[Federal Register: July 1, 1996 (Volume 61, Number 127)] [Rules and Regulations] [Page 34001-34051] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr01jy96-17] [[Page 34001]] _______________________________________________________________________ Part II Pension Benefit Guaranty Corporation _______________________________________________________________________ 29 CFR Chapters XXVI and XL Reorganization, Renumbering and Reinvention of Regulations; Final Rule [[Page 34002]] PENSION BENEFIT GUARANTY CORPORATION 29 CFR Chs. XXVI and XL RIN 1212-AA75 Reorganization, Renumbering, and Reinvention of Regulations AGENCY: Pension Benefit Guaranty Corporation. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: In accordance with the President's Regulatory Reinvention Initiative, the Pension Benefit Guaranty Corporation is reorganizing, renumbering, and reinventing its regulations. The amendments will clarify and simplify the PBGC's regulations and make them easier to use. EFFECTIVE DATE: July 1, 1996. FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General Counsel, or Marc L. Jordan, Attorney, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026, 202-326-4024 (202-326-4179 for TTY and TDD). SUPPLEMENTARY INFORMATION: The PBGC is renumbering and reorganizing its regulations to make it easier for practitioners and the public to research and use the rules under Title IV of the Employee Retirement Income Security Act of 1974. Under the new approach, the regulations will be numbered to track the statutory sections they implement. On July 8, 1994 (at 59 FR 35067), the PBGC published a notice in the Federal Register inviting public comment on a proposal to reorganize and renumber its regulations to track Title IV. No comments were received. On March 4, 1995, the President issued his Regulatory Reinvention Initiative, directing Federal agencies to eliminate or revise those regulations that are outdated or otherwise in need of reform. The PBGC is reorganizing, renumbering, and reinventing its regulations. The reinvention is limited to nonsubstantive corrections and clarifications and deletion of material that is unnecessary or that has been substantially superseded (or is no longer applicable). For example, the reinvented regulations omit existing provisions dealing with the allocation of residual assets (part 2618, subpart C) because these provisions were largely superseded by changes in section 4044(d) of ERISA made by the Pension Protection Act of 1987. Similarly, the provision regarding interest rate assumptions for paying lump sums (existing Sec. 2619.26(b)(2)) has been eliminated because of changes in section 417(e)(3) of the Internal Revenue Code and section 205(g)(3) of ERISA made by the Retirement Equity Act of 1984, the Tax Reform Act of 1986, and the Retirement Protection Act of 1994. To clarify the rules on missing participants in terminating plans, nonsubstantive language changes have been made in the missing participants regulation (existing part 2629, new part 4050), related sections in the termination regulations (existing parts 2616 and 2617, new part 4041), and in the definition of ``distribution date'' in new Sec. 4001.2. The new regulation on premium rates (part 4006, which contains portions of existing part 2610) omits the variable-rate premium cap reduction rules (which have expired) and the cap rules themselves (repealed by the Retirement Protection Act of 1994). The rule reflects new provisions in the Retirement Protection Act of 1994 dealing with regulated public utility plans. In some cases, provisions that may have been partially superseded by statutory changes have been retained pending revision--for example, the regulation on allocation of assets in terminating single-employer plans (renumbered part 4044). A note at the beginning of part 4044 and reminders within the part alert readers that some regulatory material republished in part 4044 must be read in the light of these other changes in the law. The PBGC welcomes public comment on this rule to correct any editorial errors--e.g., in cross-references--that may have been overlooked due to the magnitude of the revision project. Under this final rule, the PBGC's regulations will be moved from chapter XXVI to chapter XL of title 29 of the CFR. Sections will be numbered in the 4000's. Part 4000 consists of finding aids--tables correlating provisions of old chapter XXVI and new chapter XL. Part 4001 contains definitions of terms used throughout the PBGC's regulations. A table of contents showing the rest of the new structure, along with the full text of the revised regulations, is set forth below. Rulemaking Requirements and E.O. 12866 The PBGC has determined that this action is not a ``significant regulatory action'' under the criteria set forth in Executive Order 12866. The PBGC has determined that the notice and comment requirements of the Administrative Procedure Act (5 U.S.C. 553(b)) do not apply to this final rule. The PBGC previously notified the public of the primary changes made by this rule and provided an opportunity for public comment. None of the amendments in this rule (including those that clarify the regulations or remove or replace provisions made obsolete by the passage of time or by subsequent statutory or regulatory changes) affects applicable substantive legal requirements. Therefore, the PBGC has, for good cause, found that further notice and public procedure thereon are unnecessary. For the same reasons, the PBGC finds pursuant to section 553(d)(3) of the Administrative Procedure Act (5 U.S.C. 553(d)(3)) that there is good cause to make this rule effective less than 30 days from the date of its publication. The PBGC also certifies that the amendments in this regulation will not have a significant economic impact on a substantial number of small entities. Accordingly, as provided in section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), sections 603 and 604 of the Regulatory Flexibility Act do not apply. None of the amendments in this rule affects applicable substantive legal requirements. Issued in Washington, DC, on the 24th day of June 1996. 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. List of Subjects in 29 CFR Chapters XXVI and XL Parts 2601 and 4002 Authority delegations (Government agencies), Organization and functions (Government agencies). Part 2602 Conflict of interests, Government employees, Penalties, Political activities (Government employees), Production and disclosure of information, Testimony. Parts 2603 and 4901 Freedom of Information. Parts 2604 and 4906 Administrative practice and procedure, Conflict of interests, Penalties. Parts 2606 and 4003 Administrative practice and procedure, Organization and functions [[Page 34003]] (Government agencies), Pension insurance, Pensions. Parts 2607 and 4902 Privacy. Parts 2608 and 4907 Blind, Civil rights, Deaf, Disabled, Discrimination against handicapped, Equal employment opportunity, Federal buildings and facilities, Handicapped, Nondiscrimination, Physically handicapped. Parts 2609 and 4903 Administrative practice and procedure, Claims, Organization and functions (Government agencies). Part 2610 and 4007 Penalties, Pension insurance, Pensions, Reporting and recordkeeping requirements. Parts 2611, 2615, 2616, 2617, 2623, 2642, 2674, 4022, 4041, 4041A, 4065, 4211, and 4245 Pension insurance, Pensions, Reporting and recordkeeping requirements. Parts 2612 and 4068 Business and industry, Pension insurance, Pensions, Small businesses. Parts 2613, 2618, 2619, 2620, 2621, 2640, 2670, 4006, 4022, 4022B, 4044, and 4061 Pension insurance, Pensions. Parts 2622, 2643, 4062, 4063, 4064, and 4204 Business and industry, Pension insurance, Pensions, Reporting and recordkeeping requirements, Small businesses. Parts 2641 and 4221 Business and industry, Pensions, Small businesses. Parts 2644, 2645, 2647, 2649, 2676, 2677, 4203, 4206, 4207, and 4220 Pensions. Parts 2627, 2628, 2629, 2646, 2648, 2672, 2675, 4001, 4010, 4050, 4208, 4219, 4231, 4261, and 4281 Pensions, Reporting and recordkeeping requirements. Part 2673 Pension insurance. Part 4000 Administrative practice and procedure, Authority delegations (Government agencies), Blind, Business and industry, Civil rights, Claims, Conflict of interests, Deaf, Disabled, Discrimination against handicapped, Equal employment opportunity, Federal buildings and facilities, Freedom of Information, Government employees, Handicapped, Nondiscrimination, Organization and functions (Government agencies), Penalties, Pension insurance, Pensions, Physically handicapped, Political activities (Government employees), Privacy, Production and disclosure of information, Reporting and recordkeeping requirements, Small businesses, Testimony. Part 4001 Business and industry, Organization and functions (Government agencies), Pension insurance, Pensions, Small businesses. Part 4903 Conflict of interests, Government employees, Penalties, Political activities (Government employees). Part 4904 Government employees, Penalties, Production and disclosure of information, Testimony. For the reasons set forth above, the PBGC is amending subtitle B of title 29 of the Code of Federal Regulations as follows: CHAPTER XXVI--[REMOVED] 1. Chapter XXVI is removed. 2. Chapter XL is added to read as follows: CHAPTER XL--PENSION BENEFIT GUARANTY CORPORATION SUBCHAPTER A--GENERAL Part 4000--Finding Aids Sec. 4000.1 Distribution table. 4000.2 Derivation table. Authority: 29 U.S.C. 1302(b)(3). Part 4001--Terminology Sec. 4001.1 Purpose and scope. 4001.2 Definitions. 4001.3 Trades or businesses under common control; controlled groups. Authority: 29 U.S.C. 1301(a), 1301(b)(1), 1302(b)(3). Part 4002--Bylaws of the Pension Benefit Guaranty Corporation Sec. 4002.1 Name. 4002.2 Offices. 4002.3 Board of Directors. 4002.4 Chairman. 4002.5 Quorum. 4002.6 Meetings. 4002.7 Place of meetings; use of conference call communications equipment. 4002.8 Alternate voting procedure. 4002.9 Amendments. Authority: 29 U.S.C. 1302(f). Part 4003--Rules for Administrative Review of Agency Decisions Subpart A--General Provisions Sec. 4003.1 Purpose and scope. 4003.2 Definitions. 4003.3 PBGC assistance in obtaining information. 4003.4 Extension of time. 4003.5 Non-timely request for review. 4003.6 Representation. 4003.7 Exhaustion of administrative remedies. 4003.8 Request for confidential treatment. 4003.9 Filing of documents. 4003.10 Computation of time. Subpart B--Initial Determinations 4003.21 Form and contents of initial determinations. 4003.22 Effective date of determinations. Subpart C--Reconsideration of Initial Determinations 4003.31 Who may request reconsideration. 4003.32 When to request reconsideration. 4003.33 Where to submit request for reconsideration. 4003.34 Form and contents of request for reconsideration. 4003.35 Final decision on request for reconsideration. Subpart D--Administrative Appeals 4003.51 Who may appeal or participate in appeals. 4003.52 When to file. 4003.53 Where to file. 4003.54 Contents of appeal. 4003.55 Opportunity to appear and to present witnesses. 4003.56 Consolidation of appeals. 4003.57 Appeals affecting third parties. 4003.58 Powers of the Appeals Board. 4003.59 Decision by the Appeals Board. 4003.60 Referral of appeal to the Executive Director. Authority: 29 U.S.C. 1302(b)(3). SUBCHAPTER B--PREMIUMS Part 4006--Premium Rates Sec. 4006.1 Purpose and scope. 4006.2 Definitions. 4006.3 Premium rate. 4006.4 Determination of unfunded vested benefits. 4006.5 Exemptions and special rules. Authority: 29 U.S.C. 1302(b)(3), 1306, 1307. Part 4007--Payment of Premiums Sec. 4007.1 Purpose and scope. 4007.2 Definitions. 4007.3 Filing requirement and forms. 4007.4 Filing address. 4007.5 Date of filing. 4007.6 Computation of time. 4007.7 Late payment interest charges. 4007.8 Late payment penalty charges. 4007.9 Coverage for guaranteed basic benefits. [[Page 34004]] 4007.10 Recordkeeping requirements; PBGC audits. 4007.11 Due dates. 4007.12 Liability for single-employer premiums. Authority: 29 U.S.C. 1302(b)(3), 1306, 1307. SUBCHAPTER C--CERTAIN REPORTING AND DISCLOSURE REQUIREMENTS Part 4010--Annual Financial and Actuarial Information Reporting Sec. 4010.1 Purpose and scope. 4010.2 Definitions. 4010.3 Filing requirement. 4010.4 Filers. 4010.5 Information year. 4010.6 Information to be filed. 4010.7 Identifying information. 4010.8 Plan actuarial information. 4010.9 Financial information. 4010.10 Due date and filing with the PBGC. 4010.11 Waivers and extensions. 4010.12 Confidentiality of information submitted. 4010.13 Penalties. 4010.14 OMB control number. Authority: 29 U.S.C. 1302(b)(3); 29 U.S.C. 1310. Part 4011--Disclosure to Participants Sec. 4011.1 Purpose and scope. 4011.2 Definitions. 4011.3 Notice requirement. 4011.4 Small plan rules. 4011.5 Exemption for new and newly-covered plans. 4011.6 Mergers, consolidations, and spinoffs. 4011.7 Persons entitled to receive notice. 4011.8 Time of notice. 4011.9 Manner of issuance of notice. 4011.10 Form of notice. 4011.11 OMB control number. Appendix A to part 4011--Model participant notice. Appendix B to part 4011--Table of maximum guaranteed benefits. Authority: 29 U.S.C. 1302(b)(3), 1311. SUBCHAPTER D--COVERAGE AND BENEFITS Part 4022--Benefits Payable in Terminated Single-Employer Plans Subpart A--General Provisions; Guaranteed Benefits Sec. 4022.1 Purpose and scope. 4022.2 Definitions. 4022.3 Guaranteed benefits. 4022.4 Entitlement to a benefit. 4022.5 Determination of nonforfeitable benefits. 4022.6 Annuity payable for total disability. 4022.7 Benefits payable in a single installment. Subpart B--Limitations on Guaranteed Benefits 4022.21 Limitations; in general. 4022.22 Maximum guaranteeable benefit. 4022.23 Computation of maximum guaranteeable benefit. 4022.24 Benefit increases. 4022.25 Five-year phase-in of benefit guarantee for participants other than substantial owners. 4022.26 Phase-in of benefit guarantee for participants who are substantial owners. 4022.27 Effect of tax disqualification. Subpart C--Calculation and Payment of Unfunded Nonguaranteed Benefits [Reserved] Subpart D--Benefit Reductions in Terminating Plans 4022.61 Limitations on benefit payments by plan administrator. 4022.62 Estimated guaranteed benefit. 4022.63 Estimated title IV benefit. Subpart E--PBGC Recoupment and Reimbursement of Benefit Overpayments and Underpayments 4022.81 General rules. 4022.82 Method of recoupment. 4022.83 PBGC reimbursement of benefit underpayments. Appendix to Part 4022--Maximum Guaranteeable Monthly Benefit Authority: 29 U.S.C. 1302(b)(3), 1322, 1322b, 1341(c)(3)(D), 1344. Part 4022B--Aggregate Limits on Guaranteed Benefits Sec. 4022B.1 Aggregate payments limitation. Authority: 29 U.S.C. 1302(b)(3). SUBCHAPTER E--PLAN TERMINATIONS Part 4041--Termination of Single-Employer Plans Subpart A--General Provisions Sec. 4041.1 Purpose and scope. 4041.2 Definitions. 4041.3 Requirements for a standard or a distress termination. 4041.4 Administration of plan during pendency of termination proceedings. 4041.5 Challenges to plan termination under collective bargaining agreement. 4041.6 Annuity requirements. 4041.7 Facilitating plan sufficiency in a standard termination. 4041.8 Disaster relief--distress termination. 4041.9 Filing with the PBGC. 4041.10 Computation of time. 4041.11 Maintenance of plan records. 4041.12 Information collection. Subpart B--Standard Terminations 4041.21 Notice of intent to terminate. 4041.22 Issuance of notices of plan benefits. 4041.23 Form and contents of notices of plan benefits. 4041.24 Standard termination notice. 4041.25 PBGC action upon filing of standard termination notice. 4041.26 Notice of noncompliance. 4041.27 Closeout of plan. Subpart C--Distress Terminations 4041.41 Notice of intent to terminate. 4041.42 PBGC review of notice of intent to terminate. 4041.43 Distress termination notice. 4041.44 PBGC determination of compliance with requirements for distress termination. 4041.45 PBGC determination of plan sufficiency/insufficiency. 4041.46 Notices of benefit distribution. 4041.47 Verification of plan sufficiency prior to closeout. 4041.48 Closeout of plan. Appendix to Part 4041--Agreement for Commitment to Make Plan Sufficient for Benefit Liabilities Authority: 29 U.S.C. 1302(b)(3), 1341, 1344. Part 4041A--Termination of Multiemployer Plans Subpart A--General Provisions Sec. 4041A.1 Purpose and scope. 4041A.2 Definitions. 4041A.3 Submission of documents. Subpart B--Notice of Termination 4041A.11 Requirement of notice. 4041A.12 Contents of notice. Subpart C--Plan Sponsor Duties 4041A.21 General rule. 4041A.22 Payment of benefits. 4041A.23 Imposition and collection of withdrawal liability. 4041A.24 Annual plan valuations and monitoring. 4041A.25 Periodic determinations of plan solvency. 4041A.26 Financial assistance. 4041A.27 PBGC approval to pay benefits not otherwise permitted. Subpart D--Closeout of Sufficient Plans 4041A.41 General rule. 4041A.42 Method of distribution. 4041A.43 Benefit forms. 4041A.44 Cessation of withdrawal liability. Authority: 29 U.S.C. 1302(b)(3), 1341a, 1441. Part 4043--Reportable Events and Certain Other Notification Requirements Subpart A--Reportable Events; In General Sec. 4043.1 Purpose and scope. 4043.2 Definitions. 4043.3 Requirement of notice. 4043.4 Reporting of reportable events on annual report. 4043.5 Obligation of contributing sponsor. 4043.6 Date of filing. 4043.7 Computation of time. 4043.11 Tax disqualification. 4043.12 Title I non-compliance. 4043.13 Amendment decreasing benefits payable. 4043.14 Active participant reduction. 4043.15 Termination or partial termination. 4043.16 Failure to meet minimum funding standards and granting of funding waiver. 4043.17 Inability to pay benefits when due. 4043.18 Distribution to a substantial owner. 4043.19 Plan merger, consolidation or transfer. [[Page 34005]] 4043.20 Alternative compliance with reporting and disclosure requirements of Title I. 4043.21 Bankruptcy, insolvency, or similar settlements. 4043.22 Liquidation or dissolution. 4043.23 Transactions involving a change in contributing sponsor or controlled group. Subpart B--Section 302(f); Notice of Failure to Make Required Contributions 4043.31 PBGC Form 200, notice of failure to make required contributions. Authority: 29 U.S.C. 1302(b)(3), 1343, 1365. Part 4044--Allocation of Assets in Single-Employer Plans Subpart A--Allocation of Assets General Provisions Sec. 4044.1 Purpose and scope of subpart A. 4044.2 Definitions. 4044.3 General rule. 4044.4 Violations. Allocation of Assets to Benefit Categories 4044.10 Manner of allocation. 4044.11 Priority category 1 benefits. 4044.12 Priority category 2 benefits. 4044.13 Priority category 3 benefits. 4044.14 Priority category 4 benefits. 4044.15 Priority category 5 benefits. 4044.16 Priority category 6 benefits. 4044.17 Subclasses. Allocation of Residual Assets 4044.30 [Reserved.] Subpart B--Valuation of Benefits and Assets 4044.41 General valuation rules. Trusteed Plans 4044.51 Benefits to be valued. 4044.52 Valuation of benefits. 4044.53 Mortality assumptions--in general. 4044.54 Mortality assumptions--lump sums. Expected Retirement Age 4044.55 XRA when a participant must retire to receive a benefit. 4044.56 XRA when a participant need not retire to receive a benefit. 4044.57 Special rule for facility closing. Non-Trusteed Plans 4044.71 Valuation of annuity benefits. 4044.72 Form of annuity to be valued. 4044.73 Lump sums and other alternative forms of distribution in lieu of annuities. 4044.74 Withdrawal of employee contributions. 4044.75 Other lump sum benefits. Appendix A to Part 4044--Mortality Rate Tables Appendix B to Part 4044--Interest Rates Used to Value Annuities and Lump Sums Appendix C to Part 4044--Loading Assumptions Appendix D to Part 4044--Tables Used To Determine Expected Retirement Age Authority: 29 U.S.C. 1301(a), 1302(b)(3), 1341, 1344, 1362. Part 4047--Restoration of Terminating and Terminated Plans Sec. 4047.1 Purpose and scope. 4047.2 Definitions. 4047.3 Funding of restored plan. 4047.4 Payment of premiums. 4047.5 Repayment of PBGC payments of guaranteed benefits. Authority: 29 U.S.C. 1302(b)(3), 1347. Part 4050--Missing Participants Sec. 4050.1 Purpose and scope. 4050.2 Definitions. 4050.3 Method of distribution for missing participants. 4050.4 Diligent search. 4050.5 Designated benefit. 4050.6 Payment and required documentation. 4050.7 Benefits of missing participants--in general. 4050.8 Automatic lump sum. 4050.9 Annuity or elective lump sum--living missing participant. 4050.10 Annuity or elective lump sum--beneficiary of deceased missing participant. 4050.11 Limitations. 4050.12 Special rules. 4050.13 OMB control number. SUBCHAPTER F--LIABILITY Part 4061--Amounts Payable by the Pension Benefit Guaranty Corporation Sec. 4061.1 Cross-references. Authority: 29 U.S.C. 1302(b)(3). Part 4062--Liability for Termination of Single-Employer Plans Sec. 4062.1 Purpose and scope. 4062.2 Definitions. 4062.3 Amount and payment of section 4062(b) liability. 4062.4 Determinations of net worth and collective net worth. 4062.5 Net worth record date. 4062.6 Net worth notification and information. 4062.7 Calculating interest on liability and refunds of overpayments. 4062.8 Arrangements for satisfying liability. 4062.9 Notification of and demand for liability. 4062.10 Filing of documents. 4062.11 Computation of time. Part 4063--Withdrawal Liability; Plans Under Multiple Controlled Groups Sec. 4063.1 Cross-references. Authority: 29 U.S.C. 1302(b)(3). Part 4064--Liability on Termination of Single-Employer Plans Under Multiple Controlled Groups Sec. 4064.1 Cross-references. Authority: 29 U.S.C. 1302(b)(3). SUBCHAPTER G--ANNUAL REPORTING REQUIREMENTS Part 4065--Annual Report Sec. 4065.1 Purpose and scope. 4065.2 Definitions. 4065.3 Filing requirement. Authority: 29 U.S.C. 1302, 1365. SUBCHAPTER H--ENFORCEMENT PROVISIONS Part 4067--Recovery of Liability for Plan Terminations Sec. 4067.1 Cross-reference. Authority: 29 U.S.C. 1302, 1367. Part 4068--Lien for Liability Sec. 4068.1 Purpose; cross-references. 4068.2 Definitions. 4068.3 Notification of and demand for liability. 4068.4 Lien. Authority: 29 U.S.C. 1302(b)(3), 1368. SUBCHAPTER I--WITHDRAWAL LIABILITY FOR MULTIEMPLOYER PLANS Part 4203--Extension of Special Withdrawal Liability Rules Sec. 4203.1 Purpose and scope. 4203.2 Plan adoption of special withdrawal rules. 4203.3 Requests for PBGC approval of plan amendments. 4203.4 PBGC action on requests. 4203.5 OMB control number. Authority: 29 U.S.C. 1302(b)(3), 1383(f), 1388(e)(3). Part 4204--Variances for Sale of Assets Subpart A--General Sec. 4204.1 Purpose and scope. 4204.2 Definitions. Subpart B--Variance of the Statutory Requirements 4204.11 Variance of the bond/escrow and sale-contract requirements. 4204.12 De minimis transactions. 4204.13 Net income and net tangible assets tests. Subpart C--Procedures for Individual and Class Variances or Exemptions 4204.21 Requests to PBGC for variances and exemptions. 4204.22 PBGC action on requests. Authority: 29 U.S.C. 1302(b)(3), 1384(c). Part 4206--Adjustment of Liability for a Withdrawal Subsequent to a Partial Withdrawal Sec. 4206.1 Purpose and scope. 4206.2 Definitions. 4206.3 Credit against liability for a subsequent withdrawal. 4206.4 Amount of credit in plans using the presumptive method. 4206.5 Amount of credit in plans using the modified presumptive method. [[Page 34006]] 4206.6 Amount of credit in plans using the rolling-5 method. 4206.7 Amount of credit in plans using the direct attribution method. 4206.8 Reduction of credit for abatement or other reduction of prior partial withdrawal liability. 4206.9 Amount of credit in plans using alternative allocation methods. 4206.10 Special rule for 70-percent decline partial withdrawals. Authority: 29 U.S.C. 1302(b)(3), 1386(b). Part 4207--Reduction or Waiver of Complete Withdrawal Liability Sec. 4207.1 Purpose and scope. 4207.2 Definitions. 4207.3 Abatement. 4207.4 Withdrawal liability payments during pendency of abatement determination. 4207.5 Requirements for abatement. 4207.6 Partial withdrawals after reentry. 4207.7 Liability for subsequent complete withdrawals and related adjustments for allocating unfunded vested benefits. 4207.8 Liability for subsequent partial withdrawals. 4207.9 Special rules. 4207.10 Plan rules for abatement. Authority: 29 U.S.C. 1302(b)(3), 1387. Part 4208--Reduction or Waiver of Partial Withdrawal Liability Sec. 4208.1 Purpose and scope. 4208.2 Definitions. 4208.3 Abatement. 4208.4 Conditions for abatement. 4208.5 Withdrawal liability payments during pendency of abatement determination. 4208.6 Computation of reduced annual partial withdrawal liability payment. 4208.7 Adjustment of withdrawal liability for subsequent withdrawals. 4208.8 Multiple partial withdrawals in one plan year. 4208.9 Plan adoption of additional abatement conditions. Authority: 29 U.S.C. 1302(b)(3), 1388 (c) and (e). Part 4211--Allocating Unfunded Vested Benefits Subpart A--General Sec. 4211.1 Purpose and scope. 4211.2 Definitions. 4211.3 Special rules for construction industry and IRC section 404(c) plans. Subpart B--Changes Not Subject to PBGC Approval 4211.11 Changes not subject to PBGC approval. 4211.12 Modifications to the presumptive, modified presumptive and rolling-5 methods. 4211.13 Modifications to the direct attribution method. Subpart C--Changes Subject to PBGC Approval 4211.21 Changes subject to PBGC approval. 4211.22 Requests for PBGC approval. 4211.23 Approval of alternative method. 4211.24 Special rule for certain alternative methods previously approved. Subpart D--Allocation Methods for Merged Multiemployer Plans 4211.31 Allocation of unfunded vested benefits following the merger of plans. 4211.32 Presumptive method for withdrawals after the initial plan year. 4211.33 Modified presumptive method for withdrawals after the initial plan year. 4211.34 Rolling-5 method for withdrawals after the initial plan year. 4211.35 Direct attribution method for withdrawals after the initial plan year. 4211.36 Modifications to the determination of initial liabilities, the amortization of initial liabilities, and the allocation fraction. 4211.37 Allocating unfunded vested benefits for withdrawals before the end of the initial plan year. Authority: 29 U.S.C. 1302(b)(3), 1391 (c)(1), (c)(2)(D), (c)(5)(A), (c)(5)(B), (c)(5) (D), and (f). Part 4219--Notice, Collection, and Redetermination of Withdrawal Liability Subpart A--General Sec. 4219.1 Purpose and scope. 4219.2 Definitions. Subpart B--Redetermination of Withdrawal Liability Upon Mass Withdrawal 4219.11 Withdrawal liability upon mass withdrawal. 4219.12 Employers liable upon mass withdrawal. 4219.13 Amount of liability for de minimis amounts. 4219.14 Amount of liability for 20-year-limitation amounts. 4219.15 Determination of reallocation liability. 4219.16 Imposition of liability. 4219.17 Filings with PBGC. 4219.18 Withdrawal in a plan year in which substantially all employers withdraw. 4219.19 Information collection. Subpart C--Overdue, Defaulted, and Overpaid Withdrawal Liability Sec. 4219.31 Overdue and defaulted withdrawal liability; overpayment. 4219.32 Interest on overdue, defaulted and overpaid withdrawal liability. 4219.34 Plan rules concerning overdue and defaulted withdrawal liability. Authority: 29 U.S.C. 1302(b)(3), 1389 (c) and (d), 1399 (c)(1)(D) and (c)(6). Part 4220--Procedures for PBGC Approval of Plan Amendments Sec. 4220.1 Purpose and scope. 4220.2 Requests for PBGC approval. 4220.3 PBGC action on requests. Authority: 29 U.S.C. 1302(b)(3), 1400. Part 4221--Arbitration of Disputes in Multiemployer Plans Sec. 4221.1 Purpose and scope. 4221.2 Definitions. 4221.3 Initiation of arbitration. 4221.4 Appointment of the arbitrator. 4221.5 Powers and duties of the arbitrator. 4221.6 Hearing. 4221.7 Reopening of proceedings. 4221.8 Award. 4221.9 Reconsideration of award. 4221.10 Costs. 4221.11 Waiver of rules. 4221.12 Calculation of periods of time. 4221.13 Filing or service of documents. 4221.14 PBGC-approved arbitration procedures. Authority: 29 U.S.C. 1302(b)(3), 1401. SUBCHAPTER J--INSOLVENCY, REORGANIZATION, TERMINATION, AND OTHER RULES APPLICABLE TO MULTIEMPLOYER PLANS Part 4231--Mergers and Transfers Between Multiemployer Plans Sec. 4231.1 Purpose and scope. 4231.2 Definitions. 4231.3 Requirements for mergers and transfers. 4231.4 Preservation of accrued benefits. 4231.5 Valuation requirement. 4231.6 Plan solvency tests. 4231.7 De minimis mergers and transfers. 4231.8 Notice of merger or transfer. 4231.9 Request for compliance determination. 4231.10 Actuarial calculations and assumptions. Authority: 29 U.S.C. 1302(b)(3), 1411. Part 4245--Notice of Insolvency Sec. 4245.1 Purpose and scope. 4245.2 Definitions. 4245.3 Notice of insolvency. 4245.4 Contents of notice of insolvency. 4245.5 Notice of insolvency benefit level. 4245.6 Contents of notice of insolvency benefit level. 4245.7 PBGC address. Authority: 29 U.S.C. 1302(b)(3), 1426(e). Part 4261--Financial Assistance to Multiemployer Plans Sec. 4261.1 Cross-reference. Authority: 29 U.S.C. 1302(b)(3). Part 4281--Duties of Plan Sponsor Following Mass Withdrawal Subpart A--General Sec. 4281.1 Purpose and scope. 4281.2 Definitions. 4281.3 Submission of documents. 4281.4 Collection of information. Subpart B--Valuation of Plan Benefits and Plan Assets 4281.11 Valuation dates. 4281.12 Benefits to be valued. 4281.13 Benefit valuation methods--in general. [[Page 34007]] 4281.14 Mortality assumptions--in general. 4281.15 Mortality assumptions--lump sums under trusteed plans. 4281.16 Benefit valuation methods--plans closing out. 4281.17 Asset valuation methods--in general. 4281.18 Outstanding claims for withdrawal liability. Subpart C--Benefit Reductions 4281.31 Plan amendment. 4281.32 Notices of benefit reductions. 4281.33 Restoration of benefits. Subpart D--Benefit Suspensions 4281.41 Benefit suspensions. 4281.42 Retroactive payments. 4281.43 Notices of insolvency and annual updates. 4281.44 Contents of notices of insolvency and annual updates. 4281.45 Notices of insolvency benefit level. 4281.46 Contents of notices of insolvency benefit level. 4281.47 Application for financial assistance. Appendix A to Part 4281--Interest Rates Used to Value Lump Sums and Annuities Appendix B to Part 4281--Loading Assumptions Authority: 29 U.S.C. 1302(b)(3), 1341a, 1399(c)(1)(D), and 1441. SUBCHAPTER K--INTERNAL AND ADMINISTRATIVE RULES AND PROCEDURES Part 4901--Examination and Copying of Pension Benefit Guaranty Corporation Records Subpart A--General Sec. 4901.1 Purpose and scope. 4901.2 Definitions. 4901.3 Disclosure facilities. 4901.4 Information maintained in public reference room. 4901.5 Disclosure of other information. Subpart B--Procedure for Formal Requests 4901.11 Submittal of requests for access to records. 4901.12 Description of information requested. 4901.13 Receipt by agency of request. 4901.14 Action on request. 4901.15 Appeals from denial of requests. 4901.16 Extensions of time. 4901.17 Exhaustion of administrative remedies. Subpart C--Restrictions on Disclosure 4901.21 Restrictions in general. 4901.22 Partial disclosure. 4901.23 Records of concern to more than one agency. 4901.24 Special rules for trade secrets and confidential commercial or financial information submitted to the PBGC. Subpart D--Fees 4901.31 Charges for services. 4901.32 Fee schedule. 4901.33 Payment of fees. 4901.34 Waiver or reduction of charges. Authority: 5 U.S.C. 552; 29 U.S.C. 1302(b)(3); E.O. 12600, 52 FR 23781. Part 4902--Disclosure and Amendment of Records Under the Privacy Act Sec. 4902.1 Purpose and scope. 4902.2 Definitions. 4902.3 Procedures for determining existence of and requesting access to records. 4902.4 Disclosure of record to an individual. 4902.5 Procedures for requesting amendment of a record. 4902.6 Action on request for amendment of a record. 4902.7 Appeal of a denial of a request for amendment of a record. 4902.8 Fees. 4902.9 Specific exemptions. Authority: 5 U.S.C. 552a; 29 U.S.C. 1302(b)(3). Part 4903--Debt Collection Subpart A--General Sec. 4903.1 Purpose and scope. 4903.2 General. 4903.3 Definitions. Subpart B--Administrative Offset 4903.21 Application of Federal Claims Collection Standards. 4903.22 Administrative offset procedures. 4903.23 PBGC requests for offset to other agencies. 4903.24 Requests for offset from other agencies. Subpart C--Tax Refund Offset 4903.31 Eligibility of debt for tax refund offset. 4903.32 Tax refund offset procedures. 4903.33 Referral of debt for tax refund offset. Subpart D--Salary Offset [Reserved] Authority: 29 U.S.C. 1302(b); 31 U.S.C. 3701, 3711(f), 3720A; 4 CFR part 102; 26 CFR 301.6402-6. Part 4904--Ethical Conduct of Employees Sec. 4904.1 Ethical conduct; standards and requirements. Authority: 29 U.S.C. 1302(b)(3). Part 4905--Appearances in Certain Proceedings Sec. 4905.1 Purpose and scope. 4905.2 Definitions. 4905.3 General. 4905.4 Appearances by PBGC employees. 4905.5 Requests for authenticated copies of PBGC records. 4905.6 Penalty. Authority: 29 U.S.C. 1302(b). Part 4906--[Reserved] Part 4907--Enforcement of Nondiscrimination on the Basis of Handicap in Programs or Activities Conducted by the Pension Benefit Guaranty Corporation Sec. 4907.101 Purpose. 4907.102 Application. 4907.103 Definitions. 4907.110 Self-evaluation. 4907.111 Notice. 4907.130 General prohibitions against discrimination. 4907.140 Employment. 4907.149 Program accessibility: Discrimination prohibited. 4907.150 Program accessibility: Existing facilities. 4907.151 Program accessibility: New construction and alterations. 4907.160 Communications. 4907.170 Compliance procedures. Authority: 29 U.S.C. 794, 1302(b)(3). PART 4000--FINDING AIDS Sec. 4000.1 Distribution table. 4000.2 Derivation table. Authority: 29 U.S.C. 1302(b)(3). Sec. 4000.1 Distribution table. The following table shows where in chapter XL of 29 CFR to find regulations previously codified in chapter XXVI. ------------------------------------------------------------------------ Ch. XL Part(s)/Subpart(s) Ch. XXVI Part Subpart(s)/Section(s) Subpart(s)/Section(s) ------------------------------------------------------------------------ Subchapter A--Internal and Administrative Rules ------------------------------------------------------------------------ 2601................................... 4002 2602: Subpart A.......................... 4904 Subpart B.......................... 4905 2603................................... 4901 2604................................... Repealed 2606................................... 4003 2607................................... 4902 2608................................... 4907 [[Page 34008]] 2609................................... 4903 ------------------------------------------------------------------------ Subchapter B--Rules Applicable to Single-Employer and Multiemployer Plans ------------------------------------------------------------------------ 2610................................... 4006 & 4007 Secs. 2610.1, 2610.21, 2610.31.... Secs. 4006.1 & 4007.1 Secs. 2610.2...................... Secs. 4006.2 & 4007.2 Secs. 2610.3-2610.9 & 2610.11..... 4007 Sec. 2610.10...................... 4006.5(e) Secs. 2610.22-2610.24 & 2610.33... 4006 Secs. 2610.25, 2610.26 & 2610.34.. 4007 2611................................... 4065 2612................................... 4001, Subpart B 2613................................... 4022, Subpart A ------------------------------------------------------------------------ Subchapter C--Single-Employer Plans ------------------------------------------------------------------------ 2615................................... 4043 2616................................... 4041 Subpart A.......................... Subpart A Subpart B.......................... Subpart C 2617................................... 4041 Subpart A.......................... Subpart A Subpart B.......................... Subpart B 2618................................... 4044, Subpart A 2619................................... 4044, Subpart B 2620................................... 4044, Subpart B 2621 (except Sec. 2621.23(b))......... 4022, Subpart B 2621.23(b)............................. 4022B 2622 (except 2622.9)................... 4062 Sec. 2622.9....................... 4068 2623................................... 4022, Subparts D & E 2625................................... 4047 2627................................... 4011 2628................................... 4010 2629................................... 4050 ------------------------------------------------------------------------ Subchapter F--Withdrawal Liability in Multiemployer Plans ------------------------------------------------------------------------ 2640: Sec. 2640.2....................... Sec. 4001.2 Sec. 2640.3....................... Sec. 4221.2 Sec. 2640.4....................... Sec. 4211.2 Sec. 2640.5....................... Sec. 4204.2 Sec. 2640.6....................... Sec. 4207.2, 4208.2 Sec. 2640.7....................... Sec. 4219.2 Sec. 2640.8....................... Sec. 4206.2 2641................................... 4221 2642................................... 4211 2643................................... 4204 2644................................... 4219, Subpart C 2645................................... 4203 2646................................... 4208 2647................................... 4207 2648................................... 4219, Subpart B 2649................................... 4206 ------------------------------------------------------------------------ Subchapter H--Other Rules Applicable to Multiemployer Plans ------------------------------------------------------------------------ 2670: Sec. 2670.2....................... Sec. 4001.2 Sec. 2670.3....................... Sec. 4231.2 Sec. 2670.4....................... Secs. 4041A.2, 4245.2, & 4281.2 2672................................... 4231 2673................................... 4041A, Subpart B, & 4041A.3(a) 2674................................... 4245 2675................................... 4041A, Subparts C & D, & 4281, Subparts C & D 2676................................... 4281, Subpart B 2677................................... 4220 ------------------------------------------------------------------------ Sec. 4000.2 Derivation table. The following table shows where in previous chapter XXVI of 29 CFR to find regulations now codified in chapter XL. [[Page 34009]] ------------------------------------------------------------------------ Ch. XXVI Part(s) Subpart/ Ch. XL Part Subpart/Section(s) Section(s) ------------------------------------------------------------------------ Subchapter A--General ------------------------------------------------------------------------ 4000................................... [tables] 4001: Subpart A.......................... [various statutory and regulatory definitions] Subpart B.......................... 2612 4002................................... 2601 4003................................... 2606 ------------------------------------------------------------------------ Subchapter B--Premiums ------------------------------------------------------------------------ 4006................................... 2610 4007................................... 2610 ------------------------------------------------------------------------ Subchapter C--Certain Reporting and Disclosure Requirements ------------------------------------------------------------------------ 4010................................... 2628 4011................................... 2627 ------------------------------------------------------------------------ Subchapter D--Coverage and Benefits ------------------------------------------------------------------------ 4022: Subpart A.......................... 2613 Subpart B.......................... 2621 (except Sec. 2621.23(b)) Subparts D & E..................... 2623 4022B.................................. Sec. 2621.23(b) ------------------------------------------------------------------------ Subchapter E--Plan Terminations ------------------------------------------------------------------------ 4041: Subpart A.......................... Secs. 2616 & 2617, Subparts A Subpart B.......................... 2617, Subpart B Subpart C.......................... 2616, Subpart B 4041A: Subpart A.......................... Secs. 2670.4, 2673.1, 2673.4, 2675.1 & 2675.2 Subpart B.......................... Secs. 2673.2 & .3 Subparts C & D..................... 2675, Subparts B & E 4043................................... 2615 4044................................... 2618, 2619 & 2620 4047................................... 2625 4050................................... 2629 ------------------------------------------------------------------------ Subchapter F--Liability ------------------------------------------------------------------------ 4061................................... [cross-references] 4062................................... 2622 (except Sec. 2622.9) 4063................................... [cross-references] 4064................................... [cross-references] ------------------------------------------------------------------------ Subchapter G--Annual Reporting Requirements ------------------------------------------------------------------------ 4065................................... 2611 ------------------------------------------------------------------------ Subchapter H--Enforcement Provisions ------------------------------------------------------------------------ 4067................................... [cross-reference] 4068................................... 2622.9 Subchapter I--Withdrawal Liability in Multiemployer Plans ------------------------------------------------------------------------ 4203................................... 2645 4204................................... 2643 & Sec. 2640.5 4206................................... 2649 & Sec. 2640.8 4207................................... 2647 & 2640.6 4208................................... 2646 & 2640.6 4211................................... 2642 & 2640.4 4219: Subpart A.......................... Sec. 2640.7 Subpart B.......................... 2648 Subpart C.......................... 2644 4220................................... 2677 4221................................... 2641 & Sec. 2640.3 ------------------------------------------------------------------------ Subchapter J--Insolvency, Reorganization, Termination, and Other Rules Applicable to Multiemployer Plans ------------------------------------------------------------------------ 4231................................... 2672 & Sec. 2670.3 [[Page 34010]] 4245................................... 2674 & 2670.4 4261................................... [cross-reference] 4281: Subpart A.......................... 2675, Subpart A, & 2670.4 Subpart B.......................... 2676 Subpart C.......................... 2675, Subpart C Subpart D.......................... 2675, Subpart D ------------------------------------------------------------------------ Subchapter K--Internal Administrative Rules and Procedures ------------------------------------------------------------------------ 4901................................... 2603 4902................................... 2607 4903................................... 2609 4904................................... 2602, Subpart A 4905................................... 2602, Subpart B 4907................................... 2608 ------------------------------------------------------------------------ PART 4001--TERMINOLOGY Sec. 4001.1 Purpose and scope. 4001.2 Definitions. 4001.3 Trades or businesses under common control; controlled groups. Authority: 29 U.S.C. 1301, 1302(b)(3). Sec. 4001.1 Purpose and scope. This part contains definitions of certain terms used in this chapter and the regulations under which the PBGC makes various controlled group determinations. Sec. 4001.2 Definitions. For purposes of this chapter (unless otherwise indicated or required by the context): Affected party means, with respect to a plan-- (1) Each participant in the plan; (2) Each beneficiary of a deceased participant; (3) Each alternate payee under an applicable qualified domestic relations order, as defined in section 206(d)(3) of ERISA; (4) Each employee organization that currently represents any group of participants; (5) For any group of participants not currently represented by an employee organization, the employee organization, if any, that last represented such group of participants within the 5-year period preceding issuance of the notice of intent to terminate; and (6) the PBGC. If an affected party has designated, in writing, a person to receive a notice on behalf of the affected party, any reference to the affected party (in connection with the notice) shall be construed to refer to such person. Annuity means a series of periodic payments to a participant or surviving beneficiary for a fixed or contingent period. Basic-type benefit means a benefit that is guaranteed under the provisions of part 4022, subpart A, of this chapter, or would be guaranteed if the guarantee limits in part 4022, subpart B, of this chapter did not apply. Benefit liabilities means the benefits of participants and their beneficiaries under the plan (within the meaning of section 401(a)(2) of the Code). Code means the Internal Revenue Code of 1986, as amended. Complete withdrawal means a complete withdrawal as described in section 4203 of ERISA. Contributing sponsor means a person who is a contributing sponsor as defined in section 4001(a)(13) of ERISA. Controlled group means, in connection with any person, a group consisting of such person and all other persons under common control with such person, determined under section 4001.3 of this part. For purposes of determining the persons liable for contributions under section 412(c)(11)(B) of the Code or section 302(c)(11)(B) of ERISA, or for premiums under section 4007(e)(2) of ERISA, a controlled group also includes any group treated as a single employer under section 414 (m) or (o) of the Code. Corporation means the Pension Benefit Guaranty Corporation, except where the context demonstrates that a different meaning is intended. Defined benefit plan means a plan described in section 3(35) of ERISA. Distress termination means the voluntary termination of a single- employer plan in accordance with section 4041(c) of ERISA and part 4041, subpart C, of this chapter. Distribution date means: (1) Except as provided in paragraph (2)-- (i) For benefits provided through the purchase of irrevocable commitments, the date on which the obligation to provide the benefits passes from the plan to the insurer; and (ii) For benefits provided other than through the purchase of irrevocable commitments, the date on which the benefits are delivered to the participant or beneficiary (or to another plan or benefit arrangement or other recipient authorized by the participant or beneficiary in accordance with applicable law and regulations) personally or by deposit with a mail or courier service (as evidenced by a postmark or written receipt); or (2) Other than for purposes of determining the interest rate to be used in calculating the value of a benefit to be paid as a lump sum to a late-discovered participant, the deemed distribution date (as defined in Sec. 4050.2) in the case of a designated benefit paid to the PBGC, a benefit provided after the deemed distribution date to a late- discovered participant, or an irrevocable commitment purchased from an insurer after the deemed distribution date for a recently-missing participant in accordance with part 4050 of this chapter (dealing with missing participants). Employer means all trades or businesses (whether or not incorporated) that are under common [[Page 34011]] control, within the meaning of Sec. 4001.3 of this chapter. ERISA means the Employee Retirement Income Security Act of 1974, as amended. Fair market value means the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. FOIA means the Freedom of Information Act, as amended (5 U.S.C. 552). Funding standard account means an account established and maintained under section 302(b) of ERISA or section 412(b) of the Code. Guaranteed benefit means a benefit under a single-employer plan that is guaranteed by the PBGC under section 4022(a) of ERISA and part 4022 of this chapter, or a benefit under a multiemployer plan that is guaranteed by the PBGC under section 4022A of ERISA. Insurer means a company authorized to do business as an insurance carrier under the laws of a State or the District of Columbia. Irrevocable commitment means an obligation by an insurer to pay benefits to a named participant or surviving beneficiary, if the obligation cannot be cancelled under the terms of the insurance contract (except for fraud or mistake) without the consent of the participant or beneficiary and is legally enforceable by the participant or beneficiary. IRS means the Internal Revenue Service. Mandatory employee contributions means amounts contributed to the plan by a participant that are required as a condition of employment, as a condition of participation in such plan, or as a condition of obtaining benefits under the plan attributable to employer contributions. Mass withdrawal means the withdrawal of every employer from the plan, or the withdrawal of substantially all employers pursuant to an agreement or arrangement to withdraw. Multiemployer Act means the Multiemployer Pension Plan Amendments Act of 1980. Multiemployer plan means a plan that is described in section 4001(a)(3) of ERISA and that is covered by title IV of ERISA. Multiple employer plan means a single-employer plan maintained by two or more contributing sponsors that are not members of the same controlled group, under which all plan assets are available to pay benefits to all plan participants and beneficiaries. Nonbasic-type benefit means any benefit provided by a plan other than a basic-type benefit. Nonforfeitable benefit means a benefit described in section 4001(a)(8) of ERISA. Benefits that become nonforfeitable solely as a result of the termination of a plan will be considered forfeitable. Normal retirement age means the age specified in the plan as the normal retirement age. This age shall not exceed the later of age 65 or the age attained after 5 years of participation in the plan. If no normal retirement age is specified in the plan, it is age 65. Notice of intent to terminate means the notice of a proposed termination of a single-employer plan, as required by section 4041(a)(2) of ERISA and Sec. 4041.21 (in a standard termination) or Sec. 4041.41 (in a distress termination) of this chapter. PBGC means the Pension Benefit Guaranty Corporation. Person means a person defined in section 3(9) of ERISA. Plan means a defined benefit plan within the meaning of section 3(35) of ERISA that is covered by title IV of ERISA. Plan administrator means an administrator, as defined in section 3(16)(A) of ERISA. Plan sponsor means, with respect to a multiemployer plan, the person described in section 4001(a)(10) of ERISA. Plan year means the calendar, policy, or fiscal year on which the records of the plan are kept. Proposed termination date means the date specified as such by the plan administrator of a single-employer plan in a notice of intent to terminate or, if later, in the standard or distress termination notice, in accordance with section 4041 of ERISA and part 4041 of this chapter. Single-employer plan means any defined benefit plan (as defined in section 3(35) of ERISA) that is not a multiemployer plan (as defined in section 4001(a)(3) of ERISA) and that is covered by title IV of ERISA. Standard termination means the voluntary termination, in accordance with section 4041(b) of ERISA and part 4041, subpart B, of this chapter, of a single-employer plan that is able to provide for all of its benefit liabilities when plan assets are distributed. Substantial owner means a substantial owner as defined in section 4022(b)(5)(A) of ERISA. Sufficient for benefit liabilities means that there is no amount of unfunded benefit liabilities, as defined in section 4001(a)(18) of ERISA. Sufficient for guaranteed benefits means that there is no amount of unfunded guaranteed benefits, as defined in section 4001(a)(17) of ERISA. Termination date means the date established pursuant to section 4048(a) of ERISA. Title IV benefit means the guaranteed benefit plus any additional benefits to which plan assets are allocated pursuant to section 4044 of ERISA and part 4044 of this chapter. Voluntary employee contributions means amounts contributed by an employee to a plan, pursuant to the provisions of the plan, that are not mandatory employee contributions. Sec. 4001.3 Trades or businesses under common control; controlled groups. For purposes of title IV of ERISA: (a)(1) The PBGC will determine that trades and businesses (whether or not incorporated) are under common control if they are ``two or more trades or businesses under common control'', as defined in regulations prescribed under section 414(c) of the Code. (2) The PBGC will determine that all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and all such trades and businesses shall be treated as a single employer. (3) An individual who owns the entire interest in an unincorporated trade or business is treated as his own employer, and a partnership is treated as the employer of each partner who is an employee within the meaning of section 401(c)(1) of the Code. (b) In the case of a single-employer plan: (1) In connection with any person, a controlled group consists of that person and all other persons under common control with such person. (2) Persons are under common control if they are members of a ``controlled group of corporations'', as defined in regulations prescribed under section 414(b) of the Code, or if they are ``two or more trades or businesses under common control'', as defined in regulations prescribed under section 414(c) of the Code. PART 4002--BYLAWS OF THE PENSION BENEFIT GUARANTY CORPORATION Sec. 4002.1 Name. 4002.2 Offices. 4002.3 Board of Directors. 4002.4 Chairman. 4002.5 Quorum. [[Page 34012]] 4002.6 Meetings. 4002.7 Place of meetings; use of conference call communications equipment. 4002.8 Alternate voting procedure. 4002.9 Amendments. Authority: 29 U.S.C. 1302(f). Sec. 4002.1 Name. The name of the Corporation is the Pension Benefit Guaranty Corporation. Sec. 4002.2 Offices. The principal office of the Corporation shall be in the Metropolitan area of the City of Washington, District of Columbia. The Corporation may have additional offices at such other places as the Board of Directors may deem necessary or desirable to the conduct of its business. Sec. 4002.3 Board of Directors. (a) The Board of Directors shall establish the policies of the Corporation and shall perform the other functions assigned to the Board of Directors in title IV of the Employee Retirement Income Security Act of 1974. The Board of Directors of the Corporation shall be composed of the Secretary of Labor, the Secretary of the Treasury, and the Secretary of Commerce. Members of the Board shall serve without compensation, but shall be reimbursed by the Corporation for travel, subsistence, and other necessary expenses incurred in the performance of their duties as members of the Board. A person at the time of a meeting of the Board of Directors who is serving as Secretary of Labor, Secretary of the Treasury or Secretary of Commerce in an acting capacity, shall serve as a member of the Board of Directors with the same authority and effect as the designated Secretary. (b) The following powers are expressly reserved to the Board of Directors and shall not be delegated: (1) Approval of all final substantive regulations prior to publication in the Federal Register, except for amendments to the regulations on Allocation of Assets in Single-employer Plans and Duties of Plan Sponsor Following Mass Withdrawal (parts 4044 and 4281 of this chapter) establishing new interest rates and factors, which may be approved by the Executive Director of the PBGC. (2) Approval of all reports or recommendations to the Congress that are required by statute; (3) Establishment from time to time of the Corporation's budget and debt ceiling up to the statutory limit; (4) Determination from time to time of limits on advances to the revolving funds administered by the Corporation pursuant to section 4005(a) of ERISA; (5) Final decision on any policy matter that would materially affect the rights of a substantial number of employers or covered participants and beneficiaries. (c) Final non-substantive regulations and all proposed regulations shall be approved by the Executive Director prior to publication in the Federal Register; provided that all proposed substantive regulations shall first be circulated for review to the Board of Directors or their designees, and may thereafter be issued by the Executive Director after responding to any comments made within 21 days after circulation of the proposed regulation, or, if no comments are received, after expiration of the 21-day period. Sec. 4002.4 Chairman. The Secretary of Labor shall be the Chairman of the Board of Directors and he shall be the administrator of the Corporation with responsibility for its management, including overall supervision of the Corporation's personnel, organization, and budget practices, and shall exercise such incidental powers as may be necessary to carry out his administrative responsibilities. The Chairman may delegate his administrative responsibilities. Sec. 4002.5 Quorum. A majority of the Directors shall constitute a quorum for the transaction of business. Any act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board, except as may otherwise be provided in these bylaws. Sec. 4002.6 Meetings. Regular meetings of the Board of Directors shall be held at such times as the Chairman shall select. Special meetings of the Board of Directors shall be called by the Chairman on the request of any other Director. Reasonable notice of any meetings shall be given to each Director. The General Counsel of the Corporation shall serve as Secretary to the Board of Directors and keep its minutes. As soon as practicable after each meeting, a draft of the minutes of such meeting shall be distributed to each member of the Board for correction or approval. Sec. 4002.7 Place of meetings; use of conference call communications equipment. Meetings of the Board of Directors shall be held at the principal office of the Corporation unless otherwise determined by the Board of Directors or the Chairman. Any Director may participate in a meeting of the Board of Directors through the use of conference call telephone or similar communications equipment, by means of which all persons participating in the meeting can simultaneously speak to and hear each other. Any Director so participating in a meeting shall be deemed present for all purposes. Actions taken by the Board of Directors at meetings conducted through the use of such equipment, including the votes of each member, shall be recorded in the usual manner in the minutes of the meetings of the Board of Directors. A resolution of the Board of Directors signed by each of its three members shall have the same force and effect as if agreed at a duly called meeting and shall be recorded in the minutes of the Board of Directors. Sec. 4002.8 Alternate voting procedure. (a) A Director shall be deemed to have participated in a meeting of the Board of Directors for all purposes if, (1) That Director was represented at that meeting by an individual who was designated to act on his behalf, and (2) That Director ratified in writing the actions taken by his designee at that meeting within a reasonable period of time after such meeting. (b) For purposes of this section, a Director, including an individual serving as Acting Secretary, shall designate a representative at a level not below that of Assistant Secretary within his Department. Such designation shall be in writing and shall be effective until withdrawn or until a date specified therein. (c) For purposes of this section, a Director's approval of the minutes of a meeting of the Board of Directors shall constitute ratification of the actions of his designee at such meeting. Sec. 4002.9 Amendments. These bylaws may be amended or new bylaws adopted by unanimous vote of the Board. PART 4003--RULES FOR ADMINISTRATIVE REVIEW OF AGENCY DECISIONS Subpart A--General Provisions Sec. 4003.1 Purpose and scope. 4003.2 Definitions. 4003.3 PBGC assistance in obtaining information. 4003.4 Extension of time. 4003.5 Non-timely request for review. 4003.6 Representation. 4003.7 Exhaustion of administrative remedies. 4003.8 Request for confidential treatment. 4003.9 Filing of documents. 4003.10 Computation of time. [[Page 34013]] Subpart B--Initial Determinations 4003.21 Form and contents of initial determinations. 4003.22 Effective date of determinations. Subpart C--Reconsideration of Initial Determinations 4003.31 Who may request reconsideration. 4003.32 When to request reconsideration. 4003.33 Where to submit request for reconsideration. 4003.34 Form and contents of request for reconsideration. 4003.35 Final decision on request for reconsideration. Subpart D--Administrative Appeals 4003.51 Who may appeal or participate in appeals. 4003.52 When to file. 4003.53 Where to file. 4003.54 Contents of appeal. 4003.55 Opportunity to appear and to present witnesses. 4003.56 Consolidation of appeals. 4003.57 Appeals affecting third parties. 4003.58 Powers of the Appeals Board. 4003.59 Decision by the Appeals Board. 4003.60 Referral of appeal to the Executive Director. Authority: 29 U.S.C. 1302(b)(3). Subpart A--General Provisions Sec. 4003.1 Purpose and scope. (a) Purpose. This part sets forth the rules governing the issuance of all initial determinations by the PBGC on cases pending before it involving the matters set forth in paragraph (b) of this section and the procedures for requesting and obtaining administrative review by the PBGC of those determinations. Subpart A contains general provisions. Subpart B sets forth rules governing the issuance of all initial determinations of the PBGC on matters covered by this part. Subpart C establishes procedures governing the reconsideration by the PBGC of initial determinations relating to the matters set forth in paragraphs (b)(1) through (b)(4). Subpart D establishes procedures governing administrative appeals from initial determinations relating to the matters set forth in paragraphs (b)(5) through (b)(10). (b) Scope. This part applies to the following determinations made by the PBGC in cases pending before it and to the review of those determinations: (1) Determinations that a plan is covered under section 4021 of ERISA; (2) Determinations with respect to premiums, interest and late payment penalties pursuant to section 4007 of ERISA; (3) Determinations with respect to voluntary terminations under section 4041 of ERISA, including-- (i) A determination that a notice requirement or a certification requirement under section 4041 of ERISA has not been met, (ii) A determination that the requirements for demonstrating distress under section 4041(c)(2)(B) of ERISA have not been met, and (iii) A determination with respect to the sufficiency of plan assets for benefit liabilities or for guaranteed benefits; (4) Determinations with respect to allocation of assets under section 4044 of ERISA, including distribution of excess assets under section 4044(d); (5) Determinations that a plan is not covered under section 4021 of ERISA; (6) Determinations under section 4022 (a) or (c) or section 4022A(a) of ERISA with respect to benefit entitlement of participants and beneficiaries under covered plans and determinations that a domestic relations order is or is not a qualified domestic relations order under section 206(d)(3) of ERISA and section 414(p) of the Code; (7) Determinations under section 4022 (b) or (c), section 4022A (b) through (e), or section 4022B of ERISA of the amount of benefits payable to participants and beneficiaries under covered plans; (8) Determinations of the amount of money subject to recapture pursuant to section 4045 of ERISA; (9) Determinations of the amount of liability under section 4062(b)(1), section 4063, or section 4064 of ERISA; (10) Determinations-- (i) That the amount of a participant's or beneficiary's benefit under section 4050(a)(3) of ERISA has been correctly computed based on the designated benefit paid to the PBGC under section 4050(b)(2) of ERISA, 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. (c) Matters not covered by this part. Nothing in this part limits-- (1) The authority of the PBGC to review, either upon request or on its own initiative, a determination to which this part does not apply when, in its discretion, the PBGC determines that it would be appropriate to do so, or (2) The procedure that the PBGC may utilize in reviewing any determination to which this part does not apply. Sec. 4003.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: Code, contributing sponsor, controlled group, ERISA, multiemployer plan, PBGC, person, plan administrator, and single-employer plan. In addition, for purposes of this part: Aggrieved person means any participant, beneficiary, plan administrator, contributing sponsor of a single-employer plan or member of such a contributing sponsor's controlled group, plan sponsor of a multiemployer plan, or employer that is adversely affected by an initial determination of the PBGC with respect to a pension plan in which such person has an interest. The term ``beneficiary'' includes an alternate payee (within the meaning of section 206(d)(3)(K) of ERISA) under a qualified domestic relations order (within the meaning of section 206(d)(3)(B) of ERISA). Appeals Board means a board consisting of three PBGC officials. The Executive Director shall appoint a senior PBGC official to serve as Chairperson and three or more other PBGC officials to serve as regular Appeals Board members. The Chairperson shall designate the three officials who will constitute the Appeals Board with respect to a case, provided that a person may not serve on the Appeals Board with respect to a case in which he or she made a decision regarding the merits of the determination being appealed. The Chairperson need not serve on the Appeals Board with respect to all cases. Appellant means any person filing an appeal under subpart D of this part. Director means the Director of any department of the PBGC and includes the Executive Director of the PBGC, Deputy Executive Directors, and the General Counsel. Sec. 4003.3 PBGC assistance in obtaining information. A person who lacks information or documents necessary to file a request for review pursuant to subpart C or D of this part, or necessary to a decision whether to seek review, or necessary to participate in an appeal pursuant to Sec. 4003.57 of this part or necessary to a decision whether to participate, may request the PBGC's assistance in obtaining information or documents in the possession of a party other than the PBGC. The request shall state or describe the missing information or documents, the reason why the person needs the information or documents, and the reason why the person needs the assistance of the PBGC in obtaining the information or documents. The request may also include a request for an extension of time to file pursuant to Sec. 4003.4 of this part. Sec. 4003.4 Extension of time. (a) General rule. When a document is required under this part to be filed within a prescribed period of time, an extension of time to file will be granted only upon good cause shown and only [[Page 34014]] when the request for an extension is made before the expiration of the time prescribed. The request for an extension shall be in writing and state why additional time is needed and the amount of additional time requested. The filing of a request for an extension shall stop the running of the prescribed period of time. When a request for an extension is granted, the PBGC shall notify the person requesting the extension, in writing, of the amount of additional time granted. When a request for an extension is denied, the PBGC shall so notify the requestor in writing, and the prescribed period of time shall resume running from the date of denial. (b) Disaster relief. When the President of the United States declares that, under the Disaster Relief Act of 1974, as amended (42 U.S.C. 5121, 5122(2), 5141(b)), a major disaster exists, the Executive Director of the PBGC (or his or her designee) may, by issuing one or more notices of disaster relief, extend the due date for filing a request for reconsideration under Sec. 4003.32 or an appeal under Sec. 4003.52 by up to 180 days. (1) The due date extension or extensions shall be available only to an aggrieved person who is residing in, or whose principal place of business is within, a designated disaster area, or with respect to whom the office of the service provider, bank, insurance company, or other person maintaining the information necessary to file the request for reconsideration or appeal is within a designated disaster area; and (2) The request for reconsideration or appeal shall identify the filing as one for which the due date extension is available. Sec. 4003.5 Non-timely request for review. The PBGC will process a request for review of an initial determination that was not filed within the prescribed period of time for requesting review (see Secs. 4003.32 and 4003.52) if-- (a) The person requesting review demonstrates in his or her request that he or she did not file a timely request for review because he or she neither knew nor, with due diligence, could have known of the initial determination; and (b) The request for review is filed within 30 days after the date the aggrieved person, exercising due diligence at all relevant times, first learned of the initial determination where the requested review is reconsideration, or within 45 days after the date the aggrieved person, exercising due diligence at all relevant times, first learned of the initial determination where the request for review is an appeal. Sec. 4003.6 Representation. A person may file any document or make any appearance that is required or permitted by this part on his or her own behalf or he or she may designate a representative. When the representative is not an attorney-at-law, a notarized power of attorney, signed by the person making the designation, which authorizes the representation and specifies the scope of representation shall be filed with the PBGC in accordance with Sec. 4003.9(b) of this part. Sec. 4003.7 Exhaustion of administrative remedies. Except as provided in Sec. 4003.22(b), a person aggrieved by an initial determination of the PBGC covered by this part, other than a determination subject to reconsideration that is issued by a Department Director, has not exhausted his or her administrative remedies until he or she has filed a request for reconsideration under subpart C of this part or an appeal under subpart D of this part, whichever is applicable, and a decision granting or denying the relief requested has been issued. Sec. 4003.8 Request for confidential treatment. If any person filing a document with the PBGC believes that some or all of the information contained in the document is exempt from the mandatory public disclosure requirements of the Freedom of Information Act, 5 U.S.C. 552, he or she shall specify the information with respect to which confidentiality is claimed and the grounds therefor. Sec. 4003.9 Filing of documents. (a) Date of filing. Any document required or permitted to be filed under this part is considered filed on the date of the United States postmark stamped on the cover in which the document is mailed, provided that-- (1) The postmark was made by the United States Postal Service; and (2) The document was mailed postage prepaid, properly packaged and addressed to the PBGC. If the conditions stated in both paragraphs (a)(1) and (a)(2) of this section are not met, the document is considered filed on the date it is received by the PBGC. Documents received after regular business hours are considered filed on the next regular business day. (b) Where to file. Any document required or permitted to be filed under this part in connection with a request for reconsideration shall be submitted to the Director of the department within the PBGC that issued the initial determination. Any document required or permitted to be filed under this part in connection with an appeal shall be submitted to the Appeals Board, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. Sec. 4003.10 Computation of time. In computing any period of time prescribed or allowed by this part, the day of the act, event, or default from which the designated period of time begins to run is not counted. The last day of the period so computed shall be included, unless it is a Saturday, Sunday, or Federal holiday, in which event the period runs until the end of the next day which is not a Saturday, Sunday, or a Federal holiday. Subpart B--Initial Determinations Sec. 4003.21 Form and contents of initial determinations. All determinations to which this subpart applies shall be in writing, shall state the reason for the determination, and, except when effective on the date of issuance as provided in Sec. 4003.22(b), shall contain notice of the right to request review of the determination pursuant to subpart C or subpart D of this part, as applicable, and a brief description of the procedures for requesting review. Sec. 4003.22 Effective date of determinations. (a) General Rule. Except as provided in paragraph (b) of this section, an initial determination covered by this subpart will not become effective until the prescribed period of time for filing a request for reconsideration under subpart C of this part or an appeal under subpart D of this part, whichever is applicable, has elapsed. The filing of a request for review under subpart C or D of this part shall automatically stay the effectiveness of a determination until a decision on the request for review has been issued by the PBGC. (b) Exception. The PBGC may, in its discretion, order that the initial determination in a case is effective on the date it is issued. When the PBGC makes such an order, the initial determination shall state that the determination is effective on the date of issuance and that there is no obligation to exhaust administrative remedies with respect to that determination by seeking review of it by the PBGC. [[Page 34015]] Subpart C--Reconsideration of Initial Determinations Sec. 4003.31 Who may request reconsideration. Any person aggrieved by an initial determination of the PBGC to which this subpart applies may request reconsideration of the determination. Sec. 4003.32 When to request reconsideration. Except as provided in Secs. 4003.4 and 4003.5, a request for reconsideration must be filed within 30 days after the date of the initial determination of which reconsideration is sought or, when administrative review includes a procedure in Sec. 4903.33 of this chapter, by a date 60 days (or more) thereafter that is specified in the PBGC's notice of the right to request review. Sec. 4003.33 Where to submit request for reconsideration. A request for reconsideration shall be submitted to the Director of the department within the PBGC that issued the initial determination, except that a request for reconsideration of a determination described in Sec. 4003.1(b)(3)(ii) shall be submitted to the Executive Director. Sec. 4003.34 Form and contents of request for reconsideration. A request for reconsideration shall-- (a) Be in writing; (b) Be clearly designated as a request for reconsideration; (c) Contain a statement of the grounds for reconsideration and the relief sought; and (d) Reference all pertinent information already in the possession of the PBGC and include any additional information believed to be relevant. Sec. 4003.35 Final decision on request for reconsideration. (a) Except as provided in paragraphs (a)(1) or (a)(2), final decisions on requests for reconsideration will be issued by the same department of the PBGC that issued the initial determination, by an official whose level of authority in that department is higher than that of the person who issued the initial determination. (1) When an initial determination is issued by a Department Director, the Department Director (or an official designated by the Department Director) will issue the final decision on request for reconsideration of a determination other than one described in Sec. 4003.1(b)(3)(ii). (2) The Executive Director (or an official designated by the Executive Director) will issue the final decision on a request for reconsideration of a determination described in Sec. 4003.1(b)(3)(ii). (b) The final decision on a request for reconsideration shall be in writing, specify the relief granted, if any, state the reason(s) for the decision, and state that the person has exhausted his or her administrative remedies. Subpart D--Administrative Appeals Sec. 4003.51 Who may appeal or participate in appeals. Any person aggrieved by an initial determination to which this subpart applies may file an appeal. Any person who may be aggrieved by a decision under this subpart granting the relief requested in whole or in part may participate in the appeal in the manner provided in Sec. 4003.57. Sec. 4003.52 When to file. Except as provided in Secs. 4003.4 and 4003.5, an appeal under this subpart must be filed within 45 days after the date of the initial determination being appealed or, when administrative review includes a procedure in Sec. 4903.33 of this chapter, by a date 60 days (or more) thereafter that is specified in the PBGC's notice of the right to request review. Sec. 4003.53 Where to file. An appeal or a request for an extension of time to appeal shall be submitted to the Appeals Board, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. Sec. 4003.54 Contents of appeal. (a) An appeal shall-- (1) Be in writing; (2) Be clearly designated as an appeal; (3) Contain a statement of the grounds upon which it is brought and the relief sought; (4) Reference all pertinent information already in the possession of the PBGC and include any additional information believed to be relevant; (5) State whether the appellant desires to appear in person or through a representative before the Appeals Board; and (6) State whether the appellant desires to present witnesses to testify before the Appeals Board, and if so, state why the presence of witnesses will further the decision-making process. (b) In any case where the appellant believes that another person may be aggrieved if the PBGC grants the relief sought, the appeal shall also include the name(s) and address(es) (if known) of such other person(s). Sec. 4003.55 Opportunity to appear and to present witnesses. (a) At the discretion of the Appeals Board, any appearance permitted under this subpart may be before a hearing officer designated by the Appeals Board. (b) An opportunity to appear before the Appeals Board (or a hearing officer) and an opportunity to present witnesses will be permitted at the discretion of the Appeals Board. In general, an opportunity to appear will be permitted if the Appeals Board determines that there is a dispute as to a material fact; an opportunity to present witnesses will be permitted when the Appeals Board determines that witnesses will contribute to the resolution of a factual dispute. (c) Appearances permitted under this section will take place at the main offices of the PBGC, 1200 K Street NW., Washington, DC 20005-4026, unless the Appeals Board, in its discretion, designates a different location, either on its own initiative or at the request of the appellant or a third party participating in the appeal. Sec. 4003.56 Consolidation of appeals. (a) When consolidation may be required. Whenever multiple appeals are filed that arise out of the same or similar facts and seek the same or similar relief, the Appeals Board may, in its discretion, order the consolidation of all or some of the appeals. (b) Representation of parties. Whenever the Appeals Board orders the consolidation of appeals, the appellants may designate one (or more) of their number to represent all of them for all purposes relating to their appeals. (c) Decision by Appeals Board. The decision of the Appeals Board in a consolidated appeal shall be binding on all appellants whose appeals were subject to the consolidation. Sec. 4003.57 Appeals affecting third parties. (a) Before the Appeals Board issues a decision granting, in whole or in part, the relief requested in an appeal, it shall make a reasonable effort to notify third persons who will be aggrieved by the decision of the following: (1) The pendency of the appeal; (2) The grounds upon which the appeal is based; (3) The grounds upon which the Appeals Board is considering reversing the initial determination; (4) The right to submit written comments on the appeal; (5) The right to request an opportunity to appear in person or through a representative before the Appeals Board and to present witnesses; and (6) That no further opportunity to present information to the PBGC with [[Page 34016]] respect to the determination under appeal will be provided. (b) Written comments and a request to appear before the Appeals Board must be filed within 45 days after the date of the notice from the Appeals Board. (c) If more than one third party is involved, their participation in the appeal may be consolidated pursuant to the provisions of Sec. 4003.56. Sec. 4003.58 Powers of the Appeals Board. In addition to the powers specifically described in this part, the Appeals Board may request the submission of any information or the appearance of any person it considers necessary to resolve a matter before it and to enter any order it considers necessary for or appropriate to the disposition of any matter before it. Sec. 4003.59 Decision by the Appeals Board. (a) In reaching its decision, the Appeals Board shall consider those portions of the file relating to the initial determination, all material submitted by the appellant and any third parties in connection with the appeal, and any additional information submitted by PBGC staff. (b) The decision of the Appeals Board constitutes the final agency action by the PBGC with respect to the determination which was the subject of the appeal and is binding on all parties who participated in the appeal and who were notified pursuant to Sec. 4003.57 of their right to participate in the appeal. (c) The decision of the Appeals Board shall be in writing, specify the relief granted, if any, state the bases for the decision, including a brief statement of the facts or legal conclusions supporting the decision, and state that the appellant has exhausted his or her administrative remedies. Sec. 4003.60 Referral of appeal to the Executive Director. The Appeals Board may, in its discretion, refer any appeal to the Executive Director of the PBGC for decision. In such a case, the Executive Director shall have all the powers vested in the Appeals Board by this subpart and the decision of the Executive Director shall meet the requirements of and have the effect of a decision issued under Sec. 4003.59 of this part. PART 4006--PREMIUM RATES Sec. 4006.1 Purpose and scope. 4006.2 Definitions. 4006.3 Premium rate. 4006.4 Determination of unfunded vested benefits. 4006.5 Exemptions and special rules. Authority: 29 U.S.C. 1302(b)(3), 1306, 1307. Sec. 4006.1 Purpose and scope. This part, which applies to all plans covered by title IV of ERISA, provides rules for computing the premiums imposed by sections 4006 and 4007 of ERISA. (See part 4007 of this chapter for rules for the payment of premiums, including due dates and late payment charges.) Sec. 4006.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: Code, contributing sponsor, ERISA, fair market value, insurer, irrevocable commitment, multiemployer plan, notice of intent to terminate, PBGC, plan administrator, plan, plan year, and single- employer plan. In addition, for purposes of this part: New plan means a plan that became effective within the premium payment year and includes a plan resulting from a consolidation or spinoff. A plan that meets this definition is considered to be a new plan even if the plan constitutes a successor plan within the meaning of section 4021(a) of ERISA. Newly-covered plan means a plan that is not a new plan and that was not covered by title IV of ERISA immediately prior to the premium payment year. Participant means any individual who is included in one of the categories below: (a) Active. (1) Any individual who is currently in employment covered by the plan and who is earning or retaining credited service under the plan. This category includes any individual who is considered covered under the plan for purposes of meeting the minimum coverage requirements, but because of offset or other provisions (including integration with Social Security benefits), the individual does not have any accrued benefits. (2) Any non-vested individual who is not currently in employment covered by the plan but who is earning or retaining credited service under the plan. This category does not include a non-vested former employee who has incurred a break in service the greater of one year or the break in service period specified in the plan. (b) Inactive--(1) Inactive receiving benefits. Any individual who is retired or separated from employment covered by the plan and who is receiving benefits under the plan. This category does not include an individual to whom an insurer has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan. (2) Inactive entitled to future benefits. Any individual who is retired or separated from employment covered by the plan and who is entitled to begin receiving benefits under the plan in the future. This category does not include an individual to whom an insurer has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan. (c) Deceased. Any deceased individual who has one or more beneficiaries who are receiving or entitled to receive benefits under the plan. This category does not include an individual if an insurer has made an irrevocable commitment to pay all the benefits to which the beneficiaries of that individual are entitled under the plan. Premium payment year means the plan year for which the premium is being paid. Short plan year means a plan year that is less than twelve full months. Sec. 4006.3 Premium rate. Subject to the provisions of Sec. 4006.5 (dealing with exemptions and special rules), the premium paid for basic benefits guaranteed under section 4022(a) of ERISA shall equal the flat-rate premium under paragraph (a) of this section plus, in the case of a single-employer plan, the variable-rate premium under paragraph (b) of this section. (a) Flat-rate premium. The flat-rate premium is equal to the number of participants in the plan on the last day of the plan year preceding the premium payment year, multiplied by-- (1) $19 for a single-employer plan, or (2) $2.60 for a multiemployer plan. (b) Variable-rate premium. The variable-rate premium is $9 for each $1,000 of a single-employer plan's unfunded vested benefits, as determined under Sec. 4006.4. Sec. 4006.4 Determination of unfunded vested benefits. (a) General rule. Except as permitted by paragraph (c) of this section or as provided in the exemptions and special rules under Sec. 4006.5, the amount of a plan's unfunded vested benefits (as defined in paragraph (b) of this section) shall be determined as of the last day of the plan year preceding the premium payment year, based on the plan provisions and the plan's population as of that date. The determination shall be made in accordance with paragraph (a)(1) or (a)(2), and shall be certified to in accordance with paragraph (a)(4). (1) The unfunded vested benefits shall be determined using the actuarial assumptions and methods described in [[Page 34017]] paragraph (a)(3) for the plan year preceding the premium payment year (or, in the case of a new or newly-covered plan, for the premium payment year), except to the extent that other actuarial assumptions or methods are specifically prescribed by this section or are necessary to reflect the occurrence of a significant event described in paragraph (d) of this section between the date of the funding valuation and the last day of the plan year preceding the premium payment year. (If the plan does a valuation as of the last day of the plan year preceding the premium payment year, no separate adjustment for significant events is needed.) (2) Under this rule, the determination of the unfunded vested benefits may be based on a plan valuation done as of the first day of the premium payment year, provided that-- (i) The actuarial assumptions and methods used are those described in paragraph (a)(3) for the premium payment year, except to the extent that other actuarial assumptions or methods are specifically prescribed by this section or are required to make the adjustment described in paragraph (a)(2)(ii) of this section; and (ii) If an enrolled actuary determines that there is a material difference between the values determined under the valuation and the values that would have been determined as of the last day of the preceding plan year, the valuation results are adjusted to reflect appropriately the values as of the last day of the preceding plan year. (This adjustment need not be made if the unadjusted valuation would result in greater unfunded vested benefits.) (3) For purposes of paragraphs (a)(1) and (a)(2), the actuarial assumptions and methods for a plan year are those used by the plan for purposes of determining the additional funding requirement under section 302(d) of ERISA and section 412(1) of the Code (or, in the case of a plan that is not required to determine such additional funding requirement, any assumptions and methods that would be permitted for such purpose if the plan were so required). (4) In the case of any plan that determines the amount of its unfunded vested benefits under the general rule described in this paragraph, an enrolled actuary must certify, in accordance with the PBGC annual Premium Payment Package provided for in Sec. 4007.3 of this part, that the determination was made in a manner consistent with generally accepted actuarial principles and practices. (b) Unfunded vested benefits. The amount of a plan's unfunded vested benefits under this section shall be the excess of the plan's vested benefits amount (determined under paragraph (b)(1) of this section) over the value of the plan's assets (determined under paragraph (b)(2) of this section). (1) Vested benefits amount. A plan's vested benefits amount under this section shall be the plan's current liability (within the meaning of section 302(d)(7) of ERISA and section 412(1)(7) of the Code) determined by taking into account only vested benefits and by using an interest rate equal to the applicable percentage 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. If the interest rate (or rates) used by the plan to determine current liability was (or were all) not greater than the required interest rate, the vested benefits need not be revalued if an enrolled actuary certifies that the interest rate (or interest rates) used was (or were all) not greater than the required interest rate. For purposes of this paragraph (b)(1) (subject to the provisions of Sec. 4006.5(g), dealing with plans of regulated public utilities), the applicable percentage is-- (i) For a premium payment year that begins before July 1997, 80 percent; (ii) For a premium payment year that begins after June 1997 and before the first premium payment year to which the first tables prescribed under section 302(d)(7)(C)(ii)(II) of ERISA and section 412(1)(7)(C)(ii)(II) of the Code apply, 85 percent; and (iii) For the first premium payment year to which the first tables prescribed under section 302(d)(7)(C)(ii)(II) of ERISA and section 412(1)(7)(C)(ii)(II) of the Code apply and any subsequent plan year, 100 percent. (2) Value of assets. (i) Actuarial value. For a premium payment year that is described in paragraph (b)(1)(i) or (b)(1)(ii) of this section, the value of the plan's assets shall be their actuarial value determined in accordance with section 302(c)(2) of ERISA and section 412(c)(2) of the Code. (ii) Fair market value. For a premium payment year that is described in paragraph (b)(1)(iii) of this section, the value of the plan's assets shall be their fair market value. (iii) Use of credit balance. The value of the plan's assets shall not be reduced by a credit balance in the funding standard account. (iv) Contributions. Contributions owed for any plan year preceding the premium payment year shall be included for plans with 500 or more participants and may be included for any other plan. Contributions may be included only to the extent such contributions have been paid into the plan on or before the earlier of the due date for payment of the variable-rate portion of the premium under Sec. 4007.11 or the date that portion is paid. Contributions included that are paid after the last day of the plan year preceding the premium payment year shall be discounted at the plan asset valuation rate (on a simple or compound basis in accordance with the plan's discounting rules) to such last day to reflect the date(s) of payment. Contributions for the premium payment year may not be included for any plan. (c) Alternative method for calculating unfunded vested benefits. In lieu of determining the amount of the plan's unfunded vested benefits pursuant to paragraph (a) of this section, a plan administrator may calculate the amount of a plan's unfunded vested benefits under this paragraph (c) using the plan's Form 5500, Schedule B, for the plan year preceding the premium payment year. Pursuant to this paragraph (c), unfunded vested benefits shall be determined, in accordance with the Premium Payment Package, from values for the plan's vested benefits and assets that are required to be reported on the plan's Schedule B. The value of the vested benefits shall be adjusted in accordance with paragraph (c)(1) of this section to reflect accruals during the plan year preceding the premium payment year and with paragraph (c)(2) of this section to reflect the interest rate prescribed in paragraph (b)(1) of this section, and the value of the assets shall be adjusted in accordance with paragraph (c)(4) of this section. (If the plan administrator certifies that the interest rate (or rates) used to determine the vested benefit values taken from the Schedule B was (or were all) not greater than the interest rate prescribed in paragraph (b)(1) of this section, the interest rate adjustment prescribed in paragraph (c)(2) of this section is not required.) The resulting unfunded vested benefits amount shall be adjusted in accordance with paragraph (c)(5) of this section to reflect the passage of time from the date of the Schedule B data to the last day of the plan year preceding the premium payment year. (1) Vested benefits adjustment for accruals. The total value of the plan's current liability as of the first day of the plan year preceding the premium payment year for vested benefits of active and terminated vested participants not in pay status, computed in accordance with section 302(d)(7) of ERISA and section 412(l)(7) of the Code, [[Page 34018]] shall be adjusted to reflect the increase in vested benefits attributable to accruals during the plan year preceding the premium payment year by multiplying that value by 1.07. (2) Vested benefits interest rate adjustment. The value of vested benefits as entered on the Schedule B shall be adjusted in accordance with the following formula (except as provided in paragraph (c)(3) of this section) to reflect the interest rate prescribed in paragraph (b)(1) of this section: VBadj=VB PAY x .94(RIR-BIR)+VB NON-PAY x .94(RIR-BIR) x ((100+BIA)/(100+RIR))(ARA-50) ; where-- (i) VB adj is the adjusted vested benefits amount (as of the first day of the plan year preceding the premium payment year) under the alternative calculation method; (ii) VB PAY is the plan's current liability as of the first day of the plan year preceding the premium payment year for vested benefits of participants and beneficiaries in pay status, computed in accordance with section 302(d)(7) of ERISA and section 412(l)(7) of the Code; (iii) VB NON-PAY is the total of the plan's current liability as of the first day of the plan year preceding the premium payment year for vested benefits of active and terminated vested participants not in pay status, computed in accordance with section 302(d)(7) of ERISA and section 412(l)(7) of the Code, multiplied by 1.07 in accordance with paragraph (c)(1) of this section; (iv) RIR is the required interest rate prescribed in paragraph (b)(1) of this section; (v) BIR is the post-retirement current liability interest rate used to determine the pay-status current liability figure referred to in paragraph (c)(2)(ii) of this section; (vi) BIA is the pre-retirement current liability interest rate used to determine the pre-pay-status current liability figures referred to in paragraph (c)(2)(iii) of this section; and (vii) ARA is the plan's assumed weighted average retirement age. (3) Optional use of substitution factors in interest rate adjustment formula. In lieu of the term, .94 (RIR-BIR), in the formula prescribed by paragraph (c)(2) of this section, a plan administrator may use the optional substitution factor provided in the Premium Payment Package. (4) Adjusted value of plan assets. The value of plan assets shall be the actuarial value of plan assets as of the first day of the plan year preceding the premium payment year, determined in accordance with section 302(c)(2) of ERISA and section 412(c)(2) of the Code without reduction for any credit balance in the plan's funding standard account, unless that amount was determined as of a date other than the first day of the plan year preceding the premium payment year or the premium payment year is described in Sec. 4006.4(b)(1)(iii). In either of those events, the value of plan assets shall be the current value of assets (as reported on Form 5500) as of that first day or (if Form 5500-EZ is filed) as of the last day of the plan year preceding the Schedule B year. The value of assets from the Schedule B shall be adjusted in accordance with paragraph (b)(2) of this section, except that the amount of all contributions that are included in the value of assets and that were made after the first day of the plan year preceding the premium payment year shall be discounted to such first day at the interest rate prescribed in paragraph (b)(1) of this section for the premium payment year, compounded annually except that simple interest may be used for any partial years. (5) Adjustment for passage of time. The amount of the plan's unfunded vested benefits shall be adjusted to reflect the passage of time between the date of the Schedule B data (the first day of the plan year preceding the premium payment year) and the last day of the plan year preceding the premium payment year in accordance with the following formula: UVB adj=(VB adj-A adj) x (1+RIR/100)Y; where-- (i) UVB adj is the amount of the plan's adjusted unfunded vested benefits; (ii) VB adj is the value of the adjusted vested benefits calculated in accordance with paragraphs (c)(1) and (c)(2) of this section; (iii) A adj is the adjusted asset amount calculated in accordance with paragraph (c)(3) of this section; (iv) RIR is the required interest rate prescribed in paragraph (b)(1) of this section; and (v) Y is deemed to be equal to 1 (unless the plan year preceding the premium payment year is a short plan year, in which case Y is the number of years between the first day and the last day of the short plan year, expressed as a decimal fraction of 1.0 with two digits to the right of the decimal point). (d) Restrictions on alternative calculation method for large plans. (1) The alternative calculation method described in paragraph (c) of this section may be used for a plan with 500 or more participants as of the last day of the plan year preceding the premium payment year only if-- (i) No significant event, as described in paragraph (d)(2) of this section, has occurred between the first day and the last day of the plan year preceding the premium payment year, and an enrolled actuary so certifies in accordance with the Premium Payment Package; or (ii) An enrolled actuary makes an appropriate adjustment to the value of unfunded vested benefits to reflect the occurrence of significant events that have occurred between those dates and certifies to that fact in accordance with the Premium Payment Package. (2) The significant events described in this paragraph are-- (i) An increase in the plan's actuarial costs (consisting of the plan's normal cost under section 302(b)(2)(A) of ERISA and section 412(b)(2)(A) of the Code, amortization charges under section 302(b)(2)(B) of ERISA and section 412(b)(2)(B) of the Code, and amortization credits under section 302(b)(3)(B) of ERISA and section 412(b)(3)(B) of the Code) attributable to a plan amendment, unless the cost increase attributable to the amendment is less than 5 percent of the actuarial costs determined without regard to the amendment; (ii) The extension of coverage under the plan to a new group of employees resulting in an increase of 5 percent or more in the plan's liability for accrued benefits; (iii) A plan merger, consolidation or spinoff that is not de minimis pursuant to the regulations under section 414(l) of the Code; (iv) The shutdown of any facility, plant, store, etc., that creates immediate eligibility for benefits that would not otherwise be immediately payable for participants separating from service; (v) The offer by the plan for a temporary period to permit participants to retire at benefit levels greater than that to which they would otherwise be entitled; (vi) A cost-of-living increase for retirees resulting in an increase of 5 percent or more in the plan's liability for accrued benefits; and (vii) Any other event or trend that results in a material increase in the value of unfunded vested benefits. Sec. 4006.5 Exemptions and special rules. (a) Variable-rate premium exemptions. A plan described in any of paragraphs (a)(1)-(a)(5) of this section is not required to determine its unfunded vested benefits under Sec. 4006.4 and does not owe a variable-rate premium under Sec. 4006.3(b). (1) Certain fully funded plans. A plan is described in this paragraph if the plan had fewer than 500 participants on the [[Page 34019]] last day of the plan year preceding the premium payment year, and an enrolled actuary certifies in accordance with the Premium Payment Package that, as of that date, the plan had no unfunded vested benefits (valued at the interest rate prescribed in Sec. 4006.4(b)(1)). (2) Plans without vested benefit liabilities. A plan is described in this paragraph if it did not have any participants with vested benefits as of the last day of the plan year preceding the premium payment year, and the plan administrator so certifies in accordance with the Premium Payment Package. (3) Section 412(i) plans. A plan is described in this paragraph if the plan was a plan described in section 412(i) of the Code and the regulations thereunder at all times during the plan year preceding the premium payment year and the plan administrator so certifies, in accordance with the Premium Payment Package. If the plan is a new plan or a newly-covered plan, the certification under this paragraph shall be made as of the due date for the premium under Sec. 4007.11(c) and shall certify to the plan's status at all times during the premium payment year through such due date. (4) Plans terminating in standard terminations. The exemption for a plan described in this paragraph is conditioned upon the plan's making a final distribution of assets in a standard termination. If a plan is ultimately unable to do so, the exemption is revoked and all variable- rate amounts not paid pursuant to this exemption are due retroactive to the applicable due date(s). A plan is described in this paragraph if-- (i) The plan administrator has issued notices of intent to terminate the plan in a standard termination in accordance with section 4041(a)(2) of ERISA; and (ii) The proposed termination date set forth in the notice of intent to terminate is on or before the last day of the plan year preceding the premium payment year. (5) Plans at full funding limit. A plan is described in this paragraph if, on or before the earlier of the due date for payment of the variable-rate portion of the premium under Sec. 4007.11 or the date that portion is paid, the plan's contributing sponsor or contributing sponsors made contributions to the plan for the plan year preceding the premium payment year in an amount not less than the full funding limitation for such preceding plan year under section 302(c)(7) of ERISA and section 412(c)(7) of the Code (determined in accordance with paragraphs (a)(5)(i) and (a)(5)(ii) of this section). In order for a plan to qualify for this exemption, an enrolled actuary must certify that the plan has met the requirements of this paragraph. (i) Determination of full funding limitation. The determination of whether contributions for the preceding plan year were in an amount not less than the full funding limitation under section 302(c)(7) of ERISA and section 412(c)(7) of the Code for such preceding plan year shall be based on the methods of computing the full funding limitation, including actuarial assumptions and funding methods, used by the plan (provided such assumptions and methods met all requirements, including the requirements for reasonableness, under section 302 of ERISA and section 412 of the Code) with respect to such preceding plan year. Plan assets shall not be reduced by the amount of any credit balance in the plan's funding standard account. (ii) Rounding of de minimis amounts. Any contribution that is rounded down to no less than the next lower multiple of one hundred dollars (in the case of full funding limitations up to one hundred thousand dollars) or to no less than the next lower multiple of one thousand dollars (in the case of full funding limitations above one hundred thousand dollars) shall be deemed for purposes of this paragraph to be in an amount equal to the full funding limitation. (b) Special rule for determining vested benefits for certain large plans. With respect to a plan that had 500 or more participants on the last day of the plan year preceding the premium payment year, if an enrolled actuary determines pursuant to Sec. 4006.4(a) that the actuarial value of plan assets equals or exceeds the value of all benefits accrued under the plan (valued at the interest rate prescribed in Sec. 4006.4(b)(1)), the enrolled actuary need not determine the value of the plan's vested benefits, and may instead report in the Premium Payment Package the value of the accrued benefits. (c) Special rule for determining unfunded vested benefits for plans terminating in distress or involuntary terminations. A plan described in this paragraph may determine its unfunded vested benefits by using the special alternative calculation method set forth in this paragraph. A plan is described in this paragraph if it has issued notices of intent to terminate in a distress termination in accordance with section 4041(a)(2) of ERISA with a proposed termination date on or before the last day of the plan year preceding the premium payment year, or if the PBGC has instituted proceedings to terminate the plan in accordance with section 4042 of ERISA and has sought a termination date on or before the last day of the plan year preceding the premium payment year. Pursuant to this paragraph, a plan shall determine its unfunded vested benefits in accordance with the alternative calculation method in Sec. 4006.4(c), except that-- (1) The calculation shall be based on the Form 5500, Schedule B, for the plan year which includes (in the case of a distress termination) the proposed termination date or (in the case of an involuntary termination) the termination date sought by the PBGC, or, if no Schedule B is filed for that plan year, on the Schedule B for the immediately preceding plan year; (2) All references in Sec. 4006.4(c) and Sec. 4006.4(d) to the first day of the plan year preceding the premium payment year shall be deemed to refer to the first day of the plan year for which the Schedule B was filed; (3) The value of the sum of the plan's current liability as of the first day of the plan year preceding the premium payment year for vested benefits of active and terminated vested participants not in pay status, computed in accordance with section 302(d)(7) of ERISA and section 412(l)(7) of the Code, shall be adjusted (in lieu of the adjustment required by Sec. 4006.4(c)(1)) by multiplying that value by the sum of 1 plus the product of .07 and the number of years (rounded to the nearest hundredth of a year) between the date of the Schedule B data and (in the case of a distress termination) the proposed termination date or (in the case of an involuntary termination) the termination date sought by the PBGC; and (4) The exponent, ``Y,'' in the time adjustment formula of Sec. 4006.4(c)(5) shall be deemed to equal the number of years (rounded to the nearest hundredth of a year) between the date of the Schedule B data and the last day of the plan year preceding the premium payment year. (d) Special determination date rule for new and newly-covered plans. In the case of a new plan or a newly-covered plan, all references in Secs. 4006.3, 4006.4, and paragraphs (a) and (b) of this section to the last day of the plan year preceding the premium payment year shall be deemed to refer to the first day of the premium payment year or, if later, the date on which the plan became effective for benefit accruals for future service, and for purposes of determining the plan's premium, the number of plan participants, and (for a single- employer plan) the amount of the plan's unfunded vested benefits and the applicability of any exemption or special rule under [[Page 34020]] paragraph (a) or (b) of this section, shall be determined as of such first day or later date. (e) Special determination date rule for certain mergers and spinoffs. (1) With respect to a plan described in paragraph (e)(2) of this section, all references in Secs. 4006.3, 4006.4, and this section, as applicable, to the last day of the plan year preceding the premium payment year shall be deemed to refer to the first day of the premium payment year. (2) A plan is described in this paragraph (e)(2) if-- (i) The plan engages in a merger or spinoff that is not de minimis pursuant to the regulations under section 414(l) of the Code (in the case of single-employer plans) or pursuant to part 4231 of this chapter (in the case of multiemployer plans), as applicable; (ii) The merger or spinoff is effective on the first day of the plan's premium payment year; and (iii) The plan is the transferee plan in the case of a merger or the transferor plan in the case of a spinoff. (f) Special refund rule for certain short plan years. A plan described in this paragraph (f) is entitled to a refund for a short plan year. The amount of the refund will be determined by prorating the premium for the short plan year by the number of months (treating a part of a month as a month) in the short plan year. A plan is described in this paragraph if-- (1) The plan is a new or newly-covered plan that becomes effective for premium purposes on a date other than the first day of its first plan year; (2) The plan adopts an amendment changing its plan year, resulting in a short plan year; (3) The plan's assets are distributed pursuant to the plan's termination, in which case the short plan year for purposes of computing the amount of the refund under this paragraph shall be deemed to end on the asset distribution date or, if later (in the case of a single-employer plan), the date 30 days prior to the date the PBGC receives the plan's post-distribution certification; or (4) The plan is a single-employer plan and a trustee of the plan is appointed pursuant to section 4042 of ERISA, in which case the short plan year for purposes of computing the amount of the refund under this paragraph shall be deemed to end on the date of appointment. (g) Special rules for plans of regulated public utilities. (1) This paragraph (g) applies to a premium payment year beginning before 1998 of a plan maintained by one or more contributing sponsors at least one of which is a regulated public utility. For this purpose, a regulated public utility is one that, as of the beginning of the premium payment year, is described in section 7701(a)(33)(A)(i) of the Code and has not begun to collect from utility customers rates that reflect the costs incurred or projected to be incurred for additional premiums under section 4006(a)(3)(E) of ERISA pursuant to final and nonappealable determinations by all public utility commissions (or other authorities having jurisdiction over the rates and terms of service by the regulated public utility) that the costs are just and reasonable and recoverable from customers of the regulated public utility. (2) Limitation on variable-rate premium and required interest rate. If every contributing sponsor of a plan described in paragraph (a) of this section is a regulated public utility, then, notwithstanding the provisions of Secs. 4006.3(b) and 4006.4(b)(1),-- (i) The variable-rate premium shall not be greater than $53 multiplied by the number of participants in the plan on the last day of the plan year preceding the premium payment year; and (ii) If the premium payment year begins after June 1997, Sec. 4006.4(b)(1) shall be applied as if the applicable percentage referred to therein were 80 percent. (3) Proportional application of limitation rules. If a plan is described in paragraph (g)(1) of this section but also has a contributing sponsor that is not a regulated public utility and participants who are not regulated public utility participants (determined under any reasonable method consistently applied among participants and from year to year), the limitations in paragraph (g)(2) of this section shall be applied in proportion to the number of regulated public utility participants in accordance with the Premium Payment Package. (4) Special variable-rate premium rule for certain small regulated public utility plans paying maximum variable-rate premium. A plan whose variable-rate premium is subject to the limitation described in paragraph (g)(2)(i) of this section is not required to determine its unfunded vested benefits under Sec. 4006.4 if-- (i) The number of participants required to be taken into account in computing the plan's premium for the premium payment year is fewer than 500; and (ii) The plan pays a variable-rate premium equal to $53 multiplied by the number of participants in the plan on the last day of the plan year preceding the premium payment year. (5) Effect of omitted or inadequate information. The variable-rate premium of a plan described in paragraph (g)(2) of this section may be deemed to be $53 multiplied by the number of participants in the plan on the last day of the plan year preceding the premium payment year if-- (i) Any item or items necessary to establish the correct variable- rate premium for the plan are omitted from the plan's premium filing; or (ii) In connection with an audit, the plan's records fail, in the PBGC's judgment, to establish that the plan's unfunded vested benefits were of the amount reported by the plan for the premium payment year. PART 4007--PAYMENT OF PREMIUMS Sec. 4007.1 Purpose and scope. 4007.2 Definitions. 4007.3 Filing requirement and forms. 4007.4 Filing address. 4007.5 Date of filing. 4007.6 Computation of time. 4007.7 Late payment interest charges. 4007.8 Late payment penalty charges. 4007.9 Coverage for guaranteed basic benefits. 4007.10 Recordkeeping requirements; PBGC audits. 4007.11 Due dates. 4007.12 Liability for single-employer premiums. Authority: 29 U.S.C. 1302(b)(3), 1306, 1307. Sec. 4007.1 Purpose and scope. This part, which applies to all plans that are covered by title IV of ERISA, provides procedures for paying the premiums imposed by sections 4006 and 4007 of ERISA. (See part 4006 of this chapter for premium rates and computational rules.) Sec. 4007.2 Definitions. (a) The following terms are defined in Sec. 4001.2 of this chapter: Code, contributing sponsor, ERISA, insurer, IRS, multiemployer plan, notice of intent to terminate, PBGC, plan, plan administrator, plan year, and single-employer plan. (b) For purposes of this part, the following terms are defined in Sec. 4006.2 of this chapter: new plan, newly covered plan, participant, premium payment year, and short plan year. Sec. 4007.3 Filing requirement and forms. The estimation, declaration, reconciliation and payment of premiums shall be made using the forms prescribed by and in accordance with the instructions in the PBGC annual Premium Payment Package. The plan administrator of each covered plan shall [[Page 34021]] file the prescribed form or forms, and any premium payments due, no later than the applicable due date specified in Sec. 4007.11. Sec. 4007.4 Filing address. Plan administrators shall file all forms required to be filed under this part and all payments for premiums, interest, and penalties required to be made under this part at the address specified in the Premium Payment Package. Sec. 4007.5 Date of filing. (a) Any form required to be filed under this part and any payment required to be made under this part shall be deemed to have been filed or made on the date on which it is mailed. (b) A form or payment shall be presumed to have been mailed on the date on which it is postmarked by the United States Postal Service, or three days prior to the date on which it is received by the PBGC if it does not contain a legible United States Postal Service postmark. Sec. 4007.6 Computation of time. In computing any period of time prescribed by this part, the day of the act, event, or default from which the designated period of time begins to run is not counted. The last day of the period so computed shall be included, unless it is a Saturday, Sunday, or federal holiday, in which event the period runs until the end of the next day that is not a Saturday, Sunday, or federal holiday. For purposes of computing late payment interest charges under Sec. 4007.7 and late payment penalty charges under Sec. 4007.8, a Saturday, Sunday or federal holiday referred to in the previous sentence shall be included. Sec. 4007.7 Late payment interest charges. (a) If any premium payment due under this part is not paid by the due date prescribed for such payment by Sec. 4007.11, an interest charge will accrue on the unpaid amount at the rate imposed under section 6601(a) of the Code for the period from the date payment is due to the date payment is made. Late payment interest charges are compounded daily. (b) When PBGC issues a bill for premium payments necessary to reconcile the premiums paid with the actual premium due, interest will be accrued on the unpaid premium until the date of the bill if paid no later than 30 days after the date of such bill. If the bill is not paid within the 30-day period following the date of such bill, interest will continue to accrue throughout such 30-day period and thereafter, until the date paid. (c) PBGC bills for interest assessed under this section will be deemed paid when due if paid no later than 30 days after the date of such bills. Otherwise, interest will accrue in accordance with paragraph (a) of this section on the amount of the bill from the date of the bill until the date of payment. Sec. 4007.8 Late payment penalty charges. (a) Penalty charge. If any premium payment due under this part is not paid by the due date prescribed for such payment by Sec. 4007.11, the PBGC will, unless a waiver is granted pursuant to paragraph (b) of this section, assess a late payment charge (not to exceed 100% of the unpaid premium) equal to the greater of-- (i) 5% per month (or fraction thereof) of the unpaid premiums; or (ii) $25. (b) Waiver of penalty charge. The late payment penalty charge will be waived, in whole or in part-- (1) With respect to any premium payment made within 60 days after the due date prescribed for such payment in Sec. 4007.11, if, before such due date, the PBGC grants a waiver upon a showing of substantial hardship arising from the timely payment of the premium and a showing that the premium will be paid within such 60-day period; (2) If the PBGC grants a waiver based on any other demonstration of good cause; (3) If the PBGC, on its own motion, waives the application of paragraph (a) of this section; (4) With respect to any premium payment (excluding any variable- rate premium under Sec. 4006.3(b)), if a plan that is required to make a reconciliation filing described in Sec. 4007.11(b)(2)(iii)-- (i) Paid at least 90 percent of the flat-rate premium due for the premium payment year by the due date specified in Sec. 4007.11(b)(2)(i); or (ii) Paid by the due date specified in Sec. 4007.11(b)(2)(i) an amount equal to the premium that would be due for the premium payment year, computed using the flat per capita premium rate for the premium payment year and the participant count upon which the prior year's premium was based; and (iii) Pays 100 percent of the flat-rate premium due for the premium payment year under Sec. 4006.3 on or before the due date for the reconciliation filing under Sec. 4007.11(b)(2)(iii); or (5) With respect to any PBGC bills for the premium payment necessary to reconcile the premium paid with the actual premium due, if such bills are paid no later than 30 days after the date of such bills. Sec. 4007.9 Coverage for guaranteed basic benefits. (a) The failure by a plan administrator to pay the premiums due under this part will not result in that plan's loss of coverage for basic benefits guaranteed under sections 4022(a) or 4022A(a) of ERISA. (b) The payment of the premiums imposed by this part will not result in coverage for basic benefits guaranteed under sections 4022(a) or 4022A(a) of ERISA for plans not covered under title IV of ERISA. Sec. 4007.10 Recordkeeping requirements; PBGC audits. (a) Retention of records to support premium payments. All plan records, including calculations and other data prepared by an enrolled actuary or, for a plan described in section 412(i) of the Code, by the insurer from which the insurance contracts are purchased, that are necessary to support or to validate premium payments under this part shall be retained by the plan administrator for a period of six years after the premium due date. Records that must be retained pursuant to this paragraph include, but are not limited to, records that establish the number of plan participants and that reconcile the calculation of the plan's unfunded vested benefits with the actuarial valuation upon which the calculation was based. Records retained pursuant to this paragraph shall be made available to the PBGC upon request for inspection and photocopying. (b) PBGC audit. Premium payments under this part are subject to audit by the PBGC. If, upon audit, the PBGC determines that a premium due under this part was underpaid, the late payment interest charges under Sec. 4007.7 and the late payment penalty charges under Sec. 4007.8 shall apply to the unpaid balance from the premium due date to the date of payment. In determining the premium due, if, in the judgment of the PBGC, the plan's records fail to establish the number of plan participants with respect to whom premiums were required for any premium payment year, the PBGC may rely on data it obtains from other sources (including the IRS and the Department of Labor) for presumptively establishing the number of plan participants for premium computation purposes. Sec. 4007.11 Due dates. (a) In general. The premium filing due date for small plans is prescribed in paragraph (a)(1) of this section and the premium filing due dates for large plans are prescribed in paragraph (a)(2) of this section. [[Page 34022]] (1) Plans with fewer than 500 participants. If the plan has fewer than 500 participants, as determined under paragraph (b) of this section, the due date is the fifteenth day of the eighth full calendar month following the month in which the plan year began. (2) Plans with 500 or more participants. If the plan has 500 or more participants, as determined under paragraph (b) of this section-- (i) The due date for the flat-rate premium required by Sec. 4006.3(a) is the last day of the second full calendar month following the close of the plan year preceding the premium payment year; and (ii) The due date for the variable-rate premium required by Sec. 4006.3(b) for single-employer plans is the fifteenth day of the eighth full calendar month following the month in which the premium payment year begins. (iii) If the number of plan participants on the last day of the plan year preceding the premium payment year is not known by the date specified in paragraph (a)(2)(i) of this section, a reconciliation filing (on the form prescribed by this part) and any required premium payment or request for refund shall be made by the date specified in paragraph (a)(2)(ii) of this section. (3) Plans that change plan years. For any plan that changes its plan year, the premium form or forms and payment or payments for the short plan year shall be filed by the applicable due date or dates specified in paragraphs (a)(1), (a)(2), or (c) of this section. For the plan year that follows a short plan year, the due date or dates for the premium forms and payments shall be, with respect to each such due date, the later of-- (i) The applicable due date or dates specified in paragraph (a)(1) or (a)(2) of this section; or (ii) 30 days after the date on which the amendment changing the plan year was adopted. (b) Participant count rule for purposes of determining filing due dates. For purposes of determining under paragraph (a) of this section whether a plan has fewer than 500 participants, or 500 or more participants, the plan administrator shall use-- (1) For a single-employer plan, the number of participants for whom premiums were payable for the plan year preceding the premium payment year, or (2) For a multiemployer plan,-- (i) If the premium payment year is the plan's second plan year, the first day of the first plan year; or (ii) If the premium payment year is the plan's third or a subsequent plan year, the last day of the second preceding plan year. (c) Due dates for new and newly covered plans. Notwithstanding paragraph (a) of this section, the premium form and all premium payments due for the first plan year of coverage of any new plan or newly covered plan shall be filed on or before the latest of-- (1) The fifteenth day of the eighth full calendar month following the month in which the plan year began or, if later, in which the plan became effective for benefit accruals for future service; (2) 90 days after the date of the plan's adoption; or (3) 90 days after the date on which the plan became covered by title IV of ERISA. (d) Continuing obligation to file. The obligation to file the form or forms prescribed by this part and to pay any premiums due continues through the plan year in which all plan assets are distributed pursuant to a plan's termination or in which a trustee is appointed under section 4042 of ERISA, whichever occurs earlier. The entire premium computed under this part is due, irrespective of whether the plan is entitled to a refund for a short plan year pursuant to Sec. 4006.5(f). (e) Improper filings. Any form not filed in accordance with this part, not filed in accordance with the instructions in the Premium Payment Package, not accompanied by the required premium payment, or otherwise incomplete, may, in the discretion of the PBGC, be returned with any payment accompanying the form to the plan administrator, and such payment shall be treated as not having been made. Sec. 4007.12 Liability for single-employer premiums. (a) The designation under this part of the plan administrator as the person required to file the applicable forms and to submit the premium payment for a single-employer plan is a procedural requirement only and does not alter the liability for premium payments imposed by section 4007 of ERISA. Pursuant to section 4007(e) of ERISA, both the plan administrator and the contributing sponsor of a single-employer plan are liable for premium payments, and, if the contributing sponsor is a member of a controlled group, each member of the controlled group is jointly and severally liable for the required premiums. Any entity that is liable for required premiums is also liable for any interest and penalties assessed with respect to such premiums. (b) For any plan year in which a plan administrator issues (pursuant to section 4041(a)(2) of ERISA) notices of intent to terminate in a distress termination under section 4041(c) of ERISA or the PBGC initiates a termination proceeding under section 4042 of ERISA, and for each plan year thereafter, the obligation to pay the premiums (and any interest or penalties thereon) imposed by ERISA and this part for a single-employer plan shall be an obligation solely of the contributing sponsor and the members of its controlled group, if any. (Approved by the Office of Management and Budget under control number 1212-0009) PART 4010--ANNUAL FINANCIAL AND ACTUARIAL INFORMATION REPORTING Sec. 4010.1 Purpose and scope. 4010.2 Definitions. 4010.3 Filing requirement. 4010.4 Filers. 4010.5 Information year. 4010.6 Information to be filed. 4010.7 Identifying information. 4010.8 Plan actuarial information. 4010.9 Financial information. 4010.10 Due date and filing with the PBGC. 4010.11 Waivers and extensions. 4010.12 Confidentiality of information submitted. 4010.13 Penalties. 4010.14 OMB control number. Authority: 29 U.S.C. 1302(b)(3); 29 U.S.C. 1310. Sec. 4010.1 Purpose and scope. This part prescribes the requirements for annual filings with the PBGC under section 4010 of ERISA. This part applies to filers for any information year ending on or after December 31, 1995. Sec. 4010.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: benefit liabilities, Code, contributing sponsor, controlled group, ERISA, fair market value, IRS, PBGC, person, plan, and plan year. In addition, for purposes of this part: Exempt entity means a person who does not have to file information and about whom information does not have to be filed, as described in Sec. 4010.4(d) of this part. Exempt plan means a plan about which actuarial information does not have to be filed, as described in Sec. 4010.8(c) of this part. Fair market value of the plan's assets means the fair market value of the plan's assets at the end of the plan year ending within the filer's information year (determined without regard to any contributions receivable). [[Page 34023]] Filer means a person who is required to file reports, as described in Sec. 4010.4 of this part. Fiscal year means, with respect to a person, the person's annual accounting period or, if the person has not adopted a closing date, the calendar year. Information year means the year determined under Sec. 4010.5 of this part. Sec. 4010.3 Filing requirement. (a) In general. Except as provided in Sec. 4010.8(c) (relating to exempt plans) and except where waivers have been granted under Sec. 4010.11 of this part, each filer shall submit to the PBGC annually, on or before the due date specified in Sec. 4010.10, all information specified in Sec. 4010.6(a) with respect to all members of a controlled group and all plans maintained by members of a controlled group. (b) Single controlled group submission. Any filer or other person may submit the information specified in Sec. 4010.6(a) on behalf of one or more members of a filer's controlled group. If a person other than a filer submits the information, the submission must also include a written power of attorney signed by a filer authorizing the person to act on behalf of one or more filers. Sec. 4010.4 Filers. (a) General. A contributing sponsor of a plan and each member of the contributing sponsor's controlled group is a filer with respect to an information year (unless exempted under paragraph (d) of this section) if-- (1) the aggregate unfunded vested benefits of all plans (including any exempt plans) maintained by the members of the contributing sponsor's controlled group exceed $50 million (disregarding those plans with no unfunded vested benefits); (2) any member of a controlled group fails to make a required installment or other required payment to a plan and, as a result, the conditions for imposition of a lien described in section 302(f)(1) (A) and (B) of ERISA or section 412(n)(1) (A) and (B) of the Code have been met during the information year, and the required installment or other required payment is not made within ten days after its due date; or (3) any plan maintained by a member of a controlled group has been granted one or more minimum funding waivers under section 303 of ERISA or section 412(d) of the Code totaling in excess of $1 million that, as of the end of the plan year ending within the information year, are still outstanding (determined in accordance with paragraph (c) of this section). (b) Unfunded vested benefits--(1) General. Except as provided in paragraph (b)(2) of this section, for purposes of the $50 million test in paragraph (a)(1) of this section, the value of a plan's unfunded vested benefits is determined at the end of the plan year ending within the filer's information year in accordance with section 4006(a)(3)(E)(iii) of ERISA and Sec. 4006.4 of this chapter (without reference to the exemptions and special rules under Sec. 4006.5). (2) Optional assumptions. Prior to the first information year in which the mortality assumptions prescribed under section 302(d)(7)(C)(ii)(II) of ERISA apply to all of the plans maintained by a controlled group, the value of unfunded vested benefits for a plan may be determined by substituting for the respective assumptions used under paragraph (b)(1) of this section (but not using the alternative calculation method under Sec. 4006.4(c) of this chapter) all of the following assumptions: (i) an interest rate equal to 100% of the annual yield for 30-year Treasury constant maturities (as reported in Federal Reserve Statistical Release G.13 and H.15) for the last full calendar month in the plan year; (ii) the fair market value of the plan's assets; and (iii) the mortality tables described in section 302(d)(7)(C)(ii)(I) of ERISA or section 412(l)(7)(C)(ii)(I) of the Code; provided that for any plan year ending on or after the effective date of an amendment changing the mortality assumptions used to value benefits to be paid as annuities in trusteed plans under part 4044 of this chapter, those amended mortality assumptions shall be used. (c) Outstanding waiver. Before the end of the statutory amortization period, a minimum funding waiver for a plan is considered outstanding unless-- (1) a credit balance exists in the funding standard account (described in section 302(b) of ERISA and section 412(b) of the Code) that is no less than the outstanding balance of all waivers for the plan; (2) a waiver condition or contractual obligation requires that a credit balance as described in paragraph (c)(1) continue to be maintained as of the end of each plan year during the remainder of the statutory amortization period for the waiver; and (3) no portion of any credit balance described in paragraph (c)(1) is used to make any required installment under section 302(e) of ERISA or section 412(m) of the Code for any plan year during the remainder of the statutory amortization period. (d) Exempt entities. A person is an exempt entity if the person-- (1) is not a contributing sponsor of a plan (other than an exempt plan); (2) has revenue for its fiscal year ending within the controlled group's nformation year that is five percent or less of the controlled group's revenue for the fiscal year(s) ending within the information year; (3) has annual operating income for the fiscal year ending within the controlled group's information year that is no more than the greater of-- (i) five percent of the controlled group's annual operating income for the fiscal year(s) ending within the information year, or (ii) $5 million; and (4) has net assets at the end of the fiscal year ending within the controlled group's information year that is no more than the greater of-- (i) five percent of the controlled group's net assets at the end of the fiscal year(s) ending within the information year, or (ii) $5 million. Sec. 4010.5 Information year. (a) Determinations based on information year. An information year is used under this part to determine which persons are filers (Sec. 4010.4), what information a filer must submit (Secs. 4010.6- 4010.9), whether a plan is an exempt plan (Sec. 4010.8(c)), and the due date for submitting the information (Sec. 4010.10(a)). (b) General. Except as provided in paragraph (c) of this section, a person's information year shall be the fiscal year of the person. A filer is not required to change its fiscal year or the plan year of a plan, to report financial information for any accounting period other than an existing fiscal year, or to report actuarial information for any plan year other than an existing plan year. (c) Controlled group members with different fiscal years-- (1) Use of calendar year. If members of a controlled group (disregarding any exempt entity) report financial information on the basis of different fiscal years, the information year shall be the calendar year. (2) Example. Filers A and B are members of the same controlled group. Filer A has a July 1 fiscal year, and filer B has an October 1 fiscal year. The information year is the calendar year. Filer A's financial information with respect to its fiscal year ending June 30, 1996, and filer B's financial information with respect to its fiscal year ending September 30, 1996, must be submitted to the PBGC following the end of the 1996 calendar year (the calendar year in [[Page 34024]] which those fiscal years end). If filer B were an exempt entity, the information year would be filer A's July 1 fiscal year. Sec. 4010.6 Information to be filed. (a) General. A filer must submit the information specified in Sec. 4010.7 (identifying information), Sec. 4010.8 (plan actuarial information) and Sec. 4010.9 (financial information) of this part with respect to each member of the filer's controlled group and each plan maintained by any member of the controlled group. (b) Additional information. By written notification, the PBGC may require any filer to submit additional actuarial or financial information that is necessary to determine plan assets and liabilities for any period through the end of the filer's information year, or the financial status of a filer for any period through the end of the filer's information year. The information must be submitted within ten days after the date of the written notification or by a different time specified therein. (c) Previous submissions. If any required information has been previously submitted to the PBGC, a filer may incorporate this information into the required submission by referring to the previous submission. Sec. 4010.7 Identifying information. (a) Filers. Each filer is required to provide the following identifying information with respect to each member of the controlled group (excluding exempt entities)-- (1) the name, address, and telephone number of each member of the controlled group and the legal relationships of each (for example, parent, subsidiary); and (2) the nine-digit Employer Identification Number (EIN) assigned by the IRS to each member (or if there is no EIN for a member, an explanation). (b) Plans. Each filer is required to provide the following identifying information with respect to each plan (including exempt plans) maintained by any member of the controlled group (including exempt entities)-- (1) the name of each plan; (2) the EIN and the three-digit Plan Number (PN) assigned by the contributing sponsor to each plan (or if there is no EIN or PN for a plan, an explanation); and (3) if the EIN or PN of a plan has changed since the beginning of the filer's information year, the previous EIN or PN and an explanation. Sec. 4010.8 Plan actuarial information. (a) Required information. For each plan (other than an exempt plan) maintained by any member of the filer's controlled group, each filer is required to provide the following actuarial information-- (1) the fair market value of the plan's assets; (2) the value of the plan's benefit liabilities (determined in accordance with paragraph (d) of this section) at the end of the plan year ending within the filer's information year; (3) a copy of the actuarial valuation report for the plan year ending within the filer's information year that contains or is supplemented by the following information-- (i) each amortization base and related amortization charge or credit to the funding standard account (as defined in section 302 (b) of ERISA or section 412 (b) of the Code) for that plan year (excluding the amount considered contributed to the plan as described in section 302(b)(3)(A) of ERISA or section 412(b)(3)(A) of the Code), (ii) the itemized development of the additional funding charge payable for that plan year pursuant to section 412(l) of the Code, (iii) the minimum funding contribution and the maximum deductible contribution for that plan year, (iv) the actuarial assumptions and methods used for that plan year for purposes of section 302(b) and (d) of ERISA or section 412(b) and (l) of the Code (and any change in those assumptions and methods since the previous valuation and justifications for any change), and (v) a summary of the principal eligibility and benefit provisions on which the valuation of the plan was based (and any changes to those provisions since the previous valuation), along with descriptions of any benefits not included in the valuation, any significant events that occurred during that plan year, and the plan's early retirement factors; and (4) a written certification by an enrolled actuary that, to the best of his or her knowledge and belief, the actuarial information submitted is true, correct, and complete and conforms to all applicable laws and regulations, provided that this certification may be qualified in writing, but only to the extent the qualification(s) are permitted under 26 CFR Sec. 301.6059-1(d). (b) Alternative compliance for plan actuarial information. If any of the information specified in paragraph (a)(3) of this section is not available by the date specified in Sec. 4010.10(a), a filer may satisfy the requirement to provide such information by-- (1) including a statement, with the material that is submitted to the PBGC, that the filer will file the unavailable information by the alternative due date specified in Sec. 4010.10(b) of this part, and (2) filing such information (along with a certification by an enrolled actuary under paragraph (a)(4) of this section) with the PBGC by that alternative due date. (c) Exempt plan. The actuarial information specified in this section is not required with respect to a plan that, as of the end of the plan year ending within the filer's information year, has fewer than 500 participants or has benefit liabilities (determined in accordance with paragraph (d) of this section) equal to or less than the fair market value of the plan's assets, provided that the plan-- (1) has received, on or within ten days after their due dates, all required installments or other payments required to be made during the information year under section 302 of ERISA or section 412 of the Code; and (2) has no minimum funding waivers outstanding (as described in Sec. 4010.4(c) of this part) as of the end of the plan year ending within the information year. (d) Value of benefit liabilities. The value of a plan's benefit liabilities at the end of a plan year shall be determined using the plan census data described in paragraph (d)(1) of this section and the actuarial assumptions and methods described in paragraph (d)(2) or, where applicable, (d)(3) of this section. (1) Census data. (i) Census data period. Plan census data shall be determined (for all plans for any information year) either as of the end of the plan year or as of the beginning of the next plan year. (ii) Projected census data. If actual plan census data is not available, a plan may use a projection of plan census data from a date within the plan year. The projection must be consistent with projections used to measure pension obligations of the plan for financial statement purposes and must give a result appropriate for the end of the plan year for these obligations. For example, adjustments to the projection process will be required where there has been a significant event (such as a plan amendment or a plant shutdown) that has not been reflected in the projection data. (2) Actuarial assumptions and methods. The value of benefit liabilities shall be determined using the assumptions and methods applicable to the valuation of benefits to be paid as annuities in trusteed plans terminating at the end of the plan year (as prescribed [[Page 34025]] in Secs. 4044.51 through 4044.57 of this chapter). (3) Special actuarial assumptions for exempt plan determination. Solely for purposes of determining whether a plan is an exempt plan, the value of benefit liabilities may be determined by substituting for the retirement age assumptions in paragraph (d)(2) the retirement age assumptions used by the plan for that plan year for purposes of section 302(d) of ERISA or section 412(l) of the Code. Sec. 4010.9 Financial information. (a) General. Except as provided in this section, each filer is required to provide the following financial information for each controlled group member (other than an exempt entity)-- (1) audited financial statements for the fiscal year ending within the information year (including balance sheets, income statements, cash flow statements, and notes to the financial statements); (2) if audited financial statements are not available by the date specified in Sec. 4010.10(a), unaudited financial statements for the fiscal year ending within the information year; or (3) if neither audited nor unaudited financial statements are available by the date specified in Sec. 4010.10(a), copies of federal tax returns for the tax year ending within the information year. (b) Consolidated financial statements. If the financial information of a controlled group member is combined with the information of other group members in consolidated financial statements, a filer may provide the following financial information in lieu of the information required in paragraph (a) of this section-- (1) the audited consolidated financial statements for the filer's information year or, if the audited consolidated financial statements are not available by the date specified in Sec. 4010.10(a), unaudited consolidated financial statements for the fiscal year ending within the information year; and (2) for each controlled group member included in the consolidated financial statements that is a contributing sponsor of a plan (other than an exempt plan), the contributing sponsor's revenues and operating income for the information year, and net assets at the end of the information year. (c) Subsequent submissions. If unaudited financial statements are submitted as provided in paragraph (a)(2) or (b)(1) of this section, audited financial statements must thereafter be filed within 15 days after they are prepared. If federal tax returns are submitted as provided in paragraph (a)(3) of this section, audited and unaudited financial statements must thereafter be filed within 15 days after they are prepared. (d) Submission of public information. If any of the financial information required by paragraphs (a) through (c) of this section is publicly available, the filer, in lieu of submitting such information to the PBGC, may include a statement with the other information that is submitted to the PBGC indicating when such financial information was made available to the public and where the PBGC may obtain it. For example, if the controlled group member has filed audited financial statements with the Securities and Exchange Commission, it need not file the financial statements with PBGC but instead can identify the SEC filing as part of its submission under this part. (e) Inclusion of information about non-filers and exempt entities. Consolidated financial statements provided pursuant to paragraph (b)(1) of this section may include financial information of persons who are not controlled group members (e.g., joint ventures) or are exempt entities. Sec. 4010.10 Due date and filing with the PBGC. (a) Due date. Except as permitted under paragraph (b) of this section, a filer shall file the information required under this part with the PBGC on or before the 105th day after the close of the filer's information year. (b) Alternative due date. A filer that includes the statement specified in Sec. 4010.8(b)(1) with its submission to the PBGC by the date specified in paragraph (a) of this section must submit the actuarial information specified in Sec. 4010.8(b)(2) within 15 days after the deadline for filing the plan's annual report (Form 5500 series) for the plan year ending within the filer's information year (see Sec. 2520.104a-5(a)(2) of this title). (c) How to file. Requests and information may be delivered by mail, by delivery service, by hand, or by any other method acceptable to the PBGC, to: Corporate Finance and Negotiations Department, Pension Benefit Guaranty Corporation, 1200 K Street, N.W., Washington, DC 20005-4026. (d) Date when information filed. Information filed under this part is considered filed-- (1) 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 document was mailed postage prepaid, properly addressed to the PBGC; or (2) if the conditions stated in paragraph (d)(1) of this section are not met, 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. (e) Computation of time. In computing any period of time under this part, the day of the act or event from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a weekend or Federal holiday, in which event the period runs until the end of the next day that is not a weekend or Federal holiday. Sec. 4010.11 Waivers and extensions. The PBGC may waive the requirement to submit information with respect to one or more filers or plans or may extend the applicable due date or dates specified in Sec. 4010.10 of this part. The PBGC will exercise this discretion in appropriate cases where it finds convincing evidence supporting a waiver or extension; any waiver or extension may be subject to conditions. A request for a waiver or extension must be filed in writing with the PBGC at the address provided in Sec. 4010.10(c) no later than 15 days before the applicable date specified in Sec. 4010.10 of this part, and must state the facts and circumstances on which the request is based. Sec. 4010.12 Confidentiality of information submitted. In accordance with Sec. 4901.21(a)(3) of this chapter and section 4010(c) of ERISA, any information or documentary material that is not publicly available and is submitted to the PBGC pursuant to this part shall not be made public, except as may be relevant to any administrative or judicial action or proceeding or for disclosures to either body of Congress or to any duly authorized committee or subcommittee of the Congress. Sec. 4010.13 Penalties. If all of the information required under this part is not provided within the specified time limit, the PBGC may assess a separate penalty under section 4071 of ERISA against the filer and each member of the filer's controlled group (other than an exempt entity) of up to $1,000 a day for each day that the failure continues. The PBGC may also pursue other equitable or legal remedies available to it under the law. [[Page 34026]] Sec. 4010.14 OMB control number. The collection of information requirements contained in this part have been approved by the Office of Management and Budget under OMB Control Number 1212-0049. PART 4011--DISCLOSURE TO PARTICIPANTS Sec. 4011.1 Purpose and scope. 4011.2 Definitions. 4011.3 Notice requirement. 4011.4 Small plan rules. 4011.5 Exemption for new and newly-covered plans. 4011.6 Mergers, consolidations, and spinoffs. 4011.7 Persons entitled to receive notice. 4011.8 Time of notice. 4011.9 Manner of issuance of notice. 4011.10 Form of notice. 4011.11 OMB control number. Appendix A to Part 4011--Model Participant Notice. Appendix B to Part 4011--Table of maximum Guaranteed Benefits. Authority: 29 U.S.C. 1302(b)(3), 1311. Sec. 4011.1 Purpose and scope. This part prescribes rules and procedures for complying with the requirements of section 4011 of ERISA. This part applies for any plan year beginning on or after January 1, 1995, with respect to any single- employer plan that is covered by section 4021 of ERISA. Sec. 4011.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: contributing sponsor, employer, ERISA, normal retirement age, PBGC, person, plan, plan administrator, plan year, and single-employer plan. In addition, for purposes of this part: Participant has the meaning in Sec. 4041.2 of this chapter. Participant Notice means the notice required pursuant to section 4011 of ERISA and this part. Sec. 4011.3 Notice requirement. (a) General. Except as otherwise provided in this part, the plan administrator of a plan must provide a Participant Notice for a plan year if a variable rate premium is payable for the plan under section 4006(a)(3)(E) of ERISA and part 4006 of this chapter for that plan year, unless, for that plan year or for the prior plan year, the plan meets the Deficit Reduction Contribution (``DRC'') Exception Test in paragraph (b) of this section. The DRC Exception Test may be applied using the Small Plan DRC Exception Test rules in Sec. 4011.4(b), where applicable. (b) DRC Exception Test--(1) Basic rule. A plan meets the DRC Exception Test for a plan year if it is exempt from the requirements of section 302(d) of ERISA for that plan year by reason of section 302(d)(9), without regard to the small plan exemption in section 302(d)(6)(A). (2) 1994 plan year. A plan satisfies the DRC Exception Test for the 1994 plan year if, for any two of the plan years beginning in 1992, 1993, and 1994 (whether or not consecutive), the plan satisfies any requirement of section 302(d)(9)(D)(i) of ERISA. (c) Penalties for non-compliance. If a plan administrator fails to provide a Participant Notice within the specified time limit or omits material information from a Participant Notice, the PBGC may assess a penalty under section 4071 of ERISA of up to $1,000 a day for each day that the failure continues. Sec. 4011.4 Small plan rules. (a) 1995 plan year exemption. A plan that is exempt from the requirements of section 302(d) of ERISA for the 1994 or 1995 plan year by reason of section 302(d)(6)(A) is exempt from the Participant Notice requirement for the 1995 plan year. (b) Small Plan DRC Exception Test. In determining whether the Participant Notice requirement applies for a plan year beginning after 1995, the plan administrator of a plan that is exempt from the requirements of section 302(d) of ERISA by reason of section 302(d)(6)(A) for the plan year being tested may use any one or more of the following rules in determining whether the plan meets the DRC Exception Test for that plan year: (1) Use of Schedule B data. For any plan year for which the plan is exempt from the requirements of section 302(d) of ERISA by reason of section 302(d)(6)(A), provided both of the following adjustments are made-- (i) The market value of the plan's assets as of the beginning of the plan year (as required to be reported on Form 5500, Schedule B) may be substituted for the actuarial value of the plan's assets as of the valuation date; and (ii) The plan's current liability for all participants' total benefits as of the beginning of the plan year (as required to be reported on Form 5500, Schedule B) may be substituted for the plan's current liability as of the valuation date. (2) Pre-1995 plan year 90 percent test. A plan that is exempt from the requirements of section 302(d) of ERISA for a pre-1995 plan year by reason of section 302(d)(6)(A) satisfies the requirements of section 302(d)(9)(D)(i) for that pre-1995 plan year if the ratio of its assets to its current liability for that plan year is at least 90 percent. For this purpose, the plan's assets are valued without subtracting any credit balance under section 302(b) of ERISA, and its current liability is determined using the highest interest rate allowable for the plan year under section 302(d)(7)(C). (3) Interest rate adjustment. If the interest rate used to calculate current liability for a plan year is less than the highest rate allowable for the plan year under section 302(d)(7)(C) of ERISA, the current liability may be reduced by one percent for each tenth of a percentage point by which the highest rate exceeds the rate so used. Sec. 4011.5 Exemption for new and newly-covered plans. A plan (other than a plan resulting from a consolidation or spinoff) is exempt from the Participant Notice requirement for the first plan year for which the plan must pay premiums under parts 4006 and 4007 of this chapter. Sec. 4011.6 Mergers, consolidations, and spinoffs. In the case of a plan involved in a merger, consolidation, or spinoff transaction that becomes effective during a plan year, the plan administrator shall apply the requirements of section 4011 of ERISA and of this part for that plan year in a reasonable manner to ensure that the Participant Notice serves its statutory purpose. Sec. 4011.7 Persons entitled to receive notice. The plan administrator must provide the Participant Notice to each person who is a participant, a beneficiary of a deceased participant, an alternate payee under an applicable qualified domestic relations order (as defined in section 206(d)(3) of ERISA), or an employee organization that represents any group of participants for purposes of collective bargaining. To determine who is a person that must receive the Participant Notice for a plan year, the plan administrator may select any date during the period beginning with the last day of the previous plan year and ending with the day on which the Participant Notice for the plan year is due, provided that a change in the date from one plan year to the next does not exclude a substantial number of participants and beneficiaries. Sec. 4011.8 Time of notice. The plan administrator must issue the Participant Notice for a plan year no later than two months after the deadline (including extensions) for filing the annual report for the previous plan year (see Sec. 2520.104a-5(a)(2) of this title). [[Page 34027]] The plan administrator may change the date of issuance from one plan year to the next, provided that the effect of any change is not to avoid disclosing a minimum funding waiver under Sec. 4011.10(b)(5) or a missed contribution under Sec. 4011.10(b)(6). When the President of the United States declares that, under the Disaster Relief Act of 1974, as amended (42 U.S.C. 5121, 5122(2), 5141(b)), a major disaster exists, the PBGC may extend the due date for providing the Participant Notice by up to 180 days. Sec. 4011.9 Manner of issuance of notice. The Participant Notice shall be issued by using measures reasonably calculated to ensure actual receipt by the persons entitled to receive it. It may be issued together with another document, such as the summary annual report required under section 104(b)(3) of ERISA for the prior plan year, but must be in a separate document. Sec. 4011.10 Form of notice. (a) General. The Participant Notice (and any additional information under paragraph (d) of this section) shall be readable and written in a manner calculated to be understood by the average plan participant and not to mislead recipients. The Model Participant Notice in Appendix A to this part (when properly completed) is an example of a Participant Notice meeting the requirements of this section. (b) Content. The Participant Notice for a plan year shall include-- (1) Identifying information (the name of the plan and the contributing sponsor, the employer identification number of the contributing sponsor, the plan number, the date (at least the month and year) on which the Participant Notice is issued, and the name, title, address and telephone number of the person(s) who can provide information about the plan's funding); (2) A statement to the effect that the Participant Notice is required by law; (3) The Notice Funding Percentage for the plan year, determined in accordance with paragraph (c) of this section, and the date as of which the Notice Funding Percentage is determined; (4) A statement to the effect that-- (i) To pay pension benefits, the employer is required to contribute money to the plan over a period of years; (ii) A plan's funding percentage does not take into consideration the financial strength of the employer; and (iii) The employer, by law, must pay for all pension benefits, but benefits may be at risk if the employer faces a severe financial crisis or is in bankruptcy; (5) If, for any of the five plan years immediately preceding the plan year, the plan has been granted a minimum funding waiver under section 303 of ERISA that has not (as of the end of the prior plan year) been fully repaid, a statement identifying each such plan year and an explanation of a minimum funding waiver; (6) For any payment subject to the requirements of this paragraph, a statement identifying the due date for the payment and noting that the payment has or has not been made and (if made) the date of the payment. Once participants have been notified (under this part or Title I of ERISA) of a missed contribution that is subject to the requirements of this paragraph, the delinquency need not be reported in a Participant Notice for a subsequent plan year if the missed contribution has been paid in full by the time the subsequent Participant Notice is issued. The payments subject to the requirements of this paragraph are-- (i) Any minimum funding payment necessary to satisfy the minimum funding standard under section 302(a) of ERISA for any plan year beginning on or after January 1, 1994, if not paid by the earlier of the due date for that payment (the latest date allowed under section 302(c)(10)) or the date of issuance of the Participant Notice; and (ii) An installment or other payment required by section 302 of ERISA for a plan year beginning on or after January 1, 1995, that was not paid by the 60th day after the due date for that payment; (7) A statement to the effect that if a plan terminates before all pension benefits are fully funded, the PBGC pays most persons all pension benefits, but some persons may lose certain benefits that are not guaranteed; (8) A summary of plan benefits guaranteed by the PBGC, with an explanation of the limitations on such guarantee; and (9) A statement that further information about the PBGC's guarantee may be obtained by requesting a free copy of the booklet ``Your Guaranteed Pension'' from Consumer Information Center, Dept. YGP, Pueblo, Colorado 81009. The Participant Notice may include a statement that the booklet may be obtained through electronic access via the World Wide Web from the PBGC Homepage at http://www.pbgc.gov/ygp.htm. (c) Notice Funding Percentage-- (1) General Rule. The Notice Funding Percentage that must be included in the Participant Notice for a plan year is the ``funded current liability percentage'' (as that term is defined in section 302(d)(9)(C) of ERISA) for that plan year or the prior plan year. (2) Small plans. A plan that is exempt from the requirements of section 302(d) of ERISA for a plan year by reason of section 302(d)(6)(A) may determine its funded current liability percentage for that plan year using the Small Plan DRC Exception Test rules in Sec. 4011.4(b). (d) Additional information. The plan administrator may include with the Participant Notice any information not described in paragraph (b) of this section only if it is in a separate document. (e) Foreign languages. In the case of a plan that (as of the date selected under Sec. 4011.7) covers the numbers or percentages specified in Sec. 2520.104b-10(e) of this title of participants literate only in the same non-English language, the plan administrator shall provide those participants either-- (1) An English-language Participant Notice that prominently displays a legend, in their common non-English language, offering them assistance in that language, and clearly setting forth any procedures participants must follow to obtain such assistance, or (2) A Participant Notice in that language. Sec. 4011.11 OMB control number. The collections of information contained in this part have been approved by the Office of Management and Budget under OMB control number 1212-0050. Appendix A to Part 4011--Model Participant Notice The following is an example of a Participant Notice that satisfies the requirements of Sec. 4011.10 when the required information is filled in (subject to Secs. 4011.10(d)-(e), where applicable). Notice to Participants of [Plan Name] The law requires that you receive information on the funding level of your defined benefit pension plan and the benefits guaranteed by the Pension Benefit Guaranty Corporation (PBGC), a federal insurance agency. YOUR PLAN'S FUNDING As of [DATE], your plan had [INSERT NOTICE FUNDING PERCENTAGE (DETERMINED IN ACCORDANCE WITH Sec. 4011.10(c))] percent of the money needed to pay benefits promised to employees and retirees. To pay pension benefits, your employer is required to contribute money to the pension plan over a period of years. A plan's funding percentage does not take into consideration the financial strength of the employer. Your employer, by law, must pay for all pension benefits, but your benefits may be at risk if your employer faces a severe financial crisis or is in bankruptcy. [[Page 34028]] [INCLUDE THE FOLLOWING PARAGRAPH ONLY IF, FOR ANY OF THE PREVIOUS FIVE PLAN YEARS, THE PLAN HAS BEEN GRANTED AND HAS NOT FULLY REPAID A FUNDING WAIVER.] Your plan received a funding waiver for [LIST ANY OF THE FIVE PREVIOUS PLAN YEARS FOR WHICH A FUNDING WAIVER WAS GRANTED AND HAS NOT BEEN FULLY REPAID]. If a company is experiencing temporary financial hardship, the Internal Revenue Service may grant a funding waiver that permits the company to delay contributions that fund the pension plan. [INCLUDE THE FOLLOWING WITH RESPECT TO ANY UNPAID OR LATE PAYMENT THAT MUST BE DISCLOSED UNDER Sec. 4011.10(b)(6):] Your plan was required to receive a payment from the employer on [LIST APPLICABLE DUE DATE(S)]. That payment [has not been made] [was made on [LIST APPLICABLE PAYMENT DATE(S)]]. PBGC GUARANTEES When a pension plan ends without enough money to pay all benefits, the PBGC steps in to pay pension benefits. The PBGC pays most people all pension benefits, but some people may lose certain benefits that are not guaranteed. The PBGC pays pension benefits up to certain maximum limits. The maximum guaranteed benefit is [INSERT FROM TABLE IN APPENDIX B] per month or [INSERT FROM TABLE IN APPENDIX B] per year for a 65-year-old person in a plan that terminates in [INSERT APPLICABLE YEAR]. The maximum benefit may be reduced for an individual who is younger than age 65. For example, it is [INSERT FROM TABLE IN APPENDIX B] per month or [INSERT FROM TABLE IN APPENDIX B] per year for an individual who starts receiving benefits at age 55. [IN LIEU OF AGE 55, YOU MAY ADD OR SUBSTITUTE ANY AGE(S) RELEVANT UNDER THE PLAN. FOR EXAMPLE, YOU MAY ADD OR SUBSTITUTE THE MAXIMUM BENEFIT FOR AGES 62 OR 60 FROM THE TABLE IN APPENDIX B. IF THE PLAN PROVIDES FOR NORMAL RETIREMENT BEFORE AGE 65, YOU MUST INCLUDE THE NORMAL RETIREMENT AGE.] [IF THE PLAN DOES NOT PROVIDE FOR COMMENCEMENT OF BENEFITS BEFORE AGE 65, YOU MAY OMIT THIS PARAGRAPH.] The maximum benefit will also be reduced when a benefit is provided for a survivor. The PBGC does not guarantee certain types of benefits. [INCLUDE THE FOLLOWING GUARANTEE LIMITS THAT APPLY TO THE BENEFITS AVAILABLE UNDER YOUR PLAN.] The PBGC does not guarantee benefits for which you do not have a vested right when a plan ends, usually because you have not worked enough years for the company. The PBGC does not guarantee benefits for which you have not met all age, service, or other requirements at the time the plan ends. Benefit increases and new benefits that have been in place for less than a year are not guaranteed. Those that have been in place for less than 5 years are only partly guaranteed. Early retirement payments that are greater than payments at normal retirement age may not be guaranteed. For example, a supplemental benefit that stops when you become eligible for Social Security may not be guaranteed. Benefits other than pension benefits, such as health insurance, life insurance, death benefits, vacation pay, or severance pay, are not guaranteed. The PBGC does not pay lump sums exceeding $3,500. WHERE TO GET MORE INFORMATION Your plan, [EIN-PN], is sponsored by [CONTRIBUTING SPONSOR(S)]. If you would like more information about the funding of your plan, contact [INSERT NAME, TITLE, BUSINESS ADDRESS AND PHONE NUMBER OF INDIVIDUAL OR ENTITY]. For more information about the PBGC and the benefits it guarantees, you may request a free copy of ``Your Guaranteed Pension'' by writing to Consumer Information Center, Dept. YGP, Pueblo, Colorado 81009. [THE FOLLOWING SENTENCE MAY BE INCLUDED:] ``Your Guaranteed Pension'' is also available from the PBGC Homepage on the World Wide Web at http://www.pbgc.gov/ygp.htm. Issued: [INSERT AT LEAST MONTH AND YEAR] Appendix B to Part 4011--Table of Maximum Guaranteed Benefits -------------------------------------------------------------------------------------------------------------------------------------------------------- The maximum guaranteed benefit for an individual starting to receive benefits at the age listed below is the amount (monthly or annual) listed below: ------------------------------------------------------------------------------------------------------- If a plan terminates in-- Age 65 Age 62 Age 60 Age 55 ------------------------------------------------------------------------------------------------------- Monthly Annual Monthly Annual Monthly Annual Monthly Annual -------------------------------------------------------------------------------------------------------------------------------------------------------- 1995............................................ $2,573.86 $30,886.32 $2,033.35 $24,400.20 $1,673.01 $20,076.12 $1,158.24 $13,898.88 1996............................................ $2,642.05 $31,704.60 $2,087.22 $25,046.64 $1,717.33 $20,607.96 $1,188.92 $14,267.04 -------------------------------------------------------------------------------------------------------------------------------------------------------- The maximum guaranteed benefit for an individual starting to receive benefits at ages other than those listed above can be determined by applying the PBGC's regulation on computation of maximum guaranteeable benefits (29 CFR 4022.22). PART 4022--BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS Subpart A--General Provisions; Guaranteed Benefits Sec. 4022.1 Purpose and scope. 4022.2 Definitions. 4022.3 Guaranteed benefits. 4022.4 Entitlement to a benefit. 4022.5 Determination of nonforfeitable benefits. 4022.6 Annuity payable for total disability. 4022.7 Benefits payable in a single installment. Subpart B--Limitations on Guaranteed Benefits 4022.21 Limitations; in general. 4022.22 Maximum guaranteeable benefit. 4022.23 Computation of maximum guaranteeable benefits. 4022.24 Benefit increases. 4022.25 Five-year phase-in of benefit guarantee for participants other than substantial owners. 4022.26 Phase-in of benefit guarantee for participants who are substantial owners. 4022.27 Effect of tax disqualification. Subpart C--Calculation and Payment of Unfunded Nonguaranteed Benefits [Reserved] Subpart D--Benefit Reductions in Terminating Plans 4022.61 Limitations on benefit payments by plan administrator. 4022.62 Estimated guaranteed benefit. 4022.63 Estimated title IV benefit. Subpart E--PBGC Recoupment and Reimbursement of Benefit Overpayments and Underpayments 4022.81 General rules. 4022.82 Method of recoupment. 4022.83 PBGC reimbursement of benefit underpayments. Appendix A to Part 4022--Maximum Guaranteeable Monthly Benefit Authority: 29 U.S.C. 1302, 1322, 1322b, 1341(c)(3)(D), and 1344. Subpart A--General Provisions; Guaranteed Benefits Sec. 4022.1 Purpose and scope. The purpose of this part is to prescribe rules governing the calculation and payment of benefits payable in terminated single- employer plans under section 4022 of ERISA. Subpart A, which applies to each plan [[Page 34029]] providing benefits guaranteed under title IV of ERISA, contains definitions applicable to all subparts, and describes basic-type benefits that are guaranteed by the PBGC subject to the limitations set forth in Subpart B. Subpart C is reserved for rules relating to the calculation and payment of unfunded nonguaranteed benefits under section 4022(c) of ERISA. Subpart D prescribes procedures that minimize the overpayment of benefits by plan administrators after initiating distress terminations of single-employer plans that are not expected to be sufficient for guaranteed benefits. Subpart E sets forth the method of recoupment of benefit payments in excess of the amounts permitted under sections 4022, 4022B, and 4044 of ERISA from participants and beneficiaries in PBGC-trusteed plans, and provides for reimbursement of benefit underpayments. (The provisions of this part have not been amended to take account of changes made in section 4022 of ERISA by sections 766 and 777 of the Retirement Protection Act of 1994.) Sec. 4022.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: annuity, Code, employer, ERISA, guaranteed benefit, mandatory employee contributions, nonforfeitable benefit, normal retirement age, notice of intent to terminate, PBGC, person, plan, plan administrator, plan year, proposed termination date, substantial owner, and title IV benefit. In addition, for purposes of this part (unless otherwise required by the context): Accumulated mandatory employee contributions means mandatory employee contributions plus interest credited on those contributions under the plan, or, if greater, interest required by section 204(c) of ERISA. Benefit in pay status means that one or more benefit payments have been made or would have been made except for administrative delay. Benefit increase means any benefit arising from the adoption of a new plan or an increase in the value of benefits payable arising from an amendment to an existing plan. Such increases include, but are not limited to, a scheduled increase in benefits under a plan or plan amendment, such as a cost-of-living increase, and any change in plan provisions which advances a participant's or beneficiary's entitlement to a benefit, such as liberalized participation requirements or vesting schedules, reductions in the normal or early retirement age under a plan, and changes in the form of benefit payments. In the case of a plan under which the amount of benefits depends on the participant's salary and the participant receives a salary increase the resulting increase in benefits to which the participant becomes entitled will not, for the purpose of this part, be treated as a benefit increase. Similarly, in the case of a plan under which the amount of benefits depends on the participant's age or service, and the participant becomes entitled to increased benefits solely because of advancement in age or service, the increased benefits to which the participant becomes entitled will not, for the purpose of this part, be treated as a benefit increase. Covered employment means employment with respect to which benefits accrue under a plan. Pension benefit means a benefit payable as an annuity, or one or more payments related thereto, to a participant who permanently leaves or has permanently left covered employment, or to a surviving beneficiary, which payments by themselves or in combination with Social Security, Railroad Retirement, or workmen's compensation benefits provide a substantially level income to the recipient. Straight life annuity means a series of level periodic payments payable for the life of the recipient, but does not include any combined annuity form, including an annuity payable for a term certain and life. Sec. 4022.3 Guaranteed benefits. Except as otherwise provided in this part, the PBGC will guarantee the amount, as of the termination date, of a benefit provided under a plan to the extent that the benefit does not exceed the limitations in ERISA and in subpart B, if-- (a) The benefit is a nonforfeitable benefit; (b) The benefit qualifies as a pension benefit as defined in Sec. 4022.2; and (c) The participant is entitled to the benefit under Sec. 4022.4. Sec. 4022.4 Entitlement to a benefit. (a) A participant or his surviving beneficiary is entitled to a benefit if under the provisions of a plan: (1) The benefit was in pay status on the date of the termination of the plan. (2) A benefit payable at normal retirement age is an optional form of payment to the benefit otherwise payable at such age and the participant elected the benefit before the termination date of the plan. (3) Except for a benefit described in paragraph (a)(2) of this section, before the termination date the participant had satisfied the conditions of the plan necessary to establish the right to receive the benefit prior to such date other than application for the benefit, satisfaction of a waiting period described in the plan, or retirement; or (4) Absent an election by the participant, the benefit would be payable upon retirement. (5) In the case of a benefit that returns all or a portion of a participant's accumulated mandatory employee contributions upon death, the participant (or beneficiary) had satisfied the conditions of the plan necessary to establish the right to the benefit other than death or designation of a beneficiary. (b) If none of the conditions set forth in paragraph (a) of this section is met, the PBGC will determine whether the participant is entitled to a benefit on the basis of the provisions of the plan and the circumstances of the case. Sec. 4022.5 Determination of nonforfeitable benefits. (a) A guaranteed benefit payable to a surviving beneficiary is not considered to be forfeitable solely because the plan provides that the benefit will cease upon the remarriage of such beneficiary or his attaining a specified age. However, the PBGC will observe the provisions of the plan relating to the effect of such remarriage or attainment of such specified age on the surviving beneficiary's eligibility to continue to receive benefit payments. (b) Any other provision in a plan that the right to a benefit in pay status will cease or be suspended upon the occurrence of any specified condition does not automatically make that benefit forfeitable. In each such case the PBGC will determine whether the benefit is forfeitable. (c) A benefit guaranteed under Sec. 4022.6 shall not be considered forfeitable solely because the plan provides that upon recovery of the participant the benefit will cease. Sec. 4022.6 Annuity payable for total disability. (a) Except as provided in paragraph (b) of this section, an annuity which is payable (or would be payable after a waiting period described in the plan, whether or not the participant is in receipt of other benefits during such waiting period), under the terms of a plan on account of the total and permanent disability of a participant which is expected to last for the life of the participant and which began before the termination date is considered to be a pension benefit. (b) In any case in which the PBGC determines that the standards for [[Page 34030]] determining such total and permanent disability under a plan were unreasonable, or were modified in anticipation of termination of the plan, the disability benefits payable to a participant under such standard shall not be guaranteed unless the participant meets the standards of the Social Security Act and the regulations promulgated thereunder for determining total disability. (c) For the purpose of this section, a participant may be required, upon the request of the PBGC, to submit to an examination or to submit proof of continued total and permanent disability. If the PBGC finds that a participant is no longer so disabled, it may suspend, modify, or discontinue the payment of the disability benefit. Sec. 4022.7 Benefits payable in a single installment. (a) Alternative benefit. If a benefit that is guaranteed under this part is payable in a single installment or substantially so under the terms of the plan, or an option elected under the plan by the participant, the benefit will not be guaranteed or paid as such, but the PBGC will guarantee the alternative benefit, if any, in the plan which provides for the payment of equal periodic installments for the life of the recipient. If the plan provides more than one such annuity, the recipient may within 30 days after notification of the proposed termination of the plan elect to receive one of those annuities. If the plan does not provide such an annuity, the PBGC will guarantee an actuarially equivalent life annuity. (b)(1) Payment in single installments. Notwithstanding paragraph (a) of this section, in any case in which the value of a guaranteed benefit payable by the PBGC is $3,500 or less, the total value of the guaranteed benefit may be paid in a single payment. For purposes of determining the value of the guaranteed benefit, subtract from the value of the guaranteed benefit, any amounts that are returned under paragraph (b)(2) of this section, but only to the extent such amounts do not exceed the value of the portion of an individual's benefit derived from mandatory employee contributions that is guaranteed. (2) Return of employee contributions-- (i) General. Notwithstanding any other provision of this part, the PBGC may pay in a single installment (or a series of installments) instead of as an annuity, the value of the portion of an individual's basic-type benefit derived from mandatory employee contributions, if: (A) The individual elects payment in a single installment (or a series of installments) before the sixty-first (61st) day after the date he or she receives notice that such an election is available; and (B) Payment in a single installment (or a series of installments) is consistent with the plan's provisions. For purposes of this part, the portion of an individual's basic-type benefit derived from mandatory employee contributions is determined under Sec. 4044.12 (priority category 2 benefits) of this chapter, and the value of that portion is computed under the applicable rules contained in part 4044, subpart B, of this chapter. (ii) Set-off for distributions after termination. The amount to be returned under paragraph (b)(2)(i) of this section is reduced by the set-off amount. The set-off amount is the amount by which distributions made to the individual after the termination date exceed the amount that would have been distributed, exclusive of mandatory employee contributions, if the individual had withdrawn the mandatory employee contributions on the termination date. Example: Participant A is receiving a benefit of $600 per month when the plan terminates, $200 of which is derived from mandatory employee contributions. If the participant had withdrawn his contributions on the termination date, his benefit would have been reduced to $400 per month. The participant receives two monthly payments after the termination date. The set-off amount is $400. (The $600 actual payment minus the $400 the participant would have received if he had withdrawn his contributions multiplied by the two months for which he received the extra payment.) (c) Death benefits-- (1) General. Notwithstanding paragraph (a) of this section, a benefit that would otherwise be guaranteed under the provisions of this subpart, except for the fact that it is payable solely in a single installment (or substantially so) upon the death of a participant, shall be paid by the PBGC as an annuity that has the same value as the single installment. The PBGC will in each case determine the amount and duration of the annuity based on all the facts and circumstances. (2) Exception. Upon the death of a participant the PBGC may pay in a single installment (or a series of installments) that portion of the participant's accumulated mandatory employee contributions that is payable under the plan in a single installment (or a series of installments) upon the participant's death. Subpart B--Limitations on Guaranteed Benefits Sec. 4022.21 Limitations; in general. (a)(1) Subject to paragraphs (b), (c) and (d) of this section, the PBGC will not guarantee that part of an installment payment that exceeds the dollar amount payable as a straight life annuity commencing at normal retirement age, or thereafter, to which a participant would have been entitled under the provisions of the plan in effect on the termination date, on the basis of his credited service to such date. If the plan does not provide a straight life annuity either as its normal form of retirement benefit or as an option to the normal form, the PBGC will for purposes of this paragraph convert the plan's normal form benefit to a straight life annuity of equal actuarial value as determined by the PBGC. (2) The limitation of paragraph (a)(1) of this section shall not apply to: (i) A survivor's benefit payable as an annuity on account of the death of a participant that occurred before the plan terminates and before the participant retired; (ii) A disability pension described in section 4022.6 of this part; or (iii) A benefit payable in non-level installments that in combination with Social Security, Railroad Retirement, or workman's compensation benefits yields a substantially level income if the projected income from the plan benefit over the expected life of the recipient does not exceed the value of the straight life annuity described in paragraph (a)(1) of this section. (b) The PBGC will not guarantee the payment of that part of any benefit that exceeds the limitations in section 4022(b) of ERISA and this subpart B. (c)(1) Except as provided in paragraph (c)(2) of this section, the PBGC does not guarantee a benefit payable in a single installment (or substantially so) upon the death of a participant or his surviving beneficiary unless that benefit is substantially derived from a reduction in the pension benefit payable to the participant or surviving beneficiary. (2) Paragraphs (a) and (c)(1) of this section do not apply to that portion of accumulated mandatory employee contributions payable under a plan upon the death of a participant, and such a benefit is a pension benefit for purposes of this part. (d) The PBGC will not guarantee a benefit payable to other than natural persons, or a trust or estate for the benefit of one or more natural persons. [[Page 34031]] Sec. 4022.22 Maximum guaranteeable benefit. Subject to section 4022B of ERISA and part 4022B of this chapter, benefits payable with respect to a participant under a plan shall be guaranteed only to the extent that such benefits do not exceed the actuarial value of a benefit in the form of a life annuity payable in monthly installments, commencing at age 65 equal to the lesser of the amounts computed in paragraphs (a) and (b) of this section. (a) One-twelfth of the participant's average annual gross income from his employer during either his highest-paid five consecutive calendar years in which he was an active participant under the plan, or if he was not an active participant throughout the entire such period, the lesser number of calendar years within that period in which he was an active participant under the plan. (1) As used in this paragraph, ``gross income'' means ``earned income'' as defined in section 911(b) of the Code, determined without regard to any community property laws. (2) For the purposes of this paragraph, if the plan is one to which more than one employer contributes, and during any calendar year the participant received gross income from more than one such contributing employer, then the amounts so received shall be aggregated in determining the participant's gross income for the calendar year. (b) $750 multiplied by the fraction x/$13,200 where ``x'' is the Social Security contribution and benefit base determined under section 230 of the Social Security Act in effect at the termination date of the plan. Sec. 4022.23 Computation of maximum guaranteeable benefits. (a) General. Where a benefit is payable in any manner other than as a monthly benefit payable for life commencing at age 65, the maximum guaranteeable monthly amount of such benefit shall be computed by applying the applicable factor or factors set forth in paragraphs (c)- (e) of this section to the monthly amount computed under Sec. 4022.22. In the case of a step-down life annuity, the maximum guaranteeable monthly amount of such benefit shall be computed in accordance with paragraph (f) of this section. (b) Application of adjustment factors to monthly amount computed under Sec. 4022.22. (1) Each percentage increase or decrease computed under paragraphs (c), (d), and (e) of this section shall be added to or subtracted from a base of 1.00, and the resulting amounts shall be multiplied. (2) The monthly amount computed under Sec. 4022.22 shall be multiplied by the product computed pursuant to paragraph (b)(1) of this section in order to determine the participant's and/or beneficiary's maximum benefit guaranteeable. (c) Annuitant's age factor. If a participant or the beneficiary of a deceased participant is entitled to and chooses to receive his benefit at an age younger than 65, the monthly amount computed under Sec. 4022.22 shall be reduced by the following amounts for each month up to the number of whole months below age 65 that corresponds to the later of the participant's age at the termination date or his age at the time he begins to receive the benefit: For each of the 60 months immediately preceding the 65th birthday, the reduction shall be \7/12\ of 1%; For each of the 60 months immediately preceding the 60th birthday, the reduction shall be \4/12\ of 1%; For each of the 120 months immediately preceding the 55th birthday, the reduction shall be \2/12\ of 1%; and For each succeeding 120 months period, the monthly percentage reduction shall be \1/2\ of that used for the preceding 120 month period. (d) Factor for benefit payable in a form other than as a life annuity. When a benefit is in a form other than a life annuity payable in monthly installments, the monthly amount computed under Sec. 4022.22 shall be adjusted by the appropriate factors on a case-by-case basis by PBGC. This paragraph sets forth the adjustment factors to be used for several common benefit forms payable in monthly installments. (1) Period certain and continuous annuity. A period certain and continuous annuity means an annuity which is payable in periodic installments for the participant's life, but for not less than a specified period of time whether or not the participant dies during that period. The monthly amount of a period certain and continuous annuity computed under Sec. 4022.22 shall be reduced by the following amounts for each month of the period certain subsequent to the termination date: For each month up to 60 months deduct \1/24\ of 1%; For each month beyond 60 months deduct \1/12\ of 1%. (i) A cash refund annuity means an annuity under which if the participant dies prior to the time when he has received pension payments equal to a fixed sum specified in the plan, then the balance is paid as a lump-sum death benefit. A cash refund annuity shall be treated as a benefit payable for a period certain and continuous. The period of certainty shall be computed by dividing the amount of the lump-sum refund by the monthly amount to which the participant is entitled under the terms of the plan. (ii) An installment refund annuity means an annuity under which if the participant dies prior to the time he has received pension payments equal to a fixed sum specified in the plan, then the balance is paid as a death benefit in periodic installments equal in amount to the participant's periodic benefit. An installment refund annuity shall be treated as a benefit payable for a period certain and continuous. The period of certainty shall be computed by dividing the amount of the remaining refund by the monthly amount to which the participant is entitled under the terms of the plan. (2) Joint and survivor annuity (contingent basis). A joint and survivor annuity (contingent basis) means an annuity which is payable in periodic installments to a participant for his life and upon his death is payable to his beneficiary for the beneficiary's life in the same or in a reduced amount. The monthly amount of a joint and survivor annuity (contingent basis) computed under Sec. 4022.22 shall be reduced by an amount equal to 10% plus \2/10\ of 1% for each percentage point in excess of 50% of the participant's benefit that will continue to be paid to the beneficiary. If the benefit payable to the beneficiary is less than 50 percent of the participant's benefit, PBGC shall provide the adjustment factors to be used. (3) Joint and survivor annuity (joint basis). A joint and survivor annuity (joint basis) means an annuity which is payable in periodic installments to a participant and upon his death or the death of his beneficiary is payable to the survivor for the survivor's life in the same or in a reduced amount. The monthly amount of a joint and survivor annuity (joint basis) computed under Sec. 4022.22 shall be reduced by an amount equal to \4/10\ of 1% for each percentage point in excess of 50% of the participant's original benefit that will continue to be paid to the survivor. If the benefit payable to the survivor is less than 50 percent of the participant's original benefit, PBGC shall provide the adjustment factors to be used. (e) When a benefit is payable in a form described in paragraph (d) (2) or (3) of this section, and the beneficiary's age is different from the participant's age, by 15 years or less, the monthly amount computed under Sec. 4022.22 shall be adjusted by the following amounts: If the beneficiary is younger than the [[Page 34032]] participant, deduct 1% for each year of the age difference; If the beneficiary is older than the participant, add \1/2\ of 1% for each year of the age difference. In computing the difference in ages, years over 65 years of age shall not be counted. If the difference in age between the beneficiary and the participant is greater than 15 years, PBGC shall provide the adjustment factors to be used. (f) Step-down life annuity. A step-down life annuity means an annuity payable in a certain amount for the life of the participant plus a temporary additional amount payable until the participant attains an age specified in the plan. (1) The temporary additional amount payable under a step-down life annuity shall be converted to a life annuity payable in monthly installments by multiplying the appropriate factor based on the participant's age and the number of remaining years of the temporary additional benefit by the amount of the temporary additional benefit. The factors to be used are set forth in the table below. The amount of the monthly benefit so calculated shall be added to the level amount of the monthly benefit payable for life to determine the level-life annuity that is equivalent to the step-down life annuity. Factors for Converting Temporary Additional Benefit Under Step-Down Life Annuity ---------------------------------------------------------------------------------------------------------------- Age of participant \1\ at the Number of years temporary additional benefit is payable under the plan as of later of the date the temporary the date of plan termination \2\ additional benefit commences or ------------------------------------------------------------------------------- the date of plan termination 1 2 3 4 5 6 7 8 9 10 ---------------------------------------------------------------------------------------------------------------- 45.............................. 0.060 0.117 0.170 0.220 0.268 0.315 0.355 0.395 0.435 0.475 46.............................. .061 .119 .173 .224 .273 .321 .362 .403 .444 .485 47.............................. .062 .121 .176 .228 .278 .327 .369 .411 .453 .495 48.............................. .063 .123 .179 .232 .283 .333 .376 .419 .462 .505 49.............................. .064 .125 .182 .236 .288 .339 .383 .427 .471 .515 50.............................. .065 .127 .185 .240 .293 .345 .390 .435 .480 .525 51.............................. .066 .129 .188 .244 .298 .351 .397 .443 .489 .535 52.............................. .068 .133 .194 .252 .308 .363 .411 .459 .507 .555 53.............................. .067 .131 .191 .248 .303 .357 .404 .451 .498 .545 54.............................. .069 .135 .197 .256 .313 .369 .418 .467 .516 .565 55.............................. .070 .137 .200 .260 .318 .375 .425 .475 .525 .575 56.............................. .072 .141 .206 .268 .328 .387 .439 .491 .543 ...... 57.............................. .074 .145 .212 .276 .338 .399 .453 .507 ...... ...... 58.............................. .076 .149 .218 .284 .348 .411 .467 ...... ...... ...... 59.............................. .078 153 .224 .292 .358 .423 ...... ...... ...... ...... 60.............................. .080 .157 .230 .300 .368 ...... ...... ...... ...... ...... 61.............................. .082 .161 .236 .308 ...... ...... ...... ...... ...... ...... 62.............................. .084 .165 .242 ...... ...... ...... ...... ...... ...... ...... 63.............................. .086 .169 ...... ...... ...... ...... ...... ...... ...... ...... 64.............................. .088 ...... ...... ...... ...... ...... ...... ...... ...... ...... ---------------------------------------------------------------------------------------------------------------- \1\ Age of participant is his age at his last birthday. \2\ If the benefit is payable for less than 1 yr, the appropriate factor is obtained by multiplying the factor for 1 yr by a fraction, the numerator of which is the number of months the benefit is payable, and the denominator of which is 12. If the benefit is payable for 1 or more whole years, plus an additional number of months less than 12, the appropriate factor is obtained by linear interpolation between the factor for the number of whole years the benefit is payable and the factor for the next year. (2) If a participant is entitled to and chooses to receive a step- down life annuity at an age younger than 65, the monthly amount computed under Sec. 4022.22 shall be adjusted by applying the factors set forth in paragraph (c) of this section in the manner described in paragraph (b) of this section. (3) If the level-life monthly benefit calculated pursuant to paragraph (f)(1) of this section exceeds the monthly amount calculated pursuant to paragraph (f)(2) of this section, then the monthly maximum benefit guaranteeable shall be a step-down life annuity under which the monthly amount of the temporary additional benefit and the amount of the monthly benefit payable for life, respectively, shall bear the same ratio to the monthly amount of the temporary additional benefit and the monthly benefit payable for life provided under the plan, respectively, as the monthly benefit calculated pursuant to paragraph (f)(2) of this section bears to the monthly benefit calculated pursuant to paragraph (f)(1) of this section. Sec. 4022.24 Benefit increases. (a) Scope. This section applies: (1) To all benefit increases, as defined in Sec. 4022.2, payable with respect to a participant other than a substantial owner, which have been in effect for less than five years preceding the termination date; and (2) To all benefit increases payable with respect to a substantial owner, which have been in effect for less than 30 years preceding the termination date. (b) General rule. Benefit increases described in paragraph (a) of this section shall be guaranteed only to the extent provided in Sec. 4022.25 with respect to a participant other than a substantial owner and in Sec. 4022.26 with respect to a participant who is a substantial owner. (c) Computation of guaranteeable benefit increases. Except as provided in paragraph (d) of this section pertaining to multiple benefit increases, the amount of a guaranteeable benefit increase shall be the amount, if any, by which the monthly benefit calculated pursuant to paragraph (c)(1) of this section (the monthly benefit provided under the terms of the plan as of the termination date, as limited by Sec. 4022.22) exceeds the monthly benefit calculated pursuant to paragraph (c)(4) of this section (the monthly benefit which would have been payable on the termination date if the benefit provided subsequent to the increase were equivalent, as of the date of the increase, to the benefit provided prior to the increase). (1) Determine the amount of the monthly benefit payable on the termination date (or, in the case of a deferred benefit, the monthly benefit which will become payable thereafter) [[Page 34033]] under the terms of the plan subsequent to the increase, using service credited to the participant as of the termination date, that is guaranteeable pursuant to Sec. 4022.22; (2) Determine, as of the date of the benefit increase, in accordance with the provisions of Sec. 4022.23, the factors which would be used to calculate the monthly maximum benefit guaranteeable (i) under the terms of the plan prior to the increase and (ii) under the terms of the plan subsequent to the increase. However, when the benefit referred to in paragraph (c)(2)(ii) of this section is a joint and survivor benefit deferred as of the termination date and there is no beneficiary on that date, the factors computed in paragraph (c)(2)(ii) of this section shall be determined as if the benefit were payable only to the participant. Each set of factors determined under this paragraph shall be stated in the manner set forth in Sec. 4022.23(b)(1); (3) Multiply the monthly benefit which would have been payable (or, in the case of a deferred benefit, would have become payable) under the terms of the plan prior to the increase based on service credited to the participant as of the termination date by a fraction, the numerator of which is the product of the factors computed pursuant to paragraph (c)(2)(ii) of this section and the denominator of which is the product of the factors computed pursuant to paragraph (c)(2)(i) of this section. (4) Calculate the amount of the monthly benefit which would be payable on the termination date if the monthly benefit computed in paragraph (c)(3) of this section had been payable commencing on the date of the benefit increase (or, in the case of a deferred benefit, would have become payable thereafter.) In the case of a benefit which does not become payable until subsequent to the termination date, the amount of the monthly benefit determined pursuant to this paragraph is the same as the amount of the monthly benefit calculated pursuant to paragraph (c)(3) of this section. (d) Multiple benefit increases. (1) Where there has been more than one benefit increase described in paragraph (a) of this section, the amounts of guaranteeable benefit increases shall be calculated beginning with the earliest increase, and each such amount (except for the amount resulting from the final benefit increase) shall be multiplied by a fraction, the numerator of which is the product of the factors, stated in the manner set forth in Sec. 4022.23(b)(1), used to calculate the monthly maximum guaranteeable benefit under Sec. 4022.22 and the denominator of which is the product of the factors used in the calculation under paragraph (c)(2)(i) of this section. (2) Each benefit increase shall be treated separately for the purposes of Sec. 4022.25, except as otherwise provided in paragraph (d) of that section, and for the purposes of Sec. 4022.26, as appropriate. (e) For the purposes of this subpart, a benefit increase is deemed to be in effect commencing on the later of its adoption date or its effective date. Sec. 4022.25 Five-year phase-in of benefit guarantee for participants other than substantial owners. (a) Scope. This section applies to the guarantee of benefit increases which have been in effect for less than five years with respect to participants other than substantial owners. (b) Phase-in formula. The amount of a benefit increase computed pursuant to Sec. 4022.24 shall be guaranteed to the extent provided in the following formula: the number of years the benefit increase has been in effect, not to exceed five, multiplied by the greater of (1) 20 percent of the amount computed pursuant to Sec. 4022.24; or (2) $20 per month. (c) Computation of years. In computing the number of years a benefit increase has been in effect, each complete 12-month period prior to the termination date during which such benefit increase was in effect shall constitute one year. (d) Multiple benefit increases. In applying the formula contained in paragraph (b) of this section, multiple benefit increases within any 12-month period prior to the termination date and calculated from that date shall be aggregated and treated as one benefit increase. (e) Notwithstanding the provisions of paragraph (b) of this section, a benefit increase described in paragraph (a) of this section shall be guaranteed only if PBGC determines that the plan was terminated for a reasonable business purpose and not for the purpose of obtaining the payment of benefits by PBGC. Sec. 4022.26 Phase-in of benefit guarantee for participants who are substantial owners. (a) Scope. This section shall apply to the guarantee of all benefits described in subpart A with respect to participants who are substantial owners at the termination date or who were substantial owners at any time within the 5-year period preceding that date. (b) Phase-in formula when there have been no benefit increases. Benefits provided by a plan under which there has been no benefit increase, other than the adoption of the plan, shall be guaranteed to the extent provided in the following formula: The monthly amount computed under Sec. 4022.22 multiplied by a fraction not to exceed 1, the numerator of which is the number of full years prior to the termination date that the substantial owner was an active participant under the plan, and the denominator of which is 30. Active participation under a plan commences at the later of the date on which the plan is adopted or becomes effective. (c) Phase-in formula when there have been benefit increases. If there has been a benefit increase under the plan, other than the adoption of the plan, benefits provided by each such increase shall be guaranteed to the extent provided in the following formula: The amount of the guaranteeable benefit increase computed under Sec. 4022.24 multiplied by a fraction not to exceed 1, the numerator of which is the number of full years prior to the termination date that the benefit increase was in effect and during which the substantial owner was an active participant under the plan, and the denominator of which is 30. However, in no event shall the total benefits guaranteed under all such benefit increases exceed the benefits which are guaranteed under paragraph (b) of this section with respect to a plan described therein. (d) For the purpose of computing the benefits guaranteed under this section, in the case of a substantial owner who becomes an active participant under a plan after a benefit increase (other than the adoption of the plan) has been put into effect, the plan as it exists at the time he commences his participation shall be deemed to be the original plan with respect to him. Sec. 4022.27 Effect of tax disqualification. (a) General rule. Except as provided in paragraph (b) of this section, benefits accrued under a plan after the date on which the Secretary of the Treasury or his delegate issues a notice that any trust which is part of the plan no longer meets the requirements of section 401(a) of the Code or that the plan no longer meets the requirements of section 404(a) of the Code or after the date of adoption of a plan amendment that causes the issuance of such a notice shall not be guaranteed under this part. (b) Exceptions. The restriction on the guarantee of benefits set forth in paragraph (a) of this section shall not apply if: (1) The Secretary of the Treasury or his delegate issues a notice stating that the original notice referred to in [[Page 34034]] paragraph (a) of this section was erroneous; (2) The Secretary of the Treasury or his delegate finds that, subsequent to the issuance of the notice referred to in paragraph (a) of this section, appropriate action has been taken with respect to the trust or plan to cause it to meet the requirements of sections 401(a) or 404(a)(2) of the Code, respectively, and issues a subsequent notice stating that the trust or plan meets such requirements; or (3) The plan amendment is revoked retroactively to its original effective date. Subpart C--Calculation and Payment of Unfunded Nonguaranteed Benefits [Reserved] Subpart D--Benefit Reductions in Terminating Plans Sec. 4022.61 Limitations on benefit payments by plan administrator. (a) General. When section 4041.4 of this chapter requires a plan administrator to reduce benefits, the plan administrator shall limit benefit payments in accordance with this section. (b) Accrued benefit at normal retirement. Except to the extent permitted by paragraph (d) of this section, a plan administrator may not pay that portion of a monthly benefit payable with respect to any participant that exceeds the participant's accrued benefit payable at normal retirement age under the plan. For the purpose of applying this limitation, post-retirement benefit increases, such as cost-of-living adjustments, are not considered to increase a participant's benefit beyond his or her accrued benefit payable at normal retirement age. (c) Maximum guaranteeable benefit. Except to the extent permitted by paragraph (d) of this section, a plan administrator may not pay that portion of a monthly benefit payable with respect to any participant, as limited by paragraph (b) of this section, that exceeds the maximum guaranteeable benefit under section 4022(b)(3)(B) of ERISA and Sec. 4022.22(b) of this part, adjusted for age and benefit form, for the year of the proposed termination date. (d) Estimated benefit payments. A plan administrator shall pay the monthly benefit payable with respect to each participant as determined under Sec. 4022.62 or Sec. 4022.63, whichever produces the higher benefit. (e) PBGC authority to modify procedures. In order to avoid abuse of the plan termination insurance system, inequitable treatment of participants and beneficiaries, or the imposition of unreasonable burdens on terminating plans, the PBGC may authorize or direct the use of alternative procedures for determining benefit reductions. (f) Examples. This section is illustrated by the following examples: Example 1--Facts. On October 10, 1992, a plan administrator files with the PBGC a notice of intent to terminate in a distress termination that includes December 31, 1992, as the proposed termination date. A participant who is in pay status on December 31, 1992, has been receiving his accrued benefit of $2,500 per month under the plan. The benefit is in the form of a joint and survivor annuity (contingent basis) that will pay 50 percent of the participant's benefit amount (i.e., $1,250 per month) to his surviving spouse following the death of the participant. On December 31, 1992, the participant is age 66, and his wife is age 56. Benefit reductions. Paragraph (b) of this section requires the plan administrator to cease paying benefits in excess of the accrued benefit payable at normal retirement age. Because the participant is receiving only his accrued benefit, no reduction is required under paragraph (b). Paragraph (c) of this section requires the plan administrator to cease paying benefits in excess of the maximum guaranteeable benefit, adjusted for age and benefit form in accordance with the provisions of subpart B. The maximum guaranteeable benefit for plans terminating in 1992, the year of the proposed termination date, is $2,352.27 per month, payable in the form of a single life annuity at age 65. Because the participant is older than age 65, no adjustment is required under Sec. 4022.23(c) based on the annuitant's age factor. The benefit form is a joint and survivor annuity (contingent basis), as defined in Sec. 4022.23(d)(2). The required benefit reduction for this benefit form under Sec. 4022.23(d) is 10 percent. The corresponding adjustment factor is 0.90 (1.00-0.10). The benefit reduction factor to adjust for the age difference between the participant and the beneficiary is computed under Sec. 4022.23(e). In computing the difference in ages, years over 65 years of age are not taken into account. Therefore, the age difference is 9 years (65-56). The required percentage reduction when the beneficiary is 9 years younger than the participant is 9 percent. The corresponding adjustment factor is 0.91 (1.00-0.09). The maximum guaranteeable benefit adjusted for age and benefit form is $1,926.51 ($2,352.27 x 0.90 x 0.91) per month. Therefore, the plan administrator must reduce the participant's benefit payment from $2,500 to $1,926.51. If the participant dies after December 31, 1992, the plan administrator will pay his spouse $963.26 (0.50 x $1,926.51) per month. Example 2--Facts. The benefit of a participant who retired under a plan at age 60 is a reduced single life annuity of $400 per month plus a temporary supplement of $400 per month payable until age 62 (i.e., a step-down benefit). The participant's accrued benefit under the plan is $450 per month, payable from the plan's normal retirement age. On the proposed termination date, June 30, 1992, the participant is 61 years old. The maximum guaranteeable benefit adjusted for age under Sec. 4022.23(c) of this chapter is $1,693.63 ($2,352.27 x 0.72) per month. Since the benefit is payable as a single life annuity, no adjustment is required under Sec. 4022.23(d) for benefit form. Benefit reductions. The plan benefit of $800 per month payable until age 62 exceeds the participant's accrued benefit at normal requirement age of $450 per month. Paragraph (b) of this section requires that, except to the extent permitted by paragraph (d), the plan benefit must be reduced to $450 per month. Since the levelized benefit of $404.10 ((0.082 x 50) + $400) per month, determined under Sec. 4022.23(f), is less than the adjusted maximum guaranteeable benefit of $1,693.63 per month, no further reduction in the $450 per month benefit payment is required under paragraph (c) of this section. The plan administrator next would determine the amount of the participant's estimated benefit under paragraph (d). Example 3--Facts. A retired participant is receiving a reduced early retirement benefit of $1,100 per month plus a temporary supplement of $700 per month payable until age 62. The benefit is in the form of a single life annuity. On the proposed termination date, November 30, 1992, the participant is 56 years old. The participant's accrued benefit at normal retirement age under the plan is $1,200 per month. The maximum guaranteeable benefit adjusted for age is $1,152.61 ($2,352.27 x 0.49) per month. A form adjustment is not required. Benefit reductions. The plan benefit of $1,800 per month payable from age 56 to age 62 exceeds the participant's accrued benefit at normal retirement age of $1,200 per month. Therefore, under paragraph (b) of this section, the plan administrator must reduce the temporary supplement to $100 per month. For the purpose of determining whether the reduced benefit, i.e., a level-life annuity of $1,100 per month and a temporary annuity supplement of $100 per month to age 62, exceeds the maximum guaranteeable benefit adjusted for age, the temporary annuity supplement of $100 per month is converted to a level-life annuity equivalent in accordance with Sec. 4022.23(f) of this chapter. The level-life annuity equivalent is $38.70 ($100 x 0.387). This, added to the life annuity of $1,100 per month, equals $1,138.70. Since the maximum guaranteeable benefit of $1,152.61 per month exceeds $1,138.70 per month, no further reduction is required under paragraph (c) of this section. The plan administrator next would determine the participant's estimated benefit under paragraph (d). Assume that the estimated benefit under paragraph (d) is $780 per month until age 62 and $715 per month thereafter. The plan administrator would pay the participant $780 per month, reduced to $715 per month at age 62, subject to the final benefit determination made under title IV. Example 4--Facts. A retired participant is receiving a reduced early retirement benefit of $2,650 per month plus a temporary supplement of $800 per month payable until [[Page 34035]] age 62. The benefit is in the form of a joint and survivor annuity (contingent basis) that will pay 50 percent of the participant's benefit amount to his surviving spouse following the death of the participant. On the proposed termination date, December 20, 1992, the participant and his spouse are each 56 years old. The participant's accrued benefit at normal retirement age under the plan is $3,000 per month. The maximum guaranteeable benefit adjusted for age and the joint and survivor annuity (contingent basis) annuity form is $1,037.35 per month. An adjustment for age difference is not required because the participant and his spouse are the same age. Benefit reductions. The plan benefit of $3,450 per month payable from age 56 to age 62 exceeds the participant's accrued benefit at normal retirement age, which is $3,000 per month. Therefore, under paragraph (b) of this section, the plan administrator must reduce the participant's benefit so that it does not exceed $3,000 per month. The level-life equivalent of the participant's reduced benefit, determined using the Sec. 4022.23(f) adjustment factor, is $2,785.45 (($350 x 0.387) + $2,650) per month. Since this benefit exceeds the participant's maximum guaranteeable benefit of $1,037.35 per month, the plan administrator must reduce the participant's benefit payment so that it does not exceed the maximum guaranteeable benefit. The ratio of (i) the participant's maximum guaranteeable benefit to (ii) the level-life equivalent of the participant's reduced benefit (computed under the ``accrued for normal retirement age'' limitation) is used in converting the level-life maximum guaranteeable benefit to the step-down benefit form. The level-life equivalent of the reduced benefit computed under the ``accrued for normal retirement age'' limitation is 37.24 percent ($1,037.35/ $2,785.45). Thus, the plan administrator must reduce the participant's level-life benefit of $2,650 per month to $986.86 ($2,650 x 0.3724) and must further reduce the reduced temporary benefit of $350 per month to $130.34 ($350 x 0.3724). Under paragraph (c) of this section, therefore, the participant's maximum guaranteeable benefit is $1,117.20 ($986.86 + $130.34) per month to age 62 and $986.86 per month thereafter, subject to any adjustment under paragraph (d) of this section. Assume that the estimated benefit under paragraph (d) is $1,005.48 per month to age 62 and $888.17 per month thereafter. The plan administrator would reduce the participant's benefit from $3,450 per month to $1,005.48 per month and pay this amount until age 62, at which time the benefit payment would be reduced to $888.17 per month, subject to the final benefit determination made under title IV. Sec. 4022.62 Estimated guaranteed benefit. (a) General. The estimated guaranteed benefit payable with respect to each participant who is not a substantial owner is computed under paragraph (c) of this section. The estimated guaranteed benefit payable with respect to each participant who is a substantial owner is computed under paragraph (d) of this section. (b) Rules for determining benefits. For the purposes of determining entitlement to a benefit and the amount of the estimated benefit under this section, the following rules apply: (1) Participants in pay status on the proposed termination date. For benefits payable with respect to a participant who is in pay status on or before the proposed termination date, the plan administrator shall use the participant's age and benefit payable under the plan as of the proposed termination date. (2) Participants who enter pay status after the proposed termination date. For benefits payable with respect to a participant who enters pay status after the proposed termination date, the plan administrator shall use the participant's age as of the benefit commencement date and his or her service and compensation as of the proposed termination date. (3) Participants with new benefits or benefit improvements. For the purpose of determining the estimated guaranteed benefit under paragraph (c) of this section, only new benefits and benefit improvements that affect the benefit of the participant or beneficiary for whom the determination is made are taken into account. (4) Limitations on estimated guaranteed benefits. For the purpose of determining the estimated guaranteed benefit under paragraph (c) or (d) of this section, the benefit determined under paragraph (b)(1) or (b)(2) of this section is subject to the limitations set forth in Sec. 4022.61 (b) and (c). (c) Estimated guaranteed benefit payable with respect to a participant who is not a substantial owner. For benefits payable with respect to a participant who is not a substantial owner, the estimated guaranteed benefit is determined under paragraph (c)(1) of this section, if no portion of the benefit is subject to the phase-in of plan termination insurance guarantees set forth in section 4022(b)(1) of ERISA. In any other case, the estimated guaranteed benefit is determined under paragraph (c)(2). ``Benefit subject to phase-in'' means a benefit that is subject to the phase-in of plan termination insurance guarantees set forth in section 4022(b)(1) of ERISA, determined without regard to section 4022(b)(7) of ERISA. (1) Participants with no benefits subject to phase-in. In the case of a participant or beneficiary with no benefit improvement (as defined in paragraph (c)(2)(ii)) or new benefit (as defined in paragraph (c)(2)(i)) in the five years preceding the proposed termination date, the estimated guaranteed benefit is the benefit to which he or she is entitled under the rules in paragraph (b) of this section. (2) Participants with benefits subject to phase-in. In the case of a participant or beneficiary with a benefit improvement or new benefit in the five years preceding the proposed termination date, the estimated guaranteed benefit is the benefit to which he or she is entitled under the rules in paragraph (b) of this section, multiplied by the multiplier determined according to paragraphs (i), (ii), and (iii), but not less than the benefit to which he or she would have been entitled if the benefit improvement or new benefit had not been adopted. (i) From column (a) of Table I, select the line that applies according to the number of full years before the proposed termination date since the plan was last amended to provide for a new benefit (or the number of full years since the plan was established, if it has never been amended to provide for a new benefit). ``New benefit'' means a change in the terms of the plan that results in (a) a participant's or a beneficiary's eligibility for a benefit that was not previously available or to which he or she was not entitled (excluding a benefit that is actuarially equivalent to the normal retirement benefit to which the participant was previously entitled) or (b) an increase of more than twenty percent in the benefit to which a participant is entitled upon entering pay status before his or her normal retirement age under the plan. ``New benefits'' result from liberalized participation or vesting requirements, reductions in the age or service requirements for receiving unreduced benefits, additions of actuarially subsidized benefits, and increases in actuarial subsidies. The establishment of a plan creates a new benefit as of the effective date of the plan. A change in the amount of a benefit is not deemed to be a ``new benefit'' if it results solely from a benefit improvement. ``New benefit'' and ``benefit improvement'' are mutually exclusive terms. (ii) If there was no benefit improvement under the plan during the one-year period ending on the proposed termination date, use the multiplier set forth in column (b) of Table I on the line selected from column (a). ``Benefit improvement'' means a change in the terms of the plan that results in (a) an increase in the benefit to which a participant is entitled at his or her normal retirement age under the plan or (b) an increase in the benefit to which a participant or beneficiary in pay status is entitled. [[Page 34036]] (iii) If there was any benefit improvement during the one-year period ending on the proposed termination date, use the multiplier set forth in column (c) of Table I on the line selected from column (a). Table I.--Applicable Multiplier If-- No benefit Benefit improvement improvement Full years since last new benefit during last during last year year (a) (b) (c) ------------------------------------------------------------------------ Five or more.................................. .90 .80 Four.......................................... .80 .70 Three......................................... .65 .55 Two........................................... .50 .45 Fewer than two................................ .35 .30 Note: The foregoing method of estimating guaranteed benefits is based upon the PBGC's experience with a wide range of plans and may not provide accurate estimates in certain circumstances. In accordance with Sec. 4022.61(e), a plan administrator may use a different method of estimation if he or she demonstrates to the PBGC that his proposed method will be more equitable to participants and beneficiaries. The PBGC may require the use of a different method in certain cases. (d) Estimated guaranteed benefit payable with respect to a substantial owner. For benefits payable with respect to each participant who is a substantial owner and who commenced participation under the plan fewer than five full years before the proposed termination date, the estimated guaranteed benefit is determined under paragraph (d)(1). With respect to any other substantial owner, the estimated guaranteed benefit is determined under paragraph (d)(2). (1) Fewer than five years of participation. The estimated guaranteed benefit under this paragraph is the benefit to which the substantial owner is entitled, as determined under paragraph (b) of this section, multiplied by a fraction, not to exceed one, the numerator of which is the number of full years prior to the proposed termination date that the substantial owner was an active participant under the plan and the denominator of which is thirty. (2) Five or more years of participation. The estimated guaranteed benefit under this paragraph is the lesser of-- (i) the estimated guaranteed benefit calculated under paragraph (d)(1) of this section; or (ii) the benefit to which the substantial owner would have been entitled as of the proposed termination date (or benefit commencement date in the case of a substantial owner whose benefit commences after the proposed termination date) under the terms of the plan in effect when he or she first began participation, as limited by Sec. 4022.61 (b) and (c), multiplied by a fraction, not to exceed one, the numerator of which is two times the number of full years of his or her active participation under the plan prior to the proposed termination date and the denominator of which is thirty. (e) Examples. This section is illustrated by the following examples: Example 1--Facts. A participant who is not a substantial owner retired on December 31, 1991, at age 60 and began receiving a benefit of $600 per month. On January 1, 1989, the plan had been amended to allow participants to retire with unreduced benefits at age 60. Previously, a participant who retired before age 65 was subject to a reduction of \1/15\ for each year by which his or her actual retirement age preceded age 65. On January 1, 1992, the plan's benefit formula was amended to increase benefits for participants who retired before January 1, 1992. As a result, the participant's benefit was increased to $750 per month. There have been no other pertinent amendments. The proposed termination date is December 15, 1992. Estimated guaranteed benefit. No reduction is required under Sec. 4022.61 (b) or (c) because the participant's benefit does not exceed either the participant's accrued benefit at normal retirement age or the maximum guaranteeable benefit. (Post-retirement benefit increases are not considered as increasing accrued benefits payable at normal retirement age.) The amendment as of January 1, 1989, resulted in a ``new benefit'' because the reduction in the age at which the participant could receive unreduced benefits increased the participant's benefit entitlement at actual retirement age by \5/15\, which is more than a 20 percent increase. The amendment of January 1, 1992, which increased the participant's benefit to $750 per month, is a ``benefit improvement'' because it is an increase in the amount of benefit for persons in pay status. (No percentage test applies in determining whether such an increase is a benefit improvement.) The multiplier for computing the amount of the estimated guaranteed benefit is taken from the third row of Table I (because the last new benefit had been in effect for 3 full years as of the proposed termination date) and column (c) (because there was a benefit improvement within the 1-year period preceding the proposed termination date). This multiplier is 0.55. Therefore, the amount of the participant's estimated guaranteed benefit is $412.50 (0.55 x $750) per month. Example 2--Facts. A participant who is not a substantial owner terminated employment on December 31, 1990. On January 1, 1992, she reached age 65 and began receiving a benefit or $250 per month. She had completed 3 years of service at her termination of employment and was fully vested in her accrued benefit. The plan's vesting schedule had been amended on July 1, 1988. Under the schedule in effect before the amendment, a participant with 5 years of service was 100 percent vested. There have been no other pertinent amendments. The proposed termination date is December 31, 1992. Estimated guaranteed benefit. No reduction is required under Sec. 4022.61 (b) or (c) because the participant's benefit does not exceed either her accrued benefit at normal retirement age or the maximum guaranteeable benefit. The plan's change of vesting schedule created a new benefit for the participant. Because the amendment was in effect for 4 full years before the proposed termination date, the second row of Table I is used to determine the applicable multiplier for estimating the amount of the participant's guaranteed benefit. Because the participant did not receive any benefit improvement during the 12-month period ending on the proposed termination date, column (b) of the table is used. Therefore, the multiplier is 0.80, and the amount of the participant's estimated guaranteed benefit is $200 (0.80 x $250) per month. Example 3--Facts. A participant who is a substantial owner retired prior to the proposed termination date after 5\1/2\ years of active participation in the plan. The benefit under the terms of the plan when he first began active participation was $800 per month. On the proposed termination date of April 30, 1992, he was entitled to receive a benefit of $2000 per month. No reduction of this benefit is required under Sec. 4022.61 (b) or (c). Estimated guaranteed benefit. Paragraph (d)(2) of this section is used to compute the amount of the estimated guaranteed benefit of substantial owners with 5 or more years of active participation prior to the proposed termination date. Consequently, the amount of this participant's estimated guaranteed benefit is the lesser of-- (i) the amount calculated as if he had been an active participant in the plan for fewer than 5 full years on the proposed termination date, or $333.33 ($2000 x \5/30\) per month, or (ii) the amount to which he would have been entitled as of the proposed termination date under the terms of the plan when he first began participation, as limited by Sec. 4022.61 (b) and (c), multiplied by 2 times the number of years of active participation and divided by 30, or $266.67 ($800 x 2 x \5/30\) per month. Therefore, the amount of the participant's estimated guaranteed benefit is $266.67 per month. Sec. 4022.63 Estimated title IV benefit. (a) General. If the conditions specified in paragraph (b) exist, the plan administrator shall determine each participant's estimated title IV benefit. The estimated title IV benefit payable with respect to each participant who is not a substantial owner is computed under paragraph (c) of this section. The estimated title IV benefit payable with respect to each participant who is a substantial owner is computed under paragraph (d) of this section. (b) Conditions for use of this section. The conditions set forth in this [[Page 34037]] paragraph must be satisfied in order to make use of the procedures set forth in this section. If the specified conditions exist, estimated title IV benefits must be determined in accordance with these procedures (or in accordance with alternative procedures authorized by the PBGC under Sec. 4022.61(f)) for each participant and beneficiary whose benefit under the plan exceeds the limitations contained in Sec. 4022.61(b) or (c) or who is a substantial owner or the beneficiary of a substantial owner. If the specified conditions do not exist, title IV benefits may be estimated by the plan administrator in accordance with procedures authorized by the PBGC, but no such estimate is required. The conditions are as follows: (1) An actuarial valuation of the plan has been performed for a plan year beginning not more than eighteen months before the proposed termination date. If the interest rate used to value plan liabilities in this valuation exceeded the applicable valuation interest rates and factors under appendix B to part 4044 of this chapter in effect on the proposed termination date, the value of benefits in pay status and the value of vested benefits not in pay status on the valuation date must be converted to the PBGC's valuation rates and factors. (2) The plan has been in effect for at least five full years before the proposed termination date, and the most recent actuarial valuation demonstrates that the value of plan assets, reduced by employee contributions remaining in the plan and interest credited thereon under the terms of the plan, exceeds the present value, adjusted as required under paragraph (b)(1), of all plan benefits in pay status on the valuation date. (c) Estimated title IV benefit payable with respect to a participant who is not a substantial owner. For benefits payable with respect to a participant who is not a substantial owner, the estimated title IV benefit is the estimated priority category 3 benefit computed under this paragraph. Priority category 3 benefits are payable with respect to participants who were, or could have been, in pay status three full years prior to the proposed termination date. The estimated priority category 3 benefit is computed by multiplying the benefit payable with respect to the participant under Sec. 4022.62 (b)(1) and (b)(2) by a fraction, not to exceed one-- (1) The numerator of which is the benefit that would be payable with respect to the participant at normal retirement age under the provisions of the plan in effect on the date five full years before the proposed termination date, based on the participant's age, service, and compensation as of the earlier of the participant's benefit commencement date or the proposed termination date, and (2) The denominator of which is the benefit that would be payable with respect to the participant at normal retirement age under the provisions of the plan in effect on the proposed termination date, based on the participant's age, service, and compensation as of the earlier of the participant's benefit commencement date or the proposed termination date. (d) Estimated title IV benefit payable with respect to a substantial owner. For benefits payable with respect to a participant who is a substantial owner, the estimated title IV benefit is the higher of the benefit computed under paragraph (c) of this section or the benefit computed under this paragraph. (1) The plan administrator shall first calculate the estimated guaranteed benefit payable with respect to the substantial owner as if he or she were not a substantial owner, using the method set forth in Sec. 4022.62(c). (2) The benefit computed under paragraph (d)(1) shall be multiplied by the priority category 4 funding ratio. The category 4 funding ratio is the ratio of x to y, not to exceed one, where-- (i) in a plan with priority category 3 benefits, x equals plan assets minus employee contributions remaining in the plan on the valuation date, with interest credited thereon under the terms of the plan, and the present value of benefits in pay status, and y equals the present value of all vested benefits not in pay status minus such employee contributions and interest; or (ii) in a plan with no priority category 3 benefits, x equals plan assets minus employee contributions remaining in the plan on the valuation date, with interest credited thereon under the terms of the plan, and y equals the present value of all vested benefits minus such employee contributions and interest. (e) Examples. This section is illustrated by the following examples: Example 1--Facts. A participant who is not a substantial owner was eligible to retire 3\1/2\ years before the proposed termination date. The participant retired 2 years before the proposed termination date with 20 years of service. Her final 5 years' average salary was $45,000, and she was entitled to an unreduced early retirement benefit of $1,500 per month payable as a single life annuity. This retirement benefit does not exceed the limitation in Sec. 4022.61 (b) or (c). On the participant's benefit commencement date, the plan provided for a normal retirement benefit of 2 percent of the final 5 years' salary times the number of years of service. Five years before the proposed termination date, the percentage was 1\1/2\ percent. The amendments improving benefits were put into effect 3\1/ 2\ years prior to the proposed termination date. There were no other amendments during the 5-year period. The participant's estimated guaranteed benefit computed under Sec. 4022.62(c) is $1,500 per month times 0.90 (the factor from column (b) of Table I in Sec. 4022.62(c)(2)), or $1,350 per month. It is assumed that the plan meets the conditions set forth in paragraph (b) of this section, and the plan administrator is therefore required to estimate the title IV benefit. Estimated title IV benefit. For a participant who is not a substantial owner, the amount of the estimated title IV benefit is the estimated priority category 3 benefit computed under paragraph (c) of this section. This amount is computed by multiplying the participant's benefit under the plan as of the later of the proposed termination date or the benefit commencement date by the ratio of (i) the normal retirement benefit under the provisions of the plan in effect 5 years before the proposed termination date and (ii) the normal retirement benefit under the plan provisions in effect on the proposed termination date. Thus, the numerator of the ratio is the benefit that would be payable to the participant under the normal retirement provisions of the plan 5 years before the proposed termination date, based on her age, service, and compensation on her benefit commencement date. The denominator of the ratio is the benefit that would be payable to the participant under the normal retirement provisions of the plan in effect on the proposed termination date, based on her age, service, and compensation as of the earlier of her benefit commencement date or the proposed termination date. Since the only different factor in the numerator and denominator is the salary percentage, the amount of the estimated title IV benefit is $1,125 (0.015/0.020 x $1,500) per month. This amount is less than the estimated guaranteed benefit of $1,350 per month. Therefore, in accordance with Sec. 4022.61(d), the benefit payable to the participant is $1,350 per month. Example 2--Facts. A participant who is a substantial owner retires at the plan's normal retirement age, having completed 5 years of active participation in the plan, on October 31, 1992, which is the proposed termination date. Under provisions of the plan in effect 5 years prior to the proposed termination date, the participant is entitled to a single life annuity of $500 per month. Under the most recent plan amendments, which were put into effect 1\1/2\ years prior to the proposed termination date, the participant is entitled to a single life annuity of $1,000 per month. The participant's estimated guaranteed benefit computed under Sec. 4022.62(d)(2) is $166.67 per month. It is assumed that all of the conditions in paragraph (b) of this section have been met. Plan assets equal $2 million. The present value of all benefits in pay status is $1.5 million based on applicable PBGC interest rates. There are no employee contributions [[Page 34038]] and the present value of all vested benefits that are not in pay status is $0.75 million based on applicable PBGC interest rates. Estimated title IV benefit. Paragraph (d) of this section provides that the amount of the estimated title IV benefit payable with respect to a participant who is a substantial owner is the higher of the estimated priority category 3 benefit computed under paragraph (c) of this section or the estimated priority category 4 benefit computed under paragraph (d) of this section. Under paragraph (c), the participant's estimated priority category 3 benefit is $500 ($1,000 x $500/$1000) per month. Under paragraph (d), the participant's estimated priority category 4 benefit is the estimated guaranteed benefit computed under Sec. 4022.62(c) (i.e., as if the participant were not a substantial owner) multiplied by the priority category 4 funding ratio. Since the plan has priority category 3 benefits, the ratio is determined under paragraph (d)(2)(i). The numerator of the ratio is plan assets minus the present value of benefits in pay status. The denominator of the ratio is the present value of all vested benefits that are not in pay status. The participant's estimated guaranteed benefit under Sec. 4022.62(c) is $1,000 per month times 0.90 (the factor from column (b) of Table I in Sec. 4022.62(c)(2)), or $900 per month. Multiplying $900 by the category 4 funding ratio of \2/3\ (($2 million--$1.5 million)/$0.75 million) produces an estimated category 4 benefit of $600 per month. Because the estimated category 4 benefit so computed is greater than the estimated category 3 benefit so computed, the estimated category 4 benefit is the estimated title IV benefit. Because the estimated category 4 benefit so computed is greater than the estimated guaranteed benefit of $166.67 per month, in accordance with Sec. 4022.61(d), the benefit payable to the participant is the estimated category 4 benefit of $600 per month. Subpart E--PBGC Recoupment and Reimbursement of Benefit Overpayments and Underpayments Sec. 4022.81 General rules. (a) Recoupment of benefit overpayments. If at any time the PBGC determines that net benefits paid with respect to any participant in a PBGC-trusteed plan exceed the total amount to which the participant or his or her beneficiary is entitled up to that time under title IV of ERISA, and the participant or beneficiary is entitled to receive future benefit payments, the PBGC shall recoup the overpayment in accordance with paragraph (c) of this section and Sec. 4022.82. Notwithstanding the previous sentence, the PBGC may, in its discretion, recover overpayments by methods other than recouping in accordance with the rules in this subpart. The PBGC will not normally exercise this right unless net benefits paid after the termination date exceed those to which a participant or beneficiary is entitled under the terms of the plan before any reductions under subpart D. (b) Reimbursement of benefit underpayments. If at any time the PBGC determines that net benefits paid with respect to a participant in a PBGC-trusteed plan are less than the amount to which the participant or his or her beneficiary is entitled up to that time under title IV of ERISA, the PBGC shall reimburse the participant or beneficiary for the net underpayment in accordance with paragraphs (c) and (d) of this section and Sec. 4022.83. (c) Payments subject to recoupment or reimbursement. The PBGC shall recoup net overpayments and reimburse net underpayments made on or after the latest of the proposed termination date, the termination date, or, if no notice of intent to terminate was issued, the date on which proceedings to terminate the plan are instituted pursuant to section 4042 of ERISA. (d) Interest. The PBGC will compute interest on overpayments and underpayments using the interest rate established for valuing immediate annuities as set forth in part 4044, appendix B, of this chapter according to the following rules: (1) Overpayments before recoupment begins. Except as provided in paragraph (d)(2), no interest is charged on overpayments from the date of the payment to the date on which recoupment begins. (2) Receipt of both overpayments and underpayments. If both benefit overpayments and benefit underpayments are made with respect to a participant, the PBGC will determine the amount of the net overpayment or underpayment by charging or crediting interest on each payment from the first day of the month after the date of payment to the first day of the month in which recoupment begins. If the net overpayment thus computed is greater than the sum of the actual overpayments (unadjusted for interest to the date on which recoupment begins), computations under Sec. 4022.82 will be based upon the sum of the actual overpayments. Sec. 4022.82 Method of recoupment. (a) Future benefit reductions. Unless a participant or beneficiary elects otherwise under paragraph (b) of this section, the PBGC shall recoup overpayments of benefits in accordance with this paragraph. The benefit reduction under this paragraph shall be an amount equal to the fraction determined under paragraphs (a)(1) and (a)(2) of this section, multiplied by each future benefit payment to which the participant or beneficiary is entitled. (1) Computation. The PBGC shall determine the fractional multiplier by dividing the amount of the benefit overpayment by the present value of the benefit payable with respect to the participant under title IV of ERISA. The PBGC shall determine the present value of the benefit to which a participant or beneficiary is entitled under title IV of ERISA as of the termination date, using the PBGC interest rates and factors in effect on that date. The PBGC may, however, utilize a different date of determination if warranted by the facts and circumstances of a particular case. (2) Limitation on benefit reduction. Except as provided in paragraph (a)(1) of this section, the PBGC shall reduce benefits with respect to a participant or beneficiary by no more than the greater of (i) ten percent per month or (ii) the amount of benefit per month in excess of the maximum guaranteeable benefit payable under section 4022(b)(3)(B) of ERISA, determined without adjustment for age and benefit form. (3) PBGC notice to participant or beneficiary. Before effecting a benefit reduction pursuant to this paragraph, the PBGC shall notify the participant or beneficiary in writing of the amount of the benefit overpayment and of the amount of the reduced benefit computed under this section. The notice will advise the participant or beneficiary of the repayment option set forth in paragraph (b) of this section and inform him or her that the PBGC will proceed to recover the benefit overpayment in accordance with this paragraph unless an election to repay in a lump sum is made in accordance with paragraph (b). (b) Lump sum repayment. A participant or beneficiary who has received a net benefit overpayment may elect to repay the excess in a single payment on or before a date agreed to by the participant or beneficiary and the PBGC. If the full payment is not made by the agreed upon date or a date is not agreed upon, the PBGC may proceed to recover the overpayment in accordance with paragraph (a) of this section. Sec. 4022.83 PBGC reimbursement of benefit underpayments. When the PBGC determines that there has been a net benefit underpayment made with respect to a participant, it shall pay the participant or beneficiary the amount of the net underpayment, determined in accordance with Sec. 4022.81(d), in a single payment. [[Page 34039]] Appendix to Part 4022--Maximum Guaranteeable Monthly Benefit The following table lists by year the maximum guaranteeable monthly benefit payable in the form of a life annuity commencing at age 65 as described by Sec. 4022.22(b) to a participant in a plan that terminated in that year: ------------------------------------------------------------------------ Maximum guaranteeable Year monthly benefit ------------------------------------------------------------------------ 1974.................................................... $750.00 1975.................................................... 801.14 1976.................................................... 869.32 1977.................................................... 937.50 1978.................................................... 1,005.68 1979.................................................... 1,073.86 1980.................................................... 1,159.09 1981.................................................... 1,261.36 1982.................................................... 1,380.68 1983.................................................... 1,517.05 1984.................................................... 1,602.27 1985.................................................... 1,687.50 1986.................................................... 1,789.77 1987.................................................... 1,857.95 1988.................................................... 1,909.09 1989.................................................... 2,028.41 1990.................................................... 2,164.77 1991.................................................... 2,250.00 1992.................................................... 2,352.27 1993.................................................... 2,437.50 1994.................................................... 2,556.82 1995.................................................... 2,573.86 1996.................................................... 2,642.05 ------------------------------------------------------------------------ PART 4022B--AGGREGATE LIMITS ON GUARANTEED BENEFITS Sec. 4022B.1 Aggregate payments limitation. If a person is entitled to benefits under two or more plans or with respect to two or more participants, or if more than one person is entitled to benefits payable with respect to one participant, the aggregate benefits payable by PBGC from its funds shall be limited to the extent set forth in Sec. 4022.22 computed without regard to the provisions of Sec. 4022.22(a). The limitation contained in Sec. 4022.22 shall be applied separately to each plan at the date of its termination, and the amounts payable by PBGC under each plan shall be aggregated up to the limitation contained in this section. PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS Subpart A--General Provisions Sec. 4041.1 Purpose and scope. 4041.2 Definitions. 4041.3 Requirements for a standard termination or a distress termination. 4041.4 Administration of plan during pendency of termination proceedings. 4041.5 Challenges to plan termination under collective bargaining agreement. 4041.6 Annuity requirements. 4041.7 Facilitating plan sufficiency in a standard termination. 4041.8 Disaster relief. 4041.9 Filing with the PBGC. 4041.10 Computation of time. 4041.11 Maintenance of plan records. 4041.12 Information collection. Subpart B--Standard Termination Process 4041.21 Notice of intent to terminate. 4041.22 Issuance of notices of plan benefits. 4041.23 Form and contents of notices of plan benefits. 4041.24 Standard termination notice. 4041.25 PBGC action upon filing of standard termination notice. 4041.26 Notice of noncompliance. 4041.27 Closeout of plan. Subpart C--Distress Termination Process 4041.41 Notice of intent to terminate. 4041.42 PBGC review of notice of intent to terminate. 4041.43 Distress termination notice. 4041.44 PBGC determination of compliance with requirements for distress termination. 4041.45 PBGC determination of plan sufficiency/insufficiency. 4041.46 Notices of benefit distribution. 4041.47 Verification of plan sufficiency prior to closeout. 4041.48 Closeout of plan. Appendix to Part 4041--Agreement for Commitment to Make Plan Sufficient for Benefit Liabilities Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350. Subpart A--General Provisions Sec. 4041.1 Purpose and scope. This part sets forth the rules and procedures for terminating a single-employer pension plan in a standard termination or in a distress termination under ERISA. Subpart A contains various general rules that apply to both standard terminations and distress terminations. Subpart B sets forth the specific steps that a plan administrator must follow in order to terminate a plan in a standard termination. Subpart C sets forth the specific steps that a plan administrator must follow in order to terminate a plan in a distress termination. This part applies to the termination of any single-employer plan covered under section 4021(a) of ERISA and not excluded by section 4021(b). This part does not reflect the amendments to sections 4041(b)(2)(C)(i) (relating to the PBGC's authority not to nullify a termination if nullification would be inconsistent with the interests of participants and beneficiaries) or 4041(c)(2)(B)(i)(I) (relating to the liquidation criteria for a distress termination) that were contained in the Retirement Protection Act of 1994 (Pub. L. 103-465, section 778 (a) and (b)). Sec. 4041.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: affected party, annuity, benefit liabilities, Code, contributing sponsor, controlled group, distress termination, distribution date, employer, ERISA, guaranteed benefit, insurer, irrevocable commitment, IRS, mandatory employee contributions, normal retirement age, notice of intent to terminate, PBGC, person, plan, plan administrator, plan year, single-employer plan, standard termination, termination date, and title IV benefit. In addition, for purposes of this part: Distress termination notice means the notice filed with the PBGC pursuant to section 4041(c)(2)(A) of ERISA and Sec. 4041.43. PBGC Form 601 (including Schedule EA-D) is the distress termination notice. Distribution notice means the notice issued to the plan administrator by the PBGC pursuant to Sec. 4041.45(c) of this part upon the PBGC's determination that the plan has sufficient assets to pay at least guaranteed benefits. Existing collective bargaining agreement means a collective bargaining agreement that-- (1) By its terms, either has not expired or is extended beyond its stated expiration date because neither of the collective bargaining parties took the required action to terminate it, and (2) Has not been made inoperative by a judicial ruling. When a collective bargaining agreement no longer meets these conditions, it ceases to be an ``existing collective bargaining agreement,'' whether or not any or all of its terms may continue to apply by operation of law. Majority owner means, with respect to a contributing sponsor of a single-employer plan, an individual who owns, directly or indirectly, 50 percent or more of-- (1) An unincorporated trade or business, (2) The capital interest or the profits interest in a partnership, or (3) Either the voting stock of a corporation or the value of all of the stock of a corporation. For this purpose, the constructive ownership rules of section 414 (b) and (c) of the Code shall apply. Notice of benefit distribution means the notice to each participant and beneficiary required by Sec. 4041.46 of this part describing the benefit to be distributed to him or her. Notice of noncompliance means a notice issued to a plan administrator by the PBGC pursuant to section 4041(b)(2)(C) of ERISA and Sec. 4041.26 of this part advising the plan administrator that the requirements for a standard [[Page 34040]] termination have not been satisfied and that the plan is an ongoing plan. Notice of plan benefits means the notice to each participant and beneficiary required by section 4041(b)(2)(B) of ERISA and Secs. 4041.22 and 4041.23 of this part describing his or her plan benefits. Participant means-- (1) Any individual who is currently in employment covered by the plan and who is earning or retaining credited service under the plan, including any individual who is considered covered under the plan for purposes of meeting the minimum participation requirements but who, because of offset or similar provisions, does not have any accrued benefits; (2) Any nonvested individual who is not currently in employment covered by the plan but who is earning or retaining credited service under the plan; and (3) Any individual who is retired or separated from employment covered by the plan and who is receiving benefits under the plan or is entitled to begin receiving benefits under the plan in the future, excluding any such individual to whom an insurer has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan. Plan benefits means the benefits to which a participant is, or may become, entitled under the plan's provisions in effect as of the termination date, based on the participant's accrued benefit under the plan as of that date. Each participant's ``plan benefits'' equals that participant's ``benefit liabilities,'' and the sum of all ``plan benefits'' equals the plan's ``benefit liabilities.'' Proposed distribution date means the date chosen by the plan administrator as the tentative date for the distribution of plan assets pursuant to a standard termination. A proposed distribution date may not be earlier than the 61st day, nor later than the 240th day, following the day on which the plan administrator files a standard termination notice with the PBGC. Proposed termination date means the date specified as such by the plan administrator in the notice of intent to terminate or, if later, in the standard termination notice or the distress termination notice. A proposed termination date specified in the notice of intent to terminate may not be earlier than the 60th day, nor later than the 90th day, after the issuance of the notice of intent to terminate. A proposed termination date becomes the 'termination date' if a plan terminates in a standard termination. A proposed termination date specified in the distress termination notice may not be earlier than the proposed termination date specified in the notice of intent to terminate, or (except with PBGC approval) later than the 90th day after the issuance of the notice of intent to terminate. Residual assets means the plan assets remaining after all benefit liabilities and other liabilities of the plan have been satisfied. Standard termination notice means the notice filed with the PBGC pursuant to section 4041(b)(2)(A) of ERISA and Sec. 4041.24 of this part advising the PBGC of a proposed standard termination. PBGC Form 500 (including Schedule EA-S) is the standard termination notice. Sec. 4041.3 Requirements for a standard termination or a distress termination. (a) Exclusive means of voluntary plan termination. A plan may be voluntarily terminated by the plan administrator only if all of the requirements for a standard termination set forth in paragraph (b) of this section are satisfied or all of the requirements for a distress termination set forth in paragraph (c) of this section are satisfied. (b) Requirements for a standard termination. A plan may be terminated in a standard termination only if-- (1) The plan administrator issues a notice of intent to terminate to each affected party in accordance with Sec. 4041.21 at least 60 days and not more than 90 days before the proposed termination date; (2) The plan administrator files a standard termination notice with the PBGC in accordance with Sec. 4041.24 no later than 120 days after the proposed termination date or, if applicable, no later than the due date established in an extension notice issued under Sec. 4041.8; (3) The plan administrator issues notices of plan benefits to plan participants and beneficiaries in accordance with Secs. 4041.22 and 4041.23 no later than the date that the standard termination notice is filed with the PBGC; (4) The PBGC does not issue a notice of noncompliance to the plan administrator pursuant to Sec. 4041.26; and (5) The plan administrator distributes plan assets in accordance with Sec. 4041.27(c) within the 180-day (or extended) distribution period under Sec. 4041.27(a), (e), and (f) (or, where applicable, within the time prescribed in part 4050 of this chapter), in satisfaction of all benefit liabilities under the plan. (c) Requirements for a distress termination. A plan may be terminated in a distress termination only if-- (1) The plan administrator issues a notice of intent to terminate to each affected party in accordance with Sec. 4041.41 at least 60 days and not more than 90 days before the proposed termination date; (2) The plan administrator files a distress termination notice with the PBGC in accordance with Sec. 4041.43 no later than 120 days after the proposed termination date or, if applicable, no later than the due date established in an extension notice issued under Sec. 4041.8; and (3) The PBGC determines that each contributing sponsor and each member of its controlled group satisfy one of the distress criteria set forth in paragraph (e) of this section. (d) Effect of failure to satisfy requirements. (1) If the plan administrator does not satisfy all of the requirements of paragraph (b) of this section for a standard termination or, except as provided in paragraph (d)(2)(i) of this section, all of the requirements of paragraph (c) of this section for a distress termination, any action taken to effect the plan termination shall be null and void, and the plan shall be an ongoing plan. A plan administrator who still desires to terminate the plan shall initiate the termination process again, starting with the issuance of a new notice of intent to terminate. (2)(i) The PBGC may, upon its own motion, waive any requirement with respect to notices to be filed with the PBGC under paragraph (c)(1) or (c)(2) of this section if the PBGC believes that it will be less costly or administratively burdensome to the PBGC to do so. The PBGC will not entertain requests for waivers under this paragraph. (ii) Notwithstanding any other provision of this part, the PBGC retains the authority in any case to initiate a plan termination in accordance with the provisions of section 4042 of ERISA. (e) Distress criteria. In a distress termination, each contributing sponsor and each member of its controlled group shall satisfy at least one (but not necessarily the same one) of the following criteria in order for a distress termination to occur: (1) Liquidation. This criterion is met if, as of the proposed termination date-- (i) A person has filed or had filed against it a petition seeking liquidation in a case under title 11, United States Code, or under a similar federal law or law of a State or political subdivision of a State, or a case described in paragraph (e)(2) of this section has been converted to such a case; and (ii) The case has not been dismissed. (2) Reorganization. This criterion is met if-- [[Page 34041]] (i) As of the proposed termination date, a person has filed or had filed against it a petition seeking reorganization in a case under title 11, United States Code, or under a similar law of a state or a political subdivision of a state, or a case described in paragraph (e)(1) of this section has been converted to such a case; (ii) As of the proposed termination date, the case has not been dismissed; (iii) The person notifies the PBGC of any request to the bankruptcy court (or other appropriate court in a case under such similar law of a state or a political subdivision of a state) for approval of the plan termination by concurrently filing with the PBGC a copy of the motion requesting court approval, including any documents submitted in support of the request; and (iv) The bankruptcy court or other appropriate court determines that, unless the plan is terminated, such person will be unable to pay all its debts pursuant to a plan of reorganization and will be unable to continue in business outside the reorganization process and approves the plan termination. (3) Inability to continue in business. This criterion is met if a person demonstrates to the satisfaction of the PBGC that, unless a distress termination occurs, the person will be unable to pay its debts when due and to continue in business. (4) Unreasonably burdensome pension costs. This criterion is met if a person demonstrates to the satisfaction of the PBGC that the person's costs of providing pension coverage have become unreasonably burdensome solely as a result of declining covered employment under all single- employer plans for which that person is a contributing sponsor. (f) Non-duplicative efforts. (1) If a person requests approval of the plan termination by a court, as described in paragraph (e)(2) of this section, the PBGC-- (i) Will normally enter an appearance to request that the court make specific findings as to whether the contributing sponsor or controlled group member meets the distress test in paragraph (e)(3) of this section, or state that it is unable to make such findings; (ii) Will provide the court with any information it has that may be germane to the court's ruling; (iii) Will, if the person has requested, or later requests, a determination by the PBGC under paragraph (e)(3) of this section, defer action on the request until the court makes its determination; and (iv) Will be bound by a final and non-appealable order of the court. (2) If a person requests a determination by the PBGC under paragraph (e)(3) of this section, the PBGC determines that the distress criterion is not met, and the person thereafter requests approval of the plan termination by a court, as described in paragraph (e)(2) of this section, the PBGC will advise the court of its determination and make its administrative record available to the court. (g) Non-recognition of certain actions. If the PBGC finds that a person undertook any action or failed to act for the principal purpose of satisfying any of the distress criteria contained in paragraph (e) of this section, rather than for a reasonable business purpose, the PBGC shall disregard such act or failure to act in determining whether the person has satisfied any of those criteria. Sec. 4041.4 Administration of plan during pendency of termination proceedings. (a) General rule. Except to the extent specifically prohibited by this section, during the pendency of termination proceedings the plan administrator shall continue to carry out the normal operations of the plan, such as putting participants into pay status, collecting contributions due the plan, investing plan assets, and, during the pendency of a standard termination, making loans to participants, in accordance with plan provisions and applicable law and regulations. (b) Prohibitions after issuance of notice of intent to terminate in a standard termination. Except as provided in paragraph (d) of this section, during the period beginning on the first day the plan administrator issues a notice of intent to terminate and ending on the last day of the PBGC's 60-day (or extended) review period, as described in Sec. 4041.25(a), the plan administrator shall not-- (1) Distribute plan assets pursuant to or in furtherance of the termination of the plan; (2) Pay benefits attributable to employer contributions, other than death benefits, in any form other than as an annuity; or (3) Purchase irrevocable commitments to provide benefits from an insurer. (c) Prohibitions after issuing notice of intent to terminate in a distress termination. The plan administrator shall not make loans to plan participants beginning on the first day he or she issues a notice of intent to terminate, and from that date until a distribution is permitted pursuant to Sec. 4041.48, the plan administrator shall not-- (1) Distribute plan assets pursuant to, or (except as required by this part) take any other actions to implement, the termination of the plan; (2) Pay benefits attributable to employer contributions, other than death benefits, in any form other than as an annuity; or (3) Purchase irrevocable commitments to provide benefits from an insurer. (d) Exceptions in a standard termination. During the period set forth in paragraph (b) of this section, the plan administrator may pay benefits attributable to employer contributions either through the purchase of irrevocable commitments from an insurer or in a form other than an annuity if-- (1) The participant has separated from active employment; (2) The distribution is consistent with prior plan practice; and (3) The distribution is not reasonably expected to jeopardize the plan's sufficiency for benefit liabilities. (e) Effect of notice of noncompliance in a standard termination. If the PBGC issues a notice of noncompliance pursuant to Sec. 4041.26, the prohibitions described in paragraphs (b)(2) and (b)(3) of this section shall cease to apply-- (1) Upon expiration of the period during which reconsideration may be requested under Sec. 4041.26(c) or, if earlier, at the time the plan administrator decides not to request reconsideration; or (2) If reconsideration is requested, upon PBGC issuance of its decision on reconsideration. (f) Limitation on benefit payments on or after proposed termination date in a distress termination. Beginning on the proposed termination date, the plan administrator shall reduce benefits to the level determined under part 4022, subpart D, of this chapter. (g) Failure to qualify for distress termination. In any case where the PBGC determines, pursuant to Sec. 4041.42(c) or Sec. 4041.44(c)(1), that the requirements for a distress termination are not satisfied-- (1) The prohibitions in paragraph (c) of this section, other than those in paragraph (c)(1), shall cease to apply-- (i) Upon expiration of the period during which reconsideration may be requested under Secs. 4041.42(e) and 4041.44(d) or, if earlier, at the time the plan administrator decides not to request reconsideration; or (ii) If reconsideration is requested, upon PBGC issuance of its decision on reconsideration. (2) Any benefits that were not paid pursuant to paragraph (f) of this section shall be due and payable as of the [[Page 34042]] effective date of the PBGC's determination, together with interest from the date (or dates) on which the unpaid amounts were originally due until the date on which they are paid in full at the rate or rates prescribed under Sec. 4022.81(d) of this chapter. (h) Effect of subsequent insufficiency. If the plan administrator makes a finding of subsequent insufficiency for guaranteed benefits pursuant to Sec. 4041.47(b), or the PBGC notifies the plan administrator that it has made a finding of subsequent insufficiency for guaranteed benefits pursuant to Sec. 4041.47(d), the prohibitions in paragraph (c) of this section shall apply in accordance with Sec. 4041.47(e). Sec. 4041.5 Challenges to plan termination under collective bargaining agreement. (a) Suspension upon formal challenge to termination. (1)(i) If the PBGC is advised, before the 60-day (or extended) period specified in Sec. 4041.25 ends (in a standard termination) or before issuance of a notice of inability to determine sufficiency or a distribution notice pursuant to Sec. 4041.45(b) or (c) (in a distress termination), that a formal challenge to the termination (as described in paragraph (b) of this section) has been initiated, the PBGC shall suspend the termination proceeding and shall so advise the plan administrator in writing. (ii) If the PBGC is advised of a challenge described in paragraph (a)(1)(i) of this section after the 60-day (or extended) period specified in Sec. 4041.25 ends (in a standard termination) or after issuance of a notice of inability to determine sufficiency or a distribution notice pursuant to Sec. 4041.45(b) or (c) (in a distress termination) but before the termination procedure is concluded pursuant to this part, the PBGC may suspend the termination proceeding and, if it does, shall so advise the plan administrator in writing. (2) The rules in paragraphs (a)(3) or (a)(4) (as appropriate) shall apply during a period of suspension beginning on the date of the PBGC's written notification to the plan administrator and ending with the final resolution of the challenge to the termination: (3) In a standard termination-- (i) The running of all time periods specified in ERISA or this part relevant to the termination shall be suspended; and (ii) The plan administrator shall comply with the prohibitions in Sec. 4041.4. (4) In a distress termination-- (i) The suspension shall stay the issuance by the PBGC of any notice of inability to determine sufficiency or distribution notice or, if any such notice was previously issued, shall stay its effectiveness; (ii) The plan administrator shall comply with the prohibitions in Sec. 4041.4; and (iii) The plan administrator shall file a distress termination notice with the PBGC in the manner and within the time specified in Sec. 4041.43. (b) Formal challenge to termination. For purposes of this section, a formal challenge to a plan termination is initiated when any of the following actions is taken, asserting that the termination would violate the terms and conditions of an existing collective bargaining agreement: (1) The commencement of any procedure specified in the collective bargaining agreement for resolving disputes under the agreement; or (2) The commencement of any action before an arbitrator, administrative agency or board, or court under applicable labor- management relations law. (c) Resolution of challenge. Immediately upon the final resolution (as described in paragraph (d) of this section) of the formal challenge to the termination, the plan administrator shall notify the PBGC in writing of the outcome of the challenge, and shall provide the PBGC with a copy of the award or order, if any. If the validity of the proposed termination has been upheld, the plan administrator also shall advise the PBGC whether the plan administrator wishes to continue the proposed termination. (1) Challenge sustained. If the arbitrator, agency, board, or court has determined (or the parties have agreed) that the proposed termination violates an existing collective bargaining agreement, the PBGC shall dismiss the termination proceeding, all actions taken to effect the plan termination shall be null and void, and the plan shall be an ongoing plan. In this event, in a distress termination, Sec. 4041.4(g) shall apply as of the date of the dismissal by the PBGC. (2) Termination sustained. If the arbitrator, agency, board, or court has determined (or the parties have agreed) that the proposed termination does not violate an existing collective bargaining agreement and the plan administrator wishes to proceed with the termination, the PBGC shall reactivate the termination proceeding by sending a written notice thereof to the plan administrator, and the following rules shall apply: (i) The termination proceeding shall continue from the point where it was suspended; (ii) All actions taken to effect the termination before the suspension shall be effective; (iii) Any time periods that were suspended shall resume running from the date of the PBGC's notice of the reactivation of the proceeding; (iv) Any time periods that had fewer than 15 days remaining shall be extended to the 15th day after the date of the PBGC's notice, or such later date as the PBGC may specify, and (v) In a distress termination, the PBGC shall proceed to issue a notice of inability to determine sufficiency or a distribution notice (or reactivate any such notice stayed under paragraph (a)(3) of this section), either with or without first requesting updated information from the plan administrator pursuant to Sec. 4041.43(c). (d) Final resolution of challenge. For purposes of this section, a formal challenge to a proposed termination is finally resolved when-- (1) The parties involved in the challenge enter into a settlement that resolves the challenge; (2) A final award, administrative decision, or court order is issued that is not subject to review or appeal; or (3) A final award, administrative decision, or court order is issued that is not appealed, or review or enforcement of which is not sought, within the time for filing an appeal or requesting review or enforcement. (e) Involuntary termination by the PBGC. Notwithstanding any other provision of this section, the PBGC retains the authority in any case to initiate a plan termination in accordance with the provisions of section 4042 of ERISA. Sec. 4041.6 Annuity requirements. (a) General rule. Except as provided in paragraphs (b) and (d) of this section (or, where applicable, in part 4050 of this chapter), when a plan is closed out under Sec. 4041.27 (in a standard termination) or Sec. 4041.48 (in a distress termination), any benefit that is payable as an annuity under the provisions of the plan must be provided in annuity form through the purchase from an insurer of a single premium, nonparticipating, nonsurrenderable annuity contract that constitutes an irrevocable commitment by the insurer to provide the benefits purchased. (b) Exceptions to annuity requirement. A benefit that is payable as an annuity under the provisions of a plan need not be provided in annuity form if the plan provides for an alternative form of [[Page 34043]] distribution and either paragraph (b)(1) or (b)(2) of this section applies: (1) The participant is not in pay status as of the distribution date, and the present value of the participant's total benefit under the plan, including amounts previously distributed to the participant, is $3,500 or less, determined in accordance with sections 411(a)(11) and 417(e)(3) of the Code and the regulations thereunder. The present value of such benefits shall be determined using the interest rate or rates as of-- (i) The date set forth in the plan for such purpose, provided that the plan provision is in accord with section 417(e)(3) of the Code and the regulations thereunder (substituting ``distribution date'' for ``annuity starting date'' wherever used in the plan); or (ii) If the plan does not provide for such a date, the distribution date. (2) The participant elected the alternative form of distribution in writing, with the written consent of his or her spouse, in accordance with the requirements of sections 401(a)(11), 411(a)(11), and 417 of the Code and the regulations thereunder. (c) Optional benefit forms. Except as permitted by sections 401(a)(11), 411(d)(6), and 417 of the Code and the regulations thereunder, an annuity contract purchased to satisfy the annuity requirement shall preserve all applicable benefit options provided under the plan as of the termination date. (d) Participating annuities. (1) General rule. Notwithstanding the requirement of paragraph (a) of this section that an annuity contract be nonparticipating, a participating annuity contract may be purchased to satisfy the annuity requirement if the plan can provide for all benefit liabilities and-- (i) All benefit liabilities will be guaranteed under the annuity contract as the unconditional, irrevocable, and noncancellable obligation of the insurer; (ii) In no event, including unfavorable investment or actuarial experience, can the amounts payable to participants under the annuity contract decrease except to correct mistakes; and (iii) As provided in paragraph (d)(2) of this section, no amount of residual assets to which participants are entitled will be used to pay for the participation feature. (2) Plans with residual assets. If all or a portion of the residual assets of a plan will be distributed to participants-- (i) The additional premium for the participation feature must be paid from the contributing sponsor's share, if any, of the residual assets or from assets of the contributing sponsor; and (ii) If the plan provided for mandatory employee contributions, the amount of residual assets must be determined using the price of the annuities for all benefit liabilities without the participation feature. Sec. 4041.7 Facilitating plan sufficiency in a standard termination. (a) Commitment to make plan sufficient--(1) General rule. At any time before a standard termination notice is filed with the PBGC, in order to enable the plan to terminate in that standard termination, a contributing sponsor or a member of a controlled group of a contributing sponsor may make a commitment to contribute any additional sums necessary to make the plan sufficient for all benefit liabilities. Any such commitment shall be treated as a plan asset for all purposes under this part. A sample commitment is included in the appendix to this part. (2) Requirements for valid commitment. A commitment to make a plan sufficient for all benefit liabilities shall be valid for purposes of this part only if the commitment-- (i) Is made to the plan; (ii) Is in writing, signed by the contributing sponsor and/or controlled group member(s); and (iii) If the contributing sponsor or controlled group member is the subject of a bankruptcy liquidation or reorganization proceeding, as described in Sec. 4041.3(e)(1) or (e)(2) of this part, is approved by the court before which the liquidation or reorganization proceeding is pending or is unconditionally guaranteed, by a person not in bankruptcy, to be met at or before the time distribution of assets is required in the standard termination. (b) Alternative treatment of majority owner's benefit--(1) General rule. In order to facilitate the termination of the plan and distribution of assets in a standard termination, a majority owner may agree to forego receipt of all or part of his or her benefit until the benefit liabilities of all other plan participants have been satisfied. (2) Requirements for valid agreement. Any agreement by a majority owner to an alternative treatment of his or her benefit is valid only if-- (i) The agreement is in writing; (ii) In any case in which the total value of the benefit (determined in accordance with Sec. 4041.6(b) of this part) is greater than $3,500, the spouse, if any, of the majority owner consents, in writing, to the alternative treatment of the benefit; and (iii) The agreement is not inconsistent with a qualified domestic relations order (as defined in section 206(d)(3) of ERISA). Sec. 4041.8 Disaster relief. (a) Notwithstanding any other provision in this part, when the President of the United States declares that, under the Disaster Relief Act of 1974, as amended (42 U.S.C. 5121, 5122(2), 5141(b)), a major disaster exists, the Executive Director of the PBGC (or his or her designee) may, by issuing one or more notices of disaster relief, extend by up to 180 days the due date for-- (1) Filing the standard termination notice under Sec. 4041.24; (2) Completing the distribution of plan assets in a standard termination under Sec. 4041.27; (3) Filing the distress termination notice pursuant to Sec. 4041.43; (4) Issuing the notices of benefit distribution in a distress termination pursuant to Sec. 4041.46(a)(1); or (5) Completing the distribution of plan assets in a distress termination pursuant to Sec. 4041.48. (b) The due date extension or extensions described in paragraph (a) of this section shall apply only to plan terminations with respect to which the principal place of business of the contributing sponsor or the plan administrator, or the office of the service provider, bank, insurance company, or other person maintaining the information necessary to file the standard or distress termination notice, issue notices of plan benefits or benefit distribution, or complete the distribution of plan assets (as applicable), is within a designated disaster area. (c) The standard or distress termination notice or the post- distribution certification shall identify the termination as being qualified for the due date extension. Sec. 4041.9 Filing with the PBGC. (a) Date of filing. Any document required or permitted to be filed with the PBGC under this part shall be deemed filed on the date that it is received at the PBGC, providing it is received no later than 4:00 p.m. on a day other than Saturday, Sunday, or a Federal holiday. Documents received after 4:00 p.m. or on Saturday, Sunday, or a Federal holiday shall be deemed filed on the next regular business day. (b) How to file. Except as may otherwise be provided in applicable forms and instructions, any document to be filed under this part may be delivered by mail or by hand to: Reports [[Page 34044]] Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026 Sec. 4041.10 Computation of time. In computing any period of time prescribed or allowed by this part, the day of the act or event from which the designated period of time begins to run is not counted. The last day of the period so computed shall be included, unless it is a Saturday, Sunday, or Federal holiday, in which event the period runs until the end of the next day that is not a Saturday, Sunday, or Federal holiday. Notwithstanding the preceding sentence, a proposed termination date may be any day, including a Saturday, Sunday, or Federal holiday. Sec. 4041.11 Maintenance of plan records. Either the contributing sponsor or the plan administrator of a plan terminating in a standard termination or a plan terminating in a distress termination that closes out in accordance with Sec. 4041.48 pursuant to a distribution notice issued under Sec. 4041.45(c) shall maintain and preserve all records used to compute benefits with respect to each individual who is a plan participant or a beneficiary of a deceased participant as of the termination date in accordance with the following rules: (a) The records to be maintained and preserved are those used to compute the benefit for purposes of distribution to each individual in accordance with Sec. 4041.27(c) (in a standard termination) or Sec. 4041.48 (in a distress termination) and include, but are not limited to, the plan documents and all underlying data, including worksheets prepared by or at the direction of the enrolled actuary, used in determining the amount, form, and value of benefits. (b) All records subject to this section shall be preserved for six years after the date the post-distribution certification required under Sec. 4041.27(h) (in a standard termination) or Sec. 4041.48(b) (in a distress termination) is filed with the PBGC. (c) The contributing sponsor or plan administrator, as appropriate, shall make records subject to this section available to the PBGC upon request for inspection and photocopying, and shall submit such records to the PBGC within 30 days after receipt of the PBGC's written request therefor (or such other period as may be specified in such written request). Sec. 4041.12 Information collection. The information collection requirements contained in this part have been approved by the Office of Management and Budget under control number 1212-0036. Subpart B--Standard Termination Process Sec. 4041.21 Notice of intent to terminate. (a) General rule. At least 60 days and no more than 90 days before the proposed termination date, the plan administrator shall issue to each person who is (as of the proposed termination date) an affected party (other than the PBGC) a written notice of intent to terminate containing all of the information specified in paragraph (d) of this section. Failure to comply with the requirements of this section shall nullify the proposed termination. (b) Discovery of other affected parties. Notwithstanding the provisions of paragraph (a) of this section, if the plan administrator discovers additional affected parties after the expiration of the time period specified in paragraph (a) of this section, the failure to issue the notice of intent to terminate to such parties within the specified time period will not cause the notice to be untimely under paragraph (a) of this section if the plan administrator could not reasonably have been expected to know of the additional affected parties and if he or she promptly issues the notice to each additional affected party. (c) Issuance--(1) Method. The plan administrator shall issue the notice of intent to terminate to each affected party (other than the PBGC) individually either by hand delivery or by first-class mail or courier service directed to the affected party's last known address. (2) When issued. The notice of intent to terminate is deemed issued to each affected party on the date on which it is handed to the affected party or deposited with a mail or courier service (as evidenced by a postmark or written receipt). (d) Contents of notice. The plan administrator shall include in the notice of intent to terminate all of the following information: (1) The name of the plan and of the contributing sponsor; (2) The employer identification number (``EIN'') of the contributing sponsor and the plan number (``PN''); if there is no EIN or PN, the notice shall so state; (3) The name, address, and telephone number of the person who may be contacted by an affected party with questions concerning the plan's termination; (4) A statement that the plan administrator expects to terminate the plan in a standard termination on a proposed termination date that is either-- (i) A specific date set forth in the notice, or (ii) A date to be determined that is dependent on the occurrence of some future event; (5) If the proposed termination date is dependent on the occurrence of a future event, the nature of the event (such as the merger of the contributing sponsor with another entity), generally when the event is expected to occur, and when the termination will occur in relation to the other event; (6) A statement that benefit and service accruals will continue until the termination date or, if applicable, that benefit accruals were or will be frozen as of a specific date in accordance with section 204(h) of ERISA; (7) A statement that, in order to terminate in a standard termination, plan assets must be sufficient to provide all benefit liabilities under the plan with respect to each participant and each beneficiary of a deceased participant; (8) A statement that, after plan assets have been distributed to provide all benefit liabilities with respect to a participant or a beneficiary of a deceased participant, either by the purchase of an irrevocable commitment or commitments from an insurer to provide benefits or by an alternative form of distribution provided for under the plan, the PBGC's guarantee with respect to that participant's or beneficiary's benefit ends; (9) If distribution of benefits under the plan may be wholly or partially by the purchase of irrevocable commitments from an insurer-- (i) The name and address of the insurer or insurers from whom, or (if not then known) the insurers from among whom, the plan administrator intends to purchase the irrevocable commitments; or (ii) If the plan administrator has not identified an insurer or insurers at the time the notice of intent to terminate is issued, a statement that-- (A) Irrevocable commitments may be purchased from an insurer to provide some or all of the benefits under the plan, (B) The insurer or insurers have not yet been identified, and (C) Affected parties (other than the PBGC) will be notified at a later date (but no later than 45 days before the distribution date) of the name and address of the insurer or insurers from whom, or (if not then known) the insurers from among whom, the plan administrator intends to purchase the irrevocable commitments; [[Page 34045]] (10) A statement that if the termination does not occur, the plan administrator will notify the affected parties (other than the PBGC) in writing of that fact; (11) A statement that each affected party, other than the PBGC or any employee organization, will receive a written notification of the benefits that the person will receive; and (12) For retirees only, a statement that their monthly (or other periodic) benefit amounts will not be affected by the plan's termination. (e) Supplemental notice requirements. (1) The plan administrator shall issue a supplemental notice (or notices) of intent to terminate to each affected party (other than the PBGC) in accordance with the rules in paragraph (e)(2) of this section if-- (i) The plan administrator has not yet identified an insurer or insurers at the time the notice of intent to terminate is issued; or (ii) The plan administrator notifies affected parties (other than the PBGC) of the insurer or insurers from whom (or from among whom) he or she intends to purchase the irrevocable commitments, either in the notice of intent to terminate or in a later notice, but subsequently decides to select a different insurer. (2) The plan administrator shall issue each supplemental notice in the manner provided in paragraph (c) of this section no later than 45 days before the distribution date and shall include the name and address of the insurer or insurers from whom, or (if not then known) the insurers from among whom, the plan administrator intends to purchase the irrevocable commitments. (3) Any supplemental notice or notices meeting the requirements of paragraph (e)(2) of this section shall be deemed a part of the notice of intent to terminate. (f) Spin-off/termination transactions. In the case of a spin-off/ termination transaction, the plan administrator shall provide all participants in the original plan who are covered by the ongoing plan (as of the proposed termination date) with a notice describing the transaction no later than the date on which the plan administrator completes the issuance of notices of intent to terminate under this section. A spin-off/termination is a transaction in which a single defined benefit plan is split into two or more plans, in conjunction with the termination of one or more of the plans, resulting in a reversion of residual assets to the employer. Sec. 4041.22 Issuance of notices of plan benefits. (a) General rule. No later than the date on which the plan administrator files the standard termination notice with the PBGC, as required by Sec. 4041.24, the plan administrator shall issue to each person described in paragraph (b) of this section a notice of that individual's plan benefits. The notice shall be in the form and contain the information specified in Sec. 4041.23. Failure to comply with the requirements of this section shall nullify the proposed termination. (b) Persons entitled to notice. The plan administrator shall issue a notice of plan benefits to each person (other than the PBGC or any employee organization) who is an affected party as of the proposed termination date (and, in the case of a spin-off/termination transaction as described in Sec. 4043.21(f), each person who is, as of the proposed termination date, a participant in the original plan who is covered by the ongoing plan). (c) Discovery of other affected parties. Notwithstanding the provisions of paragraph (a) of this section, if the plan administrator discovers additional persons entitled to a notice of plan benefits after the expiration of the time period specified in paragraph (a) of this section, the failure to issue a notice of plan benefits to such persons within the specified time period will not cause such notices to be untimely under paragraph (a) of this section if the plan administrator could not reasonably have been expected to know of the additional persons and if he or she promptly issues, to each such additional person, a notice of plan benefits in the form and containing the information specified in Sec. 4041.23. (d) Issuance--(1) Method. The plan administrator shall issue a notice of plan benefits individually to each person described in paragraph (b) of this section, either by hand-delivery or by first- class mail or courier service directed to the person's last known address. (2) When issued. A notice of plan benefits is deemed issued to each person on the date it is handed to the person or deposited with a mail or courier service (as evidenced by a postmark or written receipt). Sec. 4041.23 Form and contents of notices of plan benefits. (a) Form of notices. The plan administrator shall provide notices of plan benefits written in plain, non-technical English that is likely to be understood by the average participant or beneficiary. If technical terms must be used, their meaning shall be explained in non- technical language. (b) Foreign languages. The plan administrator of a plan described in this paragraph shall comply with paragraph (a) of this section and also shall include in the notices a statement, prominently displayed, in the foreign language (or languages) common to the non-English speaking plan participants advising them of how they may obtain assistance in understanding the notice. The assistance need not involve written materials, but shall be adequate to reasonably ensure that the participants and beneficiaries understand the information contained in their notices and shall be provided through media and at times and places that are reasonably accessible to the participants and beneficiaries. A plan is described in this paragraph if, as of the proposed termination date, the plan either-- (1) Covers fewer than 100 participants and at least 25 percent of those participants speak only the same non-English language or (2) Covers 100 or more participants and at least the lesser of 500 or 10 percent of those participants speak the same non-English language. (c) Contents of notice. In addition to the information described in paragraph (d), (e), or (f) of this section, as applicable, the plan administrator shall include in each notice of plan benefits the following information: (1) The name of the plan, the employer identification number (``EIN'') of the contributing sponsor, and the plan number (``PN''); if there is no EIN or PN, the notice shall so state; (2) The name, address, and telephone number of the person who may be contacted to answer questions concerning a participant's or beneficiary's benefit; (3) The proposed termination date and, if applicable, a statement that this date is later than the proposed termination date given in the notice of intent to terminate; and (4) If the amount of the plan benefits set forth in a notice is an estimate, a statement that the amount is an estimate and that benefits paid may be greater than or less than the estimate. (d) Benefits of persons in pay status. The plan administrator shall include in the notice of plan benefits for a participant or beneficiary in pay status as of the proposed termination date the following information: (1) The amount and form of the participant's plan benefits payable as of the proposed termination date; (2) The amount and form of benefit, if any, payable to a beneficiary upon the [[Page 34046]] participant's death and the name of the beneficiary; (3) The amount and date of any increase or decrease in the benefit scheduled to occur after the proposed termination date (or that has already occurred) and an explanation of the increase or decrease, including, where applicable, a reference to the pertinent plan provision; and (4) For benefits of participants or beneficiaries in pay status for one year or less as of the proposed termination date, the specific personal data used to calculate the plan benefits described in paragraphs (d)(1) and (d)(2) of this section, e.g., participant's age at retirement, spouse's age, participant's length of service, and including, for Social Security offset benefits, the participant's actual or, if unknown, estimated Social Security benefit and, for an estimated benefit, the assumptions used for the participant's earnings history. (e) Benefits of participants not in pay status but form and starting date known. The plan administrator shall include in the notice of plan benefits for a participant who is not in pay status as of the proposed termination date, but who has, as of that date, elected to retire and has elected a form and starting date, or with respect to whom the plan administrator has determined a lump sum distribution will be made, the following information: (1) The amount and form of the participant's plan benefits payable as of the projected benefit starting date, and what that date is; (2) The amount and form of benefit, if any, payable to a beneficiary upon the participant's death and the name of the beneficiary; (3) The amount and date of any increase or decrease in the benefit scheduled to occur after the proposed termination date (or that has already occurred) and an explanation of the increase or decrease, including, where applicable, a reference to the pertinent plan provision; and (4) If the age at which, or form in which, the plan benefits will be paid differs from the age or form in which the participant's accrued benefit at normal retirement age is stated in the plan, the age or form stated in the plan and the age or form adjustment factors, including, in the case of a lump sum benefit, the interest rate used to convert to the lump sum benefit described in paragraph (e)(1) of this section and a reference to the pertinent plan provision; (5) The specific personal data, as described in paragraph (d)(4) of this section, used to calculate the plan benefits (other than a lump sum benefit) described in paragraphs (e)(1) and (e)(2) of this section and, with respect to a benefit payable as a lump sum, the personal data used to calculate the underlying annuity; and (6) If the plan benefits will be paid in a lump sum, an explanation of how the interest rate is used to calculate the lump sum; a statement that the higher the interest rate used, the smaller the lump sum amount; and, if applicable, a statement that the lump sum amount given is an estimate because the applicable interest rate may change before the distribution date. (f) Benefits of all other participants not in pay status. The plan administrator shall include in the notice of plan benefits for any participant not described in paragraph (d) or (e) of this section, the following information: (1) The amount and form of the participant's plan benefits payable at normal retirement age in any form permitted under the plan; (2) The availability of any alternative benefit forms, including those payable to a beneficiary upon the participant's death either before or after retirement, and, for any benefits to which the participant is or may become entitled that would be payable before normal retirement age, the earliest benefit commencement date, the amount payable on and after such date, and whether the benefit would be subject to future reduction; (3) The specific personal data, as described in paragraph (d)(4) of this section, used to calculate the plan benefits described in paragraph (f)(1) of this section and, with respect to a benefit that may be paid in a lump sum, the personal data used to calculate the underlying annuity; and (4) If the plan benefits may be paid in a lump sum, an explanation of when a lump sum may be paid without a participant's consent; an explanation of how the interest rate is used to calculate the lump sum; and a statement that the higher the interest rate used, the smaller the lump sum amount. Sec. 4041.24 Standard termination notice. (a) Form. The plan administrator shall file with the PBGC a PBGC Form 500, Standard Termination Notice, Single-Employer Plan Termination, with Schedule EA-S, Standard Termination Certification of Sufficiency, that has been completed in accordance with the instructions thereto. Except as provided in Sec. 4041.8, the plan administrator shall file the standard termination notice on or before the 120th day after the proposed termination date. (b) Supplemental notice requirement. If any of the benefits of the terminating plan may be provided in annuity form through the purchase of irrevocable commitments from an insurer and either of the conditions in paragraph (b)(1) of this section is met, the plan administrator shall file a supplemental notice (or notices) with the PBGC in accordance with the provisions in paragraph (b)(2) of this section. (1) The plan administrator shall file with the PBGC a supplemental notice (or notices) if-- (i) The insurer or insurers from whom the plan administrator intends to purchase irrevocable commitments is not identified in the standard termination notice filed with the PBGC, or (ii) The plan administrator has notified the PBGC of the insurer or insurers from whom he or she intends to purchase irrevocable commitments, either in the standard termination notice or in a later notice pursuant to paragraph (b)(2) of this section, and subsequently decides to select a different insurer. (2) The supplemental notice (or notices) may be filed at any time after the filing of the standard termination notice, but no later than 45 days before the distribution date, and shall-- (i) Be in writing addressed to: Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. (ii) Give information identifying the contributing sponsor and the plan by name, address, employer identification and plan numbers (``EIN/ PN''), and PBGC case number (if applicable); and (iii) Give the name and address of the insurer or insurers from whom, or (if not then known) the insurers from among whom, the plan administrator intends to purchase the irrevocable commitments. Sec. 4041.25 PBGC action upon filing of standard termination notice. (a) Review period upon filing of standard termination notice--(1) General rule. After a complete standard termination notice has been filed in accordance with Sec. 4041.9, the PBGC has 60 days to review the notice, determine whether to issue a notice of noncompliance pursuant to Sec. 4041.26, and issue any such notice. The 60-day review period begins on the day following the filing of a complete standard termination notice and includes the 60th day. If the PBGC does not issue a notice of noncompliance by the last day of this 60-day period, the plan administrator shall proceed to [[Page 34047]] close out the plan in accordance with Sec. 4041.27. (2) Extension of review period. The 60-day review period may be extended according to the following rules: (i) The PBGC and the plan administrator may agree in writing, before the expiration of the 60-day review period, to extend the period for up to an additional 60 days; (ii) More than one such extension may be made; and (iii) Any extension may be made upon whatever terms and conditions are agreed to by the PBGC and the plan administrator. (3) Suspension of review period. The 60-day review period shall be suspended in accordance with paragraph (d) of this section if the PBGC requests supplemental information. (b) Acknowledgment of complete standard termination notice. The PBGC shall notify the plan administrator in writing of the date on which a complete standard termination notice was filed, so that the plan administrator may determine when the 60-day review period will expire. (c) Return of incomplete standard termination notice. The PBGC shall return an incomplete standard termination notice and advise the plan administrator in writing of the missing item(s) of information and that the complete standard termination notice must be filed no later than the 120th day after the proposed termination date or the 20th day after the date of the PBGC notice, whichever is later. (d) Authority to request supplemental information. Whenever the PBGC has reason to believe that any of the requirements of Secs. 4041.21 through 4041.24 of this part were not complied with, or in any proposed termination that will result in a reversion of residual assets to the contributing sponsor, the PBGC may require the submission of information supplementing that furnished pursuant to Sec. 4041.24. A request for additional information under this paragraph shall be in writing and shall suspend the running of the 60-day (or extended) review period described in paragraph (a) of this section. That period shall begin running again on the day following the filing of the required information. If a plan administrator or contributing sponsor fails to submit information required under this paragraph within the period specified in the PBGC's request, the PBGC may issue a notice of noncompliance in accordance with Sec. 4041.26 or take other appropriate action to enforce the requirements of Title IV of ERISA. (e) Authority to suspend or nullify proposed termination. Notwithstanding any other provision of this part, the PBGC may, by written notice to the plan administrator, suspend or nullify a proposed termination after expiration of the 60-day (or extended) review period in any case in which it determines that such action is necessary to carry out the purposes of Title IV of ERISA. Sec. 4041.26 Notice of noncompliance. (a) General. (1) The PBGC shall issue to the plan administrator a written notice of noncompliance, within the period prescribed by Sec. 4041.25, whenever it makes one of the following determinations: (i) A determination that the plan administrator failed to issue the notice of intent to terminate in accordance with Sec. 4041.21. (ii) A determination that the plan administrator failed to issue notices of plan benefits in accordance with Secs. 4041.22 and 4041.23. (iii) A determination that the standard termination notice, or any supplemental notice, was not filed in accordance with Sec. 4041.24. (iv) A determination that, as of the proposed distribution date, plan assets will not be sufficient to satisfy all benefit liabilities under the plan. (2) The PBGC shall base any determination described in paragraph (a)(1) of this section on the information contained in the standard termination notice, including any supplemental submission under Sec. 4041.25(d) and any supplemental notice under Sec. 4041.24(b), or on information provided by any affected party or otherwise obtained by the PBGC. (b) Effect of notice of noncompliance. A notice of noncompliance ends the standard termination proceeding, nullifies all actions taken to terminate the plan, and renders the plan an ongoing plan. The notice of noncompliance is effective upon the expiration of the period within which the plan administrator may request reconsideration pursuant to paragraph (c) of this section but, once a notice is issued, the plan administrator shall take no further action to terminate the plan (except by initiation of a new termination) unless and until the notice is revoked pursuant to a decision by the PBGC on reconsideration. (c) Reconsideration of notice of noncompliance. A plan administrator may request reconsideration of a notice of noncompliance in accordance with the rules prescribed in part 4003, subpart C, of this chapter. Any request for reconsideration automatically stays the effectiveness of the notice of noncompliance until the PBGC issues its decision on reconsideration. (d) Notice to affected parties--(1) General rule. Upon a decision by the PBGC on reconsideration affirming the issuance of a notice of noncompliance (or, if earlier, upon the plan administrator's decision not to request reconsideration), the plan administrator shall notify the affected parties (other than the PBGC), and any persons who were provided notice under Sec. 4041.21(f)), in writing that the plan is not going to terminate or, if applicable, that the termination was invalid but that a new notice of intent to terminate is being issued. (2) Method of issuance. The notices shall be delivered by first- class mail or by hand to each person described in paragraph (d)(1) who is an employee organization or a participant or beneficiary who is then in pay status. The notices to other participants and beneficiaries shall be provided in any manner reasonably calculated to reach those participants and beneficiaries. Reasonable methods of notification include, but are not limited to, posting the notice at participants' worksites or publishing the notice in an employee organization newsletter or newspaper of general circulation in the area or areas where participants and beneficiaries reside. Sec. 4041.27 Closeout of plan. (a) General rules--(1) Distribution. Except as provided in paragraphs (b), (e), and (f) of this section and Sec. 4041.8 of this part, if the PBGC does not issue a notice of noncompliance within the period specified in Sec. 4041.25 or, if a notice of noncompliance is issued and later revoked after reconsideration under Sec. 4041.26(c), the plan administrator shall complete the distribution of plan assets in accordance with paragraph (c) of this section within 180 days after the expiration of the review period specified in Sec. 4041.25 (or, if applicable, the date on which the PBGC revokes the notice of noncompliance) or, if applicable, within the time prescribed in part 4050 of this chapter. (2) Post-distribution requirements. The plan administrator shall file with the PBGC a post-distribution certification in accordance with paragraph (h) of this section and, if any of the plan's benefit liabilities payable to a participant or beneficiary have been distributed through the purchase of irrevocable commitments, the plan administrator also shall provide such participant or beneficiary with a notice, contract, or certificate in accordance with paragraph (g) of this section. (b) Assets insufficient to satisfy benefit liabilities. Before distributing [[Page 34048]] plan assets to close out the plan, the plan administrator shall determine that plan assets are, in fact, sufficient to satisfy all benefit liabilities. In determining if plan assets are sufficient, the plan administrator shall subtract all liabilities (other than the future benefit liabilities that will be provided when assets are distributed), e.g., benefit payments due before the distribution date; PBGC premiums for all plan years through and including the plan year in which assets are distributed; expenses, fees, and other administrative costs. If plan assets are not sufficient to satisfy all benefit liabilities, the plan administrator shall not make any distribution of assets to effect the plan's termination. In the event of an insufficiency, the plan administrator shall promptly notify the PBGC. (c) Method of distribution. The plan administrator shall distribute plan assets in accordance with Sec. 4041.6 by purchasing irrevocable commitments from an insurer in satisfaction of all benefit liabilities that must be provided in annuity form, and by otherwise providing all benefit liabilities that need not be provided in annuity form. The plan administrator shall comply with part 4050 of this chapter (dealing with missing participants), if applicable. (d) Failure to distribute within 180-day period. Except as provided in paragraphs (e) and (f) of this section, failure to distribute assets in accordance with paragraph (c) of this section within the 180-day distribution period set forth in paragraph (a)(1) of this section, because of an insufficiency of plan assets as described in paragraph (b) of this section or for any other reason, shall nullify the termination. All actions taken to effect the plan's termination shall be null and void, and the plan shall be an ongoing plan. In this event, the plan administrator shall notify affected parties (other than the PBGC) in writing, in accordance with Sec. 4041.26(d), that the plan is not going to terminate or, if applicable, that the termination was invalid but that a new notice of intent to terminate is being issued. (e) Automatic extension of time for distribution. (1) Requirements for automatic extension. The plan administrator shall be entitled to an automatic extension of the 180-day period in which to complete the distribution of plan assets if the plan administrator-- (i) Submits to the IRS a complete request for a determination with respect to the plan's tax-qualification status upon termination (``determination letter'') on or before the date that the plan administrator files the standard termination notice with the PBGC; (ii) Does not receive a determination letter at least 60 days before the expiration of the 180-day period; and (iii) On or before the expiration of the 180-day period, notifies the PBGC in writing that an extension of the distribution deadline is required and certifies that the conditions in this paragraph have been met. (2) Extension period. If the requirements in paragraph (e)(1) of this section are met, the time within which the plan administrator shall complete the distribution of plan assets is automatically extended until the 60th day after receipt of a favorable determination letter from the IRS. (f) Discretionary extension of time for distribution. If the plan administrator will be unable to complete the distribution of plan assets within the 180-day (or extended) period for any reason other than an insufficiency described in paragraph (b) of this section, the plan administrator may request, and the PBGC shall grant or deny, in its discretion, an extension of time within which to complete the distribution according to the following rules: (1) The plan administrator shall file a written request for a discretionary extension with the PBGC at least 30 days before the expiration of the 180-day (or extended) distribution period, explain the reason(s) for the request, and provide a date certain by which the distribution will be made if the extension is granted. (2) The PBGC will not grant a discretionary extension based on failure to meet the requirements for an automatic extension under paragraph (e) of this section or failure to locate all participants or beneficiaries. (3) The PBGC will grant a discretionary extension, in whole or in part, only if it is satisfied that the delay in making the distribution is not due to the action or inaction of the plan administrator or the contributing sponsor and that the distribution can in fact be completed by the date requested. (g) Notice of annuity contract. In the case of the distribution of benefit liabilities through the purchase of irrevocable commitments-- (1) Either the plan administrator or the insurer shall, as soon as practicable, provide each participant and beneficiary with a copy of the annuity contract or certificate showing the insurer's name and address and clearly reflecting the insurer's obligation to provide the participant's or beneficiary's benefit; (2) If such a contract or certificate is not available on or before the date on which the post- distribution certificate is required to be filed pursuant to paragraph (h) of this section, the plan administrator shall, no later than such date, provide each participant and beneficiary with a written notice stating-- (i) That the obligation for providing the participant's or beneficiary's plan benefits has transferred to the insurer; (ii) The name and address of the insurer; (iii) The name, address, and telephone number of the person designated by the insurer to answer questions concerning the annuity; and (iv) That the participant or beneficiary will receive from the plan administrator or insurer a copy of the annuity contract or a certificate showing the insurer's name and address and clearly reflecting the insurer's obligation to provide the participant's or beneficiary's benefit; and (3) The plan administrator shall certify to the PBGC, as part of the post-distribution certification required under paragraph (h) of this section, that the requirements in paragraph (g)(1) or (g)(2) of this section have been satisfied. (h) Post-distribution certification. Within 30 days after the last distribution date, the plan administrator shall file with the PBGC a PBGC Form 501, Post-Distribution Certification for Standard Termination, that has been completed in accordance with the instructions thereto. This requirement shall be considered satisfied if, in accordance with Sec. 4050.6(a)(2) and (a)(3) of this chapter, the plan administrator files a preliminary post-distribution certification within 30 days after the last distribution date and, in addition, timely files an amended post-distribution certification that otherwise satisfies all applicable requirements. Subpart C--Distress Termination Process Sec. 4041.41 Notice of intent to terminate. (a) General rules. (1) At least 60 days and no more than 90 days before the proposed termination date, the plan administrator shall issue to each person who is (as of the proposed termination date) an affected party a written notice of intent to terminate. (2) The plan administrator shall issue the notice of intent to terminate to all affected parties other than the PBGC at or before the time he or she files the notice with the PBGC. (3) The notice to affected parties other than the PBGC shall contain all of the information specified in paragraph (d) of this section. [[Page 34049]] (4) The notice to the PBGC shall be filed on PBGC Form 600, Distress Termination, Notice of Intent to Terminate, completed in accordance with the instructions thereto. (b) Discovery of other affected parties. Notwithstanding the provisions of paragraphs (a)(1) and (a)(2) of this section, if the plan administrator discovers additional affected parties after the expiration of the time period specified in paragraphs (a)(1) or (a)(2) of this section, the failure to issue the notice of intent to terminate to such parties within the specified time periods will not cause the notice to be untimely under paragraph (a) of this section if the plan administrator could not reasonably have been expected to know of the additional affected parties and if he or she promptly issues the notice to each additional affected party. (c) Issuance--(1) Method. The plan administrator shall issue the notice of intent to terminate individually to each affected party. The notice to the PBGC shall be filed in accordance with Sec. 4041.9. The notice to each of the other affected parties shall be either hand delivered or delivered by first-class mail or courier service directed to the affected party's last known address. (2) When issued. The notice of intent to terminate is deemed issued to the PBGC on the date on which it is filed and to any other affected party on the date on which it is handed to the affected party or deposited with a mail or courier service (as evidenced by a postmark or written receipt). (d) Contents of notice to affected parties other than the PBGC. The plan administrator shall include in the notice of intent to terminate to each affected party other than the PBGC all of the following information: (1) The name of the plan and of the contributing sponsor; (2) The employer identification number (``EIN'') of the contributing sponsor and the plan number (``PN''); if there is no EIN or PN, the notice shall so state; (3) The name, address, and telephone number of the person who may be contacted by an affected party with questions concerning the plan's termination; (4) A statement that the plan administrator expects to terminate the plan in a distress termination on a specified proposed termination date. (5) A statement that benefit and service accruals will continue until the termination date or, if applicable, that benefit accruals were or will be frozen as of a specific date in accordance with section 204(h) of ERISA; (6) A statement of whether plan assets are sufficient to pay all guaranteed benefits or all benefit liabilities; (7) A brief description of what benefits are guaranteed by the PBGC (e.g., if only a portion of the benefits are guaranteed because of the phase-in rule, this should be explained), and a statement that participants and beneficiaries also may receive a portion of the benefits to which each is entitled under the terms of the plan in excess of guaranteed benefits; and (8) A statement, if applicable, that benefits may be subject to reduction because of the limitations on the amounts guaranteed by the PBGC or because plan assets are insufficient to pay for full benefits (pursuant to part 4022, subparts B and D, of this chapter) and that payments in excess of the amount guaranteed by the PBGC may be recouped by the PBGC (pursuant to part 4022, subpart E, of this chapter). (e) Spin-off/termination transactions. In the case of a spin-off/ termination transaction (as described in Sec. 4041.21(f)), the plan administrator shall provide all participants and beneficiaries in the original plan who are also participants or beneficiaries in the ongoing plan (as of the proposed termination date) with a notice describing the transaction no later than the date on which the plan administrator completes the issuance of notices of intent to terminate under this section. Sec. 4041.42 PBGC review of notice of intent to terminate. (a) General. When a notice of intent to terminate is filed with it, the PBGC-- (1) Shall determine whether the notice was issued in compliance with Sec. 4041.41; and (2) Shall advise the plan administrator of its determination, in accordance with paragraph (b) or (c) of this section, no later than the proposed termination date specified in the notice. (b) Tentative finding of compliance. If the PBGC determines that the issuance of the notice of intent to terminate appears to be in compliance with Sec. 4041.41, it shall notify the plan administrator in writing that-- (1) The PBGC has made a tentative determination of compliance; (2) The distress termination proceeding may continue; and (3) After reviewing the distress termination notice filed pursuant to Sec. 4041.43, the PBGC will make final, or reverse, this tentative determination. (c) Finding of noncompliance. If the PBGC determines that the issuance of the notice of intent to terminate was not in compliance with Sec. 4041.41 (except for requirements that the PBGC elects to waive under Sec. 4041.3(d)(2)(i) with respect to the notice filed with the PBGC), the PBGC shall notify the plan administrator in writing-- (1) That the PBGC has determined that the notice of intent to terminate was not properly issued; and (2) That the proposed distress termination is null and void and the plan is an ongoing plan. (d) Information on need to institute section 4042 proceedings. The PBGC may require the plan administrator to submit, within 20 days after the plan administrator's receipt of the PBGC's written request (or such other period as may be specified in such written request), any information that the PBGC determines it needs in order to decide whether to institute termination or trusteeship proceedings pursuant to section 4042 of ERISA, whenever-- (1) A notice of intent to terminate indicates that benefits currently in pay status (or that should be in pay status) are not being paid or that this is likely to occur within the 180-day period following the issuance of the notice of intent to terminate; (2) The PBGC issues a determination under paragraph (c) of this section; or (3) The PBGC has any reason to believe that it may be necessary or appropriate to institute proceedings under section 4042 of ERISA. (e) Reconsideration of finding of noncompliance. A plan administrator may request reconsideration of the PBGC's determination of noncompliance under paragraph (c) of this section in accordance with the rules prescribed in part 4003, subpart C, of this chapter. Any request for reconsideration automatically stays the effectiveness of the determination until the PBGC issues its decision on reconsideration, but does not stay the time period within which information must be submitted to the PBGC in response to a request under paragraph (d) of this section. (f) Notice to affected parties. Upon a decision by the PBGC affirming a finding of noncompliance or upon the expiration of the period within which the plan administrator may request reconsideration of a finding of noncompliance (or, if earlier, upon the plan administrator's decision not to request reconsideration), the plan administrator shall notify the affected parties (and any persons who were provided notice under Sec. 4041.41(e)) in writing that the plan is not going to terminate or, if applicable, that the termination is invalid but that a new notice of intent to terminate is being issued. The notice required by this [[Page 34050]] paragraph shall be provided in the manner described in Sec. 4041.26(d)(2). Sec. 4041.43 Distress termination notice. (a) General rule. The plan administrator shall file with the PBGC a PBGC Form 601, Distress Termination Notice, Single-Employer Plan Termination, with Schedule EA-D, Distress Termination Enrolled Actuary Certification, that has been completed in accordance with the instructions thereto, on or before the 120th day after the proposed termination date or, if applicable, no later than the due date established in an extension notice issued under Sec. 4041.8. (b) Participant and benefit information. (1) Plan insufficient for guaranteed benefits. Unless the enrolled actuary certifies, in the Schedule EA-D filed in accordance with paragraph (a) of this section, that the plan is sufficient either for guaranteed benefits or for benefit liabilities, the plan administrator shall file with the PBGC the participant and benefit information described in PBGC Form 601 and the instructions thereto by the later of-- (i) 120 days after the proposed termination date, or (ii) 30 days after receipt of the PBGC's determination, pursuant to Sec. 4041.44(b), that the requirements for a distress termination have been satisfied. (2) Plan sufficient for guaranteed benefits or benefit liabilities. If the enrolled actuary certifies that the plan is sufficient either for guaranteed benefits or for benefit liabilities, the plan administrator need not submit the participant and benefit information described in PBGC Form 601 and the instructions thereto unless requested to do so pursuant to paragraph (c) of this section. (3) Effect of failure to provide information. The PBGC may void the distress termination if the plan administrator fails to provide complete participant and benefit information in accordance with this section. (c) Additional information. The PBGC may in any case require the submission of any additional information that it needs to make the determinations that it is required to make under this part or to pay benefits pursuant to section 4061 or 4022(c) of ERISA. The plan administrator shall submit any information requested under this paragraph within 30 days after receiving the PBGC's written request (or such other period as may be specified in such written request). (d) Due date extension. Notwithstanding the provisions of paragraphs (a), (b), and (c) of this section, the due date for filing PBGC Form 601 or other information required under this section may be extended by a notice issued under Sec. 4041.8. Sec. 4041.44 PBGC determination of compliance with requirements for distress termination. (a) General. Based on the information contained in and submitted with the PBGC Form 600 and the PBGC Form 601, with Schedule EA-D, and on any information submitted by an affected party or otherwise obtained by the PBGC, the PBGC shall determine whether the requirements for a distress termination set forth in Sec. 4041.3(c) have been met and shall notify the plan administrator in writing of its determination, in accordance with paragraph (b) or (c) of this section. (b) Qualifying termination. If the PBGC determines that all of the requirements of Sec. 4041.3(c) have been satisfied, it shall so advise the plan administrator and shall also advise the plan administrator of whether participant and benefit information must be submitted in accordance with Sec. 4041.43(b). (c) Non-qualifying termination. (1) Except as provided in paragraph (c)(2) of this section, if the PBGC determines that any of the requirements of Sec. 4041.3(c) has not been met, it shall notify the plan administrator of its determination, the basis therefor, and the effect thereof (as provided in Sec. 4041.3(d)). (2) If the only basis for the PBGC's determination described in paragraph (c)(1) of this section is that the distress termination notice is incomplete, the PBGC shall advise the plan administrator of the missing item(s) of information and that the information must be filed with the PBGC no later than the 120th day after the proposed termination date or the 30th day after the date of the PBGC's notice of its determination, whichever is later, or, if applicable, no later than the due date established in an extension notice issued under Sec. 4041.8. (d) Reconsideration of determination of non-qualification. A plan administrator may request reconsideration of the PBGC's determination under paragraph (c)(1) of this section in accordance with the rules prescribed in part 4003, subpart C, of this chapter. The filing of a request for reconsideration automatically stays the effectiveness of the determination until the PBGC issues its decision on reconsideration. (e) Notice to affected parties. Upon a decision by the PBGC affirming a determination of non-qualification or upon the expiration of the period within which the plan administrator may request reconsideration of a determination of non-qualification (or, if earlier, upon the plan administrator's decision not to request reconsideration), the plan administrator shall notify the affected parties (and any persons who were provided notice under Sec. 4041.41(e)) in writing that the plan is not going to terminate or, if applicable, that the termination is invalid but that a new notice of intent to terminate is being issued. The notice required by this paragraph shall be provided in the manner described in Sec. 4041.26(d)(2). Sec. 4041.45 PBGC determination of plan sufficiency/insufficiency. (a) General. Upon receipt of participant and benefit information filed pursuant to Sec. 4041.43 (b)(1) or (c), the PBGC shall determine the degree to which the plan is sufficient and notify the plan administrator in writing of its determination in accordance with paragraph (b) or (c) of this section. (b) Insufficiency for guaranteed benefits. If the PBGC finds that it is unable to determine that a plan is sufficient for guaranteed benefits, it shall issue a ``notice of inability to determine sufficiency'' notifying the plan administrator of this finding and advising the plan administrator that-- (1) The plan administrator shall continue to administer the plan under the restrictions imposed by Sec. 4041.4; and (2) The termination shall be completed under section 4042 of ERISA. (c) Sufficiency for guaranteed benefits or benefit liabilities. If the PBGC determines that a plan is sufficient for guaranteed benefits but not for benefit liabilities or is sufficient for benefit liabilities, the PBGC shall issue to the plan administrator a distribution notice advising the plan administrator-- (1) To issue notices of benefit distribution in accordance with Sec. 4041.46; (2) To close out the plan in accordance with Sec. 4041.48; (3) To file a timely post-distribution certification with the PBGC in accordance with Sec. 4041.48(b); and (4) That either the plan administrator or the contributing sponsor must preserve and maintain plan records in accordance with Sec. 4041.11. Sec. 4041.46 Notices of benefit distribution. (a) General rules. When a distribution notice is issued by the PBGC pursuant to Sec. 4041.45(c), the plan administrator shall-- (1) No later than 60 days after receiving the distribution notice or, if applicable, no later than the due date [[Page 34051]] established in an extension notice issued under Sec. 4041.8, issue a notice of benefit distribution in accordance with the rules described in paragraphs (c) and (d) of this section to each person (other than any employee organization or the PBGC) who is an affected party as of the termination date (and, in the case of a spin-off/termination transaction as described in Sec. 4041.21(f), each person who is, as of the termination date, a participant in the original plan and covered by the ongoing plan); and (2) No later than 15 days after the date on which the plan administrator completes the issuance of the notices of benefit distribution, file with the PBGC a certification that the notices were so issued in accordance with the requirements of this section. (b) Discovery of other affected parties. Notwithstanding the provisions of paragraph (a) of this section, if the plan administrator discovers additional persons entitled to a notice of benefit distribution after the expiration of the time period specified in paragraph (a)(1) of this section, the failure to issue the notices of benefit distribution to such persons within the specified time period will not cause such notices to be untimely under paragraph (a) of this section if the plan administrator could not reasonably have been expected to know of the additional persons and if he or she promptly issues, to each such additional person, a notice of benefit distribution in the form and containing the information specified in paragraph (d) of this section. (c) Issuance--(1) Method. The plan administrator shall issue a notice of benefit distribution individually to each person, either by hand-delivery or by first-class mail or courier service directed to the person's last known address. (2) When issued. A notice of benefit distribution is deemed issued to each person on the date it is handed to the person or deposited with a mail or courier service (as evidenced by a postmark or written receipt). (d) Form and content of notices. The plan administrator shall provide notices of benefit distribution in the form described in Sec. 4041.23 (a) and (b) of this part and shall include in each-- (1) The information described in Sec. 4041.23(c) of this part; (2) The information described in Sec. 4041.23 (d), (e), or (f) of this part, as applicable (replacing the term ``plan benefits'' with ``Title IV benefits'' and ``proposed termination date'' with ``termination date''. (3) A statement that, after plan assets have been distributed to provide all of the Title IV benefits payable with respect to a participant or a beneficiary of a deceased participant, either by the purchase of an irrevocable commitment or commitments from an insurer to provide benefits or by an alternative form of distribution provided for under the plan, the PBGC's guarantee with respect to that participant's or beneficiary's benefit ends; and (4) If distribution of benefits under the plan may be wholly or partially by the purchase of irrevocable commitments from an insurer-- (i) The name and address of the insurer or insurers from whom, or (if not then known) the insurers from among whom, the plan administrator intends to purchase the irrevocable commitments; or (ii) If the plan administrator has not identified an insurer or insurers at the time the notice of distribution is issued, a statement that the affected party to whom the notice is directed will be notified at a later date (but no later than 45 days before the distribution date) of the name and address of the insurer or insurers from whom, or (if not then known) the insurers from among whom, irrevocable commitments may be purchased. (e) Supplemental notice requirements. (1) The plan administrator shall issue a supplemental notice (or notices) of distribution to each person in accordance with the rules in paragraph (e)(2) of this section if-- (i) The plan administrator has not yet identified an insurer or insurers at the time the notice of distribution is issued; or (ii) The plan administrator included in the notice of distribution the name or names of the insurer or insurers from whom (or from among whom) he or she intends to purchase the irrevocable commitments, but subsequently decides to select a different insurer. (2) The plan administrator shall issue each supplemental notice in the manner provided in paragraph (c) of this section no later than 45 days before the distribution date and shall include the name and address of the insurer or insurers from whom, or (if not then known) the insurers from among whom, the plan administrator intends to purchase the irrevocable commitments. Sec. 4041.47 Verification of plan sufficiency prior to closeout. (a) General rule. Before distributing plan assets pursuant to a closeout under Sec. 4041.48, the plan administrator shall verify whether the plan's assets are still sufficient to provide for benefits at the level determined by the PBGC, i.e., guaranteed benefits or benefit liabilities. If the plan administrator finds that the plan is no longer able to provide for benefits at the level determined by the PBGC, then paragraph (b) or (c) of this section, as appropriate, shall apply. (b) Subsequent insufficiency for guaranteed benefits. When a plan administrator finds that a plan is no longer sufficient for guaranteed benefits, the plan administrator shall promptly notify the PBGC in writing of that fact and shall take no further action to implement the plan termination, pending the PBGC's determination and notice pursuant to paragraph (b)(1) or (b)(2) of this section. (1) PBGC concurrence with finding. If the PBGC concurs with the plan administrator's finding, the distribution notice shall be void, and the PBGC shall-- (i) Issue the plan administrator a notice of inability to determine sufficiency in accordance with Sec. 4041.45(b); and (ii) Require the plan administrator to submit a new valuation, certified to by an enrolled actuary, of the benefit liabilities and guaranteed benefits under the plan, valued in accordance with Secs. 4044.41 through 4044.57 of this chapter as of the date of the plan administrator's notice to the PBGC. (2) PBGC non-concurrence with finding. If the PBGC does not concur with the plan administrator's finding, it shall so notify the plan administrator in writing, and the distribution notice shall remain in effect. (c) Subsequent insufficiency for benefit liabilities. When a plan administrator finds that a plan is sufficient for guaranteed benefits but is no longer sufficient for benefit liabilities, the plan administrator shall immediately notify the PBGC in writing of this fact, but shall continue with the distribution of assets in accordance with Sec. 4041.48. (d) Finding by PBGC of subsequent insufficiency. In any case in which the PBGC finds on its own initiative that a subsequent insufficiency for guaranteed benefits has occurred, paragraph (b)(1) of this section shall apply, except that the guaranteed benefits shall be revalued as of the date of the PBGC's finding. (e) Restrictions upon finding of subsequent insufficiency. When the plan administrator makes the finding described in paragraph (b) of this section or receives notice that the PBGC has made the finding described in paragraph (d) of this section, the plan administrator shall (except to the extent the PBGC otherwise directs) be subject to the prohibitions in Sec. 4041.4(c). [[Continued on page 34052]]