Late Premium Payments and Employer Liability Underpayments and Overpayments; Interest Rate for Determining Variable Rate Premium; Amendments to Interest Rates

PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 2610 and 2622

Late Premium Payments and Employer Liability Underpayments and

Overpayments; Interest Rate for Determining Variable Rate Premium;

Amendments to Interest Rates

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This document notifies the public of the interest rate

applicable to late premium payments and employer liability

underpayments and overpayments for the calendar quarter beginning April

1, 1996. This interest rate is established quarterly by the Internal

Revenue Service. This document also sets forth the interest rates for

valuing unfunded vested benefits for premium purposes for plan years

beginning in February through April 1996. These interest rates are

established pursuant to section 4006 of the Employee Retirement Income

Security Act of 1974, as amended. The effect of these amendments is to

advise plan sponsors and pension practitioners of these new interest

rates.

EFFECTIVE DATE: April 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 20005-4026; telephone

202-326-4024 (202-326-4179 for TTY and TTD). These are not toll-free

numbers.

SUPPLEMENTARY INFORMATION: As part of title IV of the Employee

Retirement Income Security Act of 1974, as amended, the Pension Benefit

Guaranty Corporation collects premiums from ongoing plans to support

the single-employer and multiemployer insurance programs. Under the

single-employer program, the PBGC also collects employer liability from

those persons described in ERISA section 4062(a). Under ERISA section

4007 and 29 CFR Sec. 2610.7, the interest rate to be charged on unpaid

premiums is the rate established under section 6601 of the Internal

Revenue Code (``Code''). Similarly, under 29 CFR 2622.7, the interest

rate to be credited or charged with respect to overpayments or

underpayments of employer liability is the section 6601 rate. These

interest rates are published by the PBGC in appendix A to the premium

regulation and appendix A to the employer liability regulation.

The Internal Revenue Service has announced that for the quarter

beginning April 1, 1996, the interest charged on the underpayment of

taxes will be at a rate of 8 percent. Accordingly, the PBGC is amending

appendix A to 29 CFR part 2610 and appendix A to 29 CFR part 2622 to

set forth this rate for the April 1, 1996, through June 30, 1996,

quarter.

Under ERISA section 4006(a)(3)(E)(iii)(II), in determining a

single-employer plan's unfunded vested benefits for premium computation

purposes, plans must use an interest rate equal to 80% of the annual

yield on 30-year Treasury securities for the month preceding the

beginning of the plan year for which premiums are being paid. Under

Sec. 2610.23(b)(1) of the premium regulation, this value is determined

by reference to 30-year Treasury constant maturities as reported

[[Page 16388]]

in Federal Reserve Statistical Releases G.13 and H.15. The PBGC

publishes these rates in appendix B to the regulation.

The PBGC publishes these monthly interest rates in appendix B on a

quarterly basis to coincide with the publication of the late payment

interest rate set forth in appendix A. (The PBGC publishes the appendix

A rates every quarter, regardless of whether the rate has changed.)

Unlike the appendix A rate, which is determined prospectively, the

appendix B rate is not known until a short time after the first of the

month for which it applies. Accordingly, the PBGC is hereby amending

appendix B to part 2610 to add the vested benefits valuation rates for

plan years beginning in February through April of 1996.

The appendices to 29 CFR parts 2610 and 2622 do not prescribe the

interest rates under these regulations. Under both regulations, the

appendix A rates are the rates determined under section 6601(a) of the

Code. The interest rates in appendix B to part 2610 are prescribed by

ERISA section 4006(a)(3)(E)(iii)(II) and Sec. 2610.23(b)(1) of the

regulation. These appendices merely collect and republish the interest

rates in a convenient place. Thus, the interest rates in the appendices

are informational only. Accordingly, the PBGC finds that notice of and

public comment on these amendments would be unnecessary and contrary to

the public interest. For the above reasons, the PBGC also believes that

good cause exists for making these amendments effective immediately.

The PBGC has determined that none of these actions is a

``significant regulatory action'' under the criteria set forth in

Executive Order 12866.

Because no general notice of proposed rulemaking is required for

these amendments, the Regulatory Flexibility Act of 1980 does not

apply. See 5 U.S.C. 601(2).

List of Subjects

29 CFR Part 2610

Employee benefit plans, Penalties, Pension insurance, Pensions, and

Reporting and recordkeeping requirements.

29 CFR Part 2622

Business and industry, Employee benefit plans, Pension insurance,

Pensions, Reporting and recordkeeping requirements, and Small

businesses.

In consideration of the foregoing, part 2610 and part 2622 of

chapter XXVI of title 29, Code of Federal Regulations, are hereby

amended as follows:

PART 2610--PAYMENT OF PREMIUMS

1. The authority citation for part 2610 continues to read as

follows:

Authority: 29 U.S.C. 1302(b)(3), 1306, 1307.

2. Appendix A to part 2610 is amended by adding a new entry for the

quarter beginning April 1, 1996, to read as follows. The introductory

text is republished for the convenience of the reader and remains

unchanged.

Appendix A to Part 2610--Late Payment Interest Rates

The following table lists the late payment interest rates under

Sec. 2610.7(a) for the specified time periods:

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

Interest

From-- Through-- rate

(percent)

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

* * * * *

April 1, 1996....................... June 30, 1996.......... 8.00

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

3. Appendix B to part 2610 is amended by adding to the table of

interest rates new entries for premium payment years beginning in

February through April of 1996, to read as follows. The introductory

text is republished for the convenience of the reader and remains

unchanged.

Appendix B to Part 2610--Interest Rates for Valuing Vested Benefits

The following table lists the required interest rates to be used in

valuing a plan's vested benefits under Sec. 2610.23(b) and in

calculating a plan's adjusted vested benefits under Sec. 2610.23(c)(1):

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

Required

For premium payment years beginning in-- interest

rate \1\

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

* * * * *

February 1996.............................................. 4.84

March 1996................................................. 4.99

April 1996................................................. 5.28

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\1\ The required interest rate listed above is equal to 80% of the

annual yield for 30-year Treasury constant maturities, as reported in

Federal Reserve Statistical Release G.13 and H.15 for the calendar

month preceding the calendar month in which the premium payment year

begins.

PART 2622--EMPLOYER LIABILITY FOR WITHDRAWALS FROM AND TERMINATIONS

OF SINGLE-EMPLOYER PLANS

4. The authority citation for part 2622 continues to read as

follows:

Authority: 29 U.S.C. 1302(b)(3), 1362-1364, 1367-68.

5. Appendix A to part 2622 is amended by adding a new entry for the

quarter beginning April 1, 1996, to read as follows. The introductory

text is republished for the convenience of the reader and remains

unchanged.

Appendix A to Part 2622--Late Payment and Overpayment Interest Rates

The following table lists the late payment and overpayment interest

rates under Sec. 2622.7 for the specified time periods:

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

Interest

From Through rate

(percent)

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

* * * * *

April 1, 1996....................... June 30, 1996.......... 8.00

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

Issued in Washington, DC, this 3d day of April 1996.

Martin Slate,

Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 96-8808 Filed 4-12-96; 8:45 am]

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