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

PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4044

Allocation of Assets in Single-Employer Plans; Interest

Assumptions for Valuing Benefits

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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[[Page 12099]]

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 April 1997.

EFFECTIVE DATE: April 1, 1997.

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 assumptions. These interest assumptions are intended to

reflect current conditions in the financial and annuity markets.

Two sets of interest assumptions 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 assumptions

for valuing benefits in plans with valuation dates during April 1997.

For annuity benefits, the interest assumptions will be 6.10 percent

for the first 25 years following the valuation date and 5.00 percent

thereafter. The annuity interest assumptions represent a decrease (from

those in effect for March 1997) of 0.10 percent for the first 25 years

following the valuation date and are otherwise unchanged. For benefits

to be paid as lump sums, the interest assumptions to be used by the

PBGC will be 4.75 percent for the period during which a benefit is in

pay status and 4.00 percent during any years preceding the benefit's

placement in pay status. The lump sum interest assumptions represent a

decrease (from those in effect for March 1997) of 0.25 percent for the

period during which a benefit is 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

assumptions promptly so that the assumptions 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 April 1997, the PBGC

finds that good cause exists for making the assumptions 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 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 42

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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* * * * * *

*

April 1997................................................ .0610 1-25 .0500 >25 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 0 n1), 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 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, 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.]

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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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* * * * * *

*

42....................................... 04-1-97 05-1-97 4.75 4.00 4.00 4.00 7 8

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[[Page 12100]]

Issued in Washington, D.C., on this 10th day of March 1997.

John Seal,

Acting Executive Director, Pension Benefit Guaranty Corporation.

[FR Doc. 97-6487 Filed 3-13-97; 8:45 am]

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