96-428. Valuation of Plan Benefits in Single-Employer Plans; Valuation of Plan Benefits and Plan Assets Following Mass Withdrawal; Amendments Adopting Additional PBGC Rates  

  • [Federal Register Volume 61, Number 10 (Tuesday, January 16, 1996)]
    [Rules and Regulations]
    [Pages 1127-1129]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 96-428]
    
    
    
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    PENSION BENEFIT GUARANTY CORPORATION
    29 CFR Parts 2619 and 2676
    
    
    Valuation of Plan Benefits in Single-Employer Plans; Valuation of 
    Plan Benefits and Plan Assets Following Mass Withdrawal; Amendments 
    Adopting Additional PBGC Rates
    
    AGENCY: Pension Benefit Guaranty Corporation.
    
    ACTION: Final rule.
    
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    SUMMARY: This final rule amends the Pension Benefit Guaranty 
    Corporation's regulations on Valuation of Plan Benefits in Single-
    Employer Plans and Valuation of Plan Benefits and Plan Assets Following 
    Mass Withdrawal. The former regulation contains the interest 
    assumptions that the PBGC uses to value benefits under terminating 
    single-employer plans. The latter regulation contains the interest 
    assumptions for valuations of multiemployer plans that have undergone 
    mass withdrawal. The amendments set out in this final rule adopt the 
    interest assumptions applicable to single-employer plans with 
    termination dates in February 1996, and to multiemployer plans with 
    valuation dates in February 1996. The effect of these amendments is to 
    advise the public of the adoption of these assumptions.
    
    EFFECTIVE DATE: February 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 February 1996 interest 
    assumptions to be used under the Pension Benefit Guaranty Corporation's 
    regulations on Valuation of Plan Benefits in Single-Employer Plans (29 
    CFR part 2619, the ``single-employer regulation'') and Valuation of 
    Plan Benefits and Plan Assets Following Mass Withdrawal (29 CFR part 
    2676, the ``multiemployer regulation'').
        Part 2619 sets forth the methods for valuing plan benefits of 
    terminating single-employer plans covered under title IV of the 
    Employee Retirement Income Security Act of 1974, as amended. Under 
    ERISA section 4041(c), all single-employer plans wishing to terminate 
    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, using the formulas set forth in part 2619, 
    subpart C. (Plans terminating in a standard termination may, for 
    purposes of the Standard Termination Notice filed with PBGC, use these 
    formulas to value benefit liabilities, although this is not required.) 
    In addition, when the PBGC terminates an underfunded plan involuntarily 
    pursuant to ERISA section 4042(a), it uses the subpart C formulas to 
    determine the amount of the plan's underfunding. Part 2676 prescribes 
    rules for valuing benefits and certain assets of multiemployer plans 
    under sections 4219(c)(1)(D) and 4281(b) of ERISA.
        Appendix B to part 2619 sets forth the interest rates and factors 
    under the single-employer regulation. Appendix B to part 2676 sets 
    forth the interest rates and factors under the multiemployer 
    regulation. Because these 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.
        The PBGC issues two sets of interest rates and factors, one set to 
    be used for the valuation of benefits to be paid as annuities and one 
    set for the valuation of benefits to be paid as lump sums. The same 
    assumptions apply to terminating single-employer plans and to 
    multiemployer plans that have undergone a mass withdrawal. This 
    amendment adds to appendix B to parts 2619 and 2676 sets of interest 
    rates and factors for valuing benefits in single-employer plans that 
    have termination dates during February 1996 and multiemployer plans 
    that have undergone mass withdrawal and have valuation dates during 
    February 1996.
        For annuity benefits, the interest rates will be 5.40% for the 
    first 20 years following the valuation date and 4.75% thereafter. For 
    benefits to be paid as lump sums, the interest assumptions to be used 
    by the PBGC will be 4.25% for the period during which benefits are in 
    pay status, and 4.0% during all years preceding the benefit's placement 
    in pay status. The above annuity interest assumptions represent a 
    decrease (from those in effect for January 1996) of .20 percent for the 
    first 20 years following the valuation date and are otherwise 
    unchanged. The lump sum interest assumptions represent a decrease (from 
    those in effect for January 1996) of .25 percent for the period during 
    which benefits are in pay status, and are otherwise unchanged.
        Generally, the interest rates and factors under these regulations 
    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 normally 
    will be published in the Federal Register by the 15th of 
    
    [[Page 1128]]
    the preceding month or as close to that date as circumstances permit.
        The PBGC has determined that notice and public comment on these 
    amendments 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 single-employer plans whose termination dates fall 
    during February 1996, and in multiemployer plans that have undergone 
    mass withdrawal and have valuation dates during February 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
    
    29 CFR Part 2619
    
        Employee benefit plans, Pension insurance, and Pensions.
    
    29 CFR Part 2676
    
        Employee benefit plans and Pensions.
        In consideration of the foregoing, parts 2619 and 2676 of chapter 
    XXVI, title 29, Code of Federal Regulations, are hereby amended as 
    follows:
    
    PART 2619--[AMENDED]
    
        1. The authority citation for part 2619 continues to read as 
    follows:
    
        Authority: 29 U.S.C. 1301(a), 1302(b)(3), 1341, 1344, 1362.
    
        2. In appendix B, Rate Set 28 is added to Table I, and a new entry 
    is added to Table II, as set forth below. The introductory text of both 
    tables is republished for the convenience of the reader and remains 
    unchanged.
    
    Appendix B to Part 2619--Interest Rates Used to Value Lump Sums and 
    Annuities
    
    Lump Sum Valuations
    
        In determining the value of interest factors of the form 
    v0:n (as defined in Sec. 2619.49(b)(1)) for purposes of 
    applying the formulas set forth in Sec. 2619.49(b) through (i) and 
    in determining the value of any interest factor used in valuing 
    benefits under this subpart to be paid as lump sums (including the 
    return of accumulated employee contributions upon death), the PBGC 
    shall employ the values of it set out in Table I hereof as 
    follows:
        (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 (y is 
    an integer and 0 < y=""> n1), interest rate i1 
    shall apply from the valuation date for a period of y years; 
    thereafter the immediate annuity rate shall apply.
        (3) For benefits for which the deferral period is y years (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; thereafter the immediate annuity rate shall apply.
        (4) For benefits for which the deferral period is y years (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; thereafter the immediate annuity rate shall 
    apply.
    
                                                                             Table I                                                                        
                                                                      [Lump Sum Valuations]                                                                 
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               For plans with a valuation date      Immediate            Deferred annuities (percent)       
                            Rate set                        ------------------------------------  annuity rate  --------------------------------------------
                                                                On or after         Before          (percent)       i1       i2       i3       n1       n2  
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                            
                                                     *        *        *        *        *        *        *                                                
    28.....................................................           02-1-96           03-1-96            4.25     4.00     4.00     4.00        7        8
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    
    Annuity Valuations
    
        In determining the value of interest factors of the form 
    v0:n (as defined in Sec. 2619.49(b)(1)) for purposes of 
    applying the formulas set forth in Sec. 2619.49 (b) through (i) and 
    in determining the value of any interest factor used in valuing 
    annuity benefits under this subpart, the plan administrator shall 
    use the values of it prescribed in Table II hereof.
        The following table tabulates, for each calendar month of 
    valuation ending after the effective date of this part, 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.
    
                                                        Table II                                                    
                                                  [Annuity Valuations]                                              
    ----------------------------------------------------------------------------------------------------------------
                                                                  The values of it are:                             
     For valuation dates occurring  --------------------------------------------------------------------------------
             in the month--              it         for t =         it         for t =         it         for t =   
    ----------------------------------------------------------------------------------------------------------------
                                                                                                                    
    *                  *                  *                  *                  *                  *                
                                                            *                                                       
    February 1996..................      .0540            1-20      .0475             >20        N/A             N/A
    ----------------------------------------------------------------------------------------------------------------
    
    PART 2676--[AMENDED]
    
        3. The authority citation for part 2676 continues to read as 
    follows:
    
        Authority: 29 U.S.C. 1302(b)(3), 1399(c)(1)(D), 1441(b)(1).
    
        4. In appendix B, Rate Set 28 is added to Table I, and a new entry 
    is added to Table II, as set forth below. The introductory text of both 
    tables is 
    
    [[Page 1129]]
    republished for the convenience of the reader and remains unchanged.
    
    Appendix B to Part 2676--Interest Rates Used to Value Lump Sums and 
    Annuities
    
    Lump Sum Valuations
    
        In determining the value of interest factors of the form 
    v0:n (as defined in Sec. 2676.13(b)(1)) for purposes of 
    applying the formulas set forth in Sec. 2676.13 (b) through (i) and 
    in determining the value of any interest factor used in valuing 
    benefits under this subpart to be paid as lump sums, the PBGC shall 
    use the values of it prescribed in Table I hereof. The interest 
    rates set forth in Table I shall be used by the PBGC to calculate 
    benefits payable as lump sum benefits as follows:
        (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 (y is 
    an integer and 0<> n1), interest rate i1 shall 
    apply from the valuation date for a period of y years; thereafter 
    the immediate annuity rate shall apply.
        (3) For benefits for which the deferral period is y years (y is 
    an integer and n1<> 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; thereafter the immediate annuity rate shall apply.
        (4) For benefits for which the deferral period is y years (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; 
    thereafter the immediate annuity rate shall apply.
    
                                                                             Table I                                                                        
                                                                      [Lump Sum Valuations]                                                                 
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               For plans with a valuation date      Immediate            Deferred annuities (percent)       
                            Rate set                        ------------------------------------  annuity rate  --------------------------------------------
                                                                On or after         Before          (percent)       i1       i2       i3       n1       n2  
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                            
                       *                  *                  *                  *                  *                  *                  *                  
    28.....................................................           02-1-96          03-01-96            4.25     4.00     4.00     4.00        7        8
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    
    Annuity Valuations
    
        In determining the value of interest factors of the form 
    v0:n (as defined in Sec. 2676.13(b)(1)) for purposes of 
    applying the formulas set forth in Sec. 2676.13(b) through (i) and 
    in determining the value of any interest factor used in valuing 
    annuity benefits under this subpart, the plan administrator shall 
    use the values of it prescribed in the table below.
        The following table tabulates, for each calendar month of 
    valuation ending after the effective date of this part, 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.
    
    
                                                        Table II                                                    
                                                  [Annuity Valuations]                                              
    ----------------------------------------------------------------------------------------------------------------
                                                                  The values of it are:                             
     For valuation dates occurring  --------------------------------------------------------------------------------
             in the month--              it         for t =         it         for t =         it         for t =   
    ----------------------------------------------------------------------------------------------------------------
                                                                                                                    
    *                  *                  *                  *                  *                  *                
                                                            *                                                       
    February 1996..................      .0540            1-20      .0475             >20        N/A             N/A
    ----------------------------------------------------------------------------------------------------------------
    
        Issued in Washington, DC, on this 5th day of January 1996.
    Martin Slate,
    Executive Director Pension Benefit Guaranty Corporation.
    [FR Doc. 96-428 Filed 1-11-96; 12:31 pm]
    BILLING CODE 7708-01-P
    
    

Document Information

Effective Date:
2/1/1996
Published:
01/16/1996
Department:
Pension Benefit Guaranty Corporation
Entry Type:
Rule
Action:
Final rule.
Document Number:
96-428
Dates:
February 1, 1996.
Pages:
1127-1129 (3 pages)
PDF File:
96-428.pdf
CFR: (2)
29 CFR 2619
29 CFR 2676