
plans. This final rule amends the asset allocation regulation to adopt 
interest assumptions for plans with valuation dates in the first 
quarter of 2009. As discussed below, PBGC has published a separate 
final rule dealing with interest assumptions under its regulation on 
Benefits Payable in Terminated Single-Employer Plans for January 2009. 
Interest assumptions are also published on PBGC's Web site (http://www.pbgc.gov).

DATES: Effective January 1, 2009.

FOR FURTHER INFORMATION CONTACT: Catherine B. Klion, Manager, 
Regulatory and Policy Division, Legislative and Regulatory Department, 
Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, 
DC 20005, 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's regulations prescribe actuarial 
assumptions--including interest assumptions--for valuing and paying 
plan benefits of terminating single-employer plans covered by title IV 
of the Employee Retirement Income Security Act of 1974 (ERISA). The 
interest assumptions are intended to reflect current conditions in the 
financial and annuity markets.
    These interest assumptions are found in two PBGC regulations: The 
regulation on Benefits Payable in Terminated Single-Employer Plans (29 
CFR Part 4022) and the regulation on Allocation of Assets in Single-
Employer Plans (29 CFR Part 4044). PBGC normally updates the 
assumptions under the two regulations each month in a single rulemaking 
document. Because of delays in obtaining data used in setting the 
assumptions for January 2009, PBGC is publishing two rulemaking 
documents to update the two regulations. This document is a final rule 
updating the asset allocation

[[Page 79363]]

regulation for January through March 2009.
    The interest assumptions prescribed under the asset allocation 
regulation (found in Appendix B to Part 4044) are used for the 
valuation of benefits for allocation purposes under ERISA section 4044, 
and for other purposes. When used in conjunction with the mortality 
tables specified in Appendix A to Part 4044, these interest assumptions 
are intended to produce benefit values that match as closely as 
possible the prices charged by insurers in the private-sector group 
annuity market to annuitize comparable benefits. See 70 FR 72205 
(December 2, 2005) (preamble to final rule adopting more current 
mortality tables); 58 FR 5128 (January 19, 1993) (preamble to proposed 
rule amending PBGC's valuation regulations).
    As explained in the preamble to the 2005 amendment (at 70 FR 
72205), PBGC determines prices in the private-sector group annuity 
market based on quarterly surveys of insurers conducted for PBGC by the 
American Council of Life Insurers (ACLI). Using those surveys, PBGC 
derives interest factors that, when combined with PBGC's mortality 
assumptions, provide the best fit for the average market prices 
obtained from the ACLI surveys.
    PBGC's practice has been to recalibrate its interest factors each 
January based on the two most recent ACLI surveys and subsequent 
changes in the yield on long-term corporate investment-grade bonds. 
Between the annual recalibrations, PBGC has used this corporate bond 
market data to make monthly adjustments to the interest factors.
    The recent turmoil in the financial markets has prompted PBGC to 
further examine its current practice. Based on an examination of 
historical data, PBGC has concluded that (1) increasing the frequency 
of the recalibrations from annually to quarterly and (2) basing the 
interest factors on the ACLI surveys alone can be expected to provide a 
better fit for average group annuity market prices than current 
practice.
    The recalibration reflected in this rule and future quarterly 
recalibrations will be based on an averaging of the prices from the two 
most recent ACLI surveys. The interest factors so determined will 
remain in effect for three months--in this rule, from January through 
March of 2009.
    Accordingly, this amendment adds to Appendix B to Part 4044 the 
interest assumptions for valuing benefits for allocation purposes in 
plans with valuation dates during January, February, and March 2009. 
The interest assumptions that PBGC will use for these purposes (set 
forth in Appendix B to part 4044) will be 6.02 percent for the first 20 
years following the valuation date and 5.48 percent thereafter. These 
interest assumptions represent a decrease (from those in effect for 
December 2008) of 1.90 percent for the first 20 years following the 
valuation date and 1.51 percent for all years thereafter.
    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 
assumptions promptly so that the assumptions can reflect current market 
conditions as accurately as possible.
    Because of the need to provide immediate guidance for the valuation 
of benefits in plans with valuation dates during January 2009, PBGC 
finds that good cause exists for making the assumptions set forth in 
this amendment effective less than 30 days after publication.
    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

    Employee benefit plans, Pension insurance, Pensions.

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In consideration of the foregoing, 29 CFR part 4044 is amended as 
follows:

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

0
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.


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2. In appendix B to part 4044, new entries for January, February, and 
March 2009, as set forth below, are added to the table.

Appendix B to Part 4044--Interest Rates Used to Value Benefits

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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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                                                  * * * * * * *
January 2009..................................     0.0602       1-20      0.548        >20      (\1\)      (\1\)
February 2009.................................     0.0602       1-20      0.548        >20      (\1\)      (\1\)
March 2009....................................     0.0602       1-20      0.548        >20      (\1\)      (\1\)
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\1\ Not applicable.


    Issued in Washington, DC, on this 19th day of December 2008.
Vincent K. Snowbarger,
Deputy Director for Operations, Pension Benefit Guaranty Corporation
[FR Doc. E8-30768 Filed 12-24-08; 8:45 am]
BILLING CODE 7708-01-P