[Federal Register Volume 59, Number 198 (Friday, October 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25512]
[[Page Unknown]]
[Federal Register: October 14, 1994]
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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 (``PBGC'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 November 1994, and to multiemployer plans with
valuation dates in November 1994. The effect of these amendments is to
advise the public of the adoption of these assumptions.
EFFECTIVE DATE: November 1, 1994.
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).
(These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION: This rule adopts the November 1994 interest
assumptions to be used under the Pension Benefit Guaranty Corporation's
(``PBGC'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
(``ERISA''). 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-employee regulation. Appendix B to part 2676 sets
forth the interest rates and factors under the multiemployer
regulation. Because the 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 November 1994 and multiemployer plans
that have undergone mass withdrawal and have valuation dates during
November 1994.
For annuity benefits, the interest rates will be 7.30% for the
first 25 years following the valuation date and 5.25% thereafter. For
benefits to be paid as lump sums, the interest assumptions to be used
by the PBGC will be 6.00% for the period during which benefits are in
pay status, 5.25% during the seven years directly preceding the
benefit's placement in pay status, and 4.0% during any other years
preceding the benefit's placement in pay status. (ERISA section 205(g)
and Internal Revenue Code section 417(e) provide that private sector
plans valuing lump sums not in excess of $25,000 must use interest
assumptions at least as generous as those used by the PBGC for valuing
lump sums (and for lump sums exceeding $25,000 must use interest
assumptions at least as generous as 120% of the PBGC interest
assumptions).) The above annuity interest assumptions represent an
increase (from those in effect for October 1994) of .30 percent for the
first 25 years following the valuation date and are otherwise
unchanged. The lump sum interest assumptions represent an increase
(from those in effect for October 1994) of .50 percent for the period
during which benefits are in pay status and the seven years directly
preceding that period; they 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 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 November 1994, and in multiemployer plans that have undergone
mass withdrawal and have valuation dates during November 1994, 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 it will not have an annual effect on the economy of $100
million or more or adversely affect in a material way the economy, a
sector of the economy productivity, competition, jobs, the environment,
public health or safety, or State, local, or tribal governments or
communities; create a serious inconsistency or otherwise interfere with
an action taken or planned by another agency; materially alter the
budgetary impact of entitlements, grants, user fees, or loan programs
or the rights and obligations of recipients thereof; or raise novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles 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, 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 13 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 Sum 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<>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 Immediate Deferred annuities (percent)
valuation date annuity --------------------------------------------------
Rate set -------------------------- rate
On or after (percent) i1 i2 i3 n1 n2
Before
----------------------------------------------------------------------------------------------------------------
* * * * * * *
13...................... 11-1-94 12-1-94 6.00 5.25 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 value 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 =
----------------------------------------------------------------------------------------------------------------
* * * * * * *
Nov. 1994......................... .0730 1-25 .0525 >25 N/A N/A
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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 13 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 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<>nl), 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 Immediate Deferred annuities (percent)
valuation date annuity --------------------------------------------------
Rate set -------------------------- rate
On or after (percent) i1 i2 i3 n1 n2
Before
----------------------------------------------------------------------------------------------------------------
* * * * * * *
13...................... 11-1-94 12-1-94 6.00 5.25 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=
----------------------------------------------------------------------------------------------------------------
* * * * * * *
Nov. 1994......................... .0730 1-25 .0525 >25 N/A N/A
----------------------------------------------------------------------------------------------------------------
Issued in Washington, DC, on this 11th day of October 1994.
Martin Slate,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 94-25512 Filed 10-13-94; 8:45 am]
BILLING CODE 7708-01-M
