Missing Participants

SUMMARY: The Pension Benefit Guaranty Corporation is amending its

regulations to implement the new missing participants program under

section 4050 of the Employee Retirement Income Security Act of 1974.

Section 4050 applies to single-employer defined benefit plans

distributing benefits in accordance with the standard termination

procedures of Title IV.

EFFECTIVE DATE: January 1, 1996. The missing participants program is

effective for distributions in plan years beginning on or after January

1, 1996.

FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General

Counsel, or Deborah C. Murphy, Attorney, Office of the General Counsel,

Suite 340, Pension Benefit Guaranty Corporation, 1200 K Street, NW.,

Washington, DC 20005-4026; 202-326-4024 (202-326-4179 for TTY and TDD).

SUPPLEMENTARY INFORMATION: On August 24, 1995, the PBGC published in

the Federal Register (60 FR 44158) a proposed rule to implement section

4050 of ERISA.

When a participant or beneficiary cannot be located in a standard

termination a plan administrator can either purchase an annuity or pay

funds to the PBGC. If funds are paid to the PBGC, the PBGC will search

for the participant or beneficiary and pay benefits to those who are

located.

The missing participants regulation describes the ``diligent

search'' that must be made for a missing participant before funds are

paid to the PBGC. (The term ``missing participant'' includes

beneficiaries as well as participants, and thus may include alternate

payees under qualified domestic relations orders.) It also sets forth

rules on how to determine the amount to be paid to the PBGC (the

``designated benefit''), how to pay funds and submit information to the

PBGC, and how the PBGC will pay benefits when missing participants (or

their survivors) are found.

There were five statements commenting on the rule.

Diligent Search

A plan administrator must conduct a diligent search before paying a

missing participant's benefit to the PBGC. Commenters suggested that

the PBGC should not require plan administrators to use a commercial

locator service. They suggested that it should be sufficient if the

plan administrator uses the Internal Revenue Service or Social Security

Administration letter-forwarding programs, or simply uses the search

methods required by the prudence requirements of Title I of ERISA. One

commenter suggested that the PBGC should allow searches to be conducted

by persons other than the plan administrator and to start before the

plan begins the termination process.

The PBGC searches for participants in plans that the PBGC trustees.

It is the PBGC's experience that commercial locator services are cost-

effective, timely, and thorough. The IRS and SSA programs simply

forward letters, and a missing participant who receives a letter may or

may not contact the plan. Furthermore, IRS and SSA letter forwarding

times may vary, and the forwarding area may in some cases be limited to

one region of the country.

The diligent search requirement is independent of the prudence

requirement of ERISA. The diligent search requirement is intended to

ensure that plan administrators make every effort to search out a

missing participant before turning the effort over to the government.

The PBGC is changing the regulation to allow a search by someone

other than the plan administrator, as long as the plan administrator

certifies on the missing participant forms that a diligent search was

made, and to allow searches to commence up to six months before the

termination process begins. The final regulation also makes clear that

missing participants cannot be charged, nor their benefits reduced, to

pay search costs.

Payments to the PBGC (Designated Benefit)

One commenter questioned the assumptions used for calculating the

designated benefit. The commenter felt that the $300 administrative

load was inappropriate, especially for small benefits, that the

designated benefit should not be based on the ``most valuable''

benefit, and that, in most cases, the plan administrator should be able

to use plan assumptions.

The regulations include an explicit $300 per participant

administrative load that the plan administrator must pay when valuing

the participant's benefit using the missing participant annuity

assumptions. This load is a simplified version of the administrative

load that must be paid under the PBGC's single-employer annuity

valuation regulation. (The ``missing participant lump sum assumptions''

include an implicit load; insurance company annuity rates include

similar loads.) The final regulation provides that the $300 load will

not apply to benefits whose value is $3,500 or less.

The final regulation retains the proposed structure of the

designated benefit determination rules. Use of the most valuable

benefit is consistent with insurance company annuity pricing practices.

Use of the PBGC annuity assumptions is consistent with section

4050(b)(2)(C), which makes the designated benefit equal to the greater

of the lump sum (under plan assumptions) or the value of the annuity

(under PBGC assumptions).

Benefit Payments by the PBGC

The PBGC received no comments on provisions regarding its payment

of benefits, but is making clarifications in those provisions.

Procedural Requirements

One commenter stated that the PBGC's standard termination process

already had sufficient procedural deadlines and that the PBGC should

not add additional deadlines for the missing participants program. The

commenter also felt that the six-year recordkeeping requirement was too

long.

The regulation coordinates the missing participant filing

requirements with the termination requirements. The proposed

regulation's changes from the standard termination deadlines provide

relief from situations where, late in the termination process, the plan

administrator located a missing participant (``late-discovered

participant'') or discovered that a participant was missing

(``recently-missing participant''). The final regulation provides

further relief for these situations by allowing the PBGC in its sole

discretion, where there are unusual circumstances, to grant additional

extensions.

The final regulation leaves the recordkeeping requirement as six

years. This parallels the recordkeeping period for the rest of the

termination program and also the recordkeeping provisions of section

107 of ERISA.

Finally, in response to a commenter's question, the PBGC reminds

plan administrators that ERISA section 4071 prescribes penalties for

failure to provide certain material information timely, including

information under the missing participants regulation.

[[Page 61741]]

Forms and Instructions

One commenter claimed that the PBGC does not need the information

in items 3, 4, and 5 of Attachment B to Schedule MP. This is minimal

and simple information that tells the PBGC what benefit to pay and when

to pay it. The information is essential to the proper functioning of

the missing participants program.

In response to a comment, the PBGC has revised the instructions for

Schedule MP to clarify that unavailable or inapplicable information

need not be submitted. The PBGC has also made other minor modifications

to the missing participant forms and instructions.

The PBGC has implemented the revisions to Forms 501 and 602 and

their instructions that were published with the proposed missing

participants regulation. The termination forms booklets, which will

include Schedule MP (with attachments and instructions), can be

obtained from the PBGC's Standard Termination Compliance Division, 1200

K Street, N.W., Suite 930, Washington, DC 20005-4026, or by calling

202-326-4000 (202-326-4179 for hearing-impaired persons).

Compliance With Rulemaking and Paperwork Guidelines

The PBGC has determined that this action is not a ``significant

regulatory action'' under the criteria set forth in Executive Order

12866.

The PBGC certifies under section 605(b) of the Regulatory

Flexibility Act that this regulation will not have a significant

additional economic impact on a substantial number of small entities,

given existing procedures. Pension plans with fewer than 100

participants have traditionally been treated as small plans. Plan

administrators of terminating plans of all sizes already have a duty to

determine the amounts of all benefits, to attempt to locate all persons

entitled to benefits, and to annuitize or provide cash accounts for

those who cannot be found. The primary effect of this regulation is to

substitute a formal procedure involving the PBGC for the informal

procedures already being followed. The PBGC does not expect the

standardization of these procedures to have a significant effect on

plan administrators' burdens. Accordingly, sections 603 and 604 of the

Regulatory Flexibility Act do not apply.

The collections of information contained in this part, and the

forms and instructions to be used under the missing participants

program, have been approved by the Office of Management and Budget

under OMB control number 1212-0036. An agency may not conduct or

sponsor, and a person is not required to respond to, a collection of

information unless it displays a currently valid OMB control number.

List of Subjects

29 CFR Part 2606

Employee benefit plans, Pension insurance, Pensions, Administrative

practice and procedure.

29 CFR Parts 2616, 2617, and 2629

Employee benefit plans, Pension insurance, Pensions, Reporting and

recordkeeping requirements.

In consideration of the foregoing, 29 CFR chapter XXVI is amended

as follows.

1. Part 2629 is added to subchapter C to read as follows:

PART 2629--MISSING PARTICIPANTS

Sec.

2629.1 Purpose and scope.

2629.2 Definitions.

2629.3 Method of distribution for missing participants.

2629.4 Diligent search.

2629.5 Designated benefit.

2629.6 Payment and required documentation.

2629.7 Benefits of missing participants--in general.

2629.8 Automatic lump sum.

2629.9 Annuity or elective lump sum--living missing participant.

2629.10 Annuity or elective lump sum--beneficiary of deceased

missing participant.

2629.11 Limitations.

2629.12 Special rules.

2629.13 OMB control number.

Appendix A to Part 2629--Examples of designated benefit determinations

for missing participants under Sec. 2629.5.

Appendix B to Part 2629--Examples of benefit payments for missing

participants under Sec. 2629.8 through Sec. 2629.10.

Authority: 29 U.S.C. 1302(b)(3), 1350.

Sec. 2629.1 Purpose and scope.

(a) Purpose. This part prescribes rules for distributing benefits

under a terminating plan for any individual whom the plan administrator

has not located when distributing benefits under Sec. 2617.28(c) of

this chapter.

(b) Scope. This part applies to a plan if the plan's deemed

distribution date (or the date of a payment made in accordance with

Sec. 2629.12) is in a plan year beginning on or after January 1, 1996.

Sec. 2629.2 Definitions.

For purposes of this part:

(a) Act means the Employee Retirement Income Security Act of 1974,

as amended.

(b) Code means the Internal Revenue Code of 1986, as amended.

(c) Deemed distribution date means the date selected by the plan

administrator of a terminating plan that is on or after the date when

all benefit distributions have been made under the plan except for

distributions to missing participants whose designated benefits are

paid to the PBGC, but not later than the last day of the period in

which distribution may be made (determined without regard to the

provisions of this part) under Sec. 2616.29(a) or 2617.28(a) of this

chapter (whichever applies).

(d) Designated benefit means the amount payable to the PBGC for a

missing participant pursuant to Sec. 2629.5.

(e) Designated benefit interest rate means the rate of interest

applicable to underpayments of guaranteed benefits by the PBGC under

Sec. 2623.11(d) of this chapter.

(f) Guaranteed benefit form means, with respect to a benefit, the

form in which the PBGC would pay a guaranteed benefit to a participant

or beneficiary in the PBGC's program for trusteed plans under parts

2613 and 2621 of this chapter (treating the deemed distribution date as

the date of plan termination for this purpose).

(g) Late-discovered participant means a participant or beneficiary

entitled to a distribution under a terminating plan whom the plan

administrator locates before the plan administrator pays the

individual's designated benefit to the PBGC (or distributes the

individual's benefit by purchasing an irrevocable commitment from an

insurer) and not more than 90 days before the deemed distribution date.

(h) Missing participant means a participant or beneficiary entitled

to a distribution under a terminating plan whom the plan administrator

has not located as of the date when the plan administrator pays the

individual's designated benefit to the PBGC (or distributes the

individual's benefit by purchasing an irrevocable commitment from an

insurer). In the absence of proof of death, individuals not located are

presumed living.

(i) Missing participant annuity assumptions means the interest rate

assumptions and actuarial methods (using the interest rates for annuity

valuation in Appendix B to part 2619 of this chapter) for valuing a

benefit to be paid by the PBGC as an annuity under part 2619 of this

chapter, applied--

(1) As if the deemed distribution date were the date of plan

termination;

[[Page 61742]]

(2) Using unisex mortality rates that are a fixed blend of 50

percent of the male mortality rates and 50 percent of the female

mortality rates from the 1983 Group Annuity Mortality Table as

prescribed in Rev. Rul. 95-6, 1995-1 C.B. 80 (Cumulative Bulletins are

available from the Superintendent of Documents, Government Printing

Office, Washington, DC 20402);

(3) Without using the expected retirement age assumptions in

Subpart D to part 2619 of this chapter;

(4) Without making the adjustment for expenses provided for in

Sec. 2619.49(a)(4) of this chapter; and

(5) By adding $300, as an adjustment (loading) for expenses, for

each missing participant whose designated benefit without such

adjustment would be greater than $3,500.

(j) Missing participant forms and instructions means PBGC Forms 501

and 602, Schedule MP thereto, and related forms, and their

instructions.

(k) Missing participant lump sum assumptions means the interest

rate assumptions and actuarial methods (using the interest rates for

lump sum valuations in Appendix B to part 2619 of this chapter) for

valuing a benefit to be paid by the PBGC as a lump sum under part 2619

of this chapter, applied--

(1) As if the deemed distribution date were the date of plan

termination;

(2) Using mortality assumptions for healthy lives only (from Table

I of Appendix A to part 2619 of this chapter, substituting x+1 for x);

and

(3) Without using the expected retirement age assumptions in

Subpart D to part 2619 of this chapter.

(l) Pay status means, with respect to a benefit under a plan, that

the plan administrator has made or (except for administrative delay or

a waiting period) would have made one or more benefit payments.

(m) Post-distribution certification means the post-distribution

certification required by Sec. 2616.29(b) or 2617.28(h) of this

chapter.

(n) Plan administrator means the administrator as defined in

section 4001(a)(1) of the Act.

(o) Recently-missing participant means a participant or beneficiary

whom the plan administrator discovers to be a missing participant on or

after the 90th day before the deemed distribution date.

(p) Unloaded designated benefit means the designated benefit

reduced by $300; except that the reduction shall not apply in the case

of a designated benefit determined using the missing participant

annuity assumptions without adding the $300 load described in paragraph

(i)(5) of this section.

Sec. 2629.3 Method of distribution for missing participants.

The plan administrator of a terminating plan shall distribute

benefits for each missing participant by--

(a) purchasing from an insurer an irrevocable commitment that

satisfies the requirements of Sec. 2617.28(c) or Sec. 2616.29(a)(1) of

this chapter (whichever is applicable); or

(b) paying the PBGC a designated benefit in accordance with

Secs. 2629.4 through 2629.6 (subject to the special rules in

Sec. 2629.12).

Sec. 2629.4 Diligent search.

(a) Search required. A diligent search shall be made for each

missing participant whose designated benefit (or voluntary employee

contributions under Sec. 2629.12(d)(2)) is paid to the PBGC. The search

shall be made before the payment is made.

(b) Diligence. A search is a diligent search only if the search--

(1) Begins not more than 6 months before notices of intent to

terminate are issued and is carried on in such a manner that if the

individual is found, distribution to the individual can reasonably be

expected to be made on or before the deemed distribution date (or, in

the case of a recently-missing participant, on or before the 90th day

after the deemed distribution date);

(2) Includes inquiry of any plan beneficiaries (including alternate

payees) of the missing participant whose names and addresses are known

to the plan administrator; and

(3) Includes use of a commercial locator service to search for the

missing participant (without charge to the missing participant or

reduction of the missing participant's plan benefit).

Sec. 2629.5 Designated benefit.

(a) Amount of designated benefit. The amount of the designated

benefit shall be the amount determined under paragraph (a)(1), (a)(2),

(a)(3), or (a)(4) of this section (whichever is applicable) or, if

less, the maximum amount that could be provided under the plan to the

missing participant in the form of a single sum in accordance with

section 415 of the Code.

(1) Mandatory lump sum. The designated benefit of a missing

participant required under a plan to receive a mandatory lump sum as of

the deemed distribution date shall be the lump sum payment that the

plan administrator would have distributed to the missing participant as

of the deemed distribution date.

(2) De minimis lump sum. The designated benefit of a missing

participant not described in paragraph (a)(1) of this section whose

benefit is not in pay status as of the deemed distribution date and

whose benefit has a de minimis actuarial present value ($3,500 or less)

as of the deemed distribution date under the missing participant lump

sum assumptions shall be such value.

(3) No lump sum. The designated benefit of a missing participant

not described in paragraph (a)(1) or (a)(2) of this section who, as of

the deemed distribution date, cannot elect an immediate lump sum under

the plan shall be the actuarial present value of the missing

participant's benefit as of the deemed distribution date under the

missing participant annuity assumptions.

(4) Elective lump sum. The designated benefit of a missing

participant not described in paragraph (a)(1), (a)(2), or (a)(3) of

this section shall be the greater of the amounts determined under the

methodologies of paragraph (a)(1) or (a)(3) of this section.

(b) Assumptions. When the plan administrator uses the missing

participant annuity assumptions or the missing participant lump sum

assumptions for purposes of determining the designated benefit under

paragraph (a) of this section, the plan administrator shall value the

most valuable benefit, as determined under paragraph (b)(1) of this

section, using the assumptions described in paragraph (b)(2) or (b)(3)

of this section (whichever is applicable).

(1) Most valuable benefit. For a missing participant whose benefit

is in pay status as of the deemed distribution date, the most valuable

benefit is the pay status benefit. For a missing participant whose

benefit is not in pay status as of the deemed distribution date, the

most valuable benefit is the benefit payable at the age on or after the

deemed distribution date (beginning with the participant's earliest

early retirement age and ending with the participant's normal

retirement age) for which the present value as of the deemed

distribution date is the greatest. The present value as of the deemed

distribution date with respect to any age is determined by multiplying:

(i) The monthly (or other periodic) benefit payable under the plan;

by

(ii) The present value (determined as of the deemed distribution

date using the missing participant annuity assumptions) of a $1 monthly

(or other periodic) annuity beginning at the applicable age.

[[Page 61743]]

(2) Participant. A missing participant who is a participant, and

whose benefit is not in pay status as of the deemed distribution date,

is assumed to be married to a spouse the same age, and the form of

benefit that must be valued is the qualified joint and survivor annuity

benefit that would be payable under the plan. If the participant's

benefit is in pay status as of the deemed distribution date, the form

and beneficiary of the participant's benefit are the form of benefit

and beneficiary of the pay status benefit.

(3) Beneficiary. A missing participant who is a beneficiary, and

whose benefit is not in pay status as of the deemed distribution date,

is assumed not to be married, and the form of benefit that must be

valued is the survivor benefit that would be payable under the plan. If

the beneficiary's benefit is in pay status as of the deemed

distribution date, the form and beneficiary of the beneficiary's

benefit are the form of benefit and beneficiary of the pay status

benefit.

(4) Examples. See Appendix A to this Part for examples illustrating

the provisions of this section.

(c) Missed payments. In determining the designated benefit, the

plan administrator shall include the value of any payments that were

due before the deemed distribution date but that were not made.

(d) Payment of designated benefits. Payment of designated benefits

shall be made in accordance with Sec. 2629.6 and shall be deemed made

on the deemed distribution date.

Sec. 2629.6 Payment and required documentation.

(a) Time of payment and filing--(1) General rule. The plan

administrator shall pay designated benefits, and file the information

and certifications (of the plan administrator and the plan's enrolled

actuary) specified in the missing participant forms and instructions,

by the time the post-distribution certification is due (determined in

accordance with Secs. 2616.7(a) and 2617.8(a) of this chapter). Except

as otherwise provided in the missing participant forms and

instructions, the plan administrator shall submit the designated

benefits, information, and certifications with the post-distribution

certification.

(2) Recently-missing participants. In the case of a recently-

missing participant, the plan administrator shall pay the designated

benefit by the time the amended post-distribution certification is due

under paragraph (a)(2)(ii) of this section. Except as otherwise

provided in the missing participant forms and instructions--

(i) Payment. The plan administrator shall submit the designated

benefit with the amended post-distribution certification described in

paragraph (a)(2)(ii) of this section; and

(ii) Filing. If the diligent search is not complete when the plan

administrator submits the filing described in paragraph (a)(1) of this

section, the plan administrator shall so indicate in that filing and

submit an amended filing (including an amended post-distribution

certification) within 120 days after the deemed distribution date

(subject to extension under Sec. 2629.12(h)) in accordance with the

missing participant forms and instructions.

(3) Late-discovered participants. When it is impracticable for the

plan administrator to include complete and accurate final information

on a late-discovered participant in a timely post-distribution

certification, the plan administrator shall submit an amended post-

distribution certification within 120 days after the deemed

distribution date (subject to extension under Sec. 2629.12(h)) in

accordance with the missing participant forms and instructions.

(b) Interest on late payments. If the plan administrator does not

pay a designated benefit by the time specified in paragraph (a) of this

section, the plan administrator shall pay interest as assessed by the

PBGC for the period beginning on the deemed distribution date and

ending on the date when the payment is received by the PBGC. Interest

will be assessed at the rate provided for late premium payments in

Sec. 2610.7 of this chapter. Interest assessed under this paragraph

shall be deemed paid in full if payment of the amount assessed is

received by the PBGC within 30 days after the date of a PBGC bill for

such amount.

(c) Supplemental information. Within 30 days after the date of a

written request from the PBGC, a plan administrator required to provide

the information and certifications described in paragraph (a) of this

section shall file supplemental information, as requested, for the

purpose of verifying designated benefits, determining benefits to be

paid by the PBGC under this part, and substantiating diligent searches.

(1) Information mailed. Supplemental information filed under this

paragraph (c) is considered filed on the date of the United States

postmark stamped on the cover in which the information is mailed, if--

(i) The postmark was made by the United States Postal Service; and

(ii) The information was mailed postage prepaid, properly addressed

to the PBGC.

(2) Information delivered. When the plan administrator sends or

transmits the information to the PBGC by means other than the United

States Postal Service, the information is considered filed on the date

it is received by the PBGC. Information received on a weekend or

Federal holiday or after 5:00 p.m. on a weekday is considered filed on

the next regular business day.

Sec. 2629.7 Benefits of missing participants--in general.

(a) If annuity purchased. If a plan administrator distributes a

missing participant's benefit by purchasing an irrevocable commitment

from an insurer, and the missing participant (or his or her beneficiary

or estate) later contacts the PBGC, the PBGC will inform the person of

the identity of the insurer and the relevant policy number.

(b) If designated benefit paid. If the PBGC locates or is contacted

by a missing participant (or his or her beneficiary or estate) for whom

a plan administrator paid a designated benefit to the PBGC, the PBGC

will pay benefits in accordance with Secs. 2629.8 through 2629.10

(subject to the limitations and special rules in Secs. 2629.11 and

2629.12).

(c) Examples. See Appendix B to this part for examples illustrating

the provisions of Secs. 2629.8 through 2629.10.

Sec. 2629.8 Automatic lump sum.

This section applies to a missing participant whose designated

benefit was determined under Sec. 2629.5(a)(1) (mandatory lump sum) or

Sec. 2629.5(a)(2) (de minimis lump sum).

(a) General rule--(1) Benefit paid. The PBGC will pay a single sum

benefit equal to the designated benefit plus interest at the designated

benefit interest rate from the deemed distribution date to the date on

which the PBGC pays the benefit.

(2) Payee. Payment shall be made--

(i) To the missing participant, if located;

(ii) If the missing participant died before the deemed distribution

date, and if the plan so provides, to the missing participant's

beneficiary or estate; or

(iii) If the missing participant dies on or after the deemed

distribution date, to the missing participant's estate.

(b) De minimis annuity alternative. If the guaranteed benefit form

for a missing participant whose designated benefit was determined under

Sec. 2629.5(a)(2) (de minimis lump sum) (or the guaranteed benefit form

for a beneficiary of such a missing participant) would provide for the

[[Page 61744]]

election of an annuity, the missing participant (or the beneficiary)

may elect to receive an annuity. If such an election is made--

(1) The PBGC will pay the benefit in the elected guaranteed benefit

form, beginning on the annuity starting date elected by the missing

participant (or the beneficiary), which shall not be before the later

of the date of the election or the earliest date on which the missing

participant (or the beneficiary) could have begun receiving benefits

under the plan; and

(2) The benefit paid will be actuarially equivalent to the

designated benefit, i.e., each monthly (or other periodic) benefit

payment will equal the designated benefit divided by the present value

(determined as of the deemed distribution date under the missing

participant lump sum assumptions) of a $1 monthly (or other periodic)

annuity beginning on the annuity starting date.

Sec. 2629.9 Annuity or elective lump sum--living missing participant.

This section applies to a missing participant whose designated

benefit was determined under Sec. 2629.5(a)(3) (no lump sum) or

Sec. 2629.5(a)(4) (elective lump sum) and who is living on the date as

of which the PBGC begins paying benefits.

(a) Missing participant whose benefit was not in pay status as of

the deemed distribution date. The PBGC will pay the benefit of a

missing participant whose benefit was not in pay status as of the

deemed distribution date as follows.

(1) Time and form of benefit. The PBGC will pay the missing

participant's benefit in the guaranteed benefit form, beginning on the

annuity starting date elected by the missing participant (which shall

not be before the later of the date of the election or the earliest

date on which the missing participant could have begun receiving

benefits under the plan).

(2) Amount of benefit. The PBGC will pay a benefit that is

actuarially equivalent to the unloaded designated benefit, i.e., each

monthly (or other periodic) benefit payment will equal the unloaded

designated benefit divided by the present value (determined as of the

deemed distribution date under the missing participant annuity

assumptions) of a $1 monthly (or other periodic) annuity beginning on

the annuity starting date.

(b) Missing participant whose benefit was in pay status as of the

deemed distribution date. The PBGC will pay the benefit of a missing

participant whose benefit was in pay status as of the deemed

distribution date as follows:

(1) Time and form of benefit. The PBGC will pay the benefit in the

form that was in pay status, beginning when the missing participant is

located.

(2) Amount of benefit. The PBGC will pay the monthly (or other

periodic) amount of the pay status benefit, plus a lump sum equal to

the payments the missing participant would have received under the

plan, plus interest on the missed payments (at the plan rate up to the

deemed distribution date and thereafter at the designated benefit

interest rate) to the date as of which the PBGC pays the lump sum.

(c) Payment of lump sum. If a missing participant whose designated

benefit was determined under Sec. 2629.5(a)(4) (elective lump sum) so

elects, the PBGC will pay his or her benefit in the form of a single

sum. This election is not effective unless the missing participant's

spouse consents (if such consent would be required under section 205 of

the Act). The single sum equals the designated benefit plus interest

(at the designated benefit interest rate) from the deemed distribution

date to the date as of which the PBGC pays the benefit.

Sec. 2629.10 Annuity or elective lump sum--beneficiary of deceased

missing participant.

This section applies to a beneficiary of a deceased missing

participant whose designated benefit was determined under

Sec. 2629.5(a)(3) (no lump sum) or Sec. 2629.5(a)(4) (elective lump

sum) and whose benefit is not payable under Sec. 2629.9.

(a) If deceased missing participant's benefit was not in pay status

as of the deemed distribution date. The PBGC will pay a benefit with

respect to a deceased missing participant whose benefit was not in pay

status as of the deemed distribution date as follows:

(1) General rule--(i) Beneficiary. The PBGC will pay a benefit to

the surviving spouse of a missing participant who was a participant

(unless the surviving spouse has properly waived a benefit in

accordance with section 205 of the Act).

(ii) Form and amount of benefit. The PBGC will pay the survivor

benefit in the form of a single life annuity. Each monthly (or other

periodic) benefit payment will equal 50% of the quotient that results

when the unloaded designated benefit is divided by the present value

(determined as of the deemed distribution date under the missing

participant annuity assumptions, and assuming that the missing

participant survived to the deemed distribution date) of a $1 monthly

(or other periodic) joint and 50% survivor annuity in the form

described in Sec. 2619.49(f)(1) of this chapter beginning on the

annuity starting date.

(iii) Time of benefit. The PBGC will pay the survivor benefit

beginning at the time elected by the surviving spouse (which shall not

be before the later of the date of the election or the earliest date on

which the surviving spouse could have begun receiving benefits under

the plan).

(2) If missing participant died before deemed distribution date.

Notwithstanding the provisions of paragraph (a)(1) of this section, if

a beneficiary of a missing participant who died before the deemed

distribution date establishes to the PBGC's satisfaction that he or she

is the proper beneficiary or would have received benefits under the

plan in a form, at a time, or in an amount different from the benefit

paid under paragraph (a)(1)(ii) or (a)(1)(iii) of this section, the

PBGC will make payments in accordance with the facts so established,

but only in the guaranteed benefit form.

(3) Elective lump sum. Notwithstanding the provisions of paragraphs

(a)(1) and (a)(2) of this section, if the beneficiary of a missing

participant whose designated benefit was determined under

Sec. 2629.5(a)(4) (elective lump sum) so elects, the PBGC will pay his

or her benefit in the form of a single sum. The single sum will be

equal to the actuarial present value (determined as of the deemed

distribution date under the missing participant annuity assumptions) of

the death benefit payable on the annuity starting date, plus interest

(at the designated benefit interest rate) from the deemed distribution

date to the date as of which the PBGC pays the benefit.

(b) If deceased missing participant's benefit was in pay status as

of the deemed distribution date. The PBGC will pay a benefit with

respect to a deceased missing participant whose benefit was in pay

status as of the deemed distribution date as follows.

(1) Beneficiary. The PBGC will pay a benefit to the beneficiary (if

any) of the benefit that was in pay status as of the deemed

distribution date.

(2) Form and amount of benefit. The PBGC will pay a monthly (or

other periodic) amount equal to the monthly (or other periodic) amount,

if any, that the beneficiary would have received under the form of

payment in effect, plus a lump sum payment equal to the payments the

beneficiary would have received under the plan subsequent to the

missing participant's death and prior to the date as of which the

benefit is paid under paragraph (b)(4) of this section, plus interest

on the missed

[[Page 61745]]

payments (at the plan rate up to the deemed distribution date and

thereafter at the designated benefit interest rate) to the date as of

which the benefit is paid under paragraph (b)(4) of this section.

(3) Lump sum payment to estate. The PBGC will make a lump sum

payment to the missing participant's estate equal to the payments that

the missing participant would have received under the plan for the

period prior to the missing participant's death, plus interest on the

missed payments (at the plan rate up to the deemed distribution date

and thereafter at the designated benefit interest rate) to the date

when the lump sum is paid. Notwithstanding the preceding sentence, if a

beneficiary of a missing participant other than the estate establishes

to the PBGC's satisfaction that the beneficiary is entitled to the lump

sum payment, the PBGC will pay the lump sum to such beneficiary.

(4) Time of benefit. The PBGC will pay the survivor benefit

beginning when the beneficiary is located.

(5) Spouse deceased. If the PBGC locates the estate of the deceased

missing participant's spouse under circumstances where a benefit would

have been paid under this paragraph (b) if the spouse had been located

while alive, the PBGC shall pay to the spouse's estate a lump sum

payment computed in the same manner as provided for in paragraph (b)(2)

of this section based on the period from the missing participant's

death to the death of the spouse.

Sec. 2629.11 Limitations.

(a) Exclusive benefit. The benefits provided for under this part

shall be the only benefits payable by the PBGC to missing participants

or to beneficiaries based on the benefits of deceased missing

participants.

(b) Limitation on benefit value. The total actuarial present value

of all benefits paid with respect to a missing participant under

Secs. 2629.8 through 2629.10, determined as of the deemed distribution

date, shall not exceed the missing participant's designated benefit.

(c) Guaranteed benefit. If a missing participant or his or her

beneficiary establishes to the PBGC's satisfaction that the benefit

under Secs. 2629.8 through 2629.10 (based on the designated benefit

actually paid to the PBGC) is less than the minimum benefit in this

paragraph (c), the PBGC shall instead pay the minimum benefit. The

minimum benefit shall be the lesser of:

(1) The benefit as determined under the PBGC's rules for paying

guaranteed benefits in trusteed plans under parts 2613 and 2621 of this

chapter (treating the deemed distribution date as the date of plan

termination for this purpose); or

(2) The benefit based on the designated benefit that should have

been paid under Sec. 2629.5.

(d) Limitation on annuity starting date. A missing participant (or

his or her survivor) may not elect an annuity starting date after the

later of--

(1) The required beginning date under section 401(a)(9) of the

Code; or

(2) The date when the missing participant (or the survivor) is

notified of his or her right to a benefit.

Sec. 2629.12 Special rules.

(a) Late-discovered participants. The plan administrator of a plan

that terminates with one or more late-discovered participants shall

(after issuing notices to each such participant in accordance with

Secs. 2616.22 and 2616.27 or 2617.22 and 2617.23 of this chapter

(whichever apply)), distribute each such late-discovered participant's

benefit within the period (determined without regard to the provisions

of this part) described in Sec. 2616.29(a) or 2617.28(a) of this

chapter (whichever applies) if practicable or (if not) as soon

thereafter as practicable, but not more than 90 days after the deemed

distribution date (subject to extension under Sec. 2629.12(h)).

(b) Missing participants located quickly. Notwithstanding the

provisions of Secs. 2629.8 through 2629.10, if the PBGC or the plan

administrator locates a missing participant within 30 days after the

PBGC receives the missing participant's designated benefit, the PBGC

may in its discretion return the missing participant's designated

benefit to the plan administrator, and the plan administrator shall

treat the missing participant like a late-discovered participant.

(c) Qualified domestic relations orders. Plan administrators and

the PBGC shall take the provisions of qualified domestic relations

orders (QDROs) under section 206(d)(3) of the Act or section 414(p) of

the Code into account in determining designated benefits and benefit

payments by the PBGC, including treating an alternate payee under an

applicable QDRO as a missing participant or as a beneficiary of a

missing participant, as appropriate, in accordance with the terms of

the QDRO. For purposes of calculating the amount of the designated

benefit of an alternate payee, the plan administrator shall use the

assumptions for a missing participant who is a beneficiary under

Sec. 2629.5(b).

(d) Employee contributions--(1) Mandatory employee contributions.

Notwithstanding the provisions of Sec. 2629.5, if a missing participant

made mandatory contributions (within the meaning of section 4044(a)(2)

of the Act), the missing participant's designated benefit shall not be

less than the sum of the missing participant's mandatory contributions

and interest to the deemed distribution date at the plan's rate or the

rate under section 204(c) of the Act (whichever produces the greater

amount).

(2) Voluntary employee contributions--(i) Applicability. This

paragraph (d)(2) applies to any employee contributions that were not

mandatory (within the meaning of section 4044(a)(2) of the Act) to

which a missing participant is entitled in connection with the

termination of a defined benefit plan.

(ii) Payment to PBGC. A plan administrator, in accordance with the

missing participant forms and instructions, shall pay the employee

contributions described in paragraph (d)(2)(i) of this section

(together with any earnings thereon) to the PBGC, and shall file

Schedule MP with the PBGC, by the time the designated benefit is due

under Sec. 2629.6. Any such amount shall be in addition to the

designated benefit and shall be separately identified.

(iii) Payment by PBGC. In addition to any other amounts paid by the

PBGC under Secs. 2629.8 through 2629.10, the PBGC shall pay any amount

paid to it under paragraph (d)(2)(ii) of this section, with interest at

the designated benefit interest rate from the date of receipt by the

PBGC to the date of payment by the PBGC, in the same manner as

described in Sec. 2629.8 (automatic lump sums), except that if the

missing participant died before the deemed distribution date and there

is no beneficiary, payment shall be made to the missing participant's

estate.

(e) Residual assets. The PBGC shall determine, in a manner

consistent with the purposes of this part and section 4050 of the Act,

how the provisions of this part shall apply to any distribution, to

participants and beneficiaries who cannot be located, of residual

assets remaining after the satisfaction of benefit liabilities in

connection with the termination of a defined benefit plan. Unless the

PBGC otherwise determines, the deadline for payment of residual assets

for a missing participant and for submission to the PBGC of a Schedule

MP (or an amended Schedule MP) is the 30th day after the date on which

all residual assets have been distributed to all participants and

beneficiaries other than missing participants for whom payment of

residual assets is made to the PBGC.

[[Page 61746]]

(f) Sufficient distress terminations. In the case of a plan

undergoing a distress termination (under section 4041(c) of the Act)

that is sufficient for at least all guaranteed benefits and that

distributes its assets in the manner described in section 4041(b)(3) of

the Act, the benefit assumed to be payable by the plan for purposes of

determining the amount of the designated benefit under Sec. 2629.5

shall be limited to the Title IV benefit (as defined in Sec. 2616.2 of

this chapter) plus any benefit to which funds under section 4022(c) of

the Act have been allocated.

(g) Similar rules for later payments. If the PBGC determines that

one or more persons should receive benefits (which may be in addition

to benefits already provided) in order for a plan termination to be

valid (e.g., upon audit of the termination), and one or more of such

individuals cannot be located, the PBGC shall determine, in a manner

consistent with the purposes of this part and section 4050 of the Act,

how the provisions of this part shall apply to such benefits.

(h) Discretionary extensions. The PBGC may in its sole discretion

extend the 120-day amended filing periods in Sec. 2629.6(a) (2)(ii) and

(3) and the 90-day distribution period in paragraph (a) of this

section--

(1) Where a recently-missing participant becomes a late-discovered

participant,

(2) Where the PBGC returns the designated benefit of a missing

participant who is located quickly to the plan administrator under

Sec. 2629.12(b), or

(3) In other unusual circumstances.

(i) Payments beginning after age 70\1/2\. If the PBGC begins paying

an annuity under Sec. 2629.9(a) or 2629.10(a) to a participant or a

participant's spouse after the January 1 following the date when the

participant attained or would have attained age 70\1/2\, the PBGC shall

pay to the participant or the spouse (or their respective estates) or

both, as appropriate, the lump sum equivalent of the past annuity

payments the participant and spouse would have received if the PBGC had

begun making payments on such January 1. The PBGC shall also pay lump

sum equivalents under this paragraph (i) if the PBGC locates the estate

of the participant or spouse after both are deceased. (Nothing in this

paragraph (i) shall increase the total value of the benefits payable

with respect to a missing participant.)

Sec. 2629.13 OMB control number.

The collection of information requirements contained in this part

have been approved by the Office of Management under OMB Control Number

1212-0036.

Appendix A to Part 2629--Examples of Designated Benefit Determinations

for Missing Participants Under Sec. 2629.5

The calculation of the designated benefit under Sec. 2629.5 is

illustrated by the following examples.

Example 1. Plan A provides that any participant whose benefit

has a value at distribution of $1,750 or less will be paid a lump

sum, and that no other lump sums will be paid. P, Q, and R are

missing participants.

(1) As of the deemed distribution date, the value of P's benefit

is $1,700 under plan A's assumptions. Under Sec. 2629.5(a)(1), the

plan administrator pays the PBGC $1,700 as P's designated benefit.

(2) As of the deemed distribution date, the value of Q's benefit

is $3,700 under plan A's assumptions and $3,200 under the missing

participant lump sum assumptions. Under Sec. 2629.5(a)(2), the plan

administrator pays the PBGC $3,200 as Q's designated benefit.

(3) As of the deemed distribution date, the value of R's benefit

is $3,400 under plan A's assumptions, $3,600 under the missing

participant lump sum assumptions, and $3,450 under the missing

participant annuity assumptions. Under Sec. 2629.5(a)(3), the plan

administrator pays the PBGC $3,450 as R's designated benefit.

Example 2. Plan B provides for a normal retirement age of 65 and

permits early commencement of benefits at any age between 60 and 65,

with benefits reduced by 5 percent for each year before age 65 that

the benefit begins. The qualified joint and 50 percent survivor

annuity payable under the terms of the plan requires in all cases a

16 percent reduction in the benefit otherwise payable. The plan does

not provide for elective lump sums.

(1) M is a missing participant who separated from service under

plan B with a deferred vested benefit. M is age 50 at the deemed

distribution date, and has a normal retirement benefit of $1,000 per

month payable at age 65 in the form of a single life annuity. M's

benefit as of the deemed distribution date has a value greater than

$3,500 using either plan assumptions or the missing participant lump

sum assumptions. Accordingly, M's designated benefit is to be

determined under Sec. 2629.5(a)(3).

(2) For purposes of determining M's designated benefit, M is

assumed to be married to a spouse who is also age 50 on the deemed

distribution date. M's monthly benefit in the form of the qualified

joint and survivor annuity under the plan varies from $840 at age 65

(the normal retirement age) ($1,000 x (1-.16)) to $630 at age 60

(the earliest retirement age) ($1,000 x (1-5 x (.05)) x (1-.16)).

(3) Under Sec. 2629.5(a)(3), M's benefit is to be valued using

the missing participant annuity assumptions. The select and ultimate

interest rates on Plan B's deemed distribution date are 7.50 percent

for the first 20 years and 5.75 percent thereafter. Using these

rates and the blended mortality table described in the definition of

``missing participant annuity assumptions'' in Sec. 2629.2(i)(2),

the plan administrator determines that the benefit commencing at age

60 is the most valuable benefit (i.e., the benefit at age 60 is more

valuable than the benefit at ages 61, 62, 63, 64 or 65). The present

value as of the deemed distribution date of each dollar of annual

benefit (payable monthly as a joint and 50 percent survivor annuity)

is $5.4307 if the benefit begins at age 60. (In accordance with

Sec. 2619.49(d)(5), the mortality of the spouse during the deferral

period is ignored.) Thus, without adjustment (loading) for expenses,

the value of the benefit beginning at age 60 is $41,056

(12 x $630 x 5.4307). The designated benefit is equal to this value

plus an expense adjustment of $300, or a total of $41,356.

Appendix B to Part 2629--Examples of Benefit Payments for Missing

Participants Under Secs. 2629.8 Through 2629.10

The provisions of Secs. 2629.8 through 2629.10 are illustrated

by the following examples.

Example 1. Participant M from Plan B (see Example 2 in Appendix

A of this part) is located. M's spouse is ten years younger than M.

M elects to receive benefits in the form of a joint and 50 percent

survivor annuity commencing at age 62.

(1) M's designated benefit was $41,356. The unloaded designated

benefit was $41,056. As of Plan B's deemed distribution date (and

using the missing participant annuity assumptions), the present

value per dollar of monthly benefit (payable monthly as a joint and

50 percent survivor annuity commencing at age 62 and reflecting the

actual age of M's spouse) is $4.7405. Thus, the monthly benefit to M

at age 62 is $722 ($41,056/(4.7405 x 12)). M's spouse will receive

$361 (50 percent of $722) per month for life after the death of M.

(2) If M had instead been found to have died on or after the

deemed distribution date, and M's spouse wanted benefits to commence

when M would have attained age 62, the same calculation would be

performed to arrive at a monthly benefit of $361 to M's spouse.

Example 2. Participant P is a missing participant from Plan C, a

plan that allows elective lump sums upon plan termination. Plan C's

administrator pays a designated benefit of $10,000 to the PBGC on

behalf of P, who was age 30 on the deemed distribution date.

(1) P's spouse, S, is located and has a death certificate

showing that P died on or after the deemed distribution date with S

as spouse. S is the same age as P, and would like survivor benefits

to commence immediately, at age 55 (as permitted by the plan). S's

benefit is the survivor's share of the joint and 50 percent survivor

annuity which is actuarially equivalent, as of the deemed

distribution date, to $9,700 (the unloaded designated benefit).

(2) The select and ultimate interest rates on Plan C's deemed

distribution date were 7.50 percent for the first 20 years and 5.75

percent thereafter. Using these rates and the blended mortality

table described in Sec. 2629.2(i)(2), the present value as of the

deemed distribution date of each dollar of annual benefit (payable

monthly as a joint and 50 percent survivor annuity) is $2.4048 if

the benefit begins when

[[Page 61747]]

S and P would have been age 55. Thus, the monthly benefit to S

commencing at age 55 is $168 (50 percent of $9,700/(2.4048 x 12)).

Since P could have elected a lump sum upon plan termination, S may

elect a lump sum. S's lump sum is the present value as of the deemed

distribution date (using the missing participant annuity

assumptions) of the monthly benefit of $168, accumulated with

interest at the designated benefit interest rate to the date paid.

PART 2606--RULES FOR ADMINISTRATIVE REVIEW OF AGENCY DECISIONS

2. The authority citation for part 2606 continues to read as

follows:

Authority: 29 U.S.C. 1302(b)(3).

3. In Sec. 2606.1, paragraph (b)(8) is amended by removing the word

``and''; paragraph (b)(9) is amended by removing the period at the end

of the paragraph and adding in its place ``; and''; and a new paragraph

(b)(10) is added to read as follows:

Sec. 2606.1 Purpose and scope.

* * * * *

(b) Scope. * * *

* * * * *

(10) Determinations--

(i) That the amount of a participant's or beneficiary's benefit

under section 4050(a)(3) of the Act has been correctly computed based

on the designated benefit paid to the PBGC under section 4050(b)(2) of

the Act, or

(ii) That the designated benefit is correct, but only to the extent

that the benefit to be paid does not exceed the participant's or

beneficiary's guaranteed benefit.

* * * * *

Sec. 2606.51 [Amended]

4. Section 2606.51 is amended by removing the words

``Sec. 2606.1(b) (5) through (9)'' and adding in their place the words

``Sec. 2606.1(b) (5) through (10)''.

PART 2616--DISTRESS TERMINATIONS OF SINGLE-EMPLOYER PLANS

PART 2617--STANDARD TERMINATIONS OF SINGLE-EMPLOYER PLANS

5. The authority citations for parts 2616 and 2617 are revised to

read as follows:

Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350.

Secs. 2616.2, 2617.2 [Amended]

6. In Secs. 2616.2 and 2617.2, the definition of ``date of

distribution'' is amended by removing the period at the end of

paragraph (2); adding in its place a semicolon; and adding after the

semicolon the words ``except that date of distribution means the deemed

distribution date in the case of a designated benefit paid to the PBGC,

or a benefit provided after the deemed distribution date to a late-

discovered participant, in accordance with part 2629 of this chapter

(dealing with missing participants).''

Sec. 2617.3 [Amended]

7. In Sec. 2617.3, paragraph (b)(5) is amended by removing the

words ``and (f), in satisfaction'' and adding in their place the words

``and (f) (or, where applicable, within the time prescribed in part

2629 of this chapter), in satisfaction''.

Sec. 2616.6 [Amended]

Sec. 2617.6 [Amended]

8. In Secs. 2616.6 and 2617.6, paragraph (a) is amended by removing

the words ``this section, when a plan'' and adding in their place the

words ``this section (or, where applicable, in part 2629 of this

chapter), when a plan''.

Secs. 2616.7, 2617.8 [Amended]

9. In Secs. 2616.7 and 2617.8, paragraph (b) is amended by removing

the words ``Any document'' and adding in their place the words ``Except

as may otherwise be provided in applicable forms and instructions, any

document''; and by removing the words ``Case Operations and Compliance

Department'' and adding in their place the words ``Standard Termination

Compliance Division, Insurance Operations Department''.

Sec. 2617.25 [Amended]

10. In Sec. 2617.25, paragraph (b)(2)(i) is amended by removing the

words ``Case Operations and Compliance Department'' and adding in their

place the words ``Standard Termination Compliance Division, Insurance

Operations Department''.

Sec. 2616.29 [Amended]

11. Paragraph (a)(1) of Sec. 2616.29 is amended by adding before

the period at the end of the first sentence the words ``or, where

applicable, within the time prescribed in part 2629 of this chapter''.

Sec. 2617.28 [Amended]

12. Paragraph (a)(1) of Sec. 2617.28 is amended by adding

parentheses around the words ``or, if applicable, the date on which the

PBGC revokes the notice of noncompliance'' and by adding before the

period at the end of the paragraph the words ``or, where applicable,

within the time prescribed in part 2629 of this chapter''.

Secs. 2616.29, 2617.28 [Amended]

13. Paragraph (b) of Sec. 2616.29 and paragraph (h) of Sec. 2617.28

are amended by adding at the end of Sec. 2616.29(b) and Sec. 2617.28(h)

the words ``The plan administrator shall be considered to have

satisfied this requirement if, in accordance with Sec. 2629.6(a) of

this chapter, the plan administrator timely files an amended post-

distribution certification that otherwise satisfies all applicable

requirements.''

14. In Sec. 2617.28, paragraph (c) is amended by adding at the end

a new sentence to read as follows:

Sec. 2617.28 Closeout of plan.

* * * * *

(c) Method of distribution. * * * The plan administrator shall

comply with part 2629 of this chapter (dealing with missing

participants), if applicable.

* * * * *

Issued in Washington, D.C., this 22nd day of November, 1995.

Robert B. Reich,

Chairman, Board of Directors, Pension Benefit Guaranty Corporation.

Issued on the date set forth above pursuant to a resolution of the

Board of Directors authorizing its Chairman to issue this final rule.

James J. Keightley,

Secretary, Board of Directors, Pension Benefit Guaranty Corporation.

[FR Doc. 95-29120 Filed 11-30-95; 8:45 am]

BILLING CODE 7708-01-P