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

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 July 1996, and to multiemployer plans with

valuation dates in July 1996. The effect of these amendments is to

advise the public of the adoption of these assumptions.

EFFECTIVE DATE: July 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 July 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 July 1996 and multiemployer plans that

have undergone mass withdrawal and have valuation dates during July

1996.

For annuity benefits, the interest rates will be 6.20% 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 5.00% for the period during which benefits are in

pay status, 4.25% during the seven-year period directly preceding the

benefit's placement in pay status, and 4.0% during any other years

preceding the benefit's placement in pay status. These annuity and lump

sum interest assumptions are unchanged from those in effect for June

1996.

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 July 1996, and in multiemployer plans that have undergone mass

withdrawal and have valuation dates during July 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.

[[Page 30161]]

2. In appendix B, Rate Set 33 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 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

--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * * * *

33.............. 07-1-96 08-1-96 5.00 4.25 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 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 =

----------------------------------------------------------------------------------------------------------------

* * * * * *

*

July 1996.................... .0620 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 33 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 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.

[[Page 30162]]

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

--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * * * *

33.............. 07-1-96 08-1-96 5.00 4.25 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 =

----------------------------------------------------------------------------------------------------------------

* * * * * *

*

July 1996.................... .0620 1-20 .0475 >20 N/A........... N/A

----------------------------------------------------------------------------------------------------------------

Issued in Washington, DC, on this 11th day of June 1996.

Martin Slate,

Executive Director, Pension Benefit Guaranty Corporation

[FR Doc. 96-15153 Filed 6-13-96; 8:45 am]

BILLING CODE 7708-01-P