Allocation of Assets in Single-Employer Plans; Interest Rate for Valuing Benefits

PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4044

Allocation of Assets in Single-Employer Plans; Interest Rate for

Valuing Benefits

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: The Pension Benefit Guaranty Corporation's regulation on

Allocation of Assets in Single-Employer Plans prescribes interest

assumptions for valuing benefits under terminating single-employer

plans. This final rule amends the regulation to adopt interest

assumptions for plans with valuation dates in November 1996.

EFFECTIVE DATE: November 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: The PBGC's regulation on Allocation of

Assets in Single-Employer Plans (29 CFR part 4044) prescribes actuarial

assumptions for valuing plan benefits of terminating single-employer

plans covered by title IV of the Employee Retirement Income Security

Act of 1974.

Among the actuarial assumptions prescribed in part 4044 are

interest rates and factors. These interest rates and factors are

intended to reflect current conditions in the financial and annuity

markets.

Two sets of interest rates and factors are prescribed, one set for

the valuation of benefits to be paid as annuities and one set for the

valuation of benefits to be paid as lump sums. This amendment adds to

appendix B to part 4044 the annuity and lump sum interest rates and

factors for valuing benefits in plans with valuation dates during

November 1996.

For annuity benefits, the interest rates will be 6.20 percent for

the first 20 years following the valuation date and 4.75 percent

thereafter. For benefits to be paid as lump sums, the interest

assumptions to be used by the PBGC will be 5.00 percent for the period

during which benefits are in pay status, 4.25 percent during the seven-

year period directly preceding the benefit's placement in pay status,

and 4.00 percent during any other years preceding the benefit's

placement in pay status. The annuity interest assumptions represent a

decrease (from those in effect for October 1996) of .10 percent for the

first 20 years following the valuation date and are otherwise

unchanged. The lump sum interest assumptions represent a decrease (from

those in effect for October 1996) of .25 percent for the period during

which benefits are in pay status and for the seven years directly

preceding that period; they are otherwise unchanged.

The 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 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 plans with valuation dates during November 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 in 29 CFR Part 4044

Pension insurance, Pensions.

In consideration of the foregoing, 29 CFR part 4044 is hereby

amended as follows:

PART 4044--[AMENDED]

1. The authority citation for part 4044 continues to read as

follows:

Authority: 29 U.S.C. 1301(a), 1302(b)(3), 1341, 1344, 1362.

2. In appendix B, a new entry is added to Table I, and Rate Set 37

is added to Table II, as set forth below. The introductory text of each

table is republished for the convenience of the reader and remains

unchanged.

Appendix B to Part 4044--Interest Rates Used To Value Annuities and

Lump Sums

Table I.--Annuity Valuations

[This table sets forth, for each indicated calendar month, 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.]

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The values of it are:

For valuation dates occurring in -----------------------------------------------------------------------------

the month-- it for t= it for t= it for t=

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* * * * * * *

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

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Table II.--Lump Sum Valuations

[In using this table: (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 (where y is an integer and

0n1), interest rate i1 shall apply from the

valuation date for a period of y years, and thereafter the immediate

annuity rate shall apply; (3) For benefits for which the deferral

period is y years (where y is an integer and

n1n1+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, and

thereafter the immediate annuity rate shall apply; (4) For benefits

for which the deferral period is y years (where 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, and

thereafter the immediate annuity rate shall apply.]

[[Page 53624]]

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For plans with a Deferred annuities (percent)

valuation date Immediate ------------------------------------------------------

Rate set ---------------------- annuity

On or rate i1 i2 i3 n1 n2

after Before (percent)

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* * * * * * *

37.............................................................. 11-1-96 12-1-96 5.00 4.25 4.00 4.00 7 8

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Issued in Washington, DC, on this 9th day of October 1996.

Martin Slate,

Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 96-26345 Filed 10-11-96; 8:45 am]

BILLING CODE 7708-01-P