[Federal Register Volume 85, Number 175 (Wednesday, September 9, 2020)]
[Rules and Regulations]
[Pages 55587-55592]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19610]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4022

RIN 1212-AB41


Lump Sum Payment Assumptions

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This rule modifies the assumptions the Pension Benefit 
Guaranty Corporation (PBGC) uses to determine de minimis lump sum 
benefits in PBGC-trusteed terminated single-employer defined benefit 
pension plans and discontinues monthly publication of PBGC's lump sum 
interest rate assumptions.

DATES: Effective date: This rule is effective January 1, 2021.
    Applicability date: The amendments affecting PBGC's calculation and 
payment of lump sum benefits apply to trusteed plans with termination 
dates on or after January 1, 2021.

FOR FURTHER INFORMATION CONTACT: Gregory M. Katz 
([email protected]), Attorney, Regulatory Affairs Division, Office 
of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K 
Street NW, Washington, DC 20005-4026; 202-229-3829. TTY users may call 
the Federal relay service toll-free at 1-800-877-8339 and ask to be 
connected to 202-229-3829.

SUPPLEMENTARY INFORMATION:

Executive Summary--Purpose and Authority

    This rule is intended to modernize the methodology used to 
determine de minimis lump sums in terminated underfunded single-
employer plans. Specifically, PBGC is adopting the interest and 
mortality assumptions from section 417(e)(3) of the Internal Revenue 
Code (Code) \1\ for this purpose. It also discontinues PBGC's monthly 
calculation and publication of interest rate assumptions. Because some 
private-sector plans use PBGC's lump sum interest rates, the rule 
provides a table for plans to use to determine interest assumptions in 
accordance with PBGC's historical methodology.
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    \1\ Section 417(e)(3) of the Code and section 205(g)(3) of the 
Employee Retirement Income Security Act of 1974 (ERISA) are parallel 
provisions in ERISA and the Code.
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    Legal authority for this action comes from section 4002(b)(3) of 
the Employee Retirement Income Security Act of 1974 (ERISA), which 
authorizes PBGC to issue regulations to carry out the purposes of title 
IV of ERISA and section 4022 of ERISA (Single-Employer Plan Benefits 
Guaranteed).

Background

    The Pension Benefit Guaranty Corporation (PBGC) administers two 
insurance programs for private-sector defined benefit pension plans 
under title IV of the Employee Retirement Income Security Act of 1974 
(ERISA): A single-employer plan termination insurance program and a 
multiemployer plan insolvency insurance program. This rule applies only 
to the single-employer program.
    PBGC has identified these amendments as part of its ongoing 
retrospective review of its regulations to ensure that PBGC provides 
clear and helpful guidance, minimizes burdens and maximizes benefits, 
and addresses ineffective and outdated rules.

Use of Lump Sum Assumptions by PBGC

    Covered single-employer plans that are underfunded may terminate in 
either a distress termination under section 4041(c) of ERISA or in an 
involuntary termination (one initiated by PBGC) under section 4042 of 
ERISA. When such a plan terminates, PBGC typically is appointed 
statutory trustee of the plan and becomes responsible for

[[Page 55588]]

paying guaranteed benefits in accordance with section 4022 of ERISA and 
PBGC's regulation on Benefits Payable in Terminated Single-Employer 
Plans (29 CFR part 4022).\2\
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    \2\ PBGC also pays non-guaranteed benefits when there are 
sufficient plan assets or recoveries.
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    PBGC calculates the present value of each participant's benefit to 
determine whether it is de minimis (present value of $5,000 or less) 
and therefore may be paid as a lump sum.\3\ Assumptions used to value 
benefits for this purpose are set forth in PBGC's benefit payments 
regulation. The interest assumption, published each month, employs a 
four-tiered structure to discount future benefit payments for 
determining their lump sum equivalent. This structure consists of an 
``immediate'' rate for discounting benefits for the period between the 
annuity starting date and each future payment date, and up to three 
``deferred'' rates for discounting benefits during specified parts of 
the period leading up to the annuity starting date (e.g., first 7 
years, next 8 years, and years beyond). The mortality assumption is the 
1984 Unisex Pensioners Mortality Table.
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    \3\ See 29 CFR 4022.7(b)(1)(i).
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Use of PBGC's Lump Sum Interest Rates by Private Sector

    PBGC is aware that a relatively small number of plans use PBGC's 
interest rates as computed using its historical methodology (legacy 
interest rates) to determine the lump sum equivalents of annuity 
benefits.\4\ It is PBGC's understanding that these plans do so because, 
before 1994, under section 417(e)(3) of the Code, plans were required 
to use PBGC's legacy interest rates to determine the minimum 
permissible lump sum equivalent of an annuity benefit.\5\
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    \4\ Some insurers may also use PBGC's legacy interest rates to 
determine lump sums payable under a group annuity contract for a 
pension plan that used such rates after it closed out in a standard 
termination.
    \5\ To determine the minimum lump sum equivalent of an annuity 
benefit, plans used PBGC's lump sum interest rates for benefits 
under $25,000 and used 120 percent of PBGC's lump sum interest rates 
for benefits $25,000 and over. Section 417(e)(3) of the Code (1988) 
(amended 1994).
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    The Retirement Protection Act of 1994, Public Law 103-465 (RPA '94) 
changed the interest rate specified in section 417(e)(3) of the Code. 
As a result, private-sector plans were no longer required to use PBGC's 
lump sum interest rates to determine the minimum lump sum equivalents 
of annuity benefits. Anecdotal evidence suggests many, if not most, 
plans were amended to discontinue use of PBGC's legacy interest rates 
for calculating lump sum equivalents of annuity benefits by adopting 
the new interest assumption under section 417(e)(3) of the Code.
    To preserve the possibility of a change in the way PBGC-paid lump 
sums are determined without affecting private-sector plans that use 
PBGC's legacy interest rates to determine lump sums, PBGC publishes two 
separate tables of lump sum interest rates. Appendix B provides the 
interest rates for PBGC-paid lump sums, and appendix C provides the 
legacy interest rates for use by the private sector. The tables have 
always been identical.
    PBGC first started publishing two sets of interest rates in 2000. 
At that time, PBGC recommended that plan sponsors amend (or draft) 
plans to explicitly refer to ``PBGC's lump sum interest rates for 
private-sector payments'' (i.e., appendix C) if they wanted to ensure 
plans would not be affected by a future change to the way in which 
PBGC-paid lump sums are determined.\6\
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    \6\ See 65 FR 14753, 14755 (March 17, 2000).
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Proposed Rule

    On September 30, 2019 (at 84 FR 51490), PBGC published a proposed 
rule to modernize the assumptions it uses to determine de minimis lump 
sum benefits. PBGC also proposed to discontinue monthly publication of 
the interest rates used for this purpose and to provide a final 
interest rate set for use by private-sector plans. PBGC received seven 
comments on the proposal. Commenters generally supported PBGC's 
proposal with respect to plans PBGC trustees in the future. Commenters 
expressed concern about the proposed interest assumptions for use by 
private-sector plans and the proposed effective date, both of which 
have been addressed with modifications in the final rule. The public 
comments, PBGC's responses, and the provisions of this final rule are 
discussed below.

Regulatory Changes

Adopt Lump Sum Assumptions From Section 417(e)(3) of the Code

    Actuarial practice, with the help of technology, has moved toward a 
yield-curve approach where future benefits are discounted to the 
measurement date based on yields on bonds of similar duration. By 
associating an interest rate with a specific time horizon, a yield 
curve better approximates the present value of future benefits. As a 
result, the immediate-and-deferred structure of PBGC's legacy interest 
rates has become increasingly obsolete.
    Additionally, the methodology PBGC uses to compute each month's 
immediate and deferred interest rates, which was established at a time 
when computing resources were limited, is simplistic and typically 
results in interest rates significantly lower than the rates most 
private-sector plans use to determine lump sums.
    Taking into consideration modern structures and methods, PBGC 
proposed to adopt the lump sum interest rate assumption from section 
417(e)(3) of the Code. Specifically, PBGC proposed to amend its benefit 
payments regulation to provide that PBGC will use the ``applicable 
interest rate'' \7\ specified in section 417(e)(3)(C) of the Code for 
the month containing a plan's termination date to calculate the present 
value of annuity benefits (for the purposes of determining if a benefit 
is de minimis and if so, the amount payable as a lump sum).
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    \7\ The interest assumption in section 417(e)(3) of the Code was 
updated by section 302(b) of the Pension Protection Act of 2006, 
Public Law 109-280. The applicable interest rate is defined as the 
spot segment rates published by the Internal Revenue Service each 
month.
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    In developing the proposal, PBGC also considered whether the lump 
sum mortality assumption (i.e. the 1984 Unisex Pensioners Mortality 
Table) should be replaced. Although that table does not reflect recent 
mortality improvements, the combination of using it with PBGC's legacy 
interest rates typically results in lump sum amounts that are similar 
to amounts determined using the interest and mortality assumptions 
under section 417(e)(3) of the Code. Because this would no longer hold 
true if PBGC were to adopt the interest rates under section 417(e)(3) 
of the Code without also revising its lump sum mortality assumption, 
PBGC proposed to amend its benefit payments regulation to provide that 
it will use the ``applicable mortality table'' specified in section 
417(e)(3)(B) of the Code.
    In the proposed rule, PBGC stated that the changes to the interest 
and mortality assumptions were expected to have a minimal effect on 
participants and beneficiaries of plans it trustees because PBGC uses 
these assumptions only for purposes of determining de minimis lump sum 
amounts. In addition, PBGC noted that because the interest and 
mortality changes would generally have offsetting effects, the net 
impact would be small.
    PBGC also noted that the actual impact of the proposal on any 
particular individual would depend on the participant's age and the 
assumptions in effect at the time of plan termination and that, 
depending on those factors, PBGC-paid lump sums under the proposal 
could be larger or smaller than

[[Page 55589]]

had PBGC's legacy assumptions remained in effect. For example, for a 
participant aged 40, the legacy assumptions have resulted in lump sums 
that are about the same as those determined using the assumptions from 
section 417(e)(3) of the Code for the past few years.\8\ By contrast, 
during times when interest rates are very high, PBGC's legacy 
assumptions result in larger lump sums than those determined using the 
assumptions from section 417(e)(3) of the Code. Finally, in a very low 
interest rate environment, the converse is true.
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    \8\ Age 40 was used for this illustration because over the past 
10 years, the median age of participants with de minimis benefits in 
trusteed plans was age 40.
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    Commenters generally supported the proposed changes to the interest 
and mortality assumptions to be used by PBGC when determining the lump 
sum equivalent of benefits in plans PBGC trustees in the future. The 
final rule, like the proposed rule, amends PBGC's benefit payments 
regulation to provide that it will use the ``applicable interest rate'' 
and ``applicable mortality table'' specified in section 417(e)(3) of 
the Code. As explained further in the section discussing the effective 
date, commenters suggested delaying the effective date for these 
changes, which PBGC incorporated into the final rule.

Discontinue Monthly Publication of Legacy Interest Rates

    As noted in the background section, PBGC is aware that a relatively 
small number of plans still use its legacy interest rates to determine 
lump sums. In developing the proposed rule, PBGC considered whether to 
continue calculating and publishing legacy interest rates in appendix C 
for use by private-sector plans.\9\ Given that the legacy interest 
rates' structure and methodology have become increasingly obsolete, 
PBGC proposed to discontinue publication of the legacy interest rates 
and to publish a final set of interest rates in appendix C for private-
sector plans to use for valuation dates on or after the effective date 
of the final rule. Under the proposal, the final interest rate set was 
equal to the average immediate and deferred rates for the 120-month 
period ending in July 2019, rounded to the nearest quarter percent. 
Thus, PBGC proposed that for valuation dates on or after the effective 
date of the final rule, appendix C would provide for an immediate rate 
of 1.5 percent for discounting benefits for the period between the 
annuity starting date and each future payment date and a deferred rate 
of 4 percent for discounting benefits during the period leading up to 
the annuity starting date.
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    \9\ PBGC previously considered revising its methodology for 
determining lump sum interest rates and discontinuing publication of 
its legacy interest rates in 1998. See 63 FR 57228 (October 26, 
1998); 65 FR 14753 (March 17, 2000).
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    Although most of the commenters reported that they were aware of 
``few, if any'' plans that explicitly refer to appendix C (or the rates 
PBGC publishes for private sector use), these same commenters expressed 
concern with permanently ``locking in'' legacy interest rates for plans 
that do refer to appendix C. These commenters had no objection to PBGC 
ceasing publication of the legacy interest rates but requested that 
PBGC adopt an alternative basis for appendix C rates that is responsive 
to market conditions. For example, commenters suggested alternatives 
such as amending appendix C to use the 10-year Treasury yield curve 
rate, the 30-year Treasury yield curve rate, or the rate from Moody's 
Daily Long-term Corporate Bond Yield Averages for Aa bonds.
    PBGC believes it would be inappropriate to adopt a completely new 
methodology for appendix C (such as the alternatives suggested by the 
commenters) solely for private-sector use. But, even though, ``few, if 
any, plans'' would be affected by the proposal to permanently fix the 
legacy rates at the 120-month average, PBGC appreciates the commenters' 
concerns about that approach. Therefore, PBGC is not adopting that part 
of its proposal. Instead, the final rule provides in appendix C legacy 
interest rate information determined in accordance with PBGC's long-
standing, albeit outdated, methodology, with two minor modifications. 
Some background information is needed to explain these modifications.
    PBGC's methodology for determining the legacy interest rates is 
based, in part, on an applicable external bond rate: A blend of the 
mean Aa and A Moody's Daily Long-term Corporate Bond Yield Averages for 
the last five days of the second preceding month. For example, the 
``mean 5-day rate'' for the last five days of October is one of the 
parameters used to determine the immediate legacy interest rate for 
December. Given any specific ``mean 5-day rate,'' the methodology 
produces a single set of immediate-and-deferred rates. Therefore, it is 
possible to create a table that shows the range of external rates that 
result in each particular set of immediate-and-deferred rates (e.g., if 
the ``mean 5-day rate'' for the last 5 days of October is between X 
percent and Y percent, for December, the immediate rate is A percent, 
and the three deferred rates are B, C, and D percent, respectively).
    The first modification is that instead of continuing to determine 
and publish the legacy interest rates each month, the final rule 
provides a table in appendix C that replicates PBGC's methodology by 
associating any given applicable external bond rate with the set of 
immediate-and-deferred rates the methodology would have yielded. This 
allows practitioners to determine which set of legacy interest rates 
applies for any month indefinitely. And, instead of having to wait for 
PBGC to publish the legacy rates each month, practitioners will be able 
to look up the rates themselves as soon as the applicable external bond 
rate is published.
    The second modification is a change to the applicable external bond 
rate. The Moody's indices PBGC uses for this purpose are available only 
for a fee. To avoid increasing burden on plans that use PBGC's legacy 
interest rates, the final rule substitutes the publicly available 12-
year rate for the second preceding month from the corporate bond yield 
curve (without regard to 24-month averaging) published by the Secretary 
of the Treasury and described in section 430(h)(2)(D)(ii) of the Code, 
which is closely correlated with the ``mean 5-day rates'' PBGC uses. 
Although PBGC believes this substitution will result in exactly the 
same immediate-and-deferred rates the majority of the time, in some 
cases, the resulting rates may differ by a small amount. For example, 
PBGC analyzed what the legacy interest rates would have been for the 
120-month period ending December 2019 had PBGC used this substitute 
applicable external bond rate instead of the ``mean 5-day rate'' 
determined using Moody's rates. This analysis showed that the resulting 
immediate rate would have been exactly the same 58 percent of the time 
and 25 basis points above or below the actual legacy interest rate 41 
percent of the time. In other words, 99 percent of the time, the 
resulting immediate rate would have been no more than 25 basis points 
different.
    The following example illustrates how to use the table in appendix 
C. For purposes of this example, assume the final rule became effective 
in January 2020, and a practitioner needed to determine the March 2020 
rates. A practitioner would first determine the 12-year rate for the 
second preceding month, January 2020. The January 2020 corporate bond 
yield curve is published as Table 2020-1 in IRS Notice 2020-11

[[Page 55590]]

I.R.B. 492.\10\ That table shows a 12-year rate for January 2020 of 
3.00 percent. Turning to the table in appendix C, a practitioner would 
see that because the January 2020 12-year rate, 3.00 percent, is below 
3.18 percent, the immediate annuity rate for March 2020 is 0.00 
percent, and the three deferred annuity rates are 4.00 percent. 
Similarly, if the 12-year rate for January 2020 had been 4.75 percent, 
the immediate annuity rate for March 2020 would have been 1.75 percent.
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    \10\ As of the date of publication of this rule, IRS notices 
containing monthly yield curves are available at https://www.irs.gov/retirement-plans/recent-interest-rate-notices. In 
addition, a spreadsheet containing ``recent yield curve spot rates'' 
is available at https://www.irs.gov/retirement-plans/monthly-yield-curve-tables.
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    With respect to plans that use PBGC's legacy rates but do not 
explicitly reference appendix C (i.e., plans that include a more 
general reference to PBGC's lump sum interest rates), the preamble to 
the proposed rule stated that ``once the appendix C rates are no longer 
identical to the rates used by PBGC, the plan terms [for such a plan] 
may have an ambiguity that should be resolved.'' One commenter 
questioned the use of the word ``ambiguity.'' This commenter stated 
that there would be no ambiguity as to how the proposed rule would 
affect those plans because if PBGC started using the applicable 
interest rates under section 417(e)(3) of the Code to determine lump 
sums, absent a plan amendment, such plans would do the same. Further, 
the commenter asserted that the Internal Revenue Service's (IRS) 
Revenue Ruling 81-12 makes clear that, absent a plan amendment, the 
anti-cutback requirements in section 411(d)(6) of the Code would not 
apply to such plans.
    In retrospect, PBGC realizes that this sentence in the preamble to 
the proposed rule may have unintentionally caused some confusion. The 
word ``ambiguity'' in PBGC's preamble was not intended to suggest 
whether any particular plan provision might be ambiguous, or how a plan 
administrator should interpret any particular plan provision.
    With respect to the application of section 411(d)(6) of the Code, 
PBGC staff consulted with staff at the Department of the Treasury and 
the IRS (as interpretation of that statutory provision is within the 
jurisdiction of the Secretary of the Treasury). The Department of the 
Treasury and the IRS informed PBGC that, in the case of a plan 
provision under which the amount of a lump sum distribution is 
determined using PBGC's lump sum interest rate, the anti-cutback rules 
of section 411(d)(6) of the Code are not violated merely because the 
application of this final rule results in a change in the underlying 
interest rate(s) used to determine the amount of a lump sum 
distribution.

Effective Date

    PBGC received five comments concerning the timing of the final 
rule. These commenters noted that, with respect to plans that use 
PBGC's legacy interest rates to determine lump sum amounts, the amount 
payable as a lump sum would, in some cases, decrease as soon as the 
rule takes effect. These commenters reported that affected plans may 
need time to communicate the changes to participants, to update 
administrative systems, and to determine whether to (or how to) 
mitigate any undesired effects (e.g., a rush to retire among 
participants concerned about an upcoming decrease in lump sum amounts). 
For these reasons, they requested that PBGC provide a period of time 
between the date the final rule is published and when it takes effect.
    With the final rule's continuation of PBGC's legacy interest rates 
in appendix C, participants in plans that use appendix C rates will not 
see significant changes in lump sum amounts, and there will be no 
incentive for participants to retire sooner than planned, so there is 
no need for a delayed effective date. However, for plans that use 
PBGC's legacy interest rates without specific reference to appendix C 
or the rates for private-sector use, which commenters report represent 
the vast majority of the relatively few plans that use the legacy 
interest rates, PBGC agrees that a delayed effective date could be 
helpful for communicating and implementing the change. A delayed 
effective date could also be helpful for giving plans time to consider 
whether (and how) to mitigate any concerns they may have. In response 
to these comments, PBGC is providing a delayed effective date of 
January 1, 2021. This means PBGC will continue to publish monthly 
legacy interest rates for both appendix B and appendix C through 
December 2020.

Executive Orders 12866, 13563, and 13771

    OMB has determined that this rulemaking is not a ``significant 
regulatory action'' under Executive Order 12866. Accordingly, this 
final rule is exempt from the requirements of Executive Order 13771 and 
OMB has not reviewed the rule under Executive Order 12866. Executive 
Orders 12866 and 13563 direct agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity).
    Although this is not a significant regulatory action under 
Executive Order 12866, PBGC has examined the economic implications of 
this final rule and has concluded that the changes will have minimal 
impact on PBGC's payment of lump sum benefits. As discussed above, 
applying the assumptions under section 417(e)(3) of the Code to a 
benefit could slightly raise or lower a lump sum benefit paid by PBGC. 
Additionally, with respect to PBGC-trusteed plans terminating on or 
after the effective date, some benefits that would have been considered 
de minimis using the prior assumptions would not be de minimis using 
the revised assumptions (and vice versa). Because PBGC only pays de 
minimis lump sums, from an aggregate cost perspective, any change in 
PBGC's lump sum payments is minimal.
    PBGC also has concluded that the final rule will have minimal 
impact on private-sector plans. As explained in the preamble, 
relatively few plans use PBGC's legacy interest rates to determine lump 
sums. Plans that refer specifically to appendix C will continue to use 
PBGC's legacy interest rates. To determine the immediate-and-deferred 
interest rates in effect for each month, plan administrators will look 
up an interest rate published by the IRS, which is no more burdensome 
than determining the immediate-and-deferred rates under current 
regulations. For plans that refer generally to PBGC's lump sum interest 
rates or the rates PBGC uses, commenters said that there could be 
administrative costs associated with implementing processes and 
procedures, updating systems for administering benefits, and 
communicating with participants, but did not quantify these costs. The 
costs will be contingent on plans' individual circumstances and plan 
sponsors' responses to these changes.
    Section 6 of Executive Order 13563 requires agencies to rethink 
existing regulations by periodically reviewing their regulatory program 
for rules that ``may be outmoded, ineffective, insufficient, or 
excessively burdensome.'' These rules should be modified, streamlined, 
expanded, or repealed as appropriate. PBGC has identified the 
assumptions used for lump sums in its benefit payments regulation as 
outmoded and the

[[Page 55591]]

amendment to discontinue publication of these assumptions as consistent 
with the principles for review under Executive Order 13563.

Regulatory Flexibility Act

    The Regulatory Flexibility Act imposes certain requirements with 
respect to rules that are subject to the notice-and-comment 
requirements of section 553(b) of the Administrative Procedure Act and 
that are likely to have a significant economic impact on a substantial 
number of small entities. Unless an agency determines that a rule is 
not likely to have a significant economic impact on a substantial 
number of small entities, section 604 of the Regulatory Flexibility Act 
requires that the agency present a final regulatory flexibility 
analysis at the time of the publication of the final rule describing 
the impact of the rule on small entities and seeking public comment on 
such impact. Small entities include small businesses, organizations, 
and governmental jurisdictions.
    For purposes of the Regulatory Flexibility Act requirements with 
respect to this final rule, PBGC considers a small entity to be a plan 
with fewer than 100 participants. This is substantially the same 
criterion PBGC uses in other regulations \11\ and is consistent with 
certain requirements in title I of ERISA \12\ and the Code,\13\ as well 
as the definition of a small entity that the Department of Labor has 
used for purposes of the Regulatory Flexibility Act.\14\
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    \11\ See, e.g., special rules for small plans under part 4007 
(Payment of Premiums).
    \12\ See, e.g., section 104(a)(2) of ERISA, which permits the 
Secretary of Labor to prescribe simplified annual reports for 
pension plans that cover fewer than 100 participants.
    \13\ See, e.g., section 430(g)(2)(B) of the Code, which permits 
plans with 100 or fewer participants to use valuation dates other 
than the first day of the plan year.
    \14\ See, e.g., DOL's final rule on Prohibited Transaction 
Exemption Procedures, 76 FR 66,637, 66,644 (Oct. 27, 2011).
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    Further, while some large employers operate small plans along with 
larger ones, in general, most small plans are maintained by small 
employers. Thus, PBGC believes that assessing the impact of the final 
rule on small plans is an appropriate substitute for evaluating the 
effect on small entities. The definition of small entity considered 
appropriate for this purpose differs, however, from a definition of 
small business based on size standards promulgated by the Small 
Business Administration (13 CFR 121.201) pursuant to the Small Business 
Act. PBGC requested comments on the appropriateness of the size 
standard used in evaluating the impact of the proposed rule on small 
entities. PBGC did not receive any such comments.
    On the basis of its definition of small entity, PBGC certifies 
under section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.) that the amendments in this rule will not have a significant 
economic impact on a substantial number of small entities because this 
rule primarily impacts participants in PBGC-trusteed plans. In 
addition, commenters confirmed that relatively few plans of any size 
use PBGC's legacy interest rates to calculate lump sums. Therefore, it 
is unlikely that the rule will significantly impact a substantial 
number of small plans. Accordingly, as provided in section 605 of the 
Regulatory Flexibility Act, sections 603 and 604 do not apply.

List of Subjects in 29 CFR Part 4022

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

    For the reasons given above, PBGC is amending 29 CFR part 4022 as 
follows:

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

0
1. The authority citation for part 4022 continues to read as follows:

    Authority: 29 U.S.C 1302, 1322, 1322b, 1341(c)(3)(D), and 1344.


0
2. Amend Sec.  4022.7 by revising paragraphs (d)(2) and (e) to read as 
follows:


Sec.  4022.7   Benefits payable in a single installment.

* * * * *
    (d) * * *
    (2) Actuarial assumptions. PBGC will calculate the lump sum value 
of a benefit 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 will be those described in Sec.  4044.52 of 
this chapter, except as follows:
    (i) Loading for expenses. There will be no adjustment to reflect 
the loading for expenses.
    (ii) Mortality assumption. The ``applicable mortality table'' 
specified in section 205(g)(3)(B)(i) of ERISA and section 417(e)(3)(B) 
of the Code for the year containing the termination date will apply.
    (iii) Interest rate assumption. The ``applicable interest rate'' 
specified in section 205(g)(3)(B)(ii) of ERISA and section 417(e)(3)(C) 
of the Code for the month containing the termination date will apply.
    (iv) 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.
    (e) Private-sector lump sum rates. PBGC provides lump sum interest 
rates for private-sector payments in appendix C to this part.

Appendix A to Part 4022--[Removed and Reserved]

0
3. Remove and reserve appendix A.

Appendix B to Part 4022--[Removed and Reserved]

0
4. Remove and reserve appendix B.

0
5. Revise appendix C to read as follows:

Appendix C to Part 4022--Lump Sum Interest Rates for Private-Sector 
Payments

    [In using this table:
    (1) To determine the applicable rate set for any given month (month 
x), use the applicable 12-year rate for the second preceding month 
(month x-2) to find the corresponding rate set. The applicable 12-year 
rate for the second preceding month is the 12-year rate from the 
corporate bond yield curve described in section 430(h)(2)(D)(ii) of the 
Code determined without regard to 24-month averaging for the second 
month preceding the month of the desired applicable rate set.
    (2) 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.
    (3) For benefits for which the deferral period is y years (where y 
is an integer and 0 < y <= 7), interest rate i1 shall apply 
from the valuation date for a period of y years; thereafter the 
immediate annuity rate shall apply.
    (4) For benefits for which the deferral period is y years (where y 
is an integer and 7 < y <= 15), interest rate i2 shall apply 
from the valuation date for a period of y-7 years; interest rate 
i1 shall apply for the following 7 years; thereafter the 
immediate annuity rate shall apply.
    (5) For benefits for which the deferral period is y years (where y 
is an integer and y > 15), interest rate i3 shall apply from 
the valuation date for a period of y-15 years; interest rate 
i2 shall apply for the following 8 years; interest rate 
i1 shall apply for the following 7 years; thereafter the 
immediate annuity rate shall apply.]

[[Page 55592]]



                           For Plans With a Valuation Date On or After January 1, 2021
----------------------------------------------------------------------------------------------------------------
                                                                  Applicable rate set for month x
                                                 ---------------------------------------------------------------
 Applicable 12-year rate for month x-2 (percent)     Immediate           Deferred annuity rates (percent)
                                                   annuity rate  -----------------------------------------------
                                                     (percent)          i1              i2              i3
----------------------------------------------------------------------------------------------------------------
Below 3.18......................................            0.00            4.00            4.00            4.00
3.18 to 3.40....................................            0.25            4.00            4.00            4.00
3.41 to 3.63....................................            0.50            4.00            4.00            4.00
3.64 to 3.87....................................            0.75            4.00            4.00            4.00
3.88 to 4.10....................................            1.00            4.00            4.00            4.00
4.11 to 4.34....................................            1.25            4.00            4.00            4.00
4.35 to 4.57....................................            1.50            4.00            4.00            4.00
4.58 to 4.81....................................            1.75            4.00            4.00            4.00
4.82 to 5.04....................................            2.00            4.00            4.00            4.00
5.05 to 5.28....................................            2.25            4.00            4.00            4.00
5.29 to 5.51....................................            2.50            4.00            4.00            4.00
5.52 to 5.75....................................            2.75            4.00            4.00            4.00
5.76 to 5.98....................................            3.00            4.00            4.00            4.00
5.99 to 6.22....................................            3.25            4.00            4.00            4.00
6.23 to 6.46....................................            3.50            4.00            4.00            4.00
6.47 to 6.69....................................            3.75            4.00            4.00            4.00
6.70 to 6.93....................................            4.00            4.00            4.00            4.00
6.94 to 7.16....................................            4.25            4.00            4.00            4.00
7.17 to 7.40....................................            4.50            4.00            4.00            4.00
7.41 to 7.64....................................            4.75            4.00            4.00            4.00
7.65 to 7.87....................................            5.00            4.25            4.00            4.00
7.88 to 8.11....................................            5.25            4.50            4.00            4.00
8.12 to 8.35....................................            5.50            4.75            4.00            4.00
8.36 to 8.58....................................            5.75            5.00            4.00            4.00
8.59 to 8.82....................................            6.00            5.25            4.00            4.00
8.83 to 9.06....................................            6.25            5.50            4.25            4.00
9.07 to 9.30....................................            6.50            5.75            4.50            4.00
9.31 to 9.53....................................            6.75            6.00            4.75            4.00
9.54 to 9.78....................................            7.00            6.25            5.00            4.00
9.79 to 10.02...................................            7.25            6.50            5.25            4.00
Above 10.02.....................................            7.50            6.75            5.50            4.00
----------------------------------------------------------------------------------------------------------------


    Issued in Washington, DC.
Gordon Hartogensis,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2020-19610 Filed 9-8-20; 8:45 am]
BILLING CODE 7709-02-P