2020-12883. Allocation of Assets in Single-Employer Plans; Benefits Payable in Terminated Single-Employer Plans; Interest Assumptions for Valuing and Paying Benefits
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Start Preamble
AGENCY:
Pension Benefit Guaranty Corporation.
ACTION:
Final rule.
SUMMARY:
This final rule amends the Pension Benefit Guaranty Corporation's regulations on Benefits Payable in Terminated Single-Employer Plans and Allocation of Assets in Single-Employer Plans to prescribe certain interest assumptions under the benefit payments regulation for plans with valuation dates in July 2020 and interest assumptions under the asset allocation regulation for plans with valuation dates in the third quarter of 2020. These interest assumptions are used for valuing benefits and paying certain benefits under terminating single-employer plans covered by the pension insurance system administered by PBGC.
DATES:
Effective July 1, 2020.
Start Further InfoFOR FURTHER INFORMATION CONTACT:
Gregory Katz (katz.gregory@pbgc.gov), Attorney, Regulatory Affairs Division, Pension Benefit Guaranty Corporation, 1200 K Street NW, Washington, DC 20005, 202-326-4400, ext. 3829. (TTY users may call the Federal relay service toll free at 1-800-877-8339 and ask to be connected to 202-326-4400, ext. 3829.)
End Further Info End Preamble Start Supplemental InformationSUPPLEMENTARY INFORMATION:
PBGC's regulations on Allocation of Assets in Single-Employer Plans (29 CFR part 4044) and Benefits Payable in Terminated Single-Employer Plans (29 CFR part 4022) prescribe actuarial assumptions—including interest assumptions—for valuing and paying plan benefits under terminating single-employer plans covered by title IV of the Employee Retirement Income Security Act of 1974 (ERISA). The interest assumptions in the regulations are also published on PBGC's website (https://www.pbgc.gov).
Lump Sum Interest Assumption
PBGC uses the interest assumptions in appendix B to part 4022 (“Lump Sum Interest Rates for PBGC Payments”) to determine whether a benefit is payable as a lump sum and to determine the amount to pay as a lump sum. Because some private-sector pension plans use these interest rates to determine lump sum amounts payable to plan participants (if the resulting lump sum is larger than the amount required under section 417(e)(3) of the Internal Revenue Code and section 205(g)(3) of ERISA), these rates are also provided in appendix C to part 4022 (“Lump Sum Interest Rates for Private-Sector Payments”).
This final rule updates appendices B and C of the benefit payments regulation to provide the rates for July 2020 measurement dates.
The July 2020 lump sum interest assumptions will be 0.00 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for June 2020, these assumptions represent no change in the immediate rate and are otherwise unchanged.
Valuation/Asset Allocation Interest Assumptions
PBGC uses the interest assumptions in appendix B to part 4044 (“Interest Rates Used to Value Benefits”) to value benefits for allocation purposes under section 4044 of ERISA, and some private-sector pension plans use them to determine benefit liabilities reportable under section 4044 of ERISA and for other purposes. The third quarter 2020 interest assumptions will be 1.98 percent for the first 20 years following the valuation date and 1.57 percent thereafter. In comparison with the interest assumptions in effect for the second quarter of 2020, these interest assumptions represent no change in the select period (the period during which the select rate (the initial rate) applies), a decrease of 0.13 percent in the select rate, and a decrease of 0.35 percent in the ultimate rate (the final rate).
Need for Immediate Guidance
PBGC updates appendix B of the asset allocation regulation each quarter and appendices B and C of the benefit payments regulation each month. 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 issue new interest assumptions promptly so that they are available to value benefits and, for plans that rely on our publication of them each month or each quarter, to calculate lump sum benefit amounts.
Because of the need to provide immediate guidance for the valuation and payment of benefits under plans with valuation dates during July 2020, 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).
Start List of SubjectsList of Subjects
29 CFR Part 4022
- Employee benefit plans
- Pension insurance
- Pensions
- Reporting and recordkeeping requirements
29 CFR Part 4044
- Employee benefit plans
- Pension insurance
- Pensions
In consideration of the foregoing, 29 CFR parts 4022 and 4044 are amended as follows:
Start PartPART 4022—BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS
End Part Start Amendment Part1. The authority citation for part 4022 continues to read as follows:
End Amendment Part Start Printed Page 36154 Start Amendment Part2. In appendix B to part 4022, Rate Set 321 is added at the end of the table to read as follows:
End Amendment PartAppendix B to Part 4022—Lump Sum Interest Rates for PBGC Payments
* * * * *Start Amendment PartRate set For plans with a valuation date Immediate annuity rate (percent) Deferred annuities (percent) On or after Before i 1 i 2 i 3 n 1 n 2 * * * * * * * 321 7-1-20 8-1-20 0.00 4.00 4.00 4.00 7 8 3. In appendix C to part 4022, Rate Set 321 is added at the end of the table to read as follows:
End Amendment PartAppendix C to Part 4022—Lump Sum Interest Rates for Private-Sector Payments
* * * * *Start PartRate set For plans with a valuation date Immediate annuity rate (percent) Deferred annuities (percent) On or after Before i 1 i 2 i 3 n 1 n 2 * * * * * * * 321 7-1-20 8-1-20 0.00 4.00 4.00 4.00 7 8 PART 4044—ALLOCATION OF ASSETS IN SINGLE-EMPLOYER PLANS
End Part Start Amendment Part4. The authority citation for part 4044 continues to read as follows:
End Amendment Part Start Amendment Part5. In appendix B to part 4044, an entry for “July-September 2020” is added at the end of the table to read as follows:
End Amendment PartAppendix B to Part 4044—Interest Rates Used To Value Benefits
* * * * *Start SignatureFor valuation dates occurring in the month— The values of i t are: i t for t = i t for t = i t for t = * * * * * * * July-September 2020 0.0198 1-20 0.0157 >20 N/A N/A Issued in Washington, DC.
Hilary Duke,
Assistant General Counsel for Regulatory Affairs, Pension Benefit Guaranty Corporation.
[FR Doc. 2020-12883 Filed 6-12-20; 8:45 am]
BILLING CODE 7709-02-P
Document Information
- Effective Date:
- 7/1/2020
- Published:
- 06/15/2020
- Department:
- Pension Benefit Guaranty Corporation
- Entry Type:
- Rule
- Action:
- Final rule.
- Document Number:
- 2020-12883
- Dates:
- Effective July 1, 2020.
- Pages:
- 36153-36154 (2 pages)
- Topics:
- Employee benefit plans, Pension insurance, Pensions, Reporting and recordkeeping requirements
- PDF File:
- 2020-12883.pdf
- Supporting Documents:
- » Adjustment of Civil Penalties for Inflation
- » Allocation of Assets in Single-Employer Plans: Benefits Payable in Terminated Single-Employer Plans; Interest Assumptions for Valuing and Paying Benefits
- » Benefits Payable in Terminated Single-Employer Plans: Interest Assumptions for Paying Benefits
- » Adjustment of Civil Penalties for Inflation
- » Agency Information Collection Activities; Proposals, Submissions, and Approvals: Disclosure of Termination Information
- » Agency Information Collection Activities; Proposals, Submissions, and Approvals: Mergers and Transfers Between Multiemployer Plans
- » Benefits Payable in Terminated Single-Employer Plans; Interest Assumptions for Paying Benefits
- » Allocation of Assets in Single-Employer Plans; Benefits Payable in Terminated Single-Employer Plans; Interest Assumptions for Valuing and Paying Benefits
- » Privacy Act; Systems of Records
- » Benefits Payable in Terminated Single-Employer Plans: Interest Assumptions for Paying Benefits
- CFR: (2)
- 29 CFR 4022
- 29 CFR 4044