[Federal Register: July 1, 1996 (Rules and Regulations)] [Page 34052-34102] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr01jy96-18] [[pp. 34052-34102]] Reorganization, Renumbering, and Reinvention of Regulations [[Continued from page 34051]] [[Page 34052]] Sec. 4041.48 Closeout of plan. (a) General rules--(1) Distribution. If a plan administrator receives a distribution notice from the PBGC pursuant to Sec. 4041.45(c) and neither the plan administrator nor the PBGC makes the finding described in Sec. 4041.47 (b) or (d), the plan administrator shall distribute plan assets in accordance with Secs. 4041.6 and 4041.27(c) of this part no earlier than the 61st day and (except as provided in Sec. 4041.8 or 4041.27 (e) or (f)) no later than the 180th day following the day on which the plan administrator completes the issuance of the notices of benefit distribution pursuant to Sec. 4041.46(a), or, where applicable, within the time prescribed in part 4050 of this chapter. For purposes of applying Sec. 4041.27(e)(1)(i), the phrase ``the date that the plan administrator files the standard termination notice with the PBGC'' shall be replaced by ``the date that the plan administrator completes issuance of the notices of benefit distribution.'' (2) Notice of annuity contract. 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 shall provide such participant or beneficiary with a notice, contract, or certificate in accordance with Sec. 4041.27(g). (b) Post-distribution certification. Within 30 days after the last distribution date, the plan administrator shall file with the PBGC a PBGC Form 602, Post-Distribution Certification for Distress 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. Appendix to Part 4041--Agreement for Commitment To Make Plan Sufficient for Benefit Liabilities This agreement, by and between [name of company] XXXXXXXXXX (the ``Company'') and [name of plan] XXXXXXXXXX (the ``Plan'') shall be effective as of the last date executed. Whereas, the Plan is an employee pension benefit plan as described in section 3(2)(A) of the Employee Retirement Income Security Act of 1974 (``ERISA''), 29 U.S.C. 1001-1461; and Whereas the Company is [describe entity, e.g., corporation, partnership] XXXXXXXXXX; and Whereas, the Company is a contributing sponsor of the Plan, or a member of the contributing sponsor's controlled group, as described in section 4001(a) (13) and (14) of ERISA, 29 U.S.C. 1301(2) (13) and (14); and Whereas, the Plan is covered by the termination insurance provisions of Title IV of ERISA, 29 U.S.C. 1301-1461; and Whereas, the Plan administrator has issued or intends to issue to each affected party a notice of intent to terminate the Plan, pursuant to section 4041(a)(2) of ERISA, 29 U.S.C. 1341(a)(2); and Whereas, the Company wishes the Plan to be sufficient for benefit liabilities, as described in section 4001(a)(16) of ERISA, 29 U.S.C. 1301(a)(16); and Whereas, the parties understand that if the Plan is not able to satisfy all its obligations for benefit liabilities, it will not be able to terminate in a standard termination under section 4041(b) of ERISA, 29 U.S.C. 1341(b); and Whereas, the Company is not a debtor in a bankruptcy or other insolvency proceeding. [Alternative Paragraph] Whereas, the Company is a debtor in a bankruptcy or other insolvency proceeding and the court before which the proceeding is pending approves this commitment. Whereas, the Company is a debtor in a bankruptcy or other insolvency proceeding and this commitment is unconditionally guaranteed, by an entity or person not in bankruptcy, to be met at or before the time distribution is required in this standard termination. Now Therefore, the parties hereto agree as follows: 1. The Company promises to pay to the Plan, on or before the date prescribed for distribution of Plan assets by the plan administrator, the amount necessary, if any, to ensure that, on the date the plan administrator distributes the assets of the Plan, the Plan is able to provide all benefit liabilities. 2. For the sole purpose of determining whether the Plan is sufficient to provide all benefit liabilities, an amount equal to the amount described in paragraph 1 shall be deemed a Plan asset available for allocation among the participants and beneficiaries of the Plan, in accordance with section 4044 of ERISA, 29 U.S.C. 1344. 3. This Agreement shall in no way relieve the Company of its obligations to pay contributions under the Plan. Date: By: Company: By: Plan: 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. Subpart A--General Provisions Sec. 4041A.1 Purpose and scope. The purpose of this part is to establish rules for notifying the PBGC of the termination of a multiemployer plan and rules for the administration of multiemployer plans that have terminated by mass withdrawal. Subpart B prescribes the contents of and procedures for filing a Notice of Termination for a multiemployer plan. Subpart C prescribes basic duties of plan sponsors of mass-withdrawal-terminated plans. (Other duties are prescribed in part 4281 of this chapter.) Subpart D contains procedures for closing out sufficient plans. This part applies to terminated multiemployer plans covered by title IV of ERISA but, in the case of subparts C and D, only to plans terminated by mass withdrawal under section 4041A(a)(2) of ERISA (including plans created by partition pursuant to section 4233 of ERISA). Sec. 4041A.2 Definitions. The following terms are defined in Sec. 4001.l of this chapter: annuity, ERISA, insurer, IRS, mass withdrawal, multiemployer plan, nonforfeitable benefit, PBGC, plan, and plan year. In addition, for purposes of this part: Available resources means, for a plan year, available resources as described in section 4245(b)(3) of ERISA. Benefits subject to reduction means those benefits accrued under plan amendments (or plans) adopted after March 26, 1980, or under collective bargaining agreements entered into after March 26, 1980, that are not eligible for the PBGC's guarantee under section 4022A(b) of ERISA. Financial assistance means financial assistance from the PBGC under section 4261 of ERISA. Insolvency benefit level means the greater of the resource benefit level or the benefit level guaranteed by the [[Page 34053]] PBGC for each participant and beneficiary in pay status. Insolvency year means insolvency year as described in section 4245(b)(4) of ERISA. Insolvent means that a plan is unable to pay benefits when due during the plan year. A plan terminated by mass withdrawal is not insolvent unless it has been amended to eliminate all benefits that are subject to reduction under section 4281(c) of ERISA, or, in the absence of an amendment, no benefits under the plan are subject to reduction under section 4281(c) of ERISA. Nonguaranteed benefits means those benefits that are eligible for the PBGC's guarantee under section 4022A(b) of ERISA, but exceed the guarantee limits under section 4022A(c). Resource benefit level means resource benefit level as described in section 4245(b)(2) of ERISA. Sec. 4041A.3 Submission of documents. (a) Filing date. Any notice, document, or information required to be filed with the PBGC under this part shall be deemed filed on the date of the postmark stamped on the cover in which the notice, document, or information is mailed, provided that the postmark was made by the United States Postal Service and the document was mailed postage prepaid, properly packaged and addressed to the PBGC. If these conditions 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) Address. Any notice, document, or information required to be filed with the PBGC under this part shall be sent by mail or submitted by hand during normal working hours to Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. Subpart B--Notice of Termination Sec. 4041A.11 Requirement of notice. (a) General. A Notice of Termination shall be filed with the PBGC by a multiemployer plan when the plan has terminated as described in section 4041A(a) of ERISA. (b) Who shall file. The plan sponsor or a duly authorized representative acting on behalf of the plan sponsor shall sign and file the Notice. (c) When to file. (1) For a termination pursuant to a plan amendment, the Notice shall be filed with the PBGC within thirty days after the amendment is adopted or effective, whichever is later. (2) For a termination that results from a mass withdrawal, the Notice shall be filed with the PBGC within thirty days after the last employer withdrew from the plan or thirty days after the first day of the first plan year for which no employer contributions were required under the plan, whichever is earlier. (Approved by the Office of Management and Budget under control number 1212-0020) Sec. 4041A.12 Contents of notice. (a) Information to be contained in notice. Except to the extent provided in paragraph (d), each Notice shall contain: (1) The name of the plan; (2) The name, address and telephone number of the plan sponsor and of the plan sponsor's duly authorized representative, if any; (3) The name, address, and telephone number of the person that will administer the plan after the date of termination, if other than the plan sponsor; (4) A copy of the plan's most recent Form 5500 (Annual Report Form), including schedules; and (5) The date of termination of the plan. (b) Information to be contained in a notice involving a mass withdrawal. In addition to the information contained in paragraph (a) and except as provided in paragraph (d), the following information shall be contained in a Notice filed by a plan that has terminated by mass withdrawal: (1) A copy of the plan document in effect 5 years prior to the date of termination and copies of any amendments adopted after that date. (2) A copy (or copies) of the trust agreement (or agreements), if any, authorizing the plan sponsor to control and manage the operation and administration of the plan. (3) A copy of the most recent actuarial statement and opinion (if any) relating to the plan. (4) A statement of any material change in the assets or liabilities of the plan occurring after either the date of the actuarial statement referred to in item (5) or the date of the plan's Form 5500 submitted as part of the Notice. (5) Complete copies of any letters of determination issued by the IRS relating to the establishment of the plan, any letters of determination relating to the disqualification of the plan and any subsequent requalification, and any letters of determination relating to the termination of the plan. (6) A statement whether the plan assets will be sufficient to pay all benefits in pay status during the 12-month period following the date of termination. (7) If plan assets on hand are sufficient to satisfy all nonforfeitable benefits under the plan, and if the plan sponsor intends to distribute such assets, a brief description of the proposed method of distributing the plan assets. (8) If plan assets on hand are not sufficient to satisfy all nonforfeitable benefits under the plan, the name and address of any employer who contributed to the plan within 3 plan years prior to the date of termination. (c) Certification. As part of the Notice, the plan sponsor or duly authorized representatives shall certify that all information and documents submitted pursuant to this section are true and correct to the best of the plan sponsor's or representative's knowledge and belief. (d) Avoiding duplication. Information described in paragraphs (a) and (b) of this section need not be supplied if it duplicates information contained in Form 5500, or a schedule thereof, that a plan submits as part of the Notice. (e) Additional information. In addition to the information described in paragraphs (a) and (b) of this section, the PBGC may require the submission of any other information which the PBGC determines is necessary for review of a Notice of Termination. Subpart C--Plan Sponsor Duties Sec. 4041A.21 General rule. The plan sponsor of a multiemployer plan that terminates by mass withdrawal shall continue to administer the plan in accordance with applicable statutory provisions, regulations, and plan provisions until a trustee is appointed under section 4042 of ERISA or until plan assets are distributed in accordance with subpart D of this part. In addition, the plan sponsor shall be responsible for the specific duties described in this subpart. Sec. 4041A.22 Payment of benefits. (a) Except as provided in paragraph (b), the plan sponsor shall pay any benefit attributable to employer contributions, other than a death benefit, only in the form of an annuity. (b) The plan sponsor may pay a benefit in a form other than an annuity if-- (1) The plan distributes plan assets in accordance with subpart D of this part; (2) The PBGC approves the payment of the benefit in an alternative form pursuant to Sec. 4041A.27; or (3) The value of the entire nonforfeitable benefit does not exceed $1,750. (c) Except to the extent provided in the next sentence, the plan sponsor [[Page 34054]] shall not pay benefits in excess of the amount that is nonforfeitable under the plan as of the date of termination, unless authorized to do so by the PBGC pursuant to Sec. 4041A.27. Subject to the restriction stated in paragraph (d) of this section, however, the plan sponsor may pay a qualified preretirement survivor annuity with respect to a participant who died after the date of termination. (d) The payment of benefits subject to reduction shall be discontinued to the extent provided in Sec. 4281.31 if the plan sponsor determines, in accordance with Sec. 4041A.24, that the plan's assets are insufficient to provide all nonforfeitable benefits. (e) The plan sponsor shall, to the extent provided in Sec. 4281.41, suspend the payment of nonguaranteed benefits if the plan sponsor determines, in accordance with Sec. 4041A.25, that the plan is insolvent. (f) The plan sponsor shall, to the extent required by Sec. 4281.42, make retroactive payments of suspended benefits if it determines under that section that the level of the plan's available resources requires such payments. Sec. 4041A.23 Imposition and collection of withdrawal liability. Until plan assets are distributed in accordance with subpart D of this part, or until the end of the plan year as of which the PBGC determines that plan assets (exclusive of claims for withdrawal liability) are sufficient to satisfy all nonforfeitable benefits under the plan, the plan sponsor shall be responsible for determining, imposing and collecting withdrawal liability (including the liability arising as a result of the mass withdrawal), in accordance with part 4219, subpart C, of this chapter and sections 4201 through 4225 of ERISA. Sec. 4041A.24 Annual plan valuations and monitoring. (a) Annual valuation. Not later than 150 days after the end of the plan year, the plan sponsor shall determine or cause to be determined in writing the value of nonforfeitable benefits under the plan and the value of the plan's assets, in accordance with part 4281, subpart B. This valuation shall be done as of the end of the plan year in which the plan terminates and each plan year thereafter (exclusive of a plan year for which the plan receives financial assistance from the PBGC under section 4261 of ERISA) up to but not including the plan year in which the plan is closed out in accordance with subpart D of this part. (b) Plan monitoring. Upon receipt of the annual valuation described in paragraph (a) of this section, the plan sponsor shall determine whether the value of nonforfeitable benefits exceeds the value of the plan's assets, including claims for withdrawal liability owed to the plan. When benefits do exceed assets, the plan sponsor shall-- (1) If the plan provides benefits subject to reduction, amend the plan to reduce those benefits in accordance with the procedures in part 4281, subpart C, of this chapter to the extent necessary to ensure that the plan's assets are sufficient to discharge when due all of the plan's obligations with respect to nonforfeitable benefits; or (2) If the plan provides no benefits subject to reduction, make periodic determinations of plan solvency in accordance with Sec. 4041A.25. (c) Notices of benefit reductions. The plan sponsor of a plan that has been amended to reduce benefits shall provide participants and beneficiaries and the PBGC notice of the benefit reduction in accordance with Sec. 4281.32. Sec. 4041A.25 Periodic determinations of plan solvency. (a) Annual insolvency determination. The plan sponsor of a plan that has been amended to eliminate all benefits that are subject to reduction under section 4281(c) of ERISA shall determine in writing whether the plan is expected to be insolvent for the first plan year beginning after the effective date of the amendment and for each plan year thereafter. In the event that a plan adopts more than one amendment reducing benefits under section 4281(c) of ERISA, the initial determination shall be made for the first plan year beginning after the effective date of the amendment that effects the elimination of all such benefits, and a determination shall be made for each plan year thereafter. The plan sponsor of a plan under which no benefits are subject to reduction under section 4281(c) of ERISA as of the date the plan terminated shall determine in writing whether the plan is expected to be insolvent. The initial determination shall be made for the second plan year beginning after the first plan year for which it is determined under section 4281(b) of ERISA that the value of nonforfeitable benefits under the plan exceeds the value of the plan's assets. The plan sponsor shall also make a solvency determination for each plan year thereafter. A determination required under this paragraph shall be made no later than six months before the beginning of the plan year to which it applies. (b) Other determination of insolvency. Whether or not a prior determination of plan solvency has been made under paragraph (a) of this section (or under section 4245 of ERISA), a plan sponsor that has reason to believe, taking into account the plan's recent and anticipated financial experience, that the plan is or may be insolvent for the current or next plan year shall determine in writing whether the plan is expected to be insolvent for that plan year. (c) Benefit suspensions. If the plan sponsor determines that the plan is, or is expected to be, insolvent for a plan year, it shall suspend benefits in accordance with Sec. 4281.41. (d) Insolvency notices. If the plan sponsor determines that the plan is, or is expected to be, insolvent for a plan year, it shall issue notices of insolvency or annual updates and notices of insolvency benefit level of the PBGC and to plan participants and beneficiaries in accordance with part 4281, subpart D. Sec. 4041A.26 Financial assistance. A plan sponsor that determines a resource benefit level under section 4245(b)(2) of ERISA that is below the level of guaranteed benefits or that determines that the plan will be unable to pay guaranteed benefits for any month during an insolvency year shall apply for financial assistance from the PBGC in accordance with Sec. 4281.47. Sec. 4041A.27 PBGC approval to pay benefits not otherwise permitted. Upon written application by the plan sponsor, the PBGC may authorize the plan to pay benefits other than nonforfeitable benefits or to pay benefits valued at more than $1,750 in a form other than an annuity. The PBGC will approve such payments if it determines that the plan sponsor has demonstrated that the payments are not adverse to the interests of the plan's participants and beneficiaries generally and do not unreasonably increase the PBGC's risk of loss with respect to the plan. Subpart D--Closeout of Sufficient Plans Sec. 4041A.41 General rule. If a plan's assets, excluding any claim of the plan for unpaid withdrawal liability, are sufficient to satisfy all obligations for nonforfeitable benefits provided under the plan, the plan sponsor may close out the plan in accordance with this subpart by distributing plan assets in full satisfaction of all nonforfeitable benefits under the plan. [[Page 34055]] Sec. 4041A.42 Method of distribution. The plan sponsor shall distribute plan assets by purchasing from an insurer contracts to provide all benefits required by Sec. 4041A.43 to be provided in annuity form and by paying in a lump sum (or other alternative elected by the participant) all other benefits. Sec. 4041A.43 Benefit forms. (a) General rule. Except as provided in paragraph (b) of this section, the sponsor of a plan that is closed out shall provide for the payment of any benefit attributable to employer contributions only in the form of an annuity. (b) Exceptions. The plan sponsor may pay a benefit attributable to employer contributions in a form other than an annuity if: (1) The present value of the participant's entire nonforfeitable benefit, determined using the interest assumption under Secs. 4044.41 through 4044.57, does not exceed $3,500. (2) The payment is for death benefits provided under the plan. (3) The participant elects an alternative form of distribution under paragraph (c) of this section. (c) Alternative forms of distribution. The plan sponsor may allow participants to elect alternative forms of distribution in accordance with this paragraph. When a form of distribution is offered as an alternative to the normal form, the plan sponsor shall notify each participant, in writing, of the form and estimated amount of the participant's normal form of distribution. The notification shall also describe any risks attendant to the alternative form. Participants' elections of alternative forms shall be in writing. Sec. 4041A.44 Cessation of withdrawal liability. The obligation of an employer to make payments of initial withdrawal liability and mass withdrawal liability shall cease on the date on which the plan's assets are distributed in full satisfaction of all nonforfeitable benefits provided by the plan. 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 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. 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 Transaction 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; supplementary information. Authority: 29 U.S.C. 1082(f), 1302(b)(3), 1343, 1365. Subpart A--Reportable Events; In General Sec. 4043.1 Purpose and scope. (a) Subpart A of this part contains definitions applicable to this part and prescribes specific requirements for notification of the reportable events in section 4043 of ERISA, including the reportable events specified in section 4043 (c)(1) through (c)(8) and other events that the PBGC has determined, under section 4043(c)(13) (formerly section 4043(b)(9)), may be indicative of a need to terminate the plan. It also implements the PBGC's authority to waive the requirement that plan administrators notify the PBGC with respect to certain reportable events and with respect to certain plans. (The PBGC has waived the requirements of section 4043 with respect to multiemployer plans.) However, it does not include rules based on the amendments made to section 4043 by the Retirement Protection Act of 1994 (Pub. L. 103-465, section 771). Subpart B contains rules for notifying the PBGC of a failure to make certain required contributions under section 302(f)(4) of ERISA or section 412(n)(4) of the Code. (b) This subpart applies with respect to any single-employer plan which is covered by section 4021 of ERISA and for which either no notice of intent to terminate has been issued or, if such a notice has been issued, until the proposed termination date specified under section 4041 (b) or (c) of ERISA and part 4041 of this chapter; provided, that, if a termination proceeding is suspended pursuant to Sec. 4041.5 of this chapter, this subpart continues to apply unless and until the PBGC reactivates the termination proceeding. The collection of information requirements contained in this subpart have been approved by the Office of Management and Budget under control number 1212-0013. Sec. 4043.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: Code, contributing sponsor, controlled group, ERISA, fair market value, insurer, irrevocable commitment, IRS, multiemployer plan, nonforfeitable benefit, notice of intent to terminate, PBGC, person, plan, plan administrator, plan year, proposed termination date, and single-employer plan. In addition, for purposes of this part, the following definitions apply: Distribution means a direct or indirect benefit payment made in any form by a plan to a participant, including but not limited to, a monthly annuity payment, a lump-sum payment or a direct transfer of a plan asset other than cash. A cash payment made by an insurer pursuant to an irrevocable commitment shall not be considered a distribution. Nonforfeitable benefits which are not funded means nonforfeitable benefits, as provided in Sec. 4022.5 of this chapter, in excess of plan assets. Parent means the parent of a parent-subsidiary controlled group of corporations or group of trades or businesses under common control (within the meaning of subsection (b) or (c) of section 414 of the Code and the regulations thereunder). Where there is more than one parent in a parent-subsidiary group, the term parent (for purposes of subpart B) refers to the parent at the highest level in the chain of corporations and/or other organizations comprising the group. Participant has the same meaning as in Sec. 4007.2 of this chapter. Retirement benefit means a benefit payable upon late, normal, early, or disability retirement, other than a welfare benefit described in section 3(1) of ERISA, to a participant who leaves or has left covered employment. Sec. 4043.3 Requirement of notice. (a) Obligation to file. Except where the requirement is expressly waived by this subpart, the plan administrator, or a duly authorized representative, shall file with the PBGC a notice of all reportable events described in this subpart no later than 30 days after the plan administrator knows or has reason to know a reportable event has occurred. When a notice is submitted by a plan administrator's duly authorized representative, other than an attorney at [[Page 34056]] law, it shall be accompanied by a notarized power of attorney, signed by the plan administrator, which authorizes the representative to sign and submit a notice and, if desired, also authorizes the representative to act on behalf of the plan administrator in connection with the notice. (b) Contents of notice. The plan administrator shall include the information listed in this paragraph, and when applicable, the information specified in paragraph (c) of this section, in a notice required to be submitted under this section. The plan administrator shall submit the most recent information available. The plan administrator shall identify the response to each numbered item in this paragraph by item number. If any requested information is included in an IRS form or submission attached to the notice, instead, the information may be incorporated by reference to the number, date, and page(s) of the IRS form or submission where it appears. Any required documentation previously filed with the PBGC need not be refiled, but may be incorporated by reference to the previous submission. The plan administrator shall include the following information in a notice: (1) The name of the plan; (2) The name, address, and telephone number of the contributing sponsor(s); (3) The name, address, and telephone number of the plan administrator. If the plan administrator is a corporate body, the name of an individual that should be contacted; (4) The nine-digit Employer Identification Number (EIN) assigned by the IRS to the contributing sponsor and the three-digit Plan Number (PN) assigned by the contributing sponsor to the plan, and, if different, also state the EIN-PN last filed with the PBGC. If an EIN-PN has not been assigned, so indicate; (5) A brief statement of the pertinent facts relating to the reportable event; (6) A copy of the plan document currently in effect, i.e., a copy of the last restatement of the plan and all subsequent amendments; (7) A copy of the most recent actuarial statement and opinion (if any) relating to the plan; (8) A statement of any material change in the assets or liabilities of the plan occurring after the date of the most recent actuarial statement and opinion relating to the plan; and (9) A copy of the most recent determination letter issued by the IRS (if any) relating to the plan. (c) Additional information. With respect to the following reportable events, the information specified below must be submitted in addition to that listed in paragraph (b) of this section: (1) For an event described in Sec. 4043.14(a) (relating to an active participant reduction): The number of participants and the number of active participants as of the beginning of the immediately preceding and the current plan year and as of the date of the event; the number of active participants with fully vested rights, the number of such participants with partially vested rights, and the number of such participants without vested rights, as of the date of the event or, if this information is not available as of this date, as of the beginning of the current plan year; the number of retired participants receiving benefits as of the date of the event or, if this information is not available as of this date, as of the beginning of the current plan year; the number of former employees with vested rights and the number of deceased participants whose beneficiaries are receiving or entitled to receive benefits as of the date of the event or, if this information is not available as of this date, the beginning of the current plan year. (For those plans determining the number of active participants as of the end of a plan year, instead of at the beginning of a plan year, in accordance with Sec. 4043.14(c), the information required by this paragraph as of the beginning of a plan year shall be provided as of the end of the previous plan year.) (2) For an event described in Sec. 4043.16(a) (relating to a minimum funding violation): A statement of the current funding standard account, or its alternative, showing the balance at the beginning of the plan year and the charges and credits to the account for the plan year that are required under section 302 of ERISA and section 412 of the Code; in the case of a plan maintained by one contributing sponsor or by two or more contributing sponsors that are members of the same controlled group, a copy of the most recent audited (or if not available, unaudited) financial statements, and the most recent interim financial statements, of the contributing sponsor (individually or where financial statements are only available on a consolidated basis with other members of the same controlled group, on a consolidated basis), including balance sheets, income statements, statements of changes in financial position and annual reports. (3) For an event described in Sec. 4043.17(a) (relating to an inability to pay benefits when due): The reason(s) why the plan is unable to pay benefits, including a statement of how long this inability is likely to continue; the amount of the benefits due during the current payment period and the amount of assets available to pay those benefits; the normal date of benefit payment; the amount and date of the last benefit payment. (4) For an event described in Sec. 4043.18(a) (relating to a distribution to a substantial owner): The amount and form of the distribution; a statement of whether an indemnity agreement has been entered into between the participant receiving the distribution and the plan trustee concerning lump-sum distributions to the 25 highest paid employees of the benefits subject to the early termination restrictions of Treas. Reg. Sec. 1.401-4(c). (5) For an event described in Sec. 4043.21(a) (relating to a bankruptcy, insolvency, or similar settlement): A copy of all papers filed in the relevant proceedings, including but not limited to, petitions and supporting schedules; the last date for filing claims, if known; the name, address and telephone number of any trustee or receiver of the contributing sponsor. (6) For an event described in Sec. 4043.23(a) (relating to a transaction involving a change in the same controlled group as a contributing sponsor): The name, address, and telephone number of the new contributing sponsor or of the person no longer under common control with the contributing sponsor, as applicable; a copy of the most recent audited (or if not available, unaudited) financial statements, and the most recent interim financial statements, of the contributing sponsor before and after the transaction and of the person no longer under common control with the contributing sponsor (individually or where financial statements are only available on a consolidated basis with other members of the same controlled group, on a consolidated basis), including balance sheets, income statements, statements of changes in financial position and annual reports. (d) Requests for additional information. The PBGC may, in any case, require the submission of additional information. (e) How and where to file. A notice and information required to be filed with the PBGC by this subpart may be sent by mail or submitted by hand during normal working hours to: Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. (f) Optional consolidated filing. A plan administrator may file a single notice with respect to the occurrence of [[Page 34057]] more than one reportable event, or two or more plan administrators may file a single notice with respect to one or more reportable events when-- (1) More than one event for which a notice is required by this section has occurred and the plan administrator is able to give the PBGC simultaneous timely notification of the events; or (2) An event described in Secs. 4043.21(a), 4043.22(a), or 4043.23(a) has occurred, and all plan administrators who are required to file a notice pursuant to this section sign the same notice. (g) Effect of failure to file. Failure to file a notice required by this section or failure to include all information required in the notice constitutes a violation of title IV of ERISA. Sec. 4043.4 Reporting of reportable events on annual report. The requirement that the plan administrator report the occurrence of a reportable event described in this subpart in the annual report filed pursuant to part 4065 of this chapter is waived pursuant to the provisions of section 4065 of ERISA. Sec. 4043.5 Obligation of contributing sponsor. Whenever a contributing sponsor under a plan covered by section 4021 of ERISA, knows or has reason to know that a reportable event has occurred, it shall notify the plan administrator immediately. Sec. 4043.6 Date of filing. (a) Any notice or document required to be filed under this subpart is considered filed on the date of the United States postmark stamped on the cover in which the document is mailed, if-- (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) are not met, the notice or document is considered filed on the date it is received by the PBGC. Notices or documents received after regular business hours are considered filed on the next regular business day. Sec. 4043.7 Computation of time. In computing any period of time prescribed or allowed by the rules of this subpart, 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 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. Sec. 4043.11 Tax disqualification. (a) Reportable event. A reportable event occurs when the Secretary of the Treasury issues a notice that a plan has ceased to be a plan described in section 4021(a)(2) of ERISA. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the event described in this section. Sec. 4043.12 Title I non-compliance. (a) Reportable event. A reportable event occurs when the Secretary of Labor determines that a plan is not in compliance with title I of ERISA. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the event described in this section. Sec. 4043.13 Amendment decreasing benefits payable. (a) Reportable event. A reportable event occurs when an amendment to a plan is adopted under which the retirement benefit payable from employer contributions with respect to any participant may be decreased. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the event described in this section. Sec. 4043.14 Active participant reduction. (a) Reportable event. A reportable event occurs when the number of active participants under a plan is less than 80 percent of the number of active participants at the beginning of the plan year, or is less than 75 percent of the number of active plan participants at the beginning of the previous plan year. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the event described in this section, if the conditions in paragraph (b)(1), (b)(2), or (b)(3) of this section exist. (1) The plan has less than 100 participants as of the beginning of either the current or the previous plan year. (2) With respect to a plan maintained by one contributing sponsor or by two or more contributing sponsors that are members of the same controlled group, as of the date of the event, the total number of active participants covered by all the plans covered by this part that are maintained by a contributing sponsor and all members of the same controlled group, if any, either is not less than 80 percent of the total number of active participants in all such plans determined as of the beginning of each such plan's current plan year, or is not less than 75 percent of the total number of active participants in all such plans determined as of the beginning of each such plan's previous plan year. (3) The present value of unfunded vested benefits under the plan (as reported on the most recently filed IRS/DOL/PBGC Form 5500 or Form 5500-C/R) is less than $250,000. (c) Determination of the number of active participants. (1) The number of active participants as of the beginning of a plan year may be determined as of the end of the previous plan year. (2) For purposes of this section and information submitted pursuant to Sec. 4043.3(c)(1), with respect to a plan maintained by one contributing sponsor or by two or more contributing sponsors that are members of the same controlled group, include as ``active'' only a participant who-- (i) Is receiving compensation for work performed; (ii) Is on paid or unpaid leave granted for a reason other than a layoff; (iii) Is laid off from work for a period of time that has lasted less than 30 days; or (iv) Is absent from work due to a recurring reduction in employment that occurs at least annually. Sec. 4043.15 Termination or partial termination. (a) Reportable event. A reportable event occurs when the Secretary of the Treasury determines that there has been a termination or partial termination of a plan within the meaning of section 411(d)(3) of the Code. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the events described in this section. Sec. 4043.16 Failure to meet minimum funding standards and granting of funding waiver. (a) Reportable event. A reportable event occurs when a plan fails to meet the minimum funding standards or is granted a minimum funding waiver under section 412 of the Code or section 302 of ERISA. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the event described in this section, unless a plan fails to meet minimum funding standards or is granted a minimum funding waiver and the present value of unfunded vested benefits under the plan (as reported on the most recently filed IRS/ DOL/PBGC Form 5500 or Form 5500-C/R) equals or exceeds $250,000. In addition, the 30-day notice requirement contained in Sec. 4043.3(a) is waived for the event described in this section if, with respect to the same failure, Form 200 has been [[Page 34058]] completed and submitted (including all required documentation and other information) in accordance with subpart B of this part. Sec. 4043.17 Inability to pay benefits when due. (a) Reportable event. A reportable event occurs when a plan is unable to pay benefits when due. Except as provided in paragraph (c) of this section, a plan is unable to pay benefits when due if the plan does not pay any participant, who is then entitled to benefit payments, the full promised benefits to which he or she is entitled in the form prescribed under the terms of the plan. (b) Waiver. The 30-day notice requirement in Sec. 4043.3(a) is not waived for the event described in this section. (c) Administrative delays. A plan shall not be treated as being unable to pay benefits when due if its failure to pay benefits is caused solely by: (1) The need to verify any participant's eligibility for benefits; (2) the inability to locate any participant; or (3) any other administrative delay if such delay lasts less than the shorter of two months or two full benefit payment periods. Sec. 4043.18 Distribution to a substantial owner. (a) Reportable event. A reportable event occurs when there is a distribution or distributions under the plan to a participant who is a substantial owner if-- (1) The total of all distributions to the substantial owner within a 24-month period has a value of $10,000 or more; (2) The distribution or distributions were not made by reason of the death of the participant; and (3) Immediately after the distribution or the last distribution in a series, the plan has nonforfeitable benefits which are not funded. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3 is waived for the event described in this section, unless-- (1) A plan makes a distribution or distributions within a 12-month period to a substantial owner having a total value of $10,000 or more; and (2) The amount of the distribution or distributions exceeds the amount of the maximum guaranteeable benefit for the substantial owner, determined under Sec. 4022.27 of this chapter, for the year in which the distribution or the last distribution in a series was made. (c) Valuation of distribution. The value of a distribution described in paragraph (a) or (b) of this section is determined in accordance with the provisions of this paragraph. (1) The value of a distribution, other than an irrevocable commitment, equals the sum of the cash amounts actually received by the participant and the fair market value of any assets distributed in a form other than cash, determined as of the distribution date. (2) The value of an irrevocable commitment is the purchase price of the irrevocable commitment, or the value, determined in accordance with reasonable actuarial assumptions, of the benefits payable pursuant to that irrevocable commitment. For this purpose, reasonable actuarial assumptions are the actuarial assumptions used by the PBGC under subpart B of part 4044 of this chapter, or the actuarial assumptions used by the plan for purposes of section 302 of ERISA and section 412 of the Code. (d) Date of substantial owner distribution. The date of distribution to a substantial owner of an irrevocable commitment is the date on which the obligation to provide benefits passes from the plan to the insurer. The date of distribution to a substantial owner of a cash distribution shall be the date it is received by the participant. The date of all other distributions to a substantial owner shall be the date when the plan relinquishes control over the assets transferred directly or indirectly to the participant. (e) Determination date. The determination of whether a participant is a substantial owner, or has been in the preceding 60 months, is made on the date when there has been a distribution or distributions with a total value of $10,000 or more. (f) Valuation of assets and benefits. For purposes of paragraph (a)(3) of this section, in determining whether a plan has nonforfeitable benefits which are not funded-- (1) Assets are valued at fair market value; and (2) Benefits are valued in accordance with reasonable actuarial assumptions. For this purpose, reasonable actuarial assumptions are the actuarial assumptions used by the PBGC under subpart B of part 4044 of this chapter, or the actuarial assumptions used by the plan for purposes of section 302 of ERISA and section 412 of the Code. Sec. 4043.19 Plan merger, consolidation or transfer. (a) Reportable event. A reportable event occurs when a plan merges, consolidates, or transfers its assets or liabilities under section 208 of ERISA or section 414(1) of the Code. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the events described in this section. Sec. 4043.20 Alternative compliance with reporting and disclosure requirements of Title I. (a) Reportable event. A reportable event occurs when an alternative method of compliance (not of general applicability) is prescribed for a plan by the Secretary of Labor under section 110 of ERISA. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is waived for the event described in this section. Sec. 4043.21 Bankruptcy, insolvency, or similar settlements. (a) Reportable event. A reportable event occurs with respect to a plan maintained by one contributing sponsor or by two or more contributing sponsors that are members of the same controlled group when a contributing sponsor-- (1) Commences a bankruptcy case (under Title 11, U.S.C.), or has a bankruptcy case commenced against it; (2) Commences or has commenced against it, any other type of insolvency proceeding (including, but not limited to the appointment of a receiver); (3) Commences, or has commenced against it, a proceeding to effect a composition, extension or settlement with creditors; (4) Executes a general assignment for the benefit of creditors; or (5) Undertakes to effect any other non-judicial composition, extension or settlement with substantially all its creditors. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is not waived for the event described in this section. Sec. 4043.22 Liquidation or dissolution. (a) Reportable event. Except as provided in paragraph (c) of this section, a reportable event occurs with respect to a plan maintained by one contributing sponsor or by two or more contributing sponsors that are members of the same controlled group when a contributing sponsor-- (1) Is involved in any transaction to implement its complete liquidation; or (2) Institutes or has instituted against it a proceeding to be dissolved, or is dissolved, whichever occurs first. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is not waived for the event described in this section. (c) Reorganizations described in section 4069(b). This section does not cover any of the reoganizations described in section 4069(b) of ERISA. [[Page 34059]] Sec. 4043.23 Transaction involving a change in contributing sponsor or controlled group. (a) Reportable event. Except as provided in paragraph (c) of this section, a reportable event occurs with respect to a plan maintained by one contributing sponsor or by two or more contributing sponsors that are members of the same controlled group with nonforfeitable benefits which are not funded of $1 million or more when-- (1) As a result of a transaction involving a transfer of assets of or an ownership interest in a contributing sponsor-- (i) There is or will be a new contributing sponsor that is not a member of the controlled group of the previous contributing sponsor; (ii) The contributing sponsor leaves or will leave the controlled group; or (iii) The contributing sponsor becomes or will become a member of a different controlled group, except where the new controlled group is or will be the same, but for the addition of another person, as the contributing sponsor's controlled group before the transaction; or (2) As a result of a transaction involving a transfer by a contributing sponsor of assets of or an ownership interest in another person, the contributing sponsor and that person are or will be no longer part of the same controlled group. (b) Waiver. The 30-day notice requirement contained in Sec. 4043.3(a) is not waived for the event described in this section. (c) Certain reorganizations. This section does not apply to-- (1) A reorganization involving a mere change in identity, form or place of organization, however effected; (2) A reorganization involving a liquidation into a parent corporation; and (3) A reorganization involving a merger, consolidation, or division solely between (or among) members of the same controlled group as the contributing sponsor. (d) Definition of transaction. For purposes of this section, the term transaction includes, but is not limited to, a legally binding agreement, whether or not written, to transfer, and a change in ownership that occurs as a matter of law or through the exercise or lapse of pre-existing rights. (e) Valuation of assets and benefits. For purposes of paragraph (a) of this section, in determining whether a plan has nonforfeitable benefits which are not funded of $1 million or more-- (1) Assets are valued at fair market value; and (2) Benefits are valued in accordance with reasonable actuarial assumptions. For this purpose, reasonable actuarial assumptions are the actuarial assumptions used by the PBGC under subpart B of part 4044 of this chapter, or the actuarial assumptions used by the plan for purposes of section 302 of ERISA and section 412 of the Code. Subpart B--Section 302(f); Notice of Failure To Make Required Contributions Sec. 4043.31 PBGC Form 200, notice of failure to make required contributions; supplementary information. (a) General rules. To comply with the notification requirement in section 302(f)(4) of ERISA and section 412(n)(4) of the Code, a contributing sponsor of a single-employer plan that is covered under section 4021 of ERISA and, if that contributing sponsor is a member of a parent-subsidiary controlled group, the parent must complete and submit a properly certified Form 200 that includes all required documentation and other information, as described in the related filing instructions, in accordance with this section. Notice of failure to make required contributions is required whenever the unpaid balance of a required installment or any other payment required under section 302 of ERISA and section 412 of the Code (including interest), when added to the aggregate unpaid balance of all preceding such installments or other payments for which payment was not made when due (including interest), exceeds $1 million. (1) Form 200 must be filed with the PBGC no later than 10 days after the due date for any required payment for which payment was not made when due. (i) The 10-day period for filing Form 200 is computed in accordance with Sec. 4043.7 of this chapter. (ii) The filing date for Form 200 is the date on which it is received by the PBGC office specified in the instructions if it is received no later than 4 p.m. on a weekday other than a Federal holiday. If it is received after 4 p.m. or on a weekend or Federal holiday, the Form 200 is deemed to be filed on the next regular business day. (2) If a contributing sponsor or the parent completes and submits Form 200 in accordance with this section, the PBGC will deem the other person to have so filed and it will consider the notification requirement in section 302(f)(4) of ERISA and section 412(n)(4) of the Code to be satisfied by all members of a controlled group of which the person who has filed Form 200 is a member. (b) Supplementary information. If, upon review of a Form 200, the PBGC concludes that it needs additional information in order to make decisions regarding enforcement of a lien imposed by section 302(f) of ERISA and section 412(n) of the Code, the PBGC, by written notification, may require any contributing sponsor or member of a controlled group of which a contributing sponsor is a member to supplement the Form 200. Such additional information must be filed with the PBGC office specified within 7 days after the date of the written notification, as determined in accordance with Secs. 4043.6 and 4043.7 of this chapter, or by a different time specified therein. PART 4044--ALLOCATION OF ASSETS IN SINGLE-EMPLOYER PLANS Subpart A--Allocation of Assets General Provisions Sec. 4044.1 Purpose and scope. 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 General Provisions 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. [[Page 34060]] 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. Note: Certain provisions of part 4044 have been superseded by legislative changes. For example, there are references to provisions formerly codified in 29 CFR part 2617, subpart C (and to the Notice of Sufficiency provided for thereunder) that no longer exist because of changes in the PBGC's plan termination regulations in response to the Single-Employer Pension Plan Amendments Act of 1986 and the Pension Protection Act of 1987. The PBGC intends to amend part 4044 at a later date to conform it to current statutory provisions. Subpart A--Allocation of Assets General Provisions Sec. 4044.1 Purpose and scope. This part implements section 4044 of ERISA, which contains rules for allocating a plan's assets when the plan terminates. These rules have been in effect since September 2, 1974, the date of enactment of ERISA. This part applies to any single-employer plan covered by title IV of ERISA that submits a notice of intent to terminate, or for which PBGC commences an action to terminate the plan under section 4042 of ERISA. (a) Subpart A. Sections 4044.1 through 4044.4 set forth general rules for applying Secs. 4044.10 through 4044.17. Sections 4044.10 through 4044.17 interpret the rules and describe procedures for allocating plan assets to priority categories 1 through 6. (b) Subpart B. The purpose of subpart B is to establish the method of determining the value of benefits and assets under terminating single-employer pension plans covered by title IV of ERISA. This valuation is needed for both plans trusteed under title IV and plans which are not trusteed. For the former, the valuation is needed to allocate plan assets in accordance with subpart A of this part and to determine the amount of any plan asset insufficiency. For the latter, the valuation is needed to allocate assets in accordance with subpart A and to distribute the assets in accordance with subpart B of part 4041 of this chapter. (1) Section 4044.41 sets forth the general provisions of subpart B and applies to all terminating single-employer plans. Sections 4044.51 through 4044.57 prescribe the benefit valuation rules for plans that receive or that expect to receive a Notice of Inability to Determine Sufficiency from PBGC and are placed into trusteeship by PBGC, including (in Secs. 4044.55 through 4044.57) the rules and procedures a plan administrator shall follow to determine the expected retirement age (XRA) for a plan participant entitled to early retirement benefits for whom the annuity starting date is not known as of the valuation date. This applies to all trusteed plans which have such early retirement benefits. The plan administrator shall determine an XRA under Sec. 4044.55, Sec. 4044.56 or Sec. 4044.57, as appropriate, for each active participant or participant with a deferred vested benefit who is entitled to an early retirement benefit and who as of the valuation date has not selected an annuity starting date. [See Note at beginning of part 4044.] (2) Sections 4044.71 through 4044.75 prescribe the benefit valuation rules for calculating the value of a benefit to be paid a participant or beneficiary under a terminating pension plan that is distributing assets where the plan has received a Notice of Sufficiency issued by PBGC pursuant to part 2617 of this chapter and has not been placed into trusteeship by PBGC. [See Note at beginning of part 4044.] Sec. 4044.2 Definitions. (a) The following terms are defined in Sec. 4001.2 of this chapter: annuity, basic-type benefit, Code, distribution date, ERISA, fair market value, guaranteed benefit, insurer, IRS, irrevocable commitment, mandatory employee contributions, nonbasic-type benefit, nonforfeitable benefit, normal retirement age, notice of intent to terminate, PBGC, person, plan, plan administrator, single-employer plan, substantial owner, termination date, and voluntary employee contributions. (b) For purposes of this part: Deferred annuity means an annuity under which the specified date or age at which payments are to begin occurs after the valuation date. Earliest retirement age at valuation date means the later of (a) a participant's age on his or her birthday nearest to the valuation date, or (b) the earliest age at which the participant can retire under the terms of the plan. Early retirement benefit means an annuity benefit payable under the terms of the plan, under which the participant is entitled to begin receiving payments before his or her normal retirement age and which is not payable on account of the disability of the participant. It may be reduced according to the terms of the plan. Expected retirement age (XRA) means the age, determined in accordance with Secs. 4044.55 through 4044.57, at which a participant is expected to begin receiving benefits when the participant has not elected, before the allocation date, an annuity starting date. This is the age to which a participant's benefit payment is assumed to be deferred for valuation purposes. An XRA is equal to or greater than the participant's earliest retirement age at valuation date but less than his or her normal retirement age. Non-trusteed plan means a single-employer plan which receives a Notice of Sufficiency from PBGC and is able to close out by purchasing annuities in the private sector in accordance with part 2617 of this chapter. [See Note at beginning of part 4044.] Notice of Sufficiency means a notice issued by the PBGC that it has determined that plan assets are sufficient to discharge when due all obligations of the plan with respect to benefits in priority categories 1 through 4 after plan assets have been allocated to benefits in accordance with section 4044 of ERISA and this subpart. [See Note at beginning of part 4044.] Priority category means one of the categories contained in sections 4044 (a)(1) through (a)(6) of ERISA that establish the order in which plan assets are to be allocated. Trusteed plan means a single-employer plan which has been placed into trusteeship by PBGC. Unreduced retirement age (URA) means the earlier of the normal retirement age specified in the plan or the age at which an unreduced benefit is first payable. Valuation date means (1) for non-trusteed plans, the date of distribution and (2) for trusteed plans, the date of termination. (c) For purposes of subpart B of this part (unless otherwise required by the context): Age means the participant's age at his or her nearest birthday and is determined by rounding the individual's exact age to the nearest whole year. Half years are rounded to the next highest year. This is also known as the ``insurance age.'' (d) For purposes of Secs. 4044.55 through 4044.57: Monthly benefit means the guaranteed benefit payable by PBGC. (e) For purposes of Secs. 4044.71 through 4044.75: Lump sum payable in lieu of an annuity means a benefit that is payable in a single installment and is derived from an annuity payable under the plan. [[Page 34061]] Other lump sum benefit means a benefit in priority category 5 or 6, determined under subpart A of this part, that is payable in a single installment (or substantially so) under the terms of the plan, and that is not derived from an annuity payable under the plan. The benefit may be a severance pay benefit, a death benefit or other single installment benefit. Qualifying bid means a bid obtained from an insurer in accordance with Sec. 2617.14(b) of this chapter. [See Note at beginning of part 4044.] Sec. 4044.3 General rule. (a) Asset allocation. Upon the termination of a single-employer plan, the plan administrator shall allocate the plan assets available to pay for benefits under the plan in the manner prescribed by this subpart. Plan assets available to pay for benefits include all plan assets (valued according to Sec. 4044.41(b)) remaining after the subtraction of all liabilities, other than liabilities for future benefit payments, paid or payable from plan assets under the provisions of the plan. Liabilities include expenses, fees and other administrative costs, and benefit payments due before the allocation date. Except as provided in Sec. 4044.4(b), an irrevocable commitment by an insurer to pay a benefit, which commitment is in effect on the date of the asset allocation, is not considered a plan asset, and a benefit payable under such a commitment is excluded from the allocation process. (b) Allocation date. For plans that close out pursuant to a Notice of Sufficiency under the provisions of subpart C of part 2617 of this chapter, assets shall be allocated as of the date plan assets are to be distributed. For other plans, assets shall be allocated as of the termination date. [See Note at beginning of part 4044.] Sec. 4044.4 Violations. (a) General. A plan administrator violates ERISA if plan assets are allocated or distributed upon plan termination in a manner other than that prescribed in section 4044 of ERISA and this subpart, except as may be required to prevent disqualification of the plan under the Code and regulations thereunder. (b) Distributions in anticipation of termination. A distribution, transfer, or allocation of assets to a participant or to an insurance company for the benefit of a participant, made in anticipation of plan termination, is considered to be an allocation of plan assets upon termination, and is covered by paragraph (a) of this section. In determining whether a distribution, transfer, or allocation of assets has been made in anticipation of plan termination PBGC will consider all of the facts and circumstances including-- (1) Any change in funding or operation procedures; (2) Past practice with regard to employee requests for forms of distribution; (3) Whether the distribution is consistent with plan provisions; and (4) Whether an annuity contract that provides for a cutback based on the guarantee limits in subpart B of part 4022 of this chapter could have been purchased from an insurance company. Allocation of Assets to Benefit Categories Sec. 4044.10 Manner of allocation. (a) General. The plan administrator shall allocate plan assets available to pay for benefits under the plan using the rules and procedures set forth in paragraphs (b) through (f) of this section, or any other procedure that results in each participant (or beneficiary) receiving the same benefits he or she would receive if the procedures in paragraphs (b) through (f) were followed. (b) Assigning benefits. The basic-type and nonbasic-type benefits payable with respect to each participant in a terminated plan shall be assigned to one or more priority categories in accordance with Secs. 4044.11 through 4044.16. Benefits derived from voluntary employee contributions, which are assigned only to priority category 1, are treated, under section 204(c)(4) of ERISA and section 411(d)(5) of the Code, as benefits under a separate plan. The amount of a benefit payable with respect to each participant shall be determined as of the termination date. (c) Valuing benefits. The value of a participant's benefit or benefits assigned to each priority category shall be determined, as of the allocation date, in accordance with the provisions of subpart B of this part. The value of each participant's basic-type benefit or benefits in a priority category shall be reduced by the value of the participant's benefit of the same type that is assigned to a higher priority category. Except as provided in the next two sentences, the same procedure shall be followed for nonbasic-type benefits. The value of a participant's nonbasic-type benefits in priority categories 3, 5, and 6 shall not be reduced by the value of the participant's nonbasic- type benefit assigned to priority category 2. Benefits in priority category 1 shall neither be included in nor subtracted from lower priority categories. In no event shall a benefit assigned to a priority category be valued at less than zero. (d) Allocating assets to priority categories. Plan assets available to pay for benefits under the plan shall be allocated to each priority category in succession, beginning with priority category 1. If the plan has sufficient assets to pay for all benefits in a priority category, the remaining assets shall then be allocated to the next lower priority category. This process shall be repeated until all benefits in priority categories 1 through 6 have been provided or until all available plan assets have been allocated. (e) Allocating assets within priority categories. Except for priority category 5, if the plan assets available for allocation to any priority category are insufficient to pay for all benefits in that priority category, those assets shall be distributed among the participants according to the ratio that the value of each participant's benefit or benefits in that priority category bears to the total value of all benefits in that priority category. If the plan assets available for allocation to priority category 5 are insufficient to pay for all benefits in that category, the assets shall be allocated, first, to the value of each participant's nonforfeitable benefits that would be assigned to priority category 5 under Sec. 4044.15 after reduction for the value of benefits assigned to higher priority categories, based only on the provisions of the plan in effect at the beginning of the 5-year period immediately preceding the termination date. If assets available for allocation to priority category 5 are sufficient to fully satisfy the value of those benefits, assets shall then be allocated to the value of the benefit increase under the oldest amendment during the 5-year period immediately preceding the termination date, reduced by the value of benefits assigned to higher priority categories (including higher subcategories in priority category 5). This allocation procedure shall be repeated for each succeeding plan amendment within the 5-year period until all plan assets available for allocation have been exhausted. If an amendment decreased benefits, amounts previously allocated with respect to each participant in excess of the value of the reduced benefit shall be reduced accordingly. In the subcategory in which assets are exhausted, the assets shall be distributed among the participants according to the ratio that the value of each participant's benefit or benefits in that subcategory bears to the total value of all benefits in that subcategory. (f) Applying assets to basic-type or nonbasic-type benefits within priority [[Page 34062]] categories. The assets allocated to a participant's benefit or benefits within each priority category shall first be applied to pay for the participant's basic-type benefit or benefits assigned to that priority category. Any assets allocated on behalf of that participant remaining after satisfying the participant's basic-type benefit or benefits in that priority category shall then be applied to pay for the participant's nonbasic-type benefit or benefits assigned to that priority category. If the assets allocable to a participant's basic- type benefit or benefits in all priority categories are insufficient to pay for all of the participant's guaranteed benefits, the assets allocated to that participant's benefit in priority category 4 shall be applied, first, to the guaranteed portion of the participant's benefit in priority category 4. The remaining assets allocated to that participant's benefit in priority category 4, if any, shall be applied to the nonguaranteed portion of the participant's benefit. (g) Allocation to established subclasses. Notwithstanding paragraphs (e) and (f) of this section, the assets of a plan that has established subclasses within any priority category may be allocated to the plan's subclasses in accordance with the rules set forth in Sec. 4044.17. Sec. 4044.11 Priority category 1 benefits. (a) Definition. The benefits in priority category 1 are participants' accrued benefits derived from voluntary employee contributions. (b) Assigning benefits. Absent an election described in the next sentence, the benefit assigned to priority category 1 with respect to each participant is the balance of the separate account maintained for the participant's voluntary contributions. If a participant has elected to receive an annuity in lieu of his or her account balance, the benefit assigned to priority category 1 with respect to that participant is the present value of that annuity. Sec. 4044.12 Priority category 2 benefits. (a) Definition. The benefits in priority category 2 are participants' accrued benefits derived from mandatory employee contributions, whether to be paid as an annuity benefit with a pre- retirement death benefit that returns mandatory employee contributions or, if a participant so elects under the terms of the plan and subpart A of part 4022 of this chapter, as a lump sum benefit. Benefits are primarily basic-type benefits although nonbasic-type benefits may also be included as follows: (1) Basic-type benefits. The basic-type benefit in priority category 2 with respect to each participant is the sum of the values of the annuity benefit and the pre-retirement death benefit determined under the provisions of paragraph (c)(1) of this section. (2) Nonbasic-type benefits. If a participant elects to receive a lump sum benefit and if the value of the lump sum benefit exceeds the value of the basic-type benefit in priority category 2 determined with respect to the participant, the excess is a nonbasic-type benefit. There is no nonbasic-type benefit in priority category 2 for a participant who does not elect to receive a lump sum benefit. (b) Conversion of mandatory employee contributions to an annuity benefit. Subject to the limitation set forth in paragraph (b)(3) of this section, a participant's accumulated mandatory employee contributions shall be converted to an annuity form of benefit payable at the normal retirement age or, if the plan provides for early retirement, at the expected retirement age. The conversion shall be made using the interest rates and factors specified in paragraph (b)(2) of this section. The form of the annuity benefit (e.g., straight life annuity, joint and survivor annuity, cash refund annuity, etc.) is the form that the participant or beneficiary is entitled to on the termination date. If the participant does not have a nonforfeitable right to a benefit, other than the return of his or her mandatory contributions in a lump sum, the annuity form of benefit is the form the participant would be entitled to if the participant had a nonforfeitable right to an annuity benefit under the plan on the termination date. (1) Accumulated mandatory employee contributions. Subject to any addition for the cost of ancillary benefits plus interest, as provided in the following sentence, the amount of the accumulated mandatory employee contributions for each participant is the participant's total nonforfeitable mandatory employee contributions remaining in the plan on the termination date plus interest, if any, under the plan provisions. Mandatory employee contributions, if any, used after the effective date of the minimum vesting standards in section 203 of ERISA and section 411 of the Code for costs or to provide ancillary benefits such as life insurance or health insurance, plus interest under the plan provisions, shall be added to the contributions that remain in the plan to determine the accumulated mandatory employee contributions. (2) Interest rates and conversion factors. The interest rates and conversion factors used in the administration of the plan shall be used to convert a participant's accumulated mandatory contributions to the annuity form of benefit. In the absence of plan rules and factors, the interest rates and conversion factors established by the IRS for allocation of accrued benefits between employer and employee contributions under the provisions of section 204(c) of ERISA and section 411(c) of the Code shall be used. (3) Minimum accrued benefit. The annuity benefit derived from mandatory employee contributions may not be less than the minimum accrued benefit under the provisions of section 204(c) of ERISA and section 411(c) of the Code. (c) Assigning benefits. If a participant or beneficiary elects to receive a lump sum benefit, his or her benefit shall be determined under paragraph (c)(2) of this section. Otherwise, the benefits with respect to a participant shall be determined under paragraph (c)(1) of this section. (1) Annuity benefit and pre-retirement death benefit. The annuity benefit and the pre-retirement death benefit assigned to priority category 2 with respect to a participant are determined as follows: (i) The annuity benefit is the benefit computed under paragraph (b) of this section. (ii) Except for adjustments necessary to meet the minimum lump sum requirements as hereafter provided, the pre-retirement death benefit is the benefit under the plan that returns all or a portion of the participant's mandatory employee contributions upon the death of the participant before retirement. A benefit that became payable in a single installment (or substantially so) because the participant died before the termination date is a liability of the plan within the meaning of Sec. 4044.3(a) and should not be assigned to priority category 2. A benefit payable upon a participant's death that is included in the annuity form of the benefit derived from mandatory employee contributions (e.g., the survivor's portion of a joint and survivor annuity or the cash refund portion of a cash refund annuity) is assigned to priority category 2 as part of the annuity benefit under paragraph (c)(1)(i) of this section and is not assigned as a death benefit. The pre-retirement death benefit may not be less than the minimum lump sum required upon withdrawal of mandatory employee contributions by the IRS under section 204(c) of ERISA and section 411(c) of the Code. [[Page 34063]] (2) Lump sum benefit. Except for adjustments necessary to meet the minimum lump sum requirements as hereafter provided, if a participant elects to receive a lump sum benefit under the provisions of the plan, the amount of the benefit that is assigned to priority category 2 with respect to the participant is-- (i) The combined value of the annuity benefit and the pre- retirement death benefit determined according to paragraph (c)(1) (which constitutes the basic-type benefit) plus (ii) The amount, if any, of the participant's accumulated mandatory employee contributions that exceeds the combined value of the annuity benefit and the pre-retirement death benefit (which constitutes the nonbasic-type benefit), but not more than (iii) The amount of the participant's accumulated mandatory contributions. (3) For purposes of paragraph (c)(2) of this section, accumulated mandatory contributions means the contributions with interest, if any, payable under plan provisions to the participant or beneficiary on termination of the plan or, in the absence of such provisions, the amount that is payable if the participant withdrew his or her contributions on the termination date. The lump sum benefit may not be less than the minimum lump required by the IRS under section 204(c) of ERISA and section 411(c) of the Code upon withdrawal of mandatory employee contributions. Sec. 4044.13 Priority category 3 benefits. (a) Definition. The benefits in priority category 3 are those annuity benefits that were in pay status before the beginning of the 3- year period ending on the termination date, and those annuity benefits that could have been in pay status for participants who were eligible to receive annuity benefits before the beginning of the 3-year period ending on the termination date. Benefit increases that became effective before the beginning of the 5-year period ending on the termination date, including automatic benefit increases after that date to the extent provided in paragraph (b)(5) of this section, shall be included in determining the priority category 3 benefit. Benefits are primarily basic-type benefits, although nonbasic-type benefits will be included if any portion of a participant's priority category 3 benefit is not guaranteeable under the provisions of subpart A of part 4022 of this chapter. (b) Assigning benefits. The annuity benefit that is assigned to priority category 3 with respect to each participant is the lowest annuity that was paid or payable under the rules in paragraphs (b)(2) through (b)(6) of this section. (1) Eligibility of participants and beneficiaries. A participant or beneficiary is eligible for a priority category 3 benefit if either of the following applies: (i) The participant's (or beneficiary's) benefit was in pay status before the beginning of the 3-year period ending on the termination date. (ii) The participant was eligible for an annuity and his or her benefit could have been in pay status before the beginning of the 3- year period ending on the termination date. Whether a participant was eligible to receive an annuity before the beginning of the 3-year period shall be determined using the plan provisions in effect on the day before the beginning of the 3-year period. (iii) If a participant described in either of the preceding two paragraphs died during the 3-year period ending on the date of the plan termination and his or her beneficiary is entitled to an annuity, the beneficiary is eligible for a priority category 3 benefit. (2) Plan provisions governing determination of benefit. In determining the amount of the priority category 3 annuity with respect to a participant, the plan administrator shall use the participant's age, service, actual or expected retirement age, and other relevant facts as of the following dates: (i) Except as provided in the next sentence, for a participant or beneficiary whose benefit was in pay status before the beginning of the 3-year period ending on the termination date, the priority category 3 benefit shall be determined according to plan provisions in effect on the date the benefit commenced. Benefit increases that became effective before the beginning of the 5-year period ending on the date of plan termination, including automatic benefit increases after that date to the extent provided in paragraph (b)(5) of this section, shall be included in determining the priority category 3 benefit. The form of annuity elected by a retiree is considered the normal form of annuity for that participant. (ii) For a participant who was eligible to receive an annuity before the beginning of the 3-year period ending on the termination date but whose benefit was not in pay status, the priority category 3 benefit and the normal form of annuity shall be determined according to plan provisions in effect on the day before the beginning of the 3-year period ending on the termination date as if the benefit had commenced at that time. (3) General benefit limitations. The general benefit limitation is determined as follows: (i) If a participant's benefit was in pay status before the beginning of the 3-year period, the benefit assigned to priority category 3 with respect to that participant is limited to the lesser of the lowest annuity benefit in pay status during the 3-year period ending on the termination date and the lowest annuity benefit payable under the plan provisions at any time during the 5-year period ending on the termination date. (ii) Unless a benefit was in pay status before the beginning of the 3-year period ending on the termination date, the benefit assigned to priority category 3 with respect to a participant is limited to the lowest annuity benefit payable under the plan provisions, including any reduction for early retirement, at any time during the 5-year period ending on the termination date. If the annuity form of benefit under a formula that appears to produce the lowest benefit differs from the normal annuity form for the participant under paragraph (b)(2)(ii) of this section, the benefits shall be compared after the differing form is converted to the normal annuity form, using plan factors. In the absence of plan factors, the factors in subpart B of part 4022 of this chapter shall be used. (iii) For purposes of this paragraph, if a terminating plan has been in effect less than five years on the termination date, computed in accordance with paragraph (b)(6) of this section, the lowest annuity benefit under the plan during the 5-year period ending on the termination date is zero. If the plan is a successor to a previously established defined benefit plan within the meaning of section 4021(a) of ERISA, the time it has been in effect will include the time the predecessor plan was in effect. (4) Determination of beneficiary's benefit. If a beneficiary is eligible for a priority category 3 benefit because of the death of a participant during the 3-year period ending on the termination date, the benefit assigned to priority category 3 for the beneficiary shall be determined as if the participant had died the day before the 3-year period began. (5) Automatic benefit increases. If plan provisions adopted and effective before the beginning of the 5-year period ending on the termination date provided for automatic increases in the benefit formula for both active participants and those in pay status or for participants in pay status only, the lowest annuity benefit payable during the 5-year period ending on the termination date determined under paragraph (b)(3) of this section includes the automatic [[Page 34064]] increases scheduled during the fourth and fifth years preceding termination, subject to the restriction that benefit increases for active participants in excess of the increases for retirees shall not be taken into account. (6) Computation of time periods. For purposes of this section, a plan or amendment is ``in effect'' on the later of the date on which it is adopted or the date it becomes effective. Sec. 4044.14 Priority category 4 benefits. The benefits assigned to priority category 4 with respect to each participant are the participant's basic-type benefits that do not exceed the guarantee limits set forth in subpart B of part 4022 of this chapter, except as provided in the next sentence. The benefit assigned to priority category 4 with respect to a participant is not limited by the aggregate benefits limitations set forth in Sec. 4022B.1 of this chapter for individuals who are participants in more than one plan or by the phase-in limitation applicable to substantial owners set forth in Sec. 4022.26. Sec. 4044.15 Priority category 5 benefits. The benefits assigned to priority category 5 with respect to each participant are all of the participant's nonforfeitable benefits under the plan. Sec. 4044.16 Priority category 6 benefits. The benefits assigned to priority category 6 with respect to each participant are all of the participant's benefits under the plan, whether forfeitable or nonforfeitable. Sec. 4044.17 Subclasses. (a) General rule. A plan may establish one or more subclasses within any priority category, other than priority categories 1 and 2, which subclasses will govern the allocation of assets within that priority category. The subclasses may be based only on a participant's longer service, older age, or disability, or any combination thereof. (b) Limitation. Except as provided in paragraph (c) of this section, whenever the allocation within a priority category on the basis of the subclasses established by the plan increases or decreases the cumulative amount of assets that otherwise would be allocated to guaranteed benefits, the assets so shifted shall be reallocated to other participants' benefits within the priority category in accordance with the subclasses. (c) Exception for subclasses in effect on September 2, 1974. A plan administrator may allocate assets to subclasses within any priority category, other than priority categories 1 and 2, without regard to the limitation in paragraph (b) of this section if, on September 2, 1974, the plan provided for allocation of plan assets upon termination of the plan based on a participant's longer service, older age, or disability, or any combination thereof, and-- (1) Such provisions are still in effect; or (2) The plan, if subsequently amended to modify or remove those subclasses, is re-amended to re-establish the same subclasses on or before July 28, 1981. (d) Discrimination under Code. Notwithstanding the provisions of paragraphs (a) through (c) of this section, allocation of assets to subclasses established under this section is permitted only to the extent that the allocation does not result in discrimination prohibited under the Code and regulations thereunder. Allocation of Residual Assets Sec. 4044.30 [Reserved.] Subpart B--Valuation of Benefits and Assets General Provisions Sec. 4044.41 General valuation rules. (a) Valuation of benefits--(1) Trusteed plans. The plan administrator of a plan that has been or will be placed into trusteeship by the PBGC shall value plan benefits in accordance with Secs. 4044.51 through 4044.57. (2) Non-trusteed plans. The plan administrator of a non-trusteed plan shall value plan benefits in accordance with Sec. 4044.71 through 4044.75. If a plan with respect to which PBGC has issued a Notice of Sufficiency is unable to satisfy all benefits assigned to priority categories 1 through 4 on the distribution date, the PBGC will place it into trusteeship and the plan administrator shall re-value the benefits in accordance with Secs. 4044.51 through 4044.57. [See Note at beginning of part 4044.] (b) Valuation of assets. Plan assets shall be valued at their fair market value, based on the method of valuation that most accurately reflects such fair market value. Trusteed Plans Sec. 4044.51 Benefits to be valued. (a) Form of benefit. The plan administrator shall determine the form of each benefit to be valued in accordance with the following rules: (1) If a benefit is in pay status as of the valuation date, the plan administrator shall value the form of the benefit being paid. (2) If a benefit is not in pay status as of the valuation date but a valid election with respect to the form of benefit has been made on or before the valuation date, the plan administrator shall value the form of benefit so elected. (3) If a benefit is not in pay status as of the valuation date and no valid election with respect to the form of benefit has been made on or before the valuation date, the plan administrator shall value the form of benefit that, under the terms of the plan, is payable in the absence of a valid election. (b) Timing of benefit. The plan administrator shall value benefits whose starting date is subject to election using the assumption specified in paragraph (b)(1) or (b)(2) of this section. (1) Where election made. If a valid election of the starting date of a benefit has been made on or before the valuation date, the plan administrator shall assume that the starting date of the benefit is the starting date so elected. (2) Where no election made. If no valid election of the starting date of a benefit has been made on or before the valuation date, the plan administrator shall assume that the starting date of the benefit is the later of-- (i) The expected retirement age, as determined under Secs. 4044.55 through 4044.57, of the participant with respect to whom the benefit is payable, or (ii) The valuation date. Sec. 4044.52 Valuation of benefits. (a) General rule. Except as otherwise provided in paragraph (b) of this section (regarding the valuation of benefits payable as lump sums), the plan administrator shall value annuity benefits as of the valuation date by-- (1) Using the mortality assumptions prescribed by Sec. 4044.53 and the interest assumptions prescribed by Table I of appendix B to this part; (2) Using interpolation methods, where necessary, at least as accurate as linear interpolation; (3) Using valuation formulas that accord with generally accepted actuarial principles and practices; (4) Taking mortality into account during the deferral period of a deferred joint and survivor benefit only with respect to the participant (or other principal annuitant), if upon the death of the beneficiary the participant may elect an actuarially increased single life annuity or if a new beneficiary may succeed to the survivor portion of the benefit; and (5) Adjusting the values to reflect the loading for expenses in accordance with appendix C to this part. [[Page 34065]] (b) Benefits payable as lump sums. For valuing benefits payable as lump sums (including the return of accumulated employee contributions upon death), and for determining whether the lump sum value of a benefit exceeds $3,500, the plan administrator shall value benefits in the same manner as benefits to be paid as annuities except that-- (1) The mortality assumptions prescribed in Sec. 4044.54 and the interest assumptions set forth in Table II of appendix B to this part shall apply, (2) There shall be no adjustment to reflect the loading for expenses, and (3) Beneficiary mortality during the deferral period shall be disregarded as provided in paragraph (a)(4) of this section without regard to whether the participant may elect an actuarially increased single life annuity upon the death of the beneficiary or whether a new beneficiary may succeed to the survivor portion of the benefit. Sec. 4044.53 Mortality assumptions--in general. (a) General rule. Subject to paragraph (b) of this section (regarding certain death benefits), the plan administrator shall use the mortality factors prescribed in paragraphs (c), (d), and (e) of this section to value benefits under Sec. 4044.52(a). (b) Certain death benefits. If an annuity for one person is in pay status on the valuation date, and if the payment of a death benefit after the valuation date to another person, who need not be identifiable on the valuation date, depends in whole or in part on the death of the pay status annuitant, then the plan administrator shall value the death benefit using-- (1) the mortality rates that are applicable to the annuity in pay status under this section to represent the mortality of the pay status annuitant; and (2) the mortality rates applicable to annuities not in pay status and to deferred benefits other than annuities, under paragraph (c) of this section, to represent the mortality of the death beneficiary. (c) Mortality rates for healthy lives. The mortality rates applicable to annuities in pay status on the valuation date that are not being received as disability benefits, to annuities not in pay status on the valuation date, and to deferred benefits other than annuities, are-- (1) For male participants, the rates in Table 1 of appendix A to this part, and (2) For female participants, the rates in Table 1 of appendix A to this part, set back 6 years. (d) Mortality rates for disabled lives (other than Social Security disability). The mortality rates applicable to annuities in pay status on the valuation date that are being received as disability benefits and for which neither eligibility for, nor receipt of, Social Security disability benefits is a prerequisite, are-- (1) For male participants, the rates in Table 1 of appendix A to this part, set forward 3 years, and (2) For female participants, the rates in Table 1 of appendix A to this part, set back 3 years. (e) Mortality rates for disabled lives (Social Security disability). The mortality rates applicable to annuities in pay status on the valuation date that are being received as disability benefits and for which either eligibility for, or receipt of, Social Security disability benefits is a prerequisite, are the rates in Tables 2-M and 2-F of appendix A to this part. Sec. 4044.54 Mortality assumptions--lump sums. For determining whether the value of a benefit is $3,500 or less under Sec. 4022.7(b)(1) of this chapter and for calculating the amount of a lump sum benefit, the PBGC will use the mortality rates in Table 3 of appendix A to this part. Expected Retirement Age Sec. 4044.55 XRA when a participant must retire to receive a benefit. (a) Applicability. Except as provided in Sec. 4044.57, the plan administrator shall determine the XRA under this section when plan provisions or established plan practice require a participant to retire from his or her job to begin receiving an early retirement benefit. (b) Data needed. The plan administrator shall determine for each participant who is entitled to an early retirement benefit-- (1) The amount of the participant's monthly benefit payable at unreduced retirement age in the normal form payable under the terms of the plan or in the form validly elected by the participant before the termination date; (2) The calendar year in which the participant reaches unreduced retirement age (``URA''); (3) The participant's URA; and (4) The participant's earliest retirement age at the valuation date. (c) Procedure. (1) The plan administrator shall determine whether a participant is in the high, medium or low retirement rate category using the applicable Selection of Retirement Rate Category Table in appendix D, based on the participant's benefit determined under paragraph (b)(1) of this section and the year in which the participant reaches URA. (2) Based on the retirement rate category determined under paragraph (c)(1), the plan administrator shall determine the XRA from Table II-A, II-B or II-C, as appropriate, by using the participant's URA and earliest retirement age at valuation date. Sec. 4044.56 XRA when a participant need not retire to receive a benefit. (a) Applicability. Except as provided in Sec. 4044.57, the plan administrator shall determine the XRA under this section when plan provisions or established plan practice do not require a participant to retire from his or her job to begin receiving his or her early retirement benefit. (b) Data needed. The plan administrator shall determine for each participant-- (1) The participant's URA; and (2) The participant's earliest retirement age at valuation date. (c) Procedure. Participants in this case are always assigned to the high retirement rate category and therefore the plan administrator shall use Table II-C of appendix D to determine the XRA. The plan administrator shall determine the XRA from Table II-C by using the participant's URA and earliest retirement age at termination date. Sec. 4044.57 Special rule for facility closing. (a) Applicability. The plan administrator shall determine the XRA under this section, rather than Sec. 4044.55 or Sec. 4044.56, when both the conditions set forth in paragraphs (a)(1) and (a)(2) of this section exist. (1) The facility at which the participant is or was employed permanently closed within one year before the valuation date, or is in the process of being permanently closed on the valuation date. (2) The participant left employment at the facility less than one year before the valuation date or was still employed at the facility on the valuation date. (b) XRA. The XRA is equal to the earliest retirement age at valuation date. Non-Trusteed Plans Sec. 4044.71 Valuation of annuity benefits. The value of a benefit which is to be paid as an annuity is the cost of purchasing the annuity on the date of distribution from an insurer under the qualifying bid. Sec. 4044.72 Form of annuity to be valued. (a) When both the participant and beneficiary are alive on the date of distribution, the form of annuity to be valued is-- [[Page 34066]] (1) For a participant or beneficiary already receiving a monthly benefit, that form which is being received, or (2) For a participant or beneficiary not receiving a monthly benefit, the normal annuity form payable under the plan or the optional form for which the participant has made a valid election pursuant to Sec. 2617.4(c) of this chapter. [See Note at beginning of part 4044.] (b) When the participant dies after the date of plan termination but before the date of distribution, the form of annuity to be valued is determined under paragraph (b)(1) or (b)(2) of this section: (1) For a participant who was entitled to a deferred annuity-- (i) If the form was a single or joint life annuity, no benefit shall be valued; or (ii) If the participant had made a valid election of a lump sum benefit before he or she died, the form to be valued is the lump sum. (2) For a participant who was eligible for immediate retirement, and for a participant who was in pay status at the date of termination-- (i) If the form was a single life annuity, no benefit shall be valued; (ii) If the form was an annuity for a period certain and life thereafter, the form to be valued is an annuity for the certain period; (iii) If the form was a joint and survivor annuity, the form to be valued is a single life annuity payable to the beneficiary, unless the beneficiary has also died, in which case no benefit shall be valued; (iv) If the form was an annuity for a period certain and joint and survivor thereafter, the form to be valued is an annuity for the certain period and the life of the beneficiary thereafter, unless the beneficiary has also died, in which case the form to be valued is an annuity for the certain period; (v) If the form was a cash refund annuity, the form to be valued is the remaining lump sum death benefit; or (vi) If the participant had elected a lump sum benefit before he or she died, the form to be valued is the lump sum. (c) When the participant is still living and the named beneficiary or spouse dies after the date of termination but before the date of distribution, the form of annuity to be valued is determined under paragraph (c)(1) or (c)(2) of this section: (1) For a participant entitled to a deferred annuity-- (i) If the form was a joint and survivor annuity, the form to be valued is a single life annuity payable to the participant; or (ii) If the form was an annuity for a period certain and joint and survivor thereafter, the form to be valued is an annuity for the certain period and the life of the participant thereafter. (2) For a participant eligible for immediate retirement and for a participant in pay status at the date of termination-- (i) If the form was a joint and survivor annuity, the form to be valued is a single life annuity payable to the participant; or (ii) If the form was an annuity for a period certain and joint survivor thereafter annuity, the form to be valued is an annuity for the certain period and for the life of the participant thereafter. Sec. 4044.73 Lump sums and other alternative forms of distribution in lieu of annuities. (a) Valuation. (1) The value of the lump sum or other alternative form of distribution is the present value of the normal form of benefit provided by the plan payable at normal retirement age, determined as of the date of distribution using reasonable actuarial assumptions as to interest and mortality. (2) If the participant dies before the date of distribution, but had elected a lump sum benefit, the present value shall be determined as if the participant were alive on the date of distribution. (b) Actuarial assumptions. The plan administrator shall specify the actuarial assumptions used to determine the value calculated under paragraph (a) of this section when the plan administrator submits the benefit valuation data to the PBGC pursuant to Sec. 2617.12 of part 2617 of this chapter. The same actuarial assumptions shall be used for all such calculations. The PBGC reserves the right to review the actuarial assumptions used and to re-value the benefits determined by the plan administrator if the actuarial assumptions are found to be unreasonable. [See Note at beginning of part 4044.] Sec. 4044.74 Withdrawal of employee contributions. (a) If a participant has not started to receive monthly benefit payments on the date of distribution, the value of the lump sum which returns mandatory employee contributions is equal to the total amount of contributions made by the participant, plus interest that is payable to the participant under the terms of the plan, plus interest on that total amount from the date of termination to the date of distribution. The rate of interest credited on employee contributions up to the date of termination shall be the greater of the interest rate provided under the terms of the plan or the interest rate required under section 204(c) of ERISA or section 411(c) of the IRC. (b) If a participant has started to receive monthly benefit payments on the date of distribution, part of which are attributable to his or her contributions, the value of the lump sum which returns employee contributions is equal to the excess of the amount described in paragraph (b)(1) of this section over the amount computed in paragraph (b)(2) of this section. (1) The amount of accumulated mandatory employee contributions remaining in the plan as of the date of termination plus interest from the date of termination to the date of distribution. (2) The excess of benefit payments made from the plan between date of plan termination and the date of distribution, over the amount of payments that would have been made if the employee contributions had been paid as a lump sum on the date of plan termination, with interest accumulated on the excess from the date of payment to the date of distribution. (c) Interest assumptions. The interest rate used under this section to credit interest between the date of termination to the date of distribution shall be a reasonable rate and shall be the same for both paragraphs (a) and (b). Sec. 4044.75 Other lump sum benefits. The value of a lump sum benefit which is not covered under Sec. 4044.73 or Sec. 4044.74 is equal to-- (a) The value under the qualifying bid, if an insurer provides the benefit; or (b) The present value of the benefit as of the date of distribution, determined using reasonable actuarial assumptions, if the benefit is to be distributed other than by the purchase of the benefit from an insurer. The PBGC reserves the right to review the actuarial assumptions as to reasonableness and re-value the benefit if the actuarial assumptions are unreasonable. [See Note at beginning of part 4044.] Appendix A to Part 4044--Mortality Rate Tables The tables in this appendix set forth for each age x the probability qX that an individual aged x will not survive to attain age x+1. Table 1.--Mortality Table for Healthy Male Participants ------------------------------------------------------------------------ Age x q x ------------------------------------------------------------------------ 5............................................................ 0.000342 6............................................................ 0.000318 7............................................................ 0.000302 8............................................................ 0.000294 9............................................................ 0.000292 [[Page 34067]] 10........................................................... 0.000293 11........................................................... 0.000298 12........................................................... 0.000304 13........................................................... 0.000310 14........................................................... 0.000317 15........................................................... 0.000325 16........................................................... 0.000333 17........................................................... 0.000343 18........................................................... 0.000353 19........................................................... 0.000365 20........................................................... 0.000377 21........................................................... 0.000392 22........................................................... 0.000408 23........................................................... 0.000424 24........................................................... 0.000444 25........................................................... 0.000464 26........................................................... 0.000488 27........................................................... 0.000513 28........................................................... 0.000542 29........................................................... 0.000572 30........................................................... 0.000607 31........................................................... 0.000645 32........................................................... 0.000687 33........................................................... 0.000734 34........................................................... 0.000785 35........................................................... 0.000860 36........................................................... 0.000907 37........................................................... 0.000966 38........................................................... 0.001039 39........................................................... 0.001128 40........................................................... 0.001238 41........................................................... 0.001370 42........................................................... 0.001527 43........................................................... 0.001715 44........................................................... 0.001932 45........................................................... 0.002183 46........................................................... 0.002471 47........................................................... 0.002790 48........................................................... 0.003138 49........................................................... 0.003513 50........................................................... 0.003909 51........................................................... 0.004324 52........................................................... 0.004755 53........................................................... 0.005200 54........................................................... 0.005660 55........................................................... 0.006131 56........................................................... 0.006618 57........................................................... 0.007139 58........................................................... 0.007719 59........................................................... 0.008384 60........................................................... 0.009158 61........................................................... 0.010064 62........................................................... 0.011133 63........................................................... 0.012391 64........................................................... 0.013868 65........................................................... 0.015592 66........................................................... 0.017579 67........................................................... 0.019804 68........................................................... 0.022229 69........................................................... 0.024817 70........................................................... 0.027530 71........................................................... 0.030354 72........................................................... 0.033370 73........................................................... 0.036680 74........................................................... 0.040388 75........................................................... 0.044597 76........................................................... 0.049388 77........................................................... 0.054758 78........................................................... 0.060678 79........................................................... 0.067125 80........................................................... 0.074070 81........................................................... 0.081484 82........................................................... 0.089320 83........................................................... 0.097525 84........................................................... 0.106047 85........................................................... 0.114836 86........................................................... 0.124170 87........................................................... 0.133870 88........................................................... 0.144073 89........................................................... 0.154859 90........................................................... 0.166307 91........................................................... 0.178214 92........................................................... 0.190460 93........................................................... 0.203007 94........................................................... 0.217904 95........................................................... 0.234086 96........................................................... 0.248436 97........................................................... 0.263954 98........................................................... 0.280803 99........................................................... 0.299154 100.......................................................... 0.319185 101.......................................................... 0.341086 102.......................................................... 0.365052 103.......................................................... 0.393102 104.......................................................... 0.427255 105.......................................................... 0.469531 106.......................................................... 0.521945 107.......................................................... 0.586518 108.......................................................... 0.665268 109.......................................................... 0.760215 110.......................................................... 1.000000 ------------------------------------------------------------------------ Table 2-M.--Mortality Table for Disabled Male Participants Receiving Social Security Disability Benefit Payments ------------------------------------------------------------------------ Age x T2x ------------------------------------------------------------------------ 5....................................................... 0.000000 6....................................................... 0.000000 7....................................................... 0.000000 8....................................................... 0.000000 9....................................................... 0.000000 10...................................................... 0.000000 11...................................................... 0.000000 12...................................................... 0.000000 13...................................................... 0.000000 14...................................................... 0.000000 15...................................................... 0.000000 16...................................................... 0.000000 17...................................................... 0.000000 18...................................................... 0.000000 19...................................................... 0.000000 20...................................................... 0.048300 21...................................................... 0.048300 22...................................................... 0.048300 23...................................................... 0.048300 24...................................................... 0.048300 25...................................................... 0.048300 26...................................................... 0.046100 27...................................................... 0.043600 28...................................................... 0.041100 29...................................................... 0.038600 30...................................................... 0.036200 31...................................................... 0.033900 32...................................................... 0.032000 33...................................................... 0.032000 34...................................................... 0.028800 35...................................................... 0.027800 36...................................................... 0.027200 37...................................................... 0.027100 38...................................................... 0.027300 39...................................................... 0.027600 40...................................................... 0.028200 41...................................................... 0.028800 42...................................................... 0.029700 43...................................................... 0.030500 44...................................................... 0.031400 45...................................................... 0.032200 46...................................................... 0.033000 47...................................................... 0.034000 48...................................................... 0.035300 49...................................................... 0.036700 50...................................................... 0.038300 51...................................................... 0.040100 52...................................................... 0.042000 53...................................................... 0.043900 54...................................................... 0.046000 55...................................................... 0.048200 56...................................................... 0.050600 57...................................................... 0.053100 58...................................................... 0.055500 59...................................................... 0.058100 60...................................................... 0.060300 61...................................................... 0.062400 62...................................................... 0.064300 63...................................................... 0.065700 64...................................................... 0.066800 65...................................................... 0.069225 66...................................................... 0.071813 67...................................................... 0.074526 68...................................................... 0.077350 69...................................................... 0.080366 70...................................................... 0.083676 71...................................................... 0.087384 72...................................................... 0.091593 73...................................................... 0.096384 74...................................................... 0.101754 75...................................................... 0.107674 76...................................................... 0.114121 77...................................................... 0.121066 78...................................................... 0.128480 79...................................................... 0.136316 80...................................................... 0.144521 81...................................................... 0.153043 82...................................................... 0.161832 83...................................................... 0.171166 84...................................................... 0.180866 85...................................................... 0.191069 86...................................................... 0.201855 87...................................................... 0.213303 88...................................................... 0.225210 89...................................................... 0.237456 90...................................................... 0.250003 91...................................................... 0.264900 92...................................................... 0.281082 93...................................................... 0.295432 94...................................................... 0.310950 95...................................................... 0.327799 96...................................................... 0.346150 97...................................................... 0.366181 98...................................................... 0.388082 99...................................................... 0.412048 100..................................................... 0.440098 101..................................................... 0.474251 [[Page 34068]] 102..................................................... 0.516527 103..................................................... 0.568941 104..................................................... 0.633514 105..................................................... 0.712264 106..................................................... 0.807211 107..................................................... 1.000000 ------------------------------------------------------------------------ Table 2-F.--Mortality Table for Disabled Female Participants Receiving Social Security Disability Benefit Payments ------------------------------------------------------------------------ Age x q x ------------------------------------------------------------------------ 5............................................................ 0.000000 6............................................................ 0.000000 7............................................................ 0.000000 8............................................................ 0.000000 9............................................................ 0.000000 10........................................................... 0.000000 11........................................................... 0.000000 12........................................................... 0.000000 13........................................................... 0.000000 14........................................................... 0.000000 15........................................................... 0.000000 16........................................................... 0.000000 17........................................................... 0.000000 18........................................................... 0.000000 19........................................................... 0.000000 20........................................................... 0.026300 21........................................................... 0.026300 22........................................................... 0.026300 23........................................................... 0.026300 24........................................................... 0.026300 25........................................................... 0.026300 26........................................................... 0.025700 27........................................................... 0.025300 28........................................................... 0.024700 29........................................................... 0.024200 30........................................................... 0.023700 31........................................................... 0.023200 32........................................................... 0.022700 33........................................................... 0.022200 34........................................................... 0.021800 35........................................................... 0.021400 36........................................................... 0.021200 37........................................................... 0.021000 38........................................................... 0.020800 39........................................................... 0.020800 40........................................................... 0.020900 41........................................................... 0.021000 42........................................................... 0.021300 43........................................................... 0.021600 44........................................................... 0.021900 45........................................................... 0.022400 46........................................................... 0.022900 47........................................................... 0.023500 48........................................................... 0.024200 49........................................................... 0.024900 50........................................................... 0.025700 51........................................................... 0.026400 52........................................................... 0.027200 53........................................................... 0.028100 54........................................................... 0.028800 55........................................................... 0.029500 56........................................................... 0.030100 57........................................................... 0.030700 58........................................................... 0.031500 59........................................................... 0.032300 60........................................................... 0.033100 61........................................................... 0.033900 62........................................................... 0.034700 63........................................................... 0.035500 64........................................................... 0.036200 65........................................................... 0.037269 66........................................................... 0.038527 67........................................................... 0.040004 68........................................................... 0.041728 69........................................................... 0.043715 70........................................................... 0.045940 71........................................................... 0.048365 72........................................................... 0.050953 73........................................................... 0.053666 74........................................................... 0.056490 75........................................................... 0.059506 76........................................................... 0.062816 77........................................................... 0.066524 78........................................................... 0.070733 79........................................................... 0.057524 80........................................................... 0.080894 81........................................................... 0.086814 82........................................................... 0.093261 83........................................................... 0.100206 84........................................................... 0.107620 85........................................................... 0.115456 86........................................................... 0.123661 87........................................................... 0.132183 88........................................................... 0.140972 89........................................................... 0.150306 90........................................................... 0.160006 91........................................................... 0.170209 92........................................................... 0.180995 93........................................................... 0.192443 94........................................................... 0.204350 95........................................................... 0.216596 96........................................................... 0.229143 97........................................................... 0.244040 98........................................................... 0.260222 99........................................................... 0.274572 100.......................................................... 0.290090 101.......................................................... 0.306939 102.......................................................... 0.325290 103.......................................................... 0.345321 104.......................................................... 0.367222 105.......................................................... 0.391188 106.......................................................... 0.419238 107.......................................................... 0.453391 108.......................................................... 0.495667 109.......................................................... 0.548081 110.......................................................... 0.612654 111.......................................................... 0.691404 112.......................................................... 0.786351 113.......................................................... 1.000000 ------------------------------------------------------------------------ Table 3.--Lump Sum Mortality Table ------------------------------------------------------------------------ Age q x ------------------------------------------------------------------------ 12........................................................... 0.000000 13........................................................... 0.000000 14........................................................... 0.000000 15........................................................... 0.000000 16........................................................... 0.001437 17........................................................... 0.001414 18........................................................... 0.001385 19........................................................... 0.001351 20........................................................... 0.001311 21........................................................... 0.001267 22........................................................... 0.001219 23........................................................... 0.001167 24........................................................... 0.001149 25........................................................... 0.001129 26........................................................... 0.001107 27........................................................... 0.001083 28........................................................... 0.001058 29........................................................... 0.001083 30........................................................... 0.001111 31........................................................... 0.001141 32........................................................... 0.001173 33........................................................... 0.001208 34........................................................... 0.001297 35........................................................... 0.001398 36........................................................... 0.001513 37........................................................... 0.001643 38........................................................... 0.001792 39........................................................... 0.001948 40........................................................... 0.002125 41........................................................... 0.002327 42........................................................... 0.002556 43........................................................... 0.002818 44........................................................... 0.003095 45........................................................... 0.003410 46........................................................... 0.003769 47........................................................... 0.004180 48........................................................... 0.004635 49........................................................... 0.005103 50........................................................... 0.005616 51........................................................... 0.006196 52........................................................... 0.006853 53........................................................... 0.007543 54........................................................... 0.008278 55........................................................... 0.009033 56........................................................... 0.009875 57........................................................... 0.010814 58........................................................... 0.011863 59........................................................... 0.012952 60........................................................... 0.014162 61........................................................... 0.015509 62........................................................... 0.017010 63........................................................... 0.018685 64........................................................... 0.020517 65........................................................... 0.022562 66........................................................... 0.024847 67........................................................... 0.027232 68........................................................... 0.029634 69........................................................... 0.032073 70........................................................... 0.034743 71........................................................... 0.037667 72........................................................... 0.040871 73........................................................... 0.044504 74........................................................... 0.048504 75........................................................... 0.052913 76........................................................... 0.057775 77........................................................... 0.063142 78........................................................... 0.068628 79........................................................... 0.074648 80........................................................... 0.081256 81........................................................... 0.088518 82........................................................... 0.096218 83........................................................... 0.104310 84........................................................... 0.112816 85........................................................... 0.122079 86........................................................... 0.132174 [[Page 34069]] 87........................................................... 0.143179 88........................................................... 0.155147 89........................................................... 0.168208 90........................................................... 0.182461 91........................................................... 0.198030 92........................................................... 0.215035 93........................................................... 0.232983 94........................................................... 0.252545 95........................................................... 0.273878 96........................................................... 0.297152 97........................................................... 0.322553 98........................................................... 0.349505 99........................................................... 0.378865 100.......................................................... 0.410875 101.......................................................... 0.445768 102.......................................................... 0.483830 103.......................................................... 0.524301 104.......................................................... 0.568365 105.......................................................... 0.616382 106.......................................................... 0.668696 107.......................................................... 0.725745 108.......................................................... 0.786495 109.......................................................... 0.852659 110.......................................................... 0.924666 111.......................................................... 1.000000 ------------------------------------------------------------------------ Appendix B to Part 4044--Interest Rates Used To Value Annuities and Lump Sums Table I.--[Annuity Valuations] [This table sets forth, for each indicated calendar month, the interest rates (denoted by i 1, i 2, . . ., and referred to generally as i t) assumed to be in effect between specified anniversaries of a valuation date that occurs within that calendar month; those anniversaries are specified in the columns adjacent to the rates. The last listed rate is assumed to be in effect after the last listed anniversary date.] ---------------------------------------------------------------------------------------------------------------- The values of i 1 are: For valuation dates occurring in the month-- ----------------------------------------------- i 1 for t= i 1 for t= i 1 for t= ---------------------------------------------------------------------------------------------------------------- November 1993................................................... .0560 1-25 .0525 >25 N/A N/A December 1993................................................... .0560 1-25 .0525 >25 N/A N/A January 1994.................................................... .0590 1-25 .0525 >25 N/A N/A February 1994................................................... .0590 1-25 .0525 >25 N/A N/A March 1994...................................................... .0580 1-25 .0525 >25 N/A N/A April 1994...................................................... .0620 1-25 .0525 >25 N/A N/A May 1994........................................................ .0650 1-25 .0525 >25 N/A N/A June 1994....................................................... .0670 1-25 .0525 >25 N/A N/A July 1994....................................................... .0690 1-25 0.525 >25 N/A N/A August 1994..................................................... .0700 1-25 .0525 >25 N/A N/A September 1994.................................................. .0690 1-25 .0525 >25 N/A N/A October 1994.................................................... .0700 1-25 .0525 >25 N/A N/A November 1994................................................... .0730 1-25 .0525 >25 N/A N/A December 1994................................................... .0750 1-25 .0525 >25 N/A N/A January 1995.................................................... .0750 1-20 .0575 >20 N/A N/A February 1995................................................... .0730 1-20 .0575 >20 N/A N/A March 1995...................................................... .0730 1-20 .0575 >20 N/A N/A April 1995...................................................... .0710 1-20 .0575 >20 N/A N/A May 1995........................................................ .0690 1-20 .0575 >20 N/A N/A June 1995....................................................... .0680 1-20 .0575 >20 N/A N/A July 1995....................................................... .0630 1-20 .0575 >20 N/A N/A August 1995..................................................... .0620 1-20 .0575 >20 N/A N/A September 1995.................................................. .0640 1-20 .0575 >20 N/A N/A October 1995.................................................... .0630 1-20 .0575 >20 N/A N/A November 1995................................................... .0620 1-20 .0575 >20 N/A N/A December 1995................................................... .0600 1-20 .0575 >20 N/A N/A January 1996.................................................... .0560 1-20 .0475 >20 N/A N/A February 1996................................................... .0540 1-20 .0475 >20 N/A N/A March 1996...................................................... .0550 1-20 .0475 >20 N/A N/A April 1996...................................................... .0580 1-20 .0475 >20 N/A N/A May 1996........................................................ .0600 1-20 .0475 >20 N/A N/A June 1996....................................................... .0620 1-20 .0475 >20 N/A N/A July 1996....................................................... .0620 1-20 .0475 >20 N/A N/A ---------------------------------------------------------------------------------------------------------------- [[Page 34070]] Table II.--[Lump Sum Valuations] [In using this table: (1) For benefits for which the participant or beneficiary is entitled to be in pay status on the valuation date, the immediate annuity rate shall apply; (2) For benefits for which the deferral period is y years (where y is an interger and o < y n 1), interest rate i 1 shall apply from the valuation date for a period of y years; thereafter the immediate annuity rate shall apply; (3) For benefits for which the deferral period is y years (where y is an integer and n 1 < y n 1 + n 2); interest rate i 2 shall apply from the valuation date for a period of y-n 1 years, interest rate i 1 shall apply for the following n 1 years; thereafter the immediate annuity rate shall apply; (4) For benefits for which the deferral period is y years (where y is an integer and y > n 1 + n 2), interest rate i 3 shall apply from the valuation date for a period of y-n 1-n 2 years; interest rate i 2 shall apply for the following n 2 years; interest rate i 1 shall apply for the following n 1 years; thereafter the immediate annuity rate shall apply.] ---------------------------------------------------------------------------------------------------------------- For plans with a Deferred annuities (percent) valuation date Immediate --------------------------------------- Rate set ---------------------- annuity On or rate i 1 i 2 i 3 n 1 n 2 after Before (percent) ---------------------------------------------------------------------------------------------------------------- 1.................................... 11-1-93 12-1-93 4.25 4.00 4.00 4.00 7 8 2.................................... 12-1-93 1-1-94 4.25 4.00 4.00 4.00 7 8 3.................................... 1-1-94 2-1-94 4.50 4.00 4.00 4.00 7 8 4.................................... 2-1-94 3-1-94 4.50 4.00 4.00 4.00 7 8 5.................................... 3-1-94 4-1-94 4.50 4.00 4.00 4.00 7 8 6.................................... 4-1-94 5-1-94 4.75 4.00 4.00 4.00 7 8 7.................................... 5-1-94 6-1-94 5.25 4.50 4.00 4.00 7 8 8.................................... 6-1-94 7-1-94 5.25 4.50 4.00 4.00 7 8 9.................................... 7-1-94 8-1-94 5.50 4.75 4.00 4.00 7 8 10................................... 8-1-94 9-1-94 5.75 5.00 4.00 4.00 7 8 11................................... 9-1-94 10-1-94 5.50 4.75 4.00 4.00 7 8 12................................... 10-1-94 11-1-94 5.50 4.75 4.00 4.00 7 8 13................................... 11-1-94 12-1-94 6.00 5.25 4.00 4.00 7 8 14................................... 12-1-94 1-1-95 6.25 5.50 4.25 4.00 7 8 15................................... 1-1-95 2-1-95 6.00 5.25 4.00 4.00 7 8 16................................... 2-1-95 3-1-95 6.00 5.25 4.00 4.00 7 8 17................................... 3-1-95 4-1-95 6.00 5.25 4.00 4.00 7 8 18................................... 4-1-95 5-1-95 5.75 5.00 4.00 4.00 7 8 19................................... 5-1-95 6-1-95 5.50 4.75 4.00 4.00 7 8 20................................... 6-1-95 7-1-95 5.50 4.75 4.00 4.00 7 8 21................................... 7-1-95 8-1-95 4.75 4.00 4.00 4.00 7 8 22................................... 8-1-95 9-1-95 4.75 4.00 4.00 4.00 7 8 23................................... 9-1-95 10-1-95 5.00 4.25 4.00 4.00 7 8 24................................... 10-1-95 11-1-95 4.75 4.00 4.00 4.00 7 8 25................................... 11-1-95 12-1-95 4.75 4.00 4.00 4.00 7 8 26................................... 12-1-95 1-1-96 4.50 4.00 4.00 4.00 7 8 27................................... 1-1-96 2-1-96 4.50 4.00 4.00 4.00 7 8 28................................... 2-1-96 3-1-96 4.25 4.00 4.00 4.00 7 8 29................................... 3-1-96 4-1-96 4.25 4.00 4.00 4.00 7 8 30................................... 4-1-96 5-1-96 4.75 4.00 4.00 4.00 7 8 31................................... 5-1-96 6-1-96 5.00 4.25 4.00 4.00 7 8 32................................... 6-1-96 7-1-96 5.00 4.25 4.00 4.00 7 8 33................................... 7-1-96 8-1-96 5.00 4.25 4.00 4.00 7 8 ---------------------------------------------------------------------------------------------------------------- Appendix C to Part 4044--Loading Assumptions ---------------------------------------------------------------------------------------------------------------- If the total value of the plan's benefit liabilities (as defined in 29 U.S.C. Sec. 1301(a)(16)), exclusive of the loading charge, is-- ------------------------------------------------------------------------------ The loading charge equals-- greater than but less than or equal to ---------------------------------------------------------------------------------------------------------------- $0............................................. $200,000 5% of the total value of the plan's benefits, plus $200 for each plan participant. $200,000....................................... ............................ $10,000, plus a percentage of the excess of the total value over $200,000, plus $200 for each plan participant; the percentage is equal to 1%+[(P%-7.50%)/10], where P% is the initial rate, expressed as a percentage, set forth in Table I of appendix B for the valuation of annuities. ---------------------------------------------------------------------------------------------------------------- [[Page 34071]] Appendix D to Part 4044--Tables Used To Determine Expected Retirement Age Table I-96.--Selection of Retirement Rate Category [For Plans with valuation dates after December 31, 1995, and before January 1, 1997] ---------------------------------------------------------------------------------------------------------------- Participant's retirement rate category is-- --------------------------------------------------- Medium \2\ if monthly High \3\ if Low \1\ if benefit at NRA is monthly Participant reaches NRA in year-- monthly -------------------------- benefit at benefit at NRA is NRA is less From To greater than-- than-- ---------------------------------------------------------------------------------------------------------------- 1997........................................................ 400 400 1,684 1,684 1998........................................................ 413 413 1,738 1,738 1999........................................................ 426 426 1,794 1,794 2000........................................................ 440 440 1,850 1,850 2001........................................................ 453 453 1,907 1,907 2002........................................................ 467 467 1,966 1,966 2003........................................................ 482 482 2,027 2,027 2004........................................................ 497 497 2,090 2,090 2005........................................................ 512 512 2,155 2,155 2006 or later............................................... 528 528 2,221 2,221 ---------------------------------------------------------------------------------------------------------------- \1\ Table II-A. \2\ Table II-B. \3\ Table II-C. Table II-A.--Expected Retirement Ages for Individuals in the Low Category ---------------------------------------------------------------------------------------------------------------- Normal retirement age Participant's earliest retirement ---------------------------------------------------------------------------- age at valuation date. 60 61 62 63 64 65 66 67 68 69 70 ---------------------------------------------------------------------------------------------------------------- 42................................. 53 53 53 54 54 54 54 54 54 54 54 43................................. 53 54 54 54 55 55 55 55 55 55 55 44................................. 54 54 55 55 55 55 55 56 56 56 56 45................................. 54 55 55 56 56 56 56 56 56 56 56 46................................. 55 55 56 56 56 57 57 57 57 57 57 47................................. 56 56 56 57 57 57 57 57 57 57 57 48................................. 56 57 57 57 58 58 58 58 58 58 58 49................................. 56 57 58 58 58 58 59 59 59 59 59 50................................. 57 57 58 58 59 59 59 59 59 59 59 51................................. 57 58 58 59 59 60 60 60 60 60 60 52................................. 58 58 59 59 60 60 60 60 60 60 60 53................................. 58 59 59 60 60 61 61 61 61 61 61 54................................. 58 59 60 60 61 61 61 61 61 61 61 55................................. 59 59 60 61 61 61 62 62 62 62 62 56................................. 59 60 60 61 61 62 62 62 62 62 62 57................................. 59 60 61 61 62 62 62 62 62 62 62 58................................. 59 60 61 61 62 62 63 63 63 63 63 59................................. 59 60 61 62 62 63 63 63 63 63 63 60................................. 60 60 61 62 62 63 63 63 63 63 63 61................................. ..... 61 61 62 63 63 63 63 64 64 64 62................................. ..... ..... 62 62 63 63 63 64 64 64 64 63................................. ..... ..... ..... 63 63 64 64 64 65 65 65 64................................. ..... ..... ..... ..... 64 64 65 65 65 65 65 65................................. ..... ..... ..... ..... ..... 65 65 65 65 65 65 66................................. ..... ..... ..... ..... ..... ..... 66 66 66 66 66 67................................. ..... ..... ..... ..... ..... ..... ..... 67 67 67 67 68................................. ..... ..... ..... ..... ..... ..... ..... ..... 68 68 68 69................................. ..... ..... ..... ..... ..... ..... ..... ..... ..... 69 69 70................................. ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... 70 ---------------------------------------------------------------------------------------------------------------- Table II-B.--Expected Retirement Ages for Individuals in the Medium Category ---------------------------------------------------------------------------------------------------------------- Normal retirement age Participant's earliest retirement ---------------------------------------------------------------------------- age at valuation date 60 61 62 63 64 65 66 67 68 69 70 ---------------------------------------------------------------------------------------------------------------- 42................................. 49 49 49 49 49 49 49 49 49 49 49 43................................. 50 50 50 50 50 50 50 50 50 50 50 44................................. 50 51 51 51 51 51 51 51 51 51 51 45................................. 51 51 52 52 52 52 52 52 52 52 52 46................................. 52 52 52 53 53 53 53 53 53 53 53 [[Page 34072]] 47................................. 53 53 53 53 53 54 54 54 54 54 54 48................................. 54 54 54 54 54 54 54 54 54 54 54 49................................. 54 55 55 55 55 55 55 55 55 55 55 50................................. 55 55 56 56 56 56 56 56 56 56 56 51................................. 56 56 56 57 57 57 57 57 57 57 57 52................................. 56 57 57 57 57 58 58 58 58 58 58 53................................. 57 57 58 58 58 58 58 58 58 58 58 54................................. 57 58 58 59 59 59 59 59 59 59 59 55................................. 58 58 59 59 59 60 60 60 60 60 60 56................................. 58 59 59 60 60 60 60 60 60 60 60 57................................. 59 59 60 60 61 61 61 61 61 61 61 58................................. 59 60 60 61 61 61 61 61 61 61 61 59................................. 59 60 61 61 62 62 62 62 62 62 62 60................................. 60 60 61 62 62 62 62 62 62 62 62 61................................. ..... 61 61 62 62 63 63 63 63 63 63 62................................. ..... ..... 62 62 62 63 63 63 63 63 63 63................................. ..... ..... ..... 63 63 64 64 64 64 64 64 64................................. ..... ..... ..... ..... 64 64 64 64 64 64 64 65................................. ..... ..... ..... ..... ..... 65 65 65 65 65 65 66................................. ..... ..... ..... ..... ..... ..... 66 66 66 66 66 67................................. ..... ..... ..... ..... ..... ..... ..... 67 67 67 67 68................................. ..... ..... ..... ..... ..... ..... ..... ..... 68 68 68 69................................. ..... ..... ..... ..... ..... ..... ..... ..... ..... 69 69 70................................. ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... 70 ---------------------------------------------------------------------------------------------------------------- Table II-C.--Expected Retirement Ages for Individuals in the High Category ---------------------------------------------------------------------------------------------------------------- Normal retirement age Participant's earliest retirement ---------------------------------------------------------------------------- age at valuation date. 60 61 62 63 64 65 66 67 68 69 70 ---------------------------------------------------------------------------------------------------------------- 42................................. 46 46 46 46 46 47 47 47 47 47 47 43................................. 47 47 47 47 47 47 47 47 47 47 47 44................................. 48 48 48 48 48 48 48 48 48 48 48 45................................. 49 49 49 49 49 49 49 49 49 49 49 46................................. 50 50 50 50 50 50 50 50 50 50 50 47................................. 51 51 51 51 51 51 51 51 51 51 51 48................................. 52 52 52 52 52 52 52 52 52 52 52 49................................. 53 53 53 53 53 53 53 53 53 53 53 50................................. 54 54 54 54 54 54 54 54 54 54 54 51................................. 54 55 55 55 55 55 55 55 55 55 55 52................................. 55 55 56 56 56 56 56 56 56 56 56 53................................. 56 56 56 57 57 57 57 57 57 57 57 54................................. 57 57 57 57 57 58 58 58 58 58 58 55................................. 57 58 58 58 58 58 58 58 58 58 58 56................................. 58 58 59 59 59 59 59 59 59 59 59 57................................. 58 59 59 60 60 60 60 60 60 60 60 58................................. 59 59 60 60 60 60 61 61 61 61 61 59................................. 59 60 60 61 61 61 61 61 61 61 61 60................................. 60 60 61 61 61 62 62 62 62 62 62 61................................. ..... 61 61 62 62 62 62 62 62 62 62 62................................. ..... ..... 62 62 62 62 62 62 62 62 62 63................................. ..... ..... ..... 63 63 63 64 64 64 64 64 64................................. ..... ..... ..... ..... 64 64 64 64 64 64 64 65................................. ..... ..... ..... ..... ..... 65 65 65 65 65 65 66................................. ..... ..... ..... ..... ..... ..... 66 66 66 66 66 67................................. ..... ..... ..... ..... ..... ..... ..... 67 67 67 67 68................................. ..... ..... ..... ..... ..... ..... ..... ..... 68 68 68 69................................. ..... ..... ..... ..... ..... ..... ..... ..... ..... 69 69 70................................. ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... 70 ---------------------------------------------------------------------------------------------------------------- [[Page 34073]] 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. Sec. 4047.1 Purpose and scope. Section 4047 of ERISA gives the PBGC broad authority to take any necessary actions in furtherance of a plan restoration order issued pursuant to section 4047. This part (along with Treasury regulation 26 CFR 1.412(c)(1)-3) describes certain legal obligations that arise incidental to a plan restoration under section 4047. This part also establishes procedures with respect to these obligations that are intended to facilitate the orderly transition of a restored plan from terminated (or terminating) status to ongoing status, and to help ensure that the restored plan will continue to be ongoing consistent with the best interests of the plan's participants and beneficiaries and the single-employer insurance program. This part applies to terminated and terminating single-employer plans (except for plans terminated and terminating under ERISA section 4041(b)) with respect to which the PBGC has issued or is issuing a plan restoration order pursuant to ERISA section 4047. Sec. 4047.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: controlled group, ERISA, IRS, PBGC, plan, plan administrator, plan year, and single-employer plan. Sec. 4047.3 Funding of restored plan. (a) General. Whenever the PBGC issues or has issued a plan restoration order under ERISA section 4047, it shall issue to the plan sponsor a restoration payment schedule order in accordance with the rules of this section. PBGC, through its Executive Director, shall also issue a certification to its Board of Directors and the IRS, as described in paragraph (c) of this section. If more than one plan is or has been restored, the PBGC shall issue a separate restoration payment schedule order and separate certification with respect to each restored plan. (b) Restoration payment schedule order. A restoration payment schedule order shall set forth a schedule of payments sufficient to amortize the initial restoration amortization base described in paragraph (b) of 26 CFR 1.412(c)(1)-3 over a period extending no more than 30 years after the initial post-restoration valuation date, as defined in paragraph (a)(1) of 26 CFR 1.412(c)(1)-3. The restoration payment schedule shall be consistent with the requirements of 26 CFR 1.412(c)(1)-3 and may require payments at intervals of less than one year, as determined by the PBGC. The PBGC may, in its discretion, amend the restoration payment schedule at any time, consistent with the requirements of 26 CFR 1.412(c)(1)-3. (c) Certification. The Executive Director's certification to the Board of Directors and the IRS pursuant to paragraph (a) of this section shall state that the PBGC has reviewed the funding of the plan, the financial condition of the plan sponsor and its controlled group members, the payments required under the restoration payment schedule (taking into account the availability of deferrals as permitted under paragraph (c)(4) of 26 CFR 1.412(c)(1)-3) and any other factor that the PBGC deems relevant, and, based on that review, determines that it is in the best interests of the plan's participants and beneficiaries and the single-employer insurance program that the restored plan not be reterminated. (d) Periodic PBGC review. As long as a restoration payment schedule order issued under this section is in effect, the PBGC shall review annually the funding status of the plan with respect to which the order applies. As part of this review, the PBGC, through its Executive Director, shall issue a certification in the form described in paragraph (c) of this section. As a result of its funding review, PBGC may amend the restoration payment schedule, consistent with the requirements of paragraph (c)(2) of 26 CFR 1.412(c)(1)-3. Sec. 4047.4 Payment of premiums. (a) General. Upon restoration of a plan pursuant to ERISA section 4047, the obligation to pay PBGC premiums pursuant to ERISA section 4007 is reinstated as of the date on which the plan was trusteed under section 4042 of ERISA. Except as otherwise specifically provided in paragraphs (b) and (c) of this section, the amount of the outstanding premiums owed shall be computed and paid by the plan administrator in accordance with part 4006 of this chapter (Premium Rates) and the forms and instructions issued pursuant thereto, as in effect for the plan years for which premiums are owed. (b) Notification of premiums owed. Whenever the PBGC issues or has issued a plan restoration order, it shall send a written notice to the plan administrator of the restored plan advising the plan administrator of the plan year(s) for which premiums are owed. PBGC will include with the notice the necessary premium payment forms and instructions. The notice shall prescribe the payment due dates for the outstanding premiums. (c) Methods for determining variable rate portion of the premium. In general, the variable rate portion of the outstanding premiums shall be determined in accordance with the premium regulation and forms, as provided in paragraph (a) of this section, except that for any plan year following a plan year for which Form 5500, Schedule B was not filed because the plan was terminated, the alternative calculation method in Sec. 4006.4(c) of this chapter may not be used. Sec. 4047.5 Repayment of PBGC payments of guaranteed benefits. (a) General. Upon restoration of a plan pursuant to ERISA section 4047, amounts paid by the PBGC from its single-employer insurance fund (the fund established pursuant to ERISA section 4005(a)) to pay guaranteed benefits and related expenses under the plan while it was terminated are a debt of the restored plan. The terms and conditions for payment of this debt shall be determined by the PBGC. (b) Repayment terms. The PBGC shall prescribe reasonable terms and conditions for payment of the debt described in paragraph (a) of this section, including the number, amount and commencement date of the payments. In establishing the terms, PBGC will consider the cash needs of the plan, the timing and amount of contributions owed to the plan, the liquidity of plan assets, the interests of the single-employer insurance program, and any other factors PBGC deems relevant. PBGC may, in its discretion, revise any of the payment terms and conditions, upon written notice to the plan administrator in accordance with paragraph (c) of this section. (c) Notification to plan administrator. Whenever the PBGC issues or has issued a plan restoration order, it shall send a written notice to the plan administrator of the restored plan advising the plan administrator of the amount owed the PBGC pursuant to paragraph (a) of this section. The notice shall also include the terms and conditions for payment of this debt, as established under paragraph (b) of this section. [[Page 34074]] 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. Appendix A to Part 4050--Examples of Designated Benefit Determinations for Missing Participants Under Sec. 4050.5 Appendix B to Part 4050--Examples of Benefit Payments for Missing participants Under Secs. 4050.8 Through 4050.10 Sec. 4050.1 Purpose and scope. This part prescribes rules for distributing benefits under a terminating single-employer plan for any individual whom the plan administrator has not located when distributing benefits under Sec. 4041.27(c) of this chapter. This part applies to a plan if the plan's deemed distribution date (or the date of a payment made in accordance with Sec. 4050.12) is in a plan year beginning on or after January 1, 1996. Sec. 4050.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: annuity, benefit liabilities, Code, ERISA, insurer, irrevocable commitment, mandatory employee contributions, normal retirement age, PBGC, person, plan, plan administrator, plan year and title IV benefit. In addition, for purposes of this part: Deemed distribution date means the last day of the period in which distribution may be made (determined without regard to the provisions of this part) under Sec. 4041.27(a) or Sec. 4041.48(a) of this chapter (whichever applies) or such earlier date as may be selected by the plan administrator of a terminating plan that is on or after the date when all benefit distributions have been made under the plan except for distributions to-- (1) Late-discovered participants, (2) Missing participants (including recently-missing participants) whose designated benefits are paid to the PBGC, and (3) Recently-missing participants whose benefits are distributed by purchasing an irrevocable commitment from an insurer. Designated benefit means the amount payable to the PBGC for a missing participant pursuant to Sec. 4050.5. Designated benefit interest rate means the rate of interest applicable to underpayments of guaranteed benefits by the PBGC under Sec. 4022.81(d) of this chapter. Guaranteed benefit form means, with respect to a benefit, the form in which the PBGC would pay a guaranteed benefit to a participant or beneficiary in the PBGC's program for trusteed plans under subparts A and B of part 4022 of this chapter (treating the deemed distribution date as the termination date for this purpose). Late-discovered participant means a participant or beneficiary entitled to a distribution under a terminating plan whom the plan administrator locates before the plan administrator pays the individual's designated benefit to the PBGC (or distributes the individual's benefit by purchasing an irrevocable commitment from an insurer) and not more than 90 days before the deemed distribution date. Missing participant means a participant or beneficiary entitled to a distribution under a terminating plan whom the plan administrator has not located as of the date when the plan administrator pays the individual's designated benefit to the PBGC (or distributes the individual's benefit by purchasing an irrevocable commitment from an insurer). In the absence of proof of death, individuals not located are presumed living. Missing participant annuity assumptions means the interest rate assumptions and actuarial methods (using the interest rates for annuity valuations in Table I of appendix B to part 4044 of this chapter) for valuing a benefit to be paid by the PBGC as an annuity under subpart B of part 4044, applied-- (1) As if the deemed distribution date were the termination date; (2) Using unisex mortality rates that are a fixed blend of 50 percent of the male mortality rates and 50 percent of the female mortality rates from the 1983 Group Annuity Mortality Table as prescribed in Rev. Rul. 95-6, 1995-1 C.B. 80 (Cumulative Bulletins are available from the Superintendent of Documents, Government Printing Office, Washington, DC 20402); (3) Without using the expected retirement age assumptions in Secs. 4044.55 through 4044.57 of this chapter; (4) Without making the adjustment for expenses provided for in Sec. 4044.52(a)(5) of this chapter; and (5) By adding $300, as an adjustment (loading) for expenses, for each missing participant whose designated benefit without such adjustment would be greater than $3,500. Missing participant forms and instructions means PBGC Forms 501 and 602, Schedule MP thereto, and related forms, and their instructions. Missing participant lump sum assumptions means the interest rate assumptions and actuarial methods (using the interest rates for lump sum valuations in Table II of appendix B to part 4044 of this chapter) for valuing a benefit to be paid by the PBGC as a lump sum under subpart B of part 4044 of this chapter, applied-- (1) As if the deemed distribution date were the termination date; (2) Using mortality assumptions from Table 3 of appendix A to part 4044 of this chapter; and (3) Without using the expected retirement age assumptions in Secs. 4044.55 through 4044.57 of this chapter. Pay status means, with respect to a benefit under a plan, that the plan administrator has made or (except for administrative delay or a waiting period) would have made one or more benefit payments. Post-distribution certification means the post-distribution certification required by Sec. 4041.27(h) or Sec. 4041.48(b) of this chapter. Recently-missing participant means a participant or beneficiary whom the plan administrator discovers to be a missing participant on or after the 90th day before the deemed distribution date. Unloaded designated benefit means the designated benefit reduced by $300; except that the reduction shall not apply in the case of a designated benefit determined using the missing participant annuity assumptions without adding the $300 load described in paragraph (5) of the definition of ``missing participant annuity assumptions.'' Sec. 4050.3 Method of distribution for missing participants. The plan administrator of a terminating plan shall distribute benefits for each missing participant by-- (a) purchasing from an insurer an irrevocable commitment that satisfies the requirements of Sec. 4041.27(c) or Sec. 4041.48(a)(1) of this chapter (whichever is applicable); or (b) paying the PBGC a designated benefit in accordance with Secs. 4050.4 [[Page 34075]] through 4050.6 (subject to the special rules in Sec. 4050.12). Sec. 4050.4 Diligent search. (a) Search required. A diligent search shall be made for each missing participant whose designated benefit (or voluntary employee contributions under Sec. 4050.12(d)(2)) is paid to the PBGC. The search shall be made before the payment is made. (b) Diligence. A search is a diligent search only if the search-- (1) Begins not more than 6 months before notices of intent to terminate are issued and is carried on in such a manner that if the individual is found, distribution to the individual can reasonably be expected to be made on or before the deemed distribution date (or, in the case of a recently-missing participant, on or before the 90th day after the deemed distribution date); (2) Includes inquiry of any plan beneficiaries (including alternate payees) of the missing participant whose names and addresses are known to the plan administrator; and (3) Includes use of a commercial locator service to search for the missing participant (without charge to the missing participant or reduction of the missing participant's plan benefit). Sec. 4050.5 Designated benefit. (a) Amount of designated benefit. The amount of the designated benefit shall be the amount determined under paragraph (a)(1), (a)(2), (a)(3), or (a)(4) of this section (whichever is applicable) or, if less, the maximum amount that could be provided under the plan to the missing participant in the form of a single sum in accordance with section 415 of the Code. (1) Mandatory lump sum. The designated benefit of a missing participant required under a plan to receive a mandatory lump sum as of the deemed distribution date shall be the lump sum payment that the plan administrator would have distributed to the missing participant as of the deemed distribution date. (2) De minimis lump sum. The designated benefit of a missing participant not described in paragraph (a)(1) of this section whose benefit is not in pay status as of the deemed distribution date and whose benefit has a de minimis actuarial present value ($3,500 or less) as of the deemed distribution date under the missing participant lump sum assumptions shall be such value. (3) No lump sum. The designated benefit of a missing participant not described in paragraph (a)(1) or (a)(2) of this section who, as of the deemed distribution date, cannot elect an immediate lump sum under the plan shall be the actuarial present value of the missing participant's benefit as of the deemed distribution date under the missing participant annuity assumptions. (4) Elective lump sum. The designated benefit of a missing participant not described in paragraph (a)(1), (a)(2), or (a)(3) of this section shall be the greater of the amounts determined under the methodologies of paragraph (a)(1) or (a)(3) of this section. (b) Assumptions. When the plan administrator uses the missing participant annuity assumptions or the missing participant lump sum assumptions for purposes of determining the designated benefit under paragraph (a) of this section, the plan administrator shall value the most valuable benefit, as determined under paragraph (b)(1) of this section, using the assumptions described in paragraph (b)(2) or (b)(3) of this section (whichever is applicable). (1) Most valuable benefit. For a missing participant whose benefit is in pay status as of the deemed distribution date, the most valuable benefit is the pay status benefit. For a missing participant whose benefit is not in pay status as of the deemed distribution date, the most valuable benefit is the benefit payable at the age on or after the deemed distribution date (beginning with the participant's earliest early retirement age and ending with the participant's normal retirement age) for which the present value as of the deemed distribution date is the greatest. The present value as of the deemed distribution date with respect to any age is determined by multiplying: (i) the monthly (or other periodic) benefit payable under the plan; by (ii) the present value (determined as of the deemed distribution date using the missing participant annuity assumptions) of a $1 monthly (or other periodic) annuity beginning at the applicable age. (2) Participant. A missing participant who is a participant, and whose benefit is not in pay status as of the deemed distribution date, is assumed to be married to a spouse the same age, and the form of benefit that must be valued is the qualified joint and survivor annuity benefit that would be payable under the plan. If the participant's benefit is in pay status as of the deemed distribution date, the form and beneficiary of the participant's benefit are the form of benefit and beneficiary of the pay status benefit. (3) Beneficiary. A missing participant who is a beneficiary, and whose benefit is not in pay status as of the deemed distribution date, is assumed not to be married, and the form of benefit that must be valued is the survivor benefit that would be payable under the plan. If the beneficiary's benefit is in pay status as of the deemed distribution date, the form and beneficiary of the beneficiary's benefit are the form of benefit and beneficiary of the pay status benefit. (4) Examples. See Appendix A to this part for examples illustrating the provisions of this section. (c) Missed payments. In determining the designated benefit, the plan administrator shall include the value of any payments that were due before the deemed distribution date but that were not made. (d) Payment of designated benefits. Payment of designated benefits shall be made in accordance with Sec. 4050.6 and shall be deemed made on the deemed distribution date. Sec. 4050.6 Payment and required documentation. (a) Time of payment and filing--(1) General rule. The plan administrator shall pay designated benefits, and file the information and certifications (of the plan administrator and the plan's enrolled actuary) specified in the missing participant forms and instructions, by the time the post-distribution certification is due (determined in accordance with Sec. 4041.9 of this chapter). Except as otherwise provided in the missing participant forms and instructions, the plan administrator shall submit the designated benefits, information, and certifications with the post-distribution certification. (2) Recently-missing participants. For a recently-missing participant, the plan administrator shall either purchase an irrevocable commitment from an insurer not later than 90 days after the deemed distribution date or pay a designated benefit to the PBGC by the time the amended post-distribution certification is due under paragraph (a)(2)(ii) of this section. Except as otherwise provided in the missing participant forms and instructions-- (i) Payment. The plan administrator shall submit the designated benefit with the amended post-distribution certification described in paragraph (a)(2)(ii) of this section; and (ii) Filing. If (in the case of a recently-missing participant for whom a designated benefit is to be paid to the PBGC) a diligent search has not been completed or (in the case of any other recently-missing participant) an irrevocable commitment has not been [[Page 34076]] purchased when the plan administrator submits the filing described in paragraph (a)(1) of this section, the plan administrator shall so indicate in that filing and submit an amended filing (including an amended post-distribution certification) within 120 days after the deemed distribution date (subject to extension under Sec. 4050.12(h)) in accordance with the missing participant forms and instructions. (3) Late-discovered participants. When it is impracticable for the plan administrator to include complete and accurate final information on a late-discovered participant in a timely post-distribution certification, the plan administrator shall submit an amended post- distribution certification within 120 days after the deemed distribution date (subject to extension under Sec. 4050.12(h)) in accordance with the missing participant forms and instructions. (b) Interest on late payments. If the plan administrator does not pay a designated benefit by the time specified in paragraph (a) of this section, the plan administrator shall pay interest as assessed by the PBGC for the period beginning on the deemed distribution date and ending on the date when the payment is received by the PBGC. Interest will be assessed at the rate provided for late premium payments in Sec. 4007.7 of this chapter. Interest assessed under this paragraph shall be deemed paid in full if payment of the amount assessed is received by the PBGC within 30 days after the date of a PBGC bill for such amount. (c) Supplemental information. Within 30 days after the date of a written request from the PBGC, a plan administrator required to provide the information and certifications described in paragraph (a) of this section shall file supplemental information, as requested, for the purpose of verifying designated benefits, determining benefits to be paid by the PBGC under this part, and substantiating diligent searches. (1) Information mailed. Supplemental information filed under this paragraph (c) is considered filed 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 information was mailed postage prepaid, properly addressed to the PBGC. (2) Information delivered. When the plan administrator sends or transmits the information to the PBGC by means other than the United States Postal Service, the information is considered filed 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. Sec. 4050.7 Benefits of missing participants--in general. (a) If annuity purchased. If a plan administrator distributes a missing participant's benefit by purchasing an irrevocable commitment from an insurer, and the missing participant (or his or her beneficiary or estate) later contacts the PBGC, the PBGC will inform the person of the identity of the insurer and the relevant policy number. (b) If designated benefit paid. If the PBGC locates or is contacted by a missing participant (or his or her beneficiary or estate) for whom a plan administrator paid a designated benefit to the PBGC, the PBGC will pay benefits in accordance with Secs. 4050.8 through 4050.10 (subject to the limitations and special rules in Secs. 4050.11 and 4050.12). (c) Examples. See Appendix B to this part for examples illustrating the provisions of Secs. 4050.8 through 4050.10. Sec. 4050.8 Automatic lump sum. This section applies to a missing participant whose designated benefit was determined under Sec. 4050.5(a)(1) (mandatory lump sum) or Sec. 4050.5(a)(2) (de minimis lump sum). (a) General rule--(1) Benefit paid. The PBGC will pay a single sum benefit equal to the designated benefit plus interest at the designated benefit interest rate from the deemed distribution date to the date on which the PBGC pays the benefit. (2) Payee. Payment shall be made-- (i) To the missing participant, if located; (ii) If the missing participant died before the deemed distribution date, and if the plan so provides, to the missing participant's beneficiary or estate; or (iii) If the missing participant dies on or after the deemed distribution date, to the missing participant's estate. (b) De minimis annuity alternative. If the guaranteed benefit form for a missing participant whose designated benefit was determined under Sec. 4050.5(a)(2) (de minimis lump sum) (or the guaranteed benefit form for a beneficiary of such a missing participant) would provide for the election of an annuity, the missing participant (or the beneficiary) may elect to receive an annuity. If such an election is made-- (1) The PBGC will pay the benefit in the elected guaranteed benefit form, beginning on the annuity starting date elected by the missing participant (or the beneficiary), which shall not be before the later of the date of the election or the earliest date on which the missing participant (or the beneficiary) could have begun receiving benefits under the plan; and (2) The benefit paid will be actuarially equivalent to the designated benefit, i.e., each monthly (or other periodic) benefit payment will equal the designated benefit divided by the present value (determined as of the deemed distribution date under the missing participant lump sum assumptions) of a $1 monthly (or other periodic) annuity beginning on the annuity starting date. Sec. 4050.9 Annuity or elective lump sum--living missing participant. This section applies to a missing participant whose designated benefit was determined under Sec. 4050.5(a)(3) (no lump sum) or Sec. 4050.5(a)(4) (elective lump sum) and who is living on the date as of which the PBGC begins paying benefits. (a) Missing participant whose benefit was not in pay status as of the deemed distribution date. The PBGC will pay the benefit of a missing participant whose benefit was not in pay status as of the deemed distribution date as follows. (1) Time and form of benefit. The PBGC will pay the missing participant's benefit in the guaranteed benefit form, beginning on the annuity starting date elected by the missing participant (which shall not be before the later of the date of the election or the earliest date on which the missing participant could have begun receiving benefits under the plan). (2) Amount of benefit. The PBGC will pay a benefit that is actuarially equivalent to the unloaded designated benefit, i.e., each monthly (or other periodic) benefit payment will equal the unloaded designated benefit divided by the present value (determined as of the deemed distribution date under the missing participant annuity assumptions) of a $1 monthly (or other periodic) annuity beginning on the annuity starting date. (b) Missing participant whose benefit was in pay status as of the deemed distribution date. The PBGC will pay the benefit of a missing participant whose benefit was in pay status as of the deemed distribution date as follows. (1) Time and form of benefit. The PBGC will pay the benefit in the form that was in pay status, beginning when the missing participant is located. (2) Amount of benefit. The PBGC will pay the monthly (or other periodic) amount of the pay status benefit, plus a lump sum equal to the payments the missing participant would have [[Page 34077]] received under the plan, plus interest on the missed payments (at the plan rate up to the deemed distribution date and thereafter at the designated benefit interest rate) to the date as of which the PBGC pays the lump sum. (c) Payment of lump sum. If a missing participant whose designated benefit was determined under Sec. 4050.5(a)(4) (elective lump sum) so elects, the PBGC will pay his or her benefit in the form of a single sum. This election is not effective unless the missing participant's spouse consents (if such consent would be required under section 205 of ERISA). The single sum equals the designated benefit plus interest (at the designated benefit interest rate) from the deemed distribution date to the date as of which the PBGC pays the benefit. Sec. 4050.10 Annuity or elective lump sum--beneficiary of deceased missing participant. This section applies to a beneficiary of a deceased missing participant whose designated benefit was determined under Sec. 4050.5(a)(3) (no lump sum) or Sec. 4050.5(a)(4) (elective lump sum) and whose benefit is not payable under Sec. 4050.9. (a) If deceased missing participant's benefit was not in pay status as of the deemed distribution date. The PBGC will pay a benefit with respect to a deceased missing participant whose benefit was not in pay status as of the deemed distribution date as follows. (1) General rule.--(i) Beneficiary. The PBGC will pay a benefit to the surviving spouse of a missing participant who was a participant (unless the surviving spouse has properly waived a benefit in accordance with section 205 of ERISA). (ii) Form and amount of benefit. The PBGC will pay the survivor benefit in the form of a single life annuity. Each monthly (or other periodic) benefit payment will equal 50% of the quotient that results when the unloaded designated benefit is divided by the present value (determined as of the deemed distribution date under the missing participant annuity assumptions, and assuming that the missing participant survived to the deemed distribution date) of a $1 monthly (or other periodic) joint and 50 percent survivor annuity beginning on the annuity starting date, under which reduced payments (at the 50 percent level) are made only after the death of the missing participant during the life of the spouse (and not after the death of the spouse during the missing participant's life). (iii) Time of benefit. The PBGC will pay the survivor benefit beginning at the time elected by the surviving spouse (which shall not be before the later of the date of the election or the earliest date on which the surviving spouse could have begun receiving benefits under the plan). (2) If missing participant died before deemed distribution date. Notwithstanding the provisions of paragraph (a)(1) of this section, if a beneficiary of a missing participant who died before the deemed distribution date establishes to the PBGC's satisfaction that he or she is the proper beneficiary or would have received benefits under the plan in a form, at a time, or in an amount different from the benefit paid under paragraph (a)(1)(ii) or (a)(1)(iii) of this section, the PBGC will make payments in accordance with the facts so established, but only in the guaranteed benefit form. (3) Elective lump sum. Notwithstanding the provisions of paragraphs (a)(1) and (a)(2) of this section, if the beneficiary of a missing participant whose designated benefit was determined under Sec. 4050.5(a)(4) (elective lump sum) so elects, the PBGC will pay his or her benefit in the form of a single sum. The single sum will be equal to the actuarial present value (determined as of the deemed distribution date under the missing participant annuity assumptions) of the death benefit payable on the annuity starting date, plus interest (at the designated benefit interest rate) from the deemed distribution date to the date as of which the PBGC pays the benefit. (b) If deceased missing participant's benefit was in pay status as of the deemed distribution date. The PBGC will pay a benefit with respect to a deceased missing participant whose benefit was in pay status as of the deemed distribution date as follows. (1) Beneficiary. The PBGC will pay a benefit to the beneficiary (if any) of the benefit that was in pay status as of the deemed distribution date. (2) Form and amount of benefit. The PBGC will pay a monthly (or other periodic) amount equal to the monthly (or other periodic) amount, if any, that the beneficiary would have received under the form of payment in effect, plus a lump sum payment equal to the payments the beneficiary would have received under the plan subsequent to the missing participant's death and prior to the date as of which the benefit is paid under paragraph (b)(4) of this section, plus interest on the missed payments (at the plan rate up to the deemed distribution date and thereafter at the designated benefit interest rate) to the date as of which the benefit is paid under paragraph (b)(4) of this section. (3) Lump sum payment to estate. The PBGC will make a lump sum payment to the missing participant's estate equal to the payments that the missing participant would have received under the plan for the period prior to the missing participant's death, plus interest on the missed payments (at the plan rate up to the deemed distribution date and thereafter at the designated benefit interest rate) to the date when the lump sum is paid. Notwithstanding the preceding sentence, if a beneficiary of a missing participant other than the estate establishes to the PBGC's satisfaction that the beneficiary is entitled to the lump sum payment, the PBGC will pay the lump sum to such beneficiary. (4) Time of benefit. The PBGC will pay the survivor benefit beginning when the beneficiary is located. (5) Spouse deceased. If the PBGC locates the estate of the deceased missing participant's spouse under circumstances where a benefit would have been paid under this paragraph (b) if the spouse had been located while alive, the PBGC shall pay to the spouse's estate a lump sum payment computed in the same manner as provided for in paragraph (b)(2) of this section based on the period from the missing participant's death to the death of the spouse. Sec. 4050.11 Limitations. (a) Exclusive benefit. The benefits provided for under this part shall be the only benefits payable by the PBGC to missing participants or to beneficiaries based on the benefits of deceased missing participants. (b) Limitation on benefit value. The total actuarial present value of all benefits paid with respect to a missing participant under Secs. 4050.8 through 4050.10, determined as of the deemed distribution date, shall not exceed the missing participant's designated benefit. (c) Guaranteed benefit. If a missing participant or his or her beneficiary establishes to the PBGC's satisfaction that the benefit under Secs. 4050.8 through 4050.10 (based on the designated benefit actually paid to the PBGC) is less than the minimum benefit in this paragraph (c), the PBGC shall instead pay the minimum benefit. The minimum benefit shall be the lesser of: (1) The benefit as determined under the PBGC's rules for paying guaranteed benefits in trusteed plans under subparts A and B of part 4022 of this chapter (treating the deemed distribution date as the termination date for this purpose); or [[Page 34078]] (2) The benefit based on the designated benefit that should have been paid under Sec. 4050.5. (d) Limitation on annuity starting date. A missing participant (or his or her survivor) may not elect an annuity starting date after the later of-- (1) the required beginning date under section 401(a)(9) of the Code; or (2) the date when the missing participant (or the survivor) is notified of his or her right to a benefit. Sec. 4050.12 Special rules. (a) Late-discovered participants. The plan administrator of a plan that terminates with one or more late-discovered participants shall (after issuing notices to each such participant in accordance with Secs. 4041.21 and 4041.41 or 4041.46 of this chapter (whichever apply)), distribute each such late-discovered participant's benefit within the period (determined without regard to the provisions of this part) described in Sec. 4041.27(a) or Sec. 4041.48(a) of this chapter (whichever applies) if practicable or (if not) as soon thereafter as practicable, but not more than 90 days after the deemed distribution date (subject to extension under Sec. 4050.12(h)). (b) Missing participants located quickly. Notwithstanding the provisions of Secs. 4050.8 through 4050.10, if the PBGC or the plan administrator locates a missing participant within 30 days after the PBGC receives the missing participant's designated benefit, the PBGC may in its discretion return the missing participant's designated benefit to the plan administrator, and the plan administrator shall treat the missing participant like a late-discovered participant. (c) Qualified domestic relations orders. Plan administrators and the PBGC shall take the provisions of qualified domestic relations orders (QDROs) under section 206(d)(3) of ERISA or section 414(p) of the Code into account in determining designated benefits and benefit payments by the PBGC, including treating an alternate payee under an applicable QDRO as a missing participant or as a beneficiary of a missing participant, as appropriate, in accordance with the terms of the QDRO. For purposes of calculating the amount of the designated benefit of an alternate payee, the plan administrator shall use the assumptions for a missing participant who is a beneficiary under Sec. 4050.5(b). (d) Employee contributions--(1) Mandatory employee contributions. Notwithstanding the provisions of Sec. 4050.5, if a missing participant made mandatory contributions (within the meaning of section 4044(a)(2) of ERISA), the missing participant's designated benefit shall not be less than the sum of the missing participant's mandatory contributions and interest to the deemed distribution date at the plan's rate or the rate under section 204(c) of ERISA (whichever produces the greater amount). (2) Voluntary employee contributions. (i) Applicability. This paragraph (d)(2) applies to any employee contributions that were not mandatory (within the meaning of section 4044(a)(2) of ERISA) to which a missing participant is entitled in connection with the termination of a defined benefit plan. (ii) Payment to PBGC. A plan administrator, in accordance with the missing participant forms and instructions, shall pay the employee contributions described in paragraph (d)(2)(i) of this section (together with any earnings thereon) to the PBGC, and shall file Schedule MP with the PBGC, by the time the designated benefit is due under Sec. 4050.6. Any such amount shall be in addition to the designated benefit and shall be separately identified. (iii) Payment by PBGC. In addition to any other amounts paid by the PBGC under Secs. 4050.8 through 4050.10, the PBGC shall pay any amount paid to it under paragraph (d)(2)(ii) of this section, with interest at the designated benefit interest rate from the date of receipt by the PBGC to the date of payment by the PBGC, in the same manner as described in Sec. 4050.8 (automatic lump sums), except that if the missing participant died before the deemed distribution date and there is no beneficiary, payment shall be made to the missing participant's estate. (e) Residual assets. The PBGC shall determine, in a manner consistent with the purposes of this part and section 4050 of ERISA, how the provisions of this part shall apply to any distribution, to participants and beneficiaries who cannot be located, of residual assets remaining after the satisfaction of benefit liabilities in connection with the termination of a defined benefit plan. Unless the PBGC otherwise determines, the deadline for payment of residual assets for a missing participant and for submission to the PBGC of a Schedule MP (or an amended Schedule MP) is the 30th day after the date on which all residual assets have been distributed to all participants and beneficiaries other than missing participants for whom payment of residual assets is made to the PBGC. (f) Sufficient distress terminations. In the case of a plan undergoing a distress termination (under section 4041(c) of ERISA) that is sufficient for at least all guaranteed benefits and that distributes its assets in the manner described in section 4041(b)(3) of ERISA, the benefit assumed to be payable by the plan for purposes of determining the amount of the designated benefit under Sec. 4050.5 shall be limited to the Title IV benefit plus any benefit to which funds under section 4022(c) of ERISA have been allocated. (g) Similar rules for later payments. If the PBGC determines that one or more persons should receive benefits (which may be in addition to benefits already provided) in order for a plan termination to be valid (e.g., upon audit of the termination), and one or more of such individuals cannot be located, the PBGC shall determine, in a manner consistent with the purposes of this part and section 4050 of ERISA, how the provisions of this part shall apply to such benefits. (h) Discretionary extensions. The PBGC may in its sole discretion extend the 120-day amended filing periods in Sec. 4050.6(a)(2)(ii) and (3) and the 90-day distribution periods in Sec. 4050.6(a)(2) and in paragraph (a) of this section-- (1) Where a recently-missing participant becomes a late-discovered participant, (2) Where the PBGC returns the designated benefit of a missing participant who is located quickly to the plan administrator under Sec. 4050.12(b), or (3) In other unusual circumstances. (i) Payments beginning after age 70\1/2\. If the PBGC begins paying an annuity under Sec. 4050.9(a) or 4050.10(a) to a participant or a participant's spouse after the January 1 following the date when the participant attained or would have attained age 70\1/2\, the PBGC shall pay to the participant or the spouse (or their respective estates) or both, as appropriate, the lump sum equivalent of the past annuity payments the participant and spouse would have received if the PBGC had begun making payments on such January 1. The PBGC shall also pay lump sum equivalents under this paragraph (i) if the PBGC locates the estate of the participant or spouse after both are deceased. (Nothing in this paragraph (i) shall increase the total value of the benefits payable with respect to a missing participant.) Sec. 4050.13 OMB control number. The collection of information requirements contained in this part have been approved by the Office of Management under OMB Control Number 1212-0036. [[Page 34079]] Appendix A to part 4050--Examples of Designated Benefit Determinations for Missing Participants under Sec. 4050.5 The calculation of the designated benefit under Sec. 4050.5 is illustrated by the following examples. Example 1. Plan A provides that any participant whose benefit has a value at distribution of $1,750 or less will be paid a lump sum, and that no other lump sums will be paid. P, Q, and R are missing participants. (1) As of the deemed distribution date, the value of P's benefit is $1,700 under plan A's assumptions. Under Sec. 4050.5(a)(1), the plan administrator pays the PBGC $1,700 as P's designated benefit. (2) As of the deemed distribution date, the value of Q's benefit is $3,700 under plan A's assumptions and $3,200 under the missing participant lump sum assumptions. Under Sec. 4050.5(a)(2), the plan administrator pays the PBGC $3,200 as Q's designated benefit. (3) As of the deemed distribution date, the value of R's benefit is $3,400 under plan A's assumptions, $3,600 under the missing participant lump sum assumptions, and $3,450 under the missing participant annuity assumptions. Under Sec. 4050.5(a)(3), the plan administrator pays the PBGC $3,450 as R's designated benefit. Example 2. Plan B provides for a normal retirement age of 65 and permits early commencement of benefits at any age between 60 and 65, with benefits reduced by 5 percent for each year before age 65 that the benefit begins. The qualified joint and 50 percent survivor annuity payable under the terms of the plan requires in all cases a 16 percent reduction in the benefit otherwise payable. The plan does not provide for elective lump sums. (1) M is a missing participant who separated from service under plan B with a deferred vested benefit. M is age 50 at the deemed distribution date, and has a normal retirement benefit of $1,000 per month payable at age 65 in the form of a single life annuity. M's benefit as of the deemed distribution date has a value greater than $3,500 using either plan assumptions or the missing participant lump sum assumptions. Accordingly, M's designated benefit is to be determined under Sec. 4050.5(a)(3). (2) For purposes of determining M's designated benefit, M is assumed to be married to a spouse who is also age 50 on the deemed distribution date. M's monthly benefit in the form of the qualified joint and survivor annuity under the plan varies from $840 at age 65 (the normal retirement age) ($1,000 x (1 - .16)) to $630 at age 60 (the earliest retirement age) ($1,000 x (1 - 5 x (.05)) x (1 - .16)). (3) Under Sec. 4050.5(a)(3), M's benefit is to be valued using the missing participant annuity assumptions. The select and ultimate interest rates on Plan B's deemed distribution date are 7.50 percent for the first 20 years and 5.75 percent thereafter. Using these rates and the blended mortality table described in paragraph (2) of the definition of ``missing participant annuity assumptions'' in Sec. 4050.2, the plan administrator determines that the benefit commencing at age 60 is the most valuable benefit (i.e., the benefit at age 60 is more valuable than the benefit at ages 61, 62, 63, 64 or 65). The present value as of the deemed distribution date of each dollar of annual benefit (payable monthly as a joint and 50 percent survivor annuity) is $5.4307 if the benefit begins at age 60. (Because a new spouse may succeed to the survivor benefit, the mortality of the spouse during the deferral period is ignored.) Thus, without adjustment (loading) for expenses, the value of the benefit beginning at age 60 is $41,056 (12 x $630 x 5.4307). The designated benefit is equal to this value plus an expense adjustment of $300, or a total of $41,356. Appendix B to Part 4050--Examples of Benefit Payments for Missing Participants Under Secs. 4050.8 Through 4050.10 The provisions of Secs. 4050.8 through 4050.10 are illustrated by the following examples. Example 1. Participant M from Plan B (see Example 2 in Appendix A of this part) is located. M's spouse is ten years younger than M. M elects to receive benefits in the form of a joint and 50 percent survivor annuity commencing at age 62. (1) M's designated benefit was $41,356. The unloaded designated benefit was $41,056. As of Plan B's deemed distribution date (and using the missing participant annuity assumptions), the present value per dollar of monthly benefit (payable monthly as a joint and 50 percent survivor annuity commencing at age 62 and reflecting the actual age of M's spouse) is $4.7405. Thus, the monthly benefit to M at age 62 is $722 ($41,056 / (4.7405 x 12)). M's spouse will receive $361 (50 percent of $722) per month for life after the death of M. (2) If M had instead been found to have died on or after the deemed distribution date, and M's spouse wanted benefits to commence when M would have attained age 62, the same calculation would be performed to arrive at a monthly benefit of $361 to M's spouse. Example 2. Participant P is a missing participant from Plan C, a plan that allows elective lump sums upon plan termination. Plan C's administrator pays a designated benefit of $10,000 to the PBGC on behalf of P, who was age 30 on the deemed distribution date. (1) P's spouse, S, is located and has a death certificate showing that P died on or after the deemed distribution date with S as spouse. S is the same age as P, and would like survivor benefits to commence immediately, at age 55 (as permitted by the plan). S's benefit is the survivor's share of the joint and 50 percent survivor annuity which is actuarially equivalent, as of the deemed distribution date, to $9,700 (the unloaded designated benefit). (2) The select and ultimate interest rates on Plan C's deemed distribution date were 7.50 percent for the first 20 years and 5.75 percent thereafter. Using these rates and the blended mortality table described in paragraph (2) of the definition of ``missing participant annuity assumptions'' in Sec. 4050.2, the present value as of the deemed distribution date of each dollar of annual benefit (payable monthly as a joint and 50 percent survivor annuity) is $2.4048 if the benefit begins when S and P would have been age 55. Thus, the monthly benefit to S commencing at age 55 is $168 (50 percent of $9,700 / (2.4048 x 12)). Since P could have elected a lump sum upon plan termination, S may elect a lump sum. S's lump sum is the present value as of the deemed distribution date (using the missing participant annuity assumptions) of the monthly benefit of $168, accumulated with interest at the designated benefit interest rate to the date paid. PART 4061--AMOUNTS PAYABLE BY THE PENSION BENEFIT GUARANTY CORPORATION Sec. 4061.1 Cross-references. See part 4022 of this chapter regarding benefits payable under terminated single-employer plans and Sec. 4281.47 of this chapter regarding financial assistance to pay benefits under insolvent multiemployer plans. 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 Filing of documents. 4062.10 Computation of time. Authority: 29 U.S.C. 1302(b)(3), 1362-1364, 1367, 1368. Sec. 4062.1 Purpose and scope. The purpose of this part is to set forth rules for determination and payment of the liability incurred, under section 4062(b) of ERISA, upon termination of any single-employer plan and, to the extent appropriate, determination of the liability incurred with respect to multiple employer plans under sections 4063 and 4064 of ERISA. The provisions of this part regarding the amount of liability to the PBGC that is incurred upon termination of a single-employer plan apply with respect to a plan for which a notice of intent to terminate under section 4041(c) of ERISA is issued or proceedings to terminate under section 4042 of ERISA are instituted after December 17, 1987. Those provisions also apply, to the extent described in paragraph (a) of this section, to the amount of liability for withdrawal from a multiple employer plan after that date. [[Page 34080]] Sec. 4062.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: benefit liabilities, Code, contributing sponsor, controlled group, ERISA, fair market value, guaranteed benefit, multiple employer plan, notice of intent to terminate, PBGC, person, plan, plan administrator, proposed termination date, single-employer plan, and termination date. In addition, for purposes of this part, the term collective net worth of persons subject to liability in connection with a plan termination means the sum of the individual net worths of all persons that have individual net worths which are greater than zero and that (as of the termination date) are contributing sponsors of the terminated plan or members of their controlled groups, as determined in accordance with section 4062(d)(1) of ERISA and Sec. 4062.4 of this part. Sec. 4062.3 Amount and payment of section 4062(b) liability. (a) Amount of liability.--(1) General rule. Except as provided in paragraph (a)(2) of this section, the amount of section 4062(b) liability is the total amount (as of the termination date) of the unfunded benefit liabilities (within the meaning of section 4001(a)(18) of ERISA) to all participants and beneficiaries under the plan, together with interest calculated from the termination date in accordance with Sec. 4062.7. (2) Special rule in case of subsequent finding of inability to pay guaranteed benefits. In any distress termination proceeding under section 4041(c) of ERISA and part 4041 of this chapter in which (as described in section 4041(c)(3)(C)(ii) of ERISA), after a determination that the plan is sufficient for benefit liabilities or for guaranteed benefits, the plan administrator finds that the plan is or will be insufficient for guaranteed benefits and the PBGC concurs with that finding, or the PBGC makes such a finding on its own initiative, actuarial present values shall be determined as of the date of the notice to, or the finding by, the PBGC of insufficiency for guaranteed benefits. (b) Payment of liability. Section 4062(b) liability is due and payable as of the termination date, in cash or securities acceptable to the PBGC, except that, as provided in Sec. 4062.8(c), the PBGC shall prescribe commercially reasonable terms for payment of so much of such liability as exceeds 30 percent of the collective net worth of persons subject to liability in connection with a plan termination. The PBGC may make alternative arrangements, as provided in Sec. 4062.8(b). Sec. 4062.4 Determinations of net worth and collective net worth. (a) General rules. When a contributing sponsor, or member(s) of a contributing sponsor's controlled group, notifies and submits information to the PBGC in accordance with Sec. 4062.6, the PBGC shall determine the net worth, as of the net worth record date, of that contributing sponsor and any members of its controlled group based on the factors set forth in paragraph (c) of this section and shall include the value of any assets that it determines, pursuant to paragraph (d) of this section, have been improperly transferred. In making such determinations, the PBGC will consider information submitted pursuant to Sec. 4062.6. The PBGC shall then determine the collective net worth of persons subject to liability in connection with a plan termination. (b) Partnerships and sole proprietorships. In the case of a person that is a partnership or a sole proprietorship, net worth does not include the personal assets and liabilities of the partners or sole proprietor, except for the assets included pursuant to paragraph (d) of this section. As used in this paragraph, ``personal assets'' are those assets which do not produce income for the business being valued or are not used in the business. (c) Factors for determining net worth. A person's net worth is equal to its fair market value and fair market value shall be determined on the basis of the factors set forth below, to the extent relevant; different factors may be considered with respect to different portions of the person's operations. (1) A bona fide sale of, agreement to sell, or offer to purchase or sell the business of the person made on or about the net worth record date. (2) A bona fide sale of, agreement to sell, or offer to purchase or sell stock or a partnership interest in the person, made on or about the net worth record date. (3) If stock in the person is publicly traded, the price of such stock on or about the net worth record date. (4) The price/earnings ratios and prices of stocks of similar trades or businesses on or about the net worth record date. (5) The person's economic outlook, as reflected by its earnings and dividend projections, current financial condition, and business history. (6) The economic outlook for the person's industry and the market it serves. (7) The appraised value, including the liquidating value, of the person's tangible and intangible assets. (8) The value of the equity assumed in a plan of reorganization of a person in a case under title 11, United States Code, or any similar law of a state or political subdivision thereof. (9) Any other factor relevant in determining the person's net worth. (d) Improper transfers. A person's net worth shall include the value of any assets transferred by the person which the PBGC determines were improperly transferred for the purpose, as inferred from all the facts and circumstances, and with the effect of avoiding liability under this part. Assets ``improperly transferred'' include but are not limited to assets sold, leased or otherwise transferred for less than adequate consideration and assets distributed as gifts, capital distributions and stock redemptions inconsistent with past practices of the employer. The word ``transfer'' includes but is not limited to sales, assignments, pledges, leases, gifts and dividends. Sec. 4062.5 Net worth record date. (a) General. Unless the PBGC establishes an earlier net worth record date pursuant to paragraph (b) of this section, the net worth record date, for all purposes under this part, is the plan's termination date. (b) Establishment of an earlier net worth record date. At any time during a termination proceeding, the PBGC, in order to prevent undue loss to or abuse of the plan termination insurance system, may establish as the net worth record date an earlier date during the 120- day period ending with the termination date. (c) Notification. Whenever the PBGC establishes an earlier net worth record date, it shall immediately give liable person(s) written notification of that fact. The written notice may also include a request for additional information, as provided in Sec. 4062.6(a)(3). Sec. 4062.6 Net worth notification and information. (a) General. (1) A contributing sponsor or member of the contributing sponsor's controlled group that believes section 4062(b) liability exceeds 30 percent of the collective net worth of persons subject to liability in connection with a plan termination shall-- (i) So notify the PBGC by the 90th day after the notice of intent to terminate is filed with the PBGC or, if no notice of intent to terminate is filed with the PBGC and the PBGC institutes [[Page 34081]] proceedings under section 4042 of ERISA, within 30 days after the establishment of the plan's termination date in such proceedings; and (ii) Submit to the PBGC the information specified in paragraph (b) of this section with respect to the contributing sponsor and each member of the contributing sponsor's controlled group (if any)-- (A) By the 120th day after the proposed termination date, or (B) If no notice of intent to terminate is filed with the PBGC and the PBGC institutes proceedings under section 4042 of ERISA, within 120 days after the establishment of the plan's termination date in such proceedings. (2) If a contributing sponsor or a member of its controlled group complies with the requirements of paragraph (a)(1) of this section, the PBGC will consider the requirements to be satisfied by all members of that controlled group. (3) The PBGC may require any person subject to liability-- (i) To submit the information specified in paragraph (b) of this section within a shorter period whenever the PBGC believes that its ability to obtain information or payment of liability is in jeopardy, and (ii) To submit additional information within 30 days, or a different specified time, after the PBGC's written notification that it needs such information to make net worth determinations. (4) If a provision of paragraph (b) of this section or a PBGC notice specifies information previously submitted to the PBGC, a person may respond by identifying the previous submission in which the response was provided. (b) Net worth information. The following information specifications apply, individually, with respect to each person subject to liability: (1) An estimate, made in accordance with Sec. 4062.4, of the person's net worth on the net worth record date and a statement, with supporting evidence, of the basis for the estimate. (2) A copy of the person's audited (or if not available, unaudited) financial statements for the 5 full fiscal years plus any partial fiscal year preceding the net worth record date. The statements must include balance sheets, income statements, and statements of changes in financial position and must be accompanied by the annual reports, if available. (3) A statement of all sales and copies of all offers or agreements to buy or sell at least 25 percent of the person's assets or at least 5 percent of the person's stock or partnership interest, made on or about the net worth record date. (4) A statement of the person's current financial condition and business history. (5) A statement of the person's business plans, including projected earnings and, if available, dividend projections. (6) Any appraisal of the person's fixed and intangible assets made on or about the net worth record date. (7) A copy of any plan of reorganization, whether or not confirmed, with respect to a case under title 11, United States Code, or any similar law of a state or political subdivision thereof, involving the person and occurring within 5 calendar years prior to or any time after the net worth record date. (c) Incomplete submission. If a contributing sponsor and/or members of the contributing sponsor's controlled group do not submit all of the information required pursuant to paragraph (a) of this section (other than the estimate described in paragraph (b)(1) of this section) with respect to each person subject to liability, the PBGC may base determinations of net worth and the collective net worth of persons subject to liability in connection with a plan termination on any such information that such person(s) did submit, as well as any other pertinent information that the PBGC may have. In general, the PBGC will view information as of a date further removed from the net worth record date as having less probative value than information as of a date nearer to the net worth record date. Sec. 4062.7 Calculating interest on liability and refunds of overpayments. (a) Interest. Whether or not the PBGC has granted deferred payment terms pursuant to Sec. 4062.8, the amount of liability under this part includes interest, from the termination date, on any unpaid portion of the liability. Such interest accrues at the rate set forth in paragraph (c) of this section until the liability is paid in full and is compounded daily. When liability under this part is paid in more than one payment, the PBGC will apply each payment to the satisfaction of accrued interest and then to the reduction of principal. (b) Refunds. If a contributing sponsor or member(s) of a contributing sponsor's controlled group pays the PBGC an amount that exceeds the full amount of liability under this part, the PBGC shall refund the excess amount, with interest at the rate set forth in paragraph (c) of this section. Interest on an overpayment accrues from the later of the date of the overpayment or 10 days prior to the termination date until the date of the refund and is compounded daily. (c) Interest rate. The interest rate on liability under this part and refunds thereof is the annual rate prescribed in section 6601(a) of the Code, and will change whenever the interest rate under section 6601(a) of the Code changes. Sec. 4062.8 Arrangements for satisfying liability. (a) General. The PBGC will defer payment, or agree to other arrangements for the satisfaction, of any portion of liability to the PBGC only when-- (1) As provided in paragraph (b) of this section, the PBGC determines that such action is necessary to avoid the imposition of a severe hardship and that there is a reasonable possibility that the terms so prescribed will be met and the entire liability paid; or (2) As provided in paragraph (c) of this section, the PBGC determines that section 4062(b) liability exceeds 30 percent of the collective net worth of persons subject to liability in connection with a plan termination. (b) Upon request. If the PBGC determines that such action is necessary to avoid the imposition of a severe hardship on persons that are or may become liable under section 4062, 4063, or 4064 of ERISA and that there is a reasonable possibility that persons so liable will be able to meet the terms prescribed and pay the entire liability, the PBGC, in its discretion and when so requested in accordance with paragraph (b)(2) of this section, may grant deferred payment or other terms for the satisfaction of such liability. (1) In determining what, if any, terms to grant, the PBGC shall examine the following factors: (i) The ratio of the liability to the net worth of the person making the request and (if different) to the collective net worth of persons subject to liability in connection with a plan termination. (ii) The overall financial condition of persons that are or may become liable, including, with respect to each such person-- (A) The amounts and terms of existing debts; (B) The amount and availability of liquid assets; (C) Current and past cash flow; and (D) Projected cash flow, including a projection of the impact on operations that would be caused by the immediate full payment of the liability. (iii) The availability of credit from private sector sources to the person making the request and to other liable persons. (2) A contributing sponsor or member of a contributing sponsor's controlled [[Page 34082]] group may request deferred payment or other terms for the satisfaction of any portion of the liability under section 4062, 4063, or 4064 of ERISA at any time by filing a written request. The request must include the information specified in Sec. 4062.6(b), except that-- (i) If the request is filed one year or more after the net worth record date, references to ``the net worth record date'' in Sec. 4062.6(b) shall be replaced by ``the most recent annual anniversary of the net worth record date''; and (ii) Information that already has been submitted to the PBGC need not be submitted again. (c) Liability exceeding 30 percent of collective net worth. If the PBGC determines that section 4062(b) liability exceeds 30 percent of the collective net worth of persons subject to the liability, the PBGC will, after making a reasonable effort to reach agreement with such persons, prescribe commercially reasonable terms for payment of so much of the liability as exceeds 30 percent of the collective net worth of such persons. The terms prescribed by the PBGC for payment of that portion of the liability (including interest) will provide for deferral of 50 percent of any amount otherwise payable for any year if a person subject to such liability demonstrates to the satisfaction of the PBGC that no person subject to such liability has any individual pre-tax profits (within the meaning of section 4062(d)(2) of ERISA) for such person's last full fiscal year ending during that year. (d) Interest. Interest on unpaid liability is calculated in accordance with Sec. 4062.7(a). (e) Security during period of deferred payment. As a condition to the granting of deferred payment terms, PBGC may, in its discretion, require that the liable person(s) provide PBGC with such security for its obligations as the PBGC deems adequate. Sec. 4062.9 Filing of documents. (a) Date of filing. Any document (including information) 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. Payments of liability shall be clearly designated as such and include the name of the plan. Such payments shall be sent to the address specified in the notification or demand for liability issued by the PBGC under Sec. 4068.3 or, if not so specified, to the address provided, upon request, by the Investment Management Division, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026. Any document (including information) required or permitted to be filed under this part, except for documents relating to appeals, shall be submitted to the Insurance Operations Department, Pension Benefit Guaranty Corporation, at the above address. Any document submitted pursuant to part 4003 in connection with an appeal of an initial determination shall be submitted to the Appeals Board, Pension Benefit Guaranty Corporation, at the above address. Sec. 4062.10 Computation of time. In computing any period of time prescribed or allowed by this subpart, 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. For the purpose of computing interest accrued, a Saturday, Sunday or Federal holiday referred to in the previous sentence shall be included. (Approved by the Office of Management and Budget under control number 1212-0017.) PART 4063--WITHDRAWAL LIABILITY; PLANS UNDER MULTIPLE CONTROLLED GROUPS Authority: 29 U.S.C. 1302(b)(3). Sec. 4063.1 Cross-references. (a) Part 4062, subpart A, of this chapter sets forth rules for determination and payment of the liability incurred, under section 4062(b) of ERISA, upon termination of any single-employer plan and, to the extent appropriate, determination of the liability incurred with respect to multiple employer plans under sections 4063 and 4064 of ERISA. (b) Part 4068 of this chapter includes rules regarding the PBGC's lien under section 4068 of ERISA with respect to liability arising under section 4062, 4063, or 4064. PART 4064--LIABILITY ON TERMINATION OF SINGLE-EMPLOYER PLANS UNDER MULTIPLE CONTROLLED GROUPS Authority: 29 U.S.C. 1302(b)(3). Sec. 4064.1 Cross-references. (a) Part 4062, subpart A, of this chapter sets forth rules for determination and payment of the liability incurred under section 4062(b) of ERISA, upon termination of any single-employer plan and, to the extent appropriate, determination of the liability incurred with respect to multiple employer plans under sections 4063 and 4064 of ERISA. (b) Part 4068 of this chapter includes rules regarding the PBGC's lien under section 4068 of ERISA with respect to liability arising under section 4062, 4063, or 4064. PART 4065--ANNUAL REPORT Sec. 4065.1 Purpose and scope. 4065.2 Definitions. 4065.3 Filing requirement. Authority: 29 U.S.C. 1302, 1365. Sec. 4065.1 Purpose and scope. The purpose of this part is to specify the form and content of the Annual Report required by section 4065 of ERISA. This part applies to all plans covered by title IV of ERISA. Sec. 4065.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: ERISA, IRS, PBGC, and plan. Sec. 4065.3 Filing requirement. Plan administrators shall file the Annual Report on IRS/DOL/PBGC Forms 5500, 5500-C, 5500-K or 5500-R, as appropriate, in accordance with the instructions therein. (Approved by the Office of Management and Budget under control number 1212-0026.) PART 4067--RECOVERY OF LIABILITY FOR PLAN TERMINATIONS Sec. 4067.1 Cross-reference. Section 4062.8 of this chapter contains rules on deferred payment and other arrangements for satisfaction of liability to the PBGC after termination of single-employer plans. 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. [[Page 34083]] Authority: 29 U.S.C. 1302(b)(3), 1362-1364, 1367-1368. Sec. 4068.1 Purpose; cross-references. This part contains rules regarding the PBGC's lien under section 4068 of ERISA with respect to liability arising under section 4062, 4063, or 4064 of ERISA. Sec. 4068.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: ERISA, PBGC, person, plan, and termination date. Collective net worth of persons subject to liability in connection with a plan termination has the meaning in Sec. 4062.2. Sec. 4068.3 Notification of and demand for liability. (a) Notification of liability. Except as provided in paragraph (c) of this section, when the PBGC has determined the amount of the liability under part 4062 and whether or not the liability has already been paid, the PBGC shall notify liable person(s) in writing of the amount of the liability. If the full liability has not yet been paid, the notification will include a request for payment of the full liability and will indicate that, as provided in Sec. 4062.8, the PBGC will prescribe commercially reasonable terms for payment of so much of the liability as it determines exceeds 30 percent of the collective net worth of persons subject to liability in connection with a plan termination. In all cases, the notification will include a statement of the right to appeal the assessment of liability pursuant to part 4003. (b) Demand for liability. Except as provided in paragraph (c) of this section, if person(s) liable to the PBGC fail to pay the full liability and no appeal is filed or an appeal is filed and the decision on appeal finds liability, the PBGC will issue a demand letter for the liability-- (1) If no appeal is filed, upon the expiration of time to file an appeal under part 4003; or (2) If an appeal is filed, upon issuance of a decision on the appeal finding that there is liability under this part. The demand letter will indicate that, as provided in Sec. 4062.8, the PBGC will prescribe commercially reasonable terms for payment of so much of the liability as it determines exceeds 30 percent of the collective net worth of such persons. (c) Special rule. Notwithstanding paragraphs (a) and (b) of this section, the PBGC may, in any case in which it believes that its ability to assert or obtain payment of liability is in jeopardy, issue a demand letter for the liability under this part immediately upon determining the liability, without first issuing a notification of liability pursuant to paragraph (a) of this section. When the PBGC issues a demand letter under this paragraph, there is no right to an appeal pursuant to part 4003 of this chapter. Sec. 4068.4 Lien. If any person liable to the PBGC under section 4062, 4063, or 4064 of ERISA fails or refuses to pay the full amount of such liability within the time specified in the demand letter issued under Sec. 4068.3, the PBGC shall have a lien in the amount of the liability, including interest, arising as of the plan's termination date, upon all property and rights to property, whether real or personal, belonging to that person, except that such lien may not be in an amount in excess of 30 percent of the collective net worth of all persons described in section 4062(a) of ERISA and part 4062 of this chapter. PART 4203--EXTENSION OF SPECIAL WITHDRAWAL LIABILITY RULES Sec. 4203.1 Purpose and scope. 4203.2 Definitions. 4203.3 Plan adoption of special withdrawal rules. 4203.4 Requests for PBGC approval of plan amendments. 4203.5 PBGC action on requests. 4203.6 OMB control number. Authority: 29 U.S.C. 1302(b)(3). Sec. 4203.1 Purpose and scope. (a) Purpose. The purpose of this part is to prescribe procedures whereby a multiemployer plan may, pursuant to sections 4203(f) and 4208(e)(3) of ERISA, request the PBGC to approve a plan amendment which establishes special complete or partial withdrawal liability rules. (b) Scope. This part applies to a multiemployer pension plan covered by Title IV of ERISA. Sec. 4203.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: complete withdrawal, employer, ERISA, multiemployer plan, PBGC, person, plan, plan sponsor, and plan year. Sec. 4203.3 Plan adoption of special withdrawal rules. (a) General rule. A plan may, subject to the approval of the PBGC, establish by plan amendment special complete or partial withdrawal liability rules. A complete withdrawal liability rule adopted pursuant to this part shall be similar to the rules for the construction and entertainment industries described in section 4203 (b) and (c) of ERISA. A partial withdrawal liability rule adopted pursuant to this part shall be consistent with the complete withdrawal rule adopted by the plan. A plan amendment adopted under this part may not be put into effect until it is approved by the PBGC. (b) Discretionary provisions of the plan amendment. A plan amendment adopted pursuant to this part may-- (1) Cover an entire industry or industries, or be limited to a segment of an industry; and (2) Apply to cessations of the obligation to contribute that occurred prior to the adoption of the amendment. Sec. 4203.4 Requests for PBGC approval of plan amendments. (a) Filing of request. A plan shall apply to the PBGC for approval of a plan amendment which establishes special complete or partial withdrawal liability rules. The request for approval shall be filed after the amendment is adopted. PBGC approval shall also be required for any subsequent modification of the plan amendment, other than a repeal of the amendment which results in employers being subject to the general statutory rules on withdrawal. (b) Who may request. The plan sponsor, or a duly authorized representative acting on behalf of the plan sponsor, shall sign and submit the request. (c) Where to file. The request shall be delivered by mail or submitted by hand to Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. (d) Information. Each request shall contain the following information: (1) The name and address of the plan for which the plan amendment is being submitted, and the telephone number of the plan sponsor or its authorized representative. (2) A copy of the executed amendment, including the proposed effective date. (3) A statement certifying that notice of the adoption of the amendment and the request for approval filed under this part has been given to all employers who have an obligation to contribute under the plan and to all employee organizations representing employees covered under the plan. (4) A statement indicating how the withdrawal rules in the plan amendment would operate in the event of a sale of assets by a contributing employer or the cessation of the obligation to contribute or the cessation of covered operations by all employers. (5) A copy of the plan's most recent actuarial valuation. [[Page 34084]] (6) For each of the previous five plan years, information on the number of plan participants by category (active, retired and separate vested) and a complete financial statement. This requirement may be satisfied by the submission for each of those years of Form 5500, including schedule B, or similar reports required under prior law. (7) A detailed description of the industry to which the plan amendment will apply, including information sufficient to demonstrate the effect of withdrawals on the plan's contribution base, and information establishing industry characteristics which would indicate that withdrawals in the industry do not typically have an adverse effect on the plan's contribution base. Such industry characteristics include the mobility of employees, the intermittent nature of employment, the project-by-project nature of the work, extreme fluctuations in the level of an employer's covered work under the plan, the existence of a consistent pattern of entry and withdrawal by employers, and the local nature of the work performed. (e) Supplemental information. In addition to the information described in paragraph (d) of this section, a plan may submit any other information it believes is pertinent to its request. The PBGC may require the plan sponsor to submit any other information the PBGC determines it needs to review a request under this part. Sec. 4203.5 PBGC action on requests. (a) General. The PBGC shall approve a plan amendment providing for the application of special complete or partial withdrawal liability rules upon a determination by the PBGC that the plan amendment-- (1) Will apply only to an industry that has characteristics that would make use of the special withdrawal rules appropriate; and (2) Will not pose a significant risk to the insurance system. (b) Notice of pendency of request. As soon as practicable after receiving a request for approval of a plan amendment containing all the information required under Sec. 4203.4, the PBGC shall publish a notice of the pendency of the request in the Federal Register. The notice shall contain a summary of the request and invite interested persons to submit written comments to the PBGC concerning the request. The notice will normally provide for a comment period of 45 days. (c) PBGC decision on request. After the close of the comment period, PBGC shall issue its decision in writing on the request for approval of a plan amendment. Notice of the decision shall be published in the Federal Register. Sec. 4203.6 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. 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). Subpart A--General Sec. 4204.1 Purpose and scope. (a) Purpose. Under section 4204 of ERISA, an employer that ceases covered operations under a multiemployer plan, or ceases to have an obligation to contribute for such operations, because of a bona fide, arm's-length sale of assets to an unrelated purchaser does not incur withdrawal liability if certain conditions are met. One condition is that the sale contract provide that the seller will be secondarily liable if the purchaser withdraws from the plan within five years and does not pay its withdrawal liability. Another condition is that the purchaser furnish a bond or place funds in escrow, for a period of five plan years, in a prescribed amount. Section 4204 also authorizes the PBGC to provide for variances or exemptions from these requirements. Subpart B of this part provides variances and exemptions from the requirements for certain sales of assets. Subpart C of this part establishes procedures under which a purchaser or seller may, when the conditions set forth in subpart B are not satisfied or when the parties decline to provide certain financial information to the plan, request the PBGC to grant individual or class variances or exemptions from the requirements. (b) Scope. In general, this part applies to any sale of assets described in section 4204(a)(1) of ERISA. However, this part does not apply to a sale of assets involving operations for which the seller is obligated to contribute to a plan described in section 404(c) of the Code, or a continuation of such a plan, unless the plan is amended to provide that section 4204 applies. Sec. 4204.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: Code, employer, ERISA, IRS, multiemployer plan, PBGC, person, plan, plan administrator, plan sponsor, and plan year. In addition, for purposes of this part: Date of determination means the date on which a seller ceases covered operations or ceases to have an obligation to contribute for such operations as a result of a sale of assets within the meaning of section 4204(a) of ERISA. Net income after taxes means revenue minus expenses after taxes (excluding extraordinary and non-recurring income or expenses), as presented in an audited financial statement or, in the absence of such statement, in an unaudited financial statement, each prepared in conformance with generally accepted accounting principles. Net tangible assets means tangible assets (assets other than licenses, patents copyrights, trade names, trademarks, goodwill, experimental or organizational expenses, unamortized debt discounts and expenses and all other assets which, under generally accepted accounting principles, are deemed intangible) less liabilities (other than pension liabilities). Encumbered assets shall be excluded from net tangible assets only to the extent of the amount of the encumbrance. Purchaser means a purchaser described in section 4204(a)(1) of ERISA. Seller means a seller described in section 4204(a)(1) of ERISA. Subpart B--Variance of the Statutory Requirements Sec. 4204.11 Variance of the bond/escrow and sale-contract requirements. (a) General rule. A purchaser's bond or escrow under section 4204(a)(1)(B) of ERISA and the sale-contract provision under section 4204(a)(1)(C) are not required if the parties to the sale inform the plan in writing of their intention that the sale be covered by section 4204 of ERISA and demonstrate to the satisfaction of the plan that at least one of the criteria contained in Sec. 4204.12 or Sec. 4204.13(a) is satisfied. (b) Requests after posting of bond or establishment of escrow. A request for a [[Page 34085]] variance may be filed at any time. If, after a purchaser has posted a bond or placed money in escrow pursuant to section 4204(a)(1)(B) of ERISA, the purchaser demonstrates to the satisfaction of the plan that the criterion in either Sec. 4204.13 (a)(1) or (a)(2) is satisfied, then the bond shall be cancelled or the amount in escrow shall be refunded. For purposes of considering a request after the bond or escrow is in place, the words ``the year preceding the date of the variance request'' shall be substituted for ``the date of determination'' for the first mention of that term in both Sec. 4204.13 (a)(1) and (a)(2). In addition, in determining the purchaser's average net income after taxes under Sec. 4204.13(a)(1), for any year included in the average for which the net income figure does not reflect the interest expense incurred with respect to the sale, the purchaser's net income shall be reduced by the amount of interest paid with respect to the sale in the fiscal year following the date of determination. (c) Information required. A request for a variance shall contain financial or other information that is sufficient to establish that one of the criteria in Sec. 4204.12 or Sec. 4204.13(a) is satisfied. A request on the basis of either Sec. 4204.13 (a)(1) or (a)(2) shall also include a copy of the purchaser's audited (if available) or (if not) unaudited financial statements for the specified time period. (d) Limited exemption during pendency of request. Provided that all of the information required to be submitted is submitted before the first day of the first plan year beginning after the sale, a plan may not, pending its decision on the variance, require a purchaser to post a bond or place an amount in escrow pursuant to section 4204(a)(1)(B). In the event a bond or escrow is not in place pursuant to the preceding sentence, and the plan determines that the request does not qualify for a variance, the purchaser shall comply with section 4204(a)(1)(B) within 30 days after the date on which it receives notice of the plan's decision. (Approved by the Office of Management and Budget under control number 1212--0021) Sec. 4204.12 De minimis transactions. The criterion under this section is that the amount of the bond or escrow does not exceed the lesser of $250,000 or two percent of the average total annual contributions made by all employers to the plan, for the purposes of section 412(b)(3)(A) of the Code, for the three most recent plan years ending before the date of determination. For this purpose, ``contributions made'' shall have the same meaning as the term has under Sec. 4211.12(a) of this chapter. Sec. 4204.13 Net income and net tangible assets tests. (a) General. The criteria under this section are that either-- (1) Net income test. The purchaser's average net income after taxes for its three most recent fiscal years ending before the date of determination (as defined in Sec. 4204.12), reduced by any interest expense incurred with respect to the sale which is payable in the fiscal year following the date of determination, equals or exceeds 150 percent of the amount of the bond or escrow required under ERISA section 4204(a)(1)(B); or (2) Net tangible assets test. The purchaser's net tangible assets at the end of the fiscal year preceding the date of determination (as defined in Sec. 4204.12), equal or exceed-- (i) If the purchaser was not obligated to contribute to the plan before the sale, the amount of unfunded vested benefits allocable to the seller under section 4211 (with respect to the purchased operations), as of the date of determination, or (ii) If the purchaser was obligated to contribute to the plan before the sale, the sum of the amount of unfunded vested benefits allocable to the purchaser and to the seller under ERISA section 4211 (with respect to the purchased operations), each as of the date of determination. (b) Special rule when more than one plan is covered by request. For the purposes of paragraphs (a)(1) and (a)(2), if the transaction involves the assumption by the purchaser of the seller's obligation to contribute to more than one multiemployer plan, then the total amount of the bond or escrow or of the unfunded vested benefits, as applicable, for all of the plans with respect to which the purchaser has not posted a bond or escrow shall be used to determine whether the applicable test is met. (c) Non-applicability of tests in event of purchaser's insolvency. A purchaser will not qualify for a variance under this subpart pursuant to paragraph (a)(1) or (a)(2) of this section if, as of the earlier of the date of the plan's decision on the variance request or the first day of the first plan year beginning after the date of determination, the purchaser is the subject of a petition under title 11, United States Code, or of a proceeding under similar provisions of state insolvency laws. Subpart C--Procedures for Individual and Class Variances or Exemptions Sec. 4204.21 Requests to PBGC for variances and exemptions. (a) General. If a transaction covered by this part does not satisfy the conditions set forth in subpart B of this part, or if the parties decline to provide to the plan privileged or confidential financial information within the meaning of section 552(b)(4) of the Freedom of Information Act (5 U.S.C. 552), the purchaser or seller may request from the PBGC an exemption or variance from the requirements of section 4204(a)(1) (B) and (C) of ERISA. (b) Who may request. A purchaser or a seller may file a request for a variance or exemption. The request may be submitted by one or more duly authorized representatives acting on behalf of the party or parties. When a contributing employer withdraws from a plan as a result of related sales of assets involving several purchasers, or withdraws from more than one plan as a result of a single sale, the application may request a class variance or exemption for all the transactions. (c) Where to file. The request shall be delivered by mail or submitted by hand to Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. (d) Information. Each request shall contain the following information: (1) The name and address of the plan or plans for which the variance or exemption is being requested, and the telephone number of the plan administrator of each plan. (2) For each plan described in paragraph (d)(1) of this section, the nine-digit Employer Identification Number (EIN) assigned by the IRS to the plan sponsor and the three-digit Plan Identification Number (PN) assigned by the plan sponsor to the plan, and, if different, also the EIN and PN last filed with the PBGC. If an EIN or PN has not been assigned, that should be indicated. (3) The name, address and telephone number of the seller and of its duly authorized representative, if any. (4) The name, address and telephone number of the purchaser and of its duly authorized representative, if any. (5) A full description of each transaction for which the request is being made, including effective date. (6) A statement explaining why the requested variance or exemption would not significantly increase the risk of financial loss to the plan, including evidence, financial or otherwise, that supports that conclusion. [[Page 34086]] (7) When the request for a variance or exemption is filed by the seller alone, a statement signed by the purchaser indicating its intention that section 4204 of ERISA apply to the sale of assets. (8) A statement indicating the amount of the purchaser's bond or escrow required under section 4204(a)(1)(B) of ERISA. (9) The estimated amount of withdrawal liability that the seller would otherwise incur as a result of the sale if section 4204 did not apply to the sale. (10) A certification that a complete copy of the request has been sent to each plan described in paragraph (d)(1) of this section and each collective bargaining representative of the seller's employees by certified mail, return receipt requested. (e) Additional information. In addition to the information described in paragraph (d) of this section, the PBGC may require the purchaser, the seller, or the plan to submit any other information the PBGC determines it needs to review the request. (f) Disclosure of information. Any party submitting information pursuant to this section may include a statement of whether any of the information is of a nature that its disclosure may not be required under the Freedom of Information Act, 5 U.S.C. 552. The statement should specify the information that may not be subject to disclosure and the grounds therefor. (Approved by the Office of Management and Budget under control number 1212-0021) Sec. 4204.22 PBGC action on requests. (a) General. The PBGC shall approve a request for a variance or exemption if PBGC determines that approval of the request is warranted, in that it-- (1) Would more effectively or equitably carry out the purposes of title IV of ERISA; and (2) Would not significantly increase the risk of financial loss to the plan. (b) Notice of pendency of request. As soon as practicable after receiving a variance or exemption request containing all the information specified in Sec. 4204.21, the PBGC shall publish a notice of the pendency of the request in the Federal Register. The notice shall provide that any interested person may, within the period of time specified therein, submit written comments to the PBGC concerning the request. The notice will usually provide for a comment period of 45 days. (c) PBGC decision on request. The PBGC shall issue a decision on a variance or exemption request as soon as practicable after the close of the comment period described in paragraph (b) of this section. PBGC's decision shall be in writing, and if the PBGC disapproves the request, the decision shall state the reasons therefor. Notice of the decision shall be published in the Federal Register. 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. 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) and 1386(b). Sec. 4206.1 Purpose and scope. (a) Purpose. The purpose of this part is to prescribe rules, pursuant to section 4206(b) of ERISA, for adjusting the partial or complete withdrawal liability of an employer that previously partially withdrew from the same multiemployer plan. Section 4206(b)(1) provides that when an employer that has partially withdrawn from a plan subsequently incurs liability for another partial or a complete withdrawal from that plan, the employer's liability for the subsequent withdrawal is to be reduced by the amount of its liability for the prior partial withdrawal (less any waiver or reduction of that prior liability). Section 4206(b)(2) requires the PBGC to prescribe regulations adjusting the amount of this credit to ensure that the liability for the subsequent withdrawal properly reflects the employer's share of liability with respect to the plan. The purpose of the credit is to protect a withdrawing employer from being charged twice for the same unfunded vested benefits of the plan. The reduction in the credit protects the other employers in the plan from becoming responsible for unfunded vested benefits properly allocable to the withdrawing employer. In the interests of simplicity, the rules in this part provide for, generally, a one-step calculation of the adjusted credit under section 4206(b)(2) against the subsequent liability, rather than for separate calculations first of the credit under section 4206(b)(1) and then of the reduction in the credit under paragraph (b)(2) of that section. In cases where the withdrawal liability for the prior partial withdrawal was reduced by an abatement or other reduction of that liability, the adjusted credit is further reduced in accordance with Sec. 4206.8 of this part. (b) Scope. This part applies to multiemployer plans covered under Title IV of ERISA, and to employers that have partially withdrawn from such plans after September 25, 1980 and subsequently completely or partially withdraw from the same plan. Sec. 4206.2 Definitions. The following are defined in Sec. 4001.2 of this chapter: Code, employer, ERISA, multiemployer plan, PBGC, plan, and plan year. In addition, for purposes of this part: Complete withdrawal means a complete withdrawal as described in section 4203 of ERISA. Partial withdrawal means a partial withdrawal as described in section 4205 of ERISA. Sec. 4206.3 Credit against liability for a subsequent withdrawal. Whenever an employer that was assessed withdrawal liability for a partial withdrawal from a plan partially or completely withdraws from that plan in a subsequent plan year, it shall receive a credit against the new withdrawal liability in an amount greater than or equal to zero, determined in accordance with this part. If the credit determined under Secs. 4206.4 through 4206.9 is less than zero, the amount of the credit shall equal zero. Sec. 4206.4 Amount of credit in plans using the presumptive method. (a) General. In a plan that uses the presumptive allocation method described in section 4211(b) of ERISA, the credit shall equal the sum of the unamortized old liabilities determined under paragraph (b) of this section, multiplied by the fractions described or determined under paragraph (c) of this section. When an employer's prior partial withdrawal liability has been reduced or waived, this credit shall be adjusted in accordance with Sec. 4206.8. (b) Unamortized old liabilities. The amounts determined under this paragraph are the employer's proportional shares, if any, of the unamortized amounts as of the end of the plan year preceding the withdrawal for which the credit is being calculated, of-- [[Page 34087]] (1) The plan's unfunded vested benefits as of the end of the last plan year ending before September 26, 1980; (2) The annual changes in the plan's unfunded vested benefits for plan years ending after September 25, 1980, and before the year of the prior partial withdrawal; and (3) The reallocated unfunded vested benefits (if any), as determined under section 4211(b)(4) of ERISA, for plan years ending before the year of the prior partial withdrawal. (c) Employer's allocable share of old liabilities. The sum of the amounts determined under paragraph (b) are multiplied by the two fractions described in this paragraph in order to determine the amount of the old liabilities that was previously assessed against the employer. (1) The first fraction is the fraction determined under section 4206(a)(2) of ERISA for the prior partial withdrawal. (2) The second fraction is a fraction, the numerator of which is the amount of the liability assessed against the employer for the prior partial withdrawal, and the denominator of which is the product of-- (i) The amount of unfunded vested benefits allocable to the employer as if it had completely withdrawn as of the date of the prior partial withdrawal (determined without regard to any adjustments), multiplied by-- (ii) The fraction determined under section 4206(a)(2) of ERISA for the prior partial withdrawal. Sec. 4206.5 Amount of credit in plans using the modified presumptive method. (a) General. In a plan that uses the modified presumptive method described in section 4211(c)(2) of ERISA, the credit shall equal the sum of the unamortized old liabilities determined under paragraph (b) of this section, multiplied by the fractions described or determined under paragraph (c) of this section. When an employer's prior partial withdrawal liability has been reduced or waived, this credit shall be adjusted in accordance with Sec. 4206.8. (b) Unamortized old liabilities. The amounts described in this paragraph shall be determined as of the end of the plan year preceding the withdrawal for which the credit is being calculated, and are the employer's proportional shares, if any, of-- (1) The plan's unfunded vested benefits as of the end of the last plan year ending before September 26, 1980, reduced as if those obligations were being fully amortized in level annual installments over 15 years beginning with the first plan year ending on or after such date; and (2) The aggregate post-1980 change amount determined under section 4211(c)(2)(C) of ERISA as if the employer had completely withdrawn in the year of the prior partial withdrawal, reduced as if those obligations were being fully amortized in level annual installments over the 5-year period beginning with the plan year in which the prior partial withdrawal occurred. (c) Employer's allocable share of old liabilities. The sum of the amounts determined under paragraph (b) are multiplied by the two fractions described in this paragraph in order to determine the amount of old liabilities that was previously assessed against the employer. (1) The first fraction is the fraction determined under section 4206(a)(2) of ERISA for the prior partial withdrawal. (2) The second fraction is a fraction, the numerator of which is the amount of the liability assessed against the employer for the prior partial withdrawal, and the denominator of which is the product of-- (i) The amount of unfunded vested benefits allocable to the employer as if it had completely withdrawn as of the date of the prior partial withdrawal (determined without regard to any adjustments), multiplied by-- (ii) The fraction determined under section 4206(a)(2) of ERISA for the prior partial withdrawal. Sec. 4206.6 Amount of credit in plans using the rolling-5 method. In a plan that uses the rolling-5 allocation method described in section 4211(c)(3) of ERISA, the credit shall equal the amount of the liability assessed for the prior partial withdrawal, reduced as if that amount was being fully amortized in level annual installments over the 5-year period beginning with the plan year in which the prior partial withdrawal occurred. When an employer's prior partial withdrawal liability has been reduced or waived, this credit shall be adjusted in accordance with Sec. 4206.8. Sec. 4206.7 Amount of credit in plans using the direct attribution method. In a plan that uses the direct attribution allocation method described in section 4211(c)(4) of ERISA, the credit shall equal the amount of the liability assessed for the prior partial withdrawal, reduced as if that amount was being fully amortized in level annual installments beginning with the plan year in which the prior partial withdrawal occurred, over the greater of 10 years or the amortization period for the resulting base when the combined charge base and the combined credit base are offset under section 412(b)(4) of the Code. When an employer's prior partial withdrawal liability has been reduced or waived, this credit shall be adjusted in accordance with Sec. 4206.8. Sec. 4206.8 Reduction of credit for abatement or other reduction of prior partial withdrawal liability. (a) General. If an employer's withdrawal liability for a prior partial withdrawal has been reduced or waived, the credit determined pursuant to Secs. 4206.4 through 4206.7 shall be adjusted in accordance with this section. (b) Computation. The adjusted credit is calculated by multiplying the credit determined under the preceding sections of this part by a fraction-- (1) the numerator of which is the excess of the total partial withdrawal liability of the employer for all partial withdrawals in prior years (excluding those partial withdrawals for which the credit is zero) over the present value of each abatement or other reduction of that prior withdrawal liability calculated as of the date on which that prior partial withdrawal liability was determined; and (2) the denominator of which is the total partial withdrawal liability of the employer for all partial withdrawals in prior years (excluding those partial withdrawals for which the credit is zero). Sec. 4206.9 Amount of credit in plans using alternative allocation methods. A plan that has adopted an alternative method of allocating unfunded vested benefits pursuant to section 4211(c)(5) of ERISA and part 4211 of this chapter shall adopt, by plan amendment, a method of calculating the credit provided by Sec. 4206.3 that is consistent with the rules in Secs. 4206.4 through 4206.8 for plans using the statutory allocation method most similar to the plan's alternative allocation method. Sec. 4206.10 Special rule for 70-percent decline partial withdrawals. For the purposes of applying the rules in Secs. 4206.4 through 4206.9 in any case in which either the prior or subsequent partial withdrawal resulted from a 70-percent contribution decline (or a 35- percent decline in the case of certain retail food industry plans), the first year of the 3-year testing period shall be deemed to be the plan year in which the partial withdrawal occurred. [[Page 34088]] 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. Sec. 4207.1 Purpose and scope. (a) Purpose. The purpose of this part is to prescribe rules, pursuant to section 4207(a) of ERISA, for reducing or waiving the withdrawal liability of certain employers that have completely withdrawn from a multiemployer plan and subsequently resume covered operations under the plan. This part prescribes rules pursuant to which the plan must waive the employer's obligation to make future liability payments with respect to its complete withdrawal and must calculate the amount of the employer's liability for a partial or complete withdrawal from the plan after its reentry into the plan. This part also provides procedures, pursuant to section 4207(b) of ERISA, for plan sponsors of multiemployer plans to apply to PBGC for approval of plan amendments that provide for the reduction or waiver of complete withdrawal liability under conditions other than those specified in section 4207(a) of ERISA and this part. (b) Scope. This part applies to multiemployer plans covered under title IV of ERISA, and to employers that have completely withdrawn from such plans after September 25, 1980, and that have not, as of the date of their reentry into the plan, fully satisfied their obligation to pay withdrawal liability arising from the complete withdrawal. Sec. 4207.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: employer, ERISA, IRS, Multiemployer Act, multiemployer plan, nonforfeitable benefit, PBGC, plan, and plan year . In addition, for purposes of this part: Complete withdrawal means a complete withdrawal as described in section 4203 of ERISA. Eligible employer means the employer, as defined in section 4001(b) of ERISA, as it existed on the date of its initial partial or complete withdrawal, as applicable. An eligible employer shall continue to be an eligible employer notwithstanding the occurrence of any of the following events: (1) A restoration involving a mere change in identity, form or place of organization, however effected; (2) A reorganization involving a liquidation into a parent corporation; (3) A merger, consolidation or division solely between (or among) trades or businesses (whether or not incorporated) of the employer; or (4) An acquisition by or of, or a merger or combination with another trade or business. Partial withdrawal means a partial withdrawal as described in section 4205 of ERISA. Period of withdrawal means the plan year in which the employer completely withdrew from the plan, the plan year in which the employer reentered the plan and all intervening plan years. Sec. 4207.3 Abatement. (a) General. Whenever an eligible employer that has completely withdrawn from a multiemployer plan reenters the plan, it may apply to the plan for abatement of its complete withdrawal liability. Applications shall be filed by the date of the first scheduled withdrawal liability payment falling due after the employer resumes covered operations or, if later, the fifteenth calendar day after the employer resumes covered operations. Applications shall identify the eligible employer, the withdrawn employer, if different, the date of withdrawal, and the date of resumption of covered operations. Upon receiving an application for abatement, the plan sponsor shall determine, in accordance with paragraph (b) of this section, whether the employer satisfies the requirements for abatement of its complete withdrawal liability under Sec. 4207.5, Sec. 4207.9, or a plan amendment which has been approved by PBGC pursuant to Sec. 4207.10. If the plan sponsor determines that the employer satisfies the requirements for abatement of its complete withdrawal liability, the provisions of paragraph (c) of this section shall apply. If the plan sponsor determines that the employer does not satisfy the requirements for abatement of its complete withdrawal liability, the provisions of paragraphs (d) and (e) of this section shall apply. (b) Determination of abatement. As soon as practicable after an eligible employer that completely withdrew from a multiemployer plan applies for abatement, the plan sponsor shall determine whether the employer satisfies the requirements for abatement of its complete withdrawal liability under this part and shall notify the employer in writing of its determination and of the consequences of its determination, as described in paragraphs (c) or (d) and (e) of this section, as appropriate. If a bond or escrow has been provided to the plan under Sec. 4207.4, the plan sponsor shall send a copy of the notice to the bonding or escrow agent. (c) Effects of abatement. If the plan sponsor determines that the employer satisfies the requirements for abatement of its complete withdrawal liability under this part, then-- (1) The employer shall have no obligation to make future withdrawal liability payments to the plan with respect to its complete withdrawal; (2) The employer's liability for a subsequent withdrawal shall be determined in accordance with Sec. 4207.7 or Sec. 4207.8, as applicable; (3) Any bonds furnished under Sec. 4207.4 shall be cancelled and any amounts held in escrow under Sec. 4207.4 shall be refunded to the employer; and (4) Any withdrawal liability payments due after the reentry and made by the employer to the plan shall be refunded by the plan without interest. (d) Effects of non-abatement. If the plan sponsor determines that the employer does not satisfy the requirements for abatement of its complete withdrawal liability under this part, then-- (1) The bond or escrow furnished under Sec. 4207.4 shall be paid to the plan within 30 days after the date of the plan sponsor's notice under paragraph (b) of this section; (2) The employer shall pay to the plan within 30 days after the date of the plan sponsor's notice under paragraph (b) of this section, the amount of its withdrawal liability payment or payments, with respect to which the bond or escrow was furnished, in excess of the bond or escrow; (3) The employer shall resume making its withdrawal liability payments as they are due to the plan; and (4) The employer shall be treated as a new employer for purposes of any future application of the withdrawal liability rules in sections 4201-4225 of title IV of ERISA with respect to its participation in the plan after its reentry into the plan, except that in plans using the ``direct attribution'' method (section 4211(c)(4) of ERISA), the nonforfeitable benefits attributable to service with the employer shall include nonforfeitable benefits attributable to service prior to [[Page 34089]] reentry that were not nonforfeitable at that time. (e) Collection of payments due and review of non-abatement determination. The rules in part 4219, subpart C, of this chapter (relating to overdue, defaulted, and overpaid withdrawal liability) shall apply with respect to all payments required to be made under paragraphs (d)(2) and (d)(3) of this section. For this purpose, a payment required to be made under paragraph (d)(2) shall be treated as a withdrawal liability payment due on the 30th day after the date of the plan sponsor's notice under paragraph (b) of this section. (1) Review of non-abatement determination. A plan sponsor's determination that the employer does not satisfy the requirements for abatement under this part shall be subject to plan review under section 4219(b)(2) of ERISA and to arbitration under section 4221 of ERISA, within the times prescribed by those sections. For this purpose, the plan sponsor's notice under paragraph (b) of this section shall be treated as a demand under section 4219(b)(1) of ERISA. (2) Determination of abatement. If the plan sponsor or an arbitrator determines that the employer satisfies the requirements for abatement of its complete withdrawal liability under this part, the plan sponsor shall immediately refund the following payments (plus interest, except as indicated below, determined in accordance with Sec. 4219.31(d) of this chapter as if the payments were overpayments of withdrawal liability) to the employer in a lump sum: (i) The amount of the employer's withdrawal liability payment or payments, without interest, due after its reentry and made by the employer. (ii) The bond or escrow paid to the plan under paragraph (d)(1) of this section. (iii) The amount of the employer's withdrawal liability payment or payments in excess of the bond or escrow, paid to the plan under paragraph (d)(2) of this section. (iv) Any withdrawal liability payment made by the employer to the plan pursuant to paragraph (d)(3) of this section after the plan sponsor's notice under paragraph (b) of this section. Sec. 4207.4 Withdrawal liability payments during pendency of abatement determination. (a) General rule. An eligible employer that completely withdraws from a multiemployer plan and subsequently reenters the plan may, in lieu of making withdrawal liability payments due after its reentry, provide a bond to, or establish an escrow account for, the plan that satisfies the requirements of paragraph (b) of this section or any plan rules adopted under paragraph (d) of this section, pending a determination by the plan sponsor under Sec. 4207.3(b) of whether the employer satisfies the requirements for abatement of its complete withdrawal liability. An employer that applies for abatement and neither provides a bond/escrow nor pays its withdrawal liability payments remains eligible for abatement. (b) Bond/escrow. The bond or escrow allowed by this section shall be in an amount equal to 70 percent of the withdrawal liability payments that would otherwise be due. The bond or escrow relating to each payment shall be furnished before the due date of that payment. A single bond or escrow may be provided for more than one payment due during the pendency of the plan sponsor's determination. The bond or escrow agreement shall provide that if the plan sponsor determines that the employer does not satisfy the requirements for abatement of its complete withdrawal liability under this part, the bond or escrow shall be paid to the plan upon notice from the plan sponsor to the bonding or escrow agent. A bond provided under this paragraph shall be issued by a corporate surety company that is an acceptable surety for purposes of section 412 of ERISA. (c) Notice of bond/escrow. Concurrently with posting a bond or establishing an escrow account under paragraph (b) of this section, the employer shall notify the plan sponsor. The notice shall include a statement of the amount of the bond or escrow, the scheduled payment or payments with respect to which the bond or escrow is being furnished, and the name and address of the bonding or escrow agent. (d) Plan amendments concerning bond/escrow. A plan may, by amendment, adopt rules decreasing the amount specified in paragraph (b) of a bond or escrow allowed under this section. A plan amendment adopted under this paragraph may be applied only to the extent that it is consistent with the purposes of ERISA. Sec. 4207.5 Requirements for abatement. (a) General rule. Except as provided in Sec. 4207.9 (d) and (e) (pertaining to acquisitions, mergers and other combinations), an eligible employer that completely withdraws from a multiemployer plan and subsequently reenters the plan shall have its liability for that withdrawal abated in accordance with Sec. 4207.3(c) if the employer resumes covered operations under the plan, and the number of contribution base units with respect to which the employer has an obligation to contribute under the plan for the measurement period (as defined in paragraph (b) of this section) after it resumes covered operations exceeds 30 percent of the number of contribution base units with respect to which the employer had an obligation to contribute under the plan for the base year (as defined in paragraph (c) of this section). (b) Measurement period. If the employer resumes covered operations under the plan at least six full months prior to the end of a plan year and would satisfy the test in paragraph (a) based on its contribution base units for that plan year, then the measurement period shall be the period from the date it resumes covered operations until the end of that plan year. If the employer would not satisfy this test, or if the employer resumes covered operations under the plan less than six full months prior to the end of the plan year, the measurement period shall be the first twelve months after it resumes covered operations. (c) Base year. For purposes of paragraph (a) of this section, the employer's number of contribution base units for the base year is the average number of contribution base units for the two plan years in which its contribution base units were the highest, within the five plan years immediately preceding the year of its complete withdrawal. Sec. 4207.6 Partial withdrawals after reentry. (a) General rule. For purposes of determining whether there is a partial withdrawal of an eligible employer whose liability is abated under this part upon the employer's reentry into the plan or at any time thereafter, the plan sponsor shall apply the rules in section 4205 of ERISA, as modified by the rules in this section, and section 108 of the Multiemployer Act. A partial withdrawal of an employer whose liability is abated under this part may occur under these rules upon the employer's reentry into the plan. However, a plan sponsor may not demand payment of withdrawal liability for a partial withdrawal occurring upon the employer's reentry before the plan sponsor has determined that the employer's liability for its complete withdrawal is abated under this part and has so notified the employer in accordance with Sec. 4207.3(b). (b) Partial withdrawal--70-percent contribution decline. The plan sponsor shall determine whether there is a partial withdrawal described in section 4205(a)(1) of ERISA (relating to a 70- [[Page 34090]] percent contribution decline) in accordance with the rules in section 4205 of ERISA and section 108 of the Multiemployer Act, as modified by the rules in this paragraph, and shall determine the amount of an employer's liability for that partial withdrawal in accordance with the rules in Sec. 4207.8(b). (1) Definition of ``3-year testing period.'' For purposes of section 4205(b)(1) of ERISA, the term ``3-year testing period'' means the period consisting of the plan year for which the determination is made and the two immediately preceding plan years, excluding any plan year during the period of withdrawal. (2) Contribution base units for high base year. For purposes of section 4205(b)(1) of ERISA and except as provided in section 108(d)(3) of the Multiemployer Act, in determining the number of contribution base units for the high base year, if the five plan years immediately preceding the beginning of the 3-year testing period include a plan year during the period of withdrawal, the number of contribution base units for each such year of withdrawal shall be deemed to be the greater of-- (i) The employer's contribution base units for that plan year; or (ii) The average of the employer's contribution base units for the three plan years preceding the plan year in which the employer completely withdrew from the plan. (c) Partial withdrawal--partial cessation of contribution obligation. The plan sponsor shall determine whether there is a partial withdrawal described in section 4205(a)(2) of ERISA (relating to a partial cessation of the employer's contribution obligation) in accordance with the rules in section 4205 of ERISA, as modified by the rules in this paragraph, and section 108 of the Multiemployer Act. In making this determination, the sponsor shall exclude all plan years during the period of withdrawal. A partial withdrawal under this paragraph can occur no earlier than the plan year of reentry. If the sponsor determines that there was a partial withdrawal, it shall determine the amount of an employer's liability for that partial withdrawal in accordance with the rules in Sec. 4207.8(c). Sec. 4207.7 Liability for subsequent complete withdrawals and related adjustments for allocating unfunded vested benefits. (a) General. When an eligible employer that has had its liability for a complete withdrawal abated under this part completely withdraws from the plan, the employer's liability for that subsequent withdrawal shall be determined in accordance with the rules in sections 4201-4225 of title IV, as modified by the rules in this section, and section 108 of the Multiemployer Act. In the case of a combination described in Sec. 4207.9(d), the modifications described in this section shall be applied only with respect to that portion of the eligible employer that had previously withdrawn from the plan. In the case of a combination described in Sec. 4207.9(e), the modifications shall be applied separately with respect to each previously withdrawn employer that comprises the eligible employer. In addition, when a plan has abated the liability of a reentered employer, if the plan uses either the ``presumptive'' or the ``direct attribution'' method (section 4211(b) or (c)(4), respectively) for allocating unfunded vested benefits, the plan shall modify those allocation methods as described in this section in allocating unfunded vested benefits to any employer that withdraws from the plan after the reentry. (b) Allocation of unfunded vested benefits for subsequent withdrawal in plans using ``presumptive'' method. In a plan using the ``presumptive'' allocation method under section 4211(b) of ERISA, the amount of unfunded vested benefits allocable to a reentered employer for a subsequent withdrawal shall equal the sum of-- (1) The unamortized amount of the employer's allocable shares of the amounts described in section 4211(b)(1), for the plan years preceding the initial withdrawal, determined as if the employer had not previously withdrawn; (2) The sum of the unamortized annual credits attributable to the year of the initial withdrawal and each succeeding year ending prior to reentry; and (3) The unamortized amount of the employer's allocable shares of the amounts described in section 4211(b)(1) (A) and (C) for plan years ending after its reentry. For purposes of paragraph (b)(2), the annual credit for a plan year is the amount by which the employer's withdrawal liability payments for the year exceed the greater of the employer's imputed contributions or actual contributions for the year. The employer's imputed contributions for a year shall equal the average annual required contributions of the employer for the three plan years preceding the initial withdrawal. The amount of the credit for a plan year is reduced by 5 percent of the original amount for each succeeding plan year ending prior to the year of the subsequent withdrawal. (c) Allocation of unfunded vested benefits for subsequent withdrawal in plans using ``modified presumptive'' or ``rolling-5'' method. In a plan using either the ``modified presumptive'' allocation method under section 4211(c)(2) of ERISA or the ``rolling-5'' method under section 4211(c)(3), the amount of unfunded vested benefits allocable to a reentered employer for a subsequent withdrawal shall equal the sum of-- (1) The amount determined under section 4211 (c)(2) or (c)(3) of ERISA, as appropriate, as if the date of reentry were the employer's initial date of participation in the plan; and (2) The outstanding balance, as of the date of reentry, of the unfunded vested benefits allocated to the employer for its previous withdrawal (as defined in paragraph (c)(2)(i) of this section) reduced as if that amount were being fully amortized in level annual installments, at the plan's funding rate as of the date of reentry, over the period described in paragraph (c)(2)(ii), beginning with the first plan year after reentry. (i) The outstanding balance of the unfunded vested benefits allocated to an employer for its previous withdrawal is the excess of the amount determined under section 4211 (c)(2) or (c)(3) of ERISA as of the end of the plan year in which the employer initially withdrew, accumulated with interest at the plan's funding rate for that year, from that year to the date of reentry, over the withdrawal liability payments made by the employer, accumulated with interest from the date of payment to the date of reentry at the plan's funding rate for the year of entry. (ii) The period referred to in paragraph (c)(2) for plans using the modified presumptive method is the greater of five years, or the number of full plan years remaining on the amortization schedule under section 4211(c)(2)(B)(i) of ERISA. For plans using the rolling-5 method, the period is five years. (d) Adjustments applicable to all employers in plans using ``presumptive'' method. In a plan using the ``presumptive'' allocation method under section 4211(b) of ERISA, when the plan has abated the withdrawal liability of a reentered employer pursuant to this part, the following adjustments to the allocation method shall be made in computing the unfunded vested benefits allocable to any employer that withdraws from the plan in a plan year beginning after the reentry: (1) The sum of the unamortized amounts of the annual credits of a reentered employer shall be treated as a reallocated amount under section [[Page 34091]] 4211(b)(4) of ERISA in the plan year in which the employer reenters. (2) In the event that the 5-year period used to compute the denominator of the fraction described in section 4211 (b)(2)(E) and (b)(4)(D) of ERISA includes a year during the period of withdrawal of a reentered employer, the contributions for a year during the period of withdrawal shall be adjusted to include any actual or imputed contributions of the employer, as determined under paragraph (b) of this section. (e) Adjustments applicable to all employers in plans using ``direct attribution'' method. In a plan using the ``direct attribution'' method under section 4211(c)(4) of ERISA, when the plan has abated the withdrawal liability of a reentered employer pursuant to this part, the following adjustments to the allocation method shall be made in computing the unfunded vested benefits allocable to any employer that withdraws from the plan in a plan year beginning after the reentry: (1) The nonforfeitable benefits attributable to service with a reentered employer prior to its initial withdrawal shall be treated as benefits that are attributable to service with that employer. (2) For purposes of section 4211(c)(4)(D) (ii) and (iii) of ERISA, withdrawal liability payments made by a reentered employer shall be treated as contributions made by the reentered employer. (f) Plans using alternative allocation methods under section 4211(c)(5). A plan that has adopted an alternative method of allocating unfunded vested benefits pursuant to section 4211(c)(5) of ERISA and part 4211 of this chapter shall adopt by plan amendment a method of determining a reentered employer's allocable share of the plan's unfunded vested benefits upon its subsequent withdrawal. The method shall treat the reentered employer and other withdrawing employers in a manner consistent with the treatment under the paragraph(s) of this section applicable to plans using the statutory allocation method most similar to the plan's alternative allocation method. (g) Adjustments to amount of annual withdrawal liability payments for subsequent withdrawal. For purposes of section 4219(c)(1)(C) (i)(I) and (ii)(I) of ERISA, in determining the amount of the annual withdrawal liability payments for a subsequent complete withdrawal, if the period of ten consecutive plan years ending before the plan year in which the withdrawal occurs includes a plan year during the period of withdrawal, the employer's number of contribution base units, used in section 4219(c)(1)(C)(i)(I), or the required employer contributions, used in section 4219(c)(1)(C)(ii)(I), for each such plan year during the period of withdrawal shall be deemed to be the greater of-- (1) The employer's contribution base units or the required employer contributions, as applicable, for that year; or (2) The average of the employer's contribution base units or of the required employer contributions, as applicable, for those plan years not during the period of withdrawal, within the ten consecutive plan years ending before the plan year in which the employer's subsequent complete withdrawal occurred. Sec. 4207.8 Liability for subsequent partial withdrawals. (a) General. When an eligible employer that has had its liability for a complete withdrawal abated under this part partially withdraws from the plan, the employer's liability for that subsequent partial withdrawal shall be determined in accordance with the rules in sections 4201-4225 of ERISA, as modified by the rules in Sec. 4207.7 (b) through (g) of this part and the rules in this section, and section 108 of the Multiemployer Act. (b) Liability for a 70-percent contribution decline. The amount of an employer's liability under section 4206(a) (relating to the calculation of liability for a partial withdrawal), section 4208 (relating to the reduction of liability for a partial withdrawal) and section 4219(c)(1) (relating to the schedule of partial withdrawal liability payments) of ERISA, for a subsequent partial withdrawal described in section 4205(a)(1) of ERISA (relating to a 70-percent contribution decline) shall be modified in accordance with the rules in this paragraph. (1) Definition of ``3-year testing period.'' For purposes of sections 4206(a) and 4219(c)(1) of ERISA, and paragraphs (b)(2)-(b)(4) of this section, the term ``3-year testing period'' means the period consisting of the plan year for which the determination is made and the two immediately preceding plan years, excluding any plan year during the period of withdrawal. (2) Determination date of section 4211 allocable share. For purposes of section 4206(a)(1)(B) of ERISA, the amount determined under section 4211 shall be determined as if the employer had withdrawn from the plan in a complete withdrawal on the last day of the first plan year in the 3-year testing period or the last day of the plan year in which the employer reentered the plan, whichever is later. (3) Calculation of fractional share of section 4211 amount. For purposes of sections 4206(a)(2)(B)(ii) and 4219(c)(1)(E)(ii) of ERISA, if the five plan years immediately preceding the beginning of the 3- year testing period include a plan year during the period of withdrawal, then, in determining the denominator of the fraction described in section 4206(a)(2), the employer's contribution base units for each such year of withdrawal shall be deemed to be the greater of-- (i) The employer's contribution base units for that plan year; or (ii) The average of the employer's contribution base units for the three plan years preceding the plan year in which the employer completely withdrew from the plan. (4) Contribution base units for high base year. If the five plan years immediately preceding the beginning of the 3-year testing period include a plan year during the period of withdrawal, then for purposes of section 4208 (a) and (b)(1) of ERISA, the number of contribution base units for the high base year shall be the number of contribution base units determined under paragraph (b)(3) of this section. (c) Liability for partial cessation of contribution obligation. The amount of an employer's liability under section 4206(a) (relating to the calculation of liability for a partial withdrawal) and section 4219(c)(1) (relating to the amount of the annual partial withdrawal liability payments) of ERISA, for a subsequent partial withdrawal described in section 4205(a)(2) of ERISA (relating to a partial cessation of the contribution obligation) shall be modified in accordance with the rules in this paragraph. For purposes of sections 4206(a)(2)(B)(i) and 4219(c)(1)(E)(ii) of ERISA, if the five plan years immediately preceding the plan year in which the partial withdrawal occurs include a plan year during the period of withdrawal, the denominator of the fraction described in section 4206(a)(2) shall be determined in accordance with the rule set forth in paragraph (b)(3) of this section. Sec. 4207.9 Special rules. (a) Employer that has withdrawn and reentered the plan before the effective date of this part. This part shall apply, in accordance with the rules in this paragraph, with respect to an eligible employer that completely withdraws from a multiemployer plan after September 25, 1980, and is performing covered work under the plan on the effective date of this part. Upon the [[Page 34092]] application of an employer described in the preceding sentence, the plan sponsor of a multiemployer plan shall determine whether the employer satisfies the requirements for abatement of its complete withdrawal liability under this part. Pending the plan sponsor's determination, the employer may provide the plan with a bond or escrow that satisfies the requirements of Sec. 4207.4, in lieu of making its withdrawal liability payments due after its application for an abatement determination. The plan sponsor shall notify the employer in writing of its determination and the consequences of its determination as described in Sec. 4207.3 (c) or (d) and (e), as applicable. If the plan sponsor determines that the employer qualifies for abatement, only withdrawal liability payments made prior to the employer's reentry shall be retained by the plan; payments made by the employer after its reentry shall be refunded to the employer, with interest on those made prior to the application for abatement, in accordance with Sec. 4207.3(e)(2). If a bond or escrow has been provided to the plan in accordance with Sec. 4207.4, the plan sponsor shall send a copy of the notice to the bonding or escrow agent. Sections 4207.6 through 4207.8 shall apply with respect to the employer's subsequent complete withdrawal occurring on or after the effective date of this part, or partial withdrawal occurring either before or after that date. This paragraph shall not negate reasonable actions taken by plans prior to the effective date of this part under plan rules implementing section 4207(a) of ERISA that were validly adopted pursuant to section 405 of the Multiemployer Act. (b) Employer with multiple complete withdrawals that has reentered the plan before effective date of this part. If an employer described in paragraph (a) of this section has completely withdrawn from a multiemployer plan on two or more occasions before the effective date of this part, the rules in paragraph (a) of this section shall be applied as modified by this paragraph. (1) The plan sponsor shall determine whether the employer satisfies the requirements for abatement under Sec. 4207.5 based on the most recent complete withdrawal. (2) If the employer satisfies the requirements for abatement, the employer's liability with respect to all previous complete withdrawals shall be abated. (3) If the liability is abated, Secs. 4207.6 and 4207.7 shall be applied as if the employer's earliest complete withdrawal were its initial complete withdrawal. (c) Employer with multiple complete withdrawals that has not reentered the plan as of the effective date of this part. If an eligible employer has completely withdrawn from a multiemployer plan on two or more occasions between September 26, 1980 and the effective date of this part and is not performing covered work under the plan on the effective date of this regulation, the rules in this part shall apply, subject to the modifications specified in paragraphs (b)(1)-(b)(3) of this section, upon the employer's reentry into the plan. (d) Combination of withdrawn employer with contributing employer. If a withdrawn employer merges or otherwise combines with an employer that has an obligation to contribute to the plan from which the first employer withdrew, the combined entity is the eligible employer, and the rules of Sec. 4207.5 shall be applied-- (1) By subtracting from the measurement period contribution base units the contribution base units for which the non-withdrawn portion of the employer was obligated to contribute in the last plan year ending prior to the combination; (2) By determining the base year contribution base units solely by reference to the contribution base units of the withdrawn portion of the employer; and (3) By using the date of the combination, rather than the date of resumption of covered operations, to begin the measurement period. (e) Combination of two or more withdrawn employers. If two or more withdrawn employers merge or otherwise combine, the combined entity is the eligible employer, and the rules of Sec. 4207.5 shall be applied by combining the number of contribution base units with respect to which each portion of the employer had an obligation to contribute under the plan for its base year. However, the combined number of contribution base units shall not include contribution base units of a withdrawn portion of the employer that had fully paid its withdrawal liability as of the date of the resumption of covered operations. Sec. 4207.10 Plan rules for abatement. (a) General rule. Subject to the approval of the PBGC, a plan may, by amendment, adopt rules for the reduction or waiver of complete withdrawal liability under conditions other than those specified in Secs. 4207.5 and 4207.9 (c) and (d), provided that such conditions relate to events occurring or factors existing subsequent to a complete withdrawal year. The request for PBGC approval shall be filed after the amendment is adopted. A plan amendment under this section may not be put into effect until it is approved by the PBGC. However, an amendment that is approved by the PBGC may apply retroactively to the date of the adoption of the amendment. PBGC approval shall also be required for any subsequent modification of the amendment, other than repeal of the amendment. Sections 4207.6, 4207.7, and 4207.8 shall apply to all subsequent partial withdrawals after a reduction or waiver of complete withdrawal liability under a plan amendment approved by the PBGC pursuant to this section. (b) Who may request. The plan sponsor, or a duly authorized representative acting on behalf of the plan sponsor, shall sign and submit the request. (c) Where to file. The request shall be addressed to Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026. (d) Information. Each request shall contain the following information: (1) The name and address of the plan for which the plan amendment is being submitted and the telephone number of the plan sponsor or its duly authorized representative. (2) The nine-digit Employer Identification Number (EIN) assigned to the plan sponsor by the IRS and the three-digit Plan Identification Number (PN) assigned to the plan by the plan sponsor, and, if different, the EIN and PN last filed with the PBGC. If no EIN or PN has been assigned, that should be indicated. (3) A copy of the executed amendment, including-- (i) The date on which the amendment was adopted; (ii) The proposed effective date; and (iii) The full text of the rules on the reduction or waiver of complete withdrawal liability. (4) A copy of the most recent actuarial valuation report of the plan. (5) A statement certifying that notice of the adoption of the amendment and of the request for approval filed under this section has been given to all employers that have an obligation to contribute under the plan and to all employee organizations representing employees covered under the plan. (e) Supplemental information. In addition to the information described in paragraph (d) of this section, a plan may submit any other information that it believes it pertinent to its request. The PBGC may require the plan sponsor to submit any other information that the [[Page 34093]] PBGC determines it needs to review a request under this section. (f) Criteria for PBGC approval. The PBGC shall approve a plan amendment authorized by paragraph (a) of this section if it determines that the rules therein are consistent with the purposes of ERISA. An abatement rule is not consistent with the purposes of ERISA if-- (1) Implementation of the rule would be adverse to the interest of plan participants and beneficiaries; or (2) The rule would increase the PBGC's risk of loss with respect to the plan. (Approved by the Office of Management and Budget under control number 1212-0044) 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). Sec. 4208.1 Purpose and scope. (a) Purpose. The purpose of this part is to establish rules for reducing or waiving the liability of certain employers that have partially withdrawn from a multiemployer pension plan. (b) Scope. This part applies to multiemployer pension plans covered under title IV of ERISA and to employers that have partially withdrawn from such plans after September 25, 1980, and that have not, as of the date on which they satisfy the conditions for reducing or eliminating their partial withdrawal liability, fully satisfied their obligation to pay that partial withdrawal liability. This rule shall not negate reasonable actions taken by plans prior to the effective date of this part under plan rules implementing section 4208 of ERISA that were validly adopted pursuant to section 405 of the Multiemployer Act. Sec. 4208.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: employer, ERISA, IRS, Multiemployer Act, multiemployer plan, PBGC, plan, and plan year. In addition, for purposes of this part: Complete withdrawal means a complete withdrawal as described in section 4203 of ERISA. Eligible employer means the employer, as defined in section 4001(b) of ERISA, as it existed on the date of its initial partial or complete withdrawal, as applicable. An eligible employer shall continue to be an eligible employer notwithstanding the occurrence of any of the following events: (1) A restoration involving a mere change in identity, form or place of organization, however effected; (2) A reorganization involving a liquidation into a parent corporation; (3) A merger, consolidation or division solely between (or among) trades or businesses (whether or not incorporated) of the employer; or (4) An acquisition by or of, or a merger or combination with another trade or business. Partial withdrawal means a partial withdrawal as described in section 4205 of ERISA. Partial withdrawal year means the third year of the 3-year testing period in the case of a partial withdrawal caused by a 70-percent contribution decline, or the year of the partial cessation in the case of a partial withdrawal caused by a partial cessation of the employer's contribution obligation. Sec. 4208.3 Abatement. (a) General. Whenever an eligible employer that has partially withdrawn from a multiemployer plan satisfies the requirements in Sec. 4208.4 for the reduction or waiver of its partial withdrawal liability, it may apply to the plan for abatement of its partial withdrawal liability. Applications shall identify the eligible employer, the withdrawn employer (if different), the date of withdrawal, and the basis for reduction or waiver of its withdrawal liability. Upon receiving a complete application for abatement, the plan sponsor shall determine, in accordance with paragraph (b) of this section, whether the employer satisfies the requirements for abatement of its partial withdrawal liability under Sec. 4208.4. If the plan sponsor determines that the employer satisfies the requirements for abatement of its partial withdrawal liability, the provisions of paragraph (c) of this section shall apply. If the plan sponsor determines that the employer does not satisfy the requirements for abatement of its partial withdrawal liability, the provisions of paragraphs (d) and (e) of this section shall apply. (b) Determination of abatement. Within 60 days after an eligible employer that partially withdrew from a multiemployer plan applies for abatement in accordance with paragraph (a) of this section, the plan sponsor shall determine whether the employer satisfies the requirements for abatement of its partial withdrawal liability under Sec. 4208.4 and shall notify the employer in writing of its determination and of the consequences of its determination, as described in paragraphs (c) or (d) and (e) of this section, as appropriate. If a bond or escrow has been provided to the plan under Sec. 4208.5 of this part, the plan sponsor shall send a copy of the notice to the bonding or escrow agent. (c) Effects of abatement. If the plan sponsor determines that the employer satisfies the requirements for abatement of its partial withdrawal liability under Sec. 4208.4, then-- (1) The employer's partial withdrawal liability shall be eliminated or its annual partial withdrawal liability payments shall be reduced in accordance with Sec. 4208.6, as applicable; (2) The employer's liability for a subsequent withdrawal shall be determined in accordance with Sec. 4208.7; (3) Any bonds furnished under Sec. 4208.5 shall be canceled and any amounts held in escrow under Sec. 4208.5 shall be refunded to the employer; and (4) Any withdrawal liability payments originally due and paid after the end of the plan year in which the conditions for abatement were satisfied, in excess of the amount due under this part after that date shall be credited to the remaining withdrawal liability payments, if any, owed by the employer, beginning with the first payment due after the revised payment schedule is issued pursuant to this paragraph. If the credited amount is greater than the outstanding amount of the employer's partial withdrawal liability, the amount remaining after satisfaction of the liability shall be refunded to the employer. Interest on the credited amount at the rate prescribed in part 4219, subpart C, of this chapter (relating to overdue, defaulted, and overpaid withdrawal liability) shall be added if the plan sponsor does not issue a revised payment schedule reflecting the credit or make the required refund within 60 days after receipt by the plan sponsor of a complete abatement application. Interest shall accrue from the 61st day. (d) Effects of non-abatement. If the plan sponsor determines that the employer does not satisfy the requirements for abatement of its partial withdrawal liability under Sec. 4208.4, then the employer shall take or cause to [[Page 34094]] be taken the actions set forth in paragraphs (d)(1)-(d)(3) of this section. The rules in part 4219, subpart C, shall apply with respect to all payments required to be made under paragraphs (d)(2) and (d)(3). For this purpose, a payment required under paragraph (d)(2) shall be treated as a withdrawal liability payment due on the 30th day after the date of the plan sponsor's notice under paragraph (b) of this section. (1) Any bond or escrow furnished under Sec. 4208.5 shall be paid to the plan within 30 days after the date of the plan sponsor's notice under paragraph (b) of this section. (2) The employer shall pay to the plan within 30 days after the date of the plan sponsor's notice under paragraph (b) of this section, the amount of its withdrawal liability payment or payments, with respect to which the bond or escrow was furnished, in excess of the bond or escrow. (3) The employer shall resume or continue making its partial withdrawal liability payments as they are due to the plan. (e) Review of non-abatement determination. A plan sponsor's determinations that the employer does not satisfy the requirements for abatement under Sec. 4208.4 and of the amount of reduction determined under Sec. 4208.6 shall be subject to plan review under section 4219(b)(2) of ERISA and to arbitration under section 4221 of ERISA and part 4221 of this chapter, within the times prescribed by those provisions. For this purpose, the plan sponsor's notice under paragraph (b) of this section shall be treated as a demand under section 4219(b)(1) of ERISA. If the plan sponsor upon review or an arbitrator determines that the employer satisfies the requirements for abatement of its partial withdrawal liability under Sec. 4208.4, the plan sponsor shall immediately refund the amounts described in paragraph (e)(1) of this section if the liability is waived, or credit and refund the amounts described in paragraph (e)(2) if the annual payment is reduced. (1) Refund for waived liability. If the employer's partial withdrawal liability is waived, the plan sponsor shall refund to the employer the payments made pursuant to paragraphs (d)(1)-(d)(3) of this section (plus interest determined in accordance with Sec. 4219.31(d) of this chapter as if the payments were overpayments of withdrawal liability). (2) Credit for reduced annual payment. If the employer's annual partial withdrawal liability payment is reduced, the plan sponsor shall credit the payments made pursuant to paragraphs (d)(1)-(d)(3) of this section (plus interest determined in accordance with Sec. 4219.31(d) of this chapter as if the payments were overpayments of withdrawal liability) to future withdrawal liability payments owed by the employer, beginning with the first payment that is due after the determination, and refund any credit (including interest) remaining after satisfaction of the outstanding amount of the employer's partial withdrawal liability. Sec. 4208.4 Conditions for abatement. (a) Waiver of liability for a 70-percent contribution decline. An employer that has incurred a partial withdrawal under section 4205(a)(1) of ERISA shall have no obligation to make payments with respect to that partial withdrawal (other than delinquent payments) for plan years beginning after the second consecutive plan year in which the conditions of either paragraph (a)(1) or (a)(2) are satisfied for each of the two years: (1) The number of contribution base units with respect to which the employer has an obligation to contribute under the plan for each year is not less than 90 percent of the total number of contribution base units with respect to which the employer had an obligation to contribute to the plan for the high base year (as defined in paragraph (d) of this section). (2) The conditions of this paragraph are satisfied if-- (i) The number of contribution base units with respect to which the employer has an obligation to contribute for each year exceeds 30 percent of the total number of contribution base units with respect to which the employer had an obligation to contribute to the plan for the high base year (as defined in paragraph (d) of this section); and (ii) The total number of contribution base units with respect to which all employers under the plan have obligations to contribute in each of the two years is not less than 90 percent of the total number of contribution base units for which all employers had obligations to contribute in the partial withdrawal year. (b) Waiver of liability for a partial cessation of the employer's contribution obligation. Except as provided in Sec. 4208.8, an employer that has incurred partial withdrawal liability under section 4205(a)(2) of ERISA shall have no obligation to make payments with respect to that partial withdrawal (other than delinquent payments) for plan years beginning after the second consecutive plan year in which the employer satisfies the conditions under either paragraph (b)(1) or (b)(2) of this section. (1) Partial restoration of withdrawn work. The employer satisfies the conditions under this paragraph if, for each of two consecutive plan years-- (i) The employer makes contributions for the same facility or under the same collective bargaining agreement that gave rise to the partial withdrawal; (ii) The employer's contribution base units for that facility or under that agreement exceed 30 percent of the contribution base units with respect to which the employer had an obligation to contribute for that facility or under that agreement for the high base year (as defined in paragraph (d) of this section); and (iii) The total number of contribution base units with respect to which the employer has an obligation to contribute to the plan equals at least 90 percent of the total number of contribution base units with respect to which the employer had an obligation to contribute under the plan for the high base year (as defined in paragraph (d) of this section). (2) Substantial restoration of withdrawn work. The employer satisfies the conditions under this paragraph if, for each of two consecutive plan years-- (i) The employer makes contributions for the same facility or under the same collective bargaining agreement that gave rise to the partial withdrawal; (ii) The employer's contribution base units for that facility or under that agreement are not less than 90 percent of the contribution base units with respect to which the employer had an obligation to contribute for that facility or under that agreement for the high base year (as defined in paragraph (d) of this section); and (iii) The total number of contribution base units with respect to which the employer has an obligation to contribute to the plan equals or exceeds the sum of-- (A) The number of contribution base units with respect to which the employer had an obligation to contribute in the year prior to the partial withdrawal year, determined without regard to the contribution base units for the facility or under the agreement that gave rise to the partial withdrawal; and (B) 90 percent of the contribution base units with respect to which the employer had an obligation to contribute for that facility or under that agreement in either the year prior to the partial withdrawal year or the high base year (as defined in paragraph (d) of this section), whichever is less. (c) Reduction in annual partial withdrawal liability payment-- [[Page 34095]] (1) Partial withdrawals under section 4205(a)(1). An employer shall be entitled to a reduction of its annual partial withdrawal liability payment for a plan year if the number of contribution base units with respect to which the employer had an obligation to contribute during the plan year exceeds the greater of-- (i) 110 percent (or such lower number as the plan may, by amendment, adopt) of the number of contribution base units with respect to which the employer had an obligation to contribute in the partial withdrawal year; or (ii) The total number of contribution base units with respect to which the employer had an obligation to contribute to the plan for the plan year following the partial withdrawal year. (2) Partial withdrawals under section 4205(a)(2). An employer that resumes the obligation to contribute with respect to a facility or collective bargaining agreement that gave rise to a partial withdrawal, but does not qualify to have that liability waived under paragraph (b) of this section, shall have its annual partial withdrawal liability payment reduced for any plan year in which the total number of contribution base units with respect to which the employer has an obligation to contribute equals or exceeds the sum of-- (i) The number of contribution base units for the reentered facility or agreement during that year; and (ii) The total number of contribution base units with respect to which the employer had an obligation to contribute to the plan for the year following the partial withdrawal year. (d) High base year. For purposes of paragraphs (a) and (b)(1)(iii) of this section, the high base year contributions are the average of the total contribution base units for the two plan years for which the employer's total contribution base units were highest within the five plan years immediately preceding the beginning of the 3-year testing period defined in section 4205(b)(1)(B)(i) of ERISA, with respect to paragraph (a) of this section, or the partial withdrawal year, with respect to paragraph (b)(1)(iii) of this section. For purposes of paragraphs (b)(1)(ii) and (b)(2) of this section, the high base year contributions are the average number of contribution base units for the facility or under the agreement for the two plan years for which the employer's contribution base units for that facility or under that agreement were highest within the five plan years immediately preceding the partial withdrawal. Sec. 4208.5 Withdrawal liability payments during pendency of abatement determination. (a) Bond/Escrow. An employer that has satisfied the requirements of Sec. 4208.4(a)(1) without regard to ``90 percent of'' or Sec. 4208.4(b) for one year with respect to all partial withdrawals it incurred in a plan year may, in lieu of making scheduled withdrawal liability payments in the second year for those withdrawals, provide a bond to, or establish an escrow account for, the plan that satisfies the requirements of paragraph (b) of this section or any plan rules adopted under paragraph (d) of this section, pending a determination by the plan sponsor of whether the employer satisfies the requirements of Sec. 4208.4 (a)(1) or (b) for the second consecutive plan year. An employer that applies for abatement and neither provides a bond/escrow nor makes its withdrawal liability payments remains eligible for abatement. (b) Amount of bond/escrow. The bond or escrow allowed by this section shall be in an amount equal to 50 percent of the withdrawal liability payments that would otherwise be due. The bond or escrow relating to each payment shall be furnished before the due date of that payment. A single bond or escrow may be provided for more than one payment due during the pendency of the plan sponsor's determination. The bond or escrow agreement shall provide that if the plan sponsor determines that the employer does not satisfy the requirements for abatement of its partial withdrawal liability under Sec. 4208.4 (a)(1) or (b), the bond or escrow shall be paid to the plan upon notice from the plan sponsor to the bonding or escrow agent. A bond provided under this paragraph shall be issued by a corporate surety company that is an acceptable surety for purposes of section 412 of ERISA. (c) Notice of bond/escrow. Concurrently with posting a bond or establishing an escrow account under this section, the employer shall notify the plan sponsor. The notice shall include a statement of the amount of the bond or escrow, the scheduled payment or payments with respect to which the bond or escrow is being furnished, and the name and address of the bonding or escrow agent. (d) Plan amendments concerning bond/escrow. A plan may, by amendment, adopt rules decreasing the amount of the bond or escrow specified in paragraph (b) of this section. A plan amendment adopted under this paragraph may be applied only to the extent that it is consistent with the purposes of ERISA. An amendment satisfies this requirement only if it does not create an unreasonable risk of loss to the plan. (e) Plan sponsor determination. Within 60 days after the end of the plan year in which the bond/escrow is furnished, the plan sponsor shall determine whether the employer satisfied the requirements of Sec. 4208.4 (a)(1) or (b) for the second consecutive plan year. The plan sponsor shall notify the employer and the bonding or escrow agent in writing of its determination and of the consequences of its determination, as described in Sec. 4208.3 (c) or (d) and (e), as appropriate. Sec. 4208.6 Computation of reduced annual partial withdrawal liability payment. (a) Amount of reduced payment. An employer that satisfies the requirements of Sec. 4208.4 (c)(1) or (c)(2) shall have its annual partial withdrawal liability payment for that plan year reduced in accordance with paragraph (a)(1) or (a)(2) of this section, respectively. (1) The reduced annual payment amount for an employer that satisfies Sec. 4208.4(c)(1) shall be determined by substituting the number of contribution base units in the plan year in which the requirements are satisfied for the number of contribution base units in the year following the partial withdrawal year in the numerator of the fraction described in section 4206(a)(2)(A) of ERISA. (2) The reduced annual payment for an employer that satisfies Sec. 4208.4(c)(2) shall be determined by adding the contribution base units for which the employer is obligated to contribute with respect to the reentered facility or agreement in the year in which the requirements are satisfied to the numerator of the fraction described in section 4206(a)(2)(A) of ERISA. (b) Credit for reduction. The plan sponsor shall credit the account of an employer that satisfies the requirements of Sec. 4208.4(c)(1) or (c)(2) with the amount of annual withdrawal liability that it paid in excess of the amount described in paragraph (a)(1) or (a)(2) of this section, as appropriate. The credit shall be applied, a revised payment schedule issued, refund made and interest added, all in accordance with Sec. 4208.3(c)(4). Sec. 4208.7 Adjustment of withdrawal liability for subsequent withdrawals. The liability of an employer for a partial or complete withdrawal from a plan subsequent to a partial withdrawal from that plan in a prior plan year shall be reduced in accordance with part 4206 of this chapter. [[Page 34096]] Sec. 4208.8 Multiple partial withdrawals in one plan year. (a) General rule. If an employer partially withdraws from the same multiemployer plan on two or more occasions during the same plan year, the rules of Sec. 4208.4 shall be applied as modified by this section. (b) Partial withdrawals under section 4205 (a)(1) and (a)(2) in the same plan year. If an employer partially withdraws from the same multiemployer plan as a result of a 70-percent contribution decline and a partial cessation of the employer's contribution obligation in the same plan year, the employer shall not be eligible for abatement under Sec. 4208.4 (b) or (c)(2) or under paragraph (c) of this section. The employer may qualify for abatement under Sec. 4208.4(a) and (c)(1) and under any rules adopted by the plan pursuant to Sec. 4208.9. (c) Multiple partial cessations of the employer's contribution obligation. If an employer permanently ceases to have an obligation to contribute for more than one facility, under more than one collective bargaining agreement, or for one or more facilities and under one or more collective bargaining agreements, resulting in multiple partial withdrawals under section 4205(b)(2)(A) in the same plan year, the abatement rules in Sec. 4208.4(b) shall be applied as modified by this paragraph. If an employer resumes work at all such facilities and under all such collective bargaining agreements, the determination of whether the employer qualifies for elimination of its liability under Sec. 4208.4(b) shall be made by substituting the test set forth in paragraph (c)(1) of this section for that prescribed by Sec. 4208.4 (b)(1)(ii) or (b)(2)(ii), as applicable. If the employer resumes work at or under fewer than all the facilities or collective bargaining agreements described in this paragraph, the employer cannot qualify for elimination of its liability under Sec. 4208.4(b). However, the employer may qualify for a reduction in its partial withdrawal liability pursuant to paragraph (c)(2) of this section. (1) Resumption of work at all facilities and under all bargaining agreements. The test under this paragraph is satisfied if for each of the two consecutive plan years referred to in Sec. 4208.4(b), the employer's total contribution base units for the facilities and under the collective bargaining agreements with respect to which the employer incurred the multiple partial withdrawals exceed 30 percent of the total number of contribution base units with respect to which the employer had an obligation to contribute for those facilities and under those agreements for the base year (as defined in paragraph (d) of this section). (2) Resumption at fewer than all facilities or under fewer than all bargaining agreements. If the employer satisfies the conditions in Sec. 4208.4 (b)(1)(i) and (b)(1)(iii) and paragraph (c)(2)(i) of this section, or the conditions in Sec. 4208.4 (b)(2)(i) and (b)(2)(iii) and paragraph (c)(2)(ii) of this section, as applicable, the employer's withdrawal liability shall be partially waived as set forth in paragraph (c)(2)(iii) of this section. (i) With respect to a resumption of work under Sec. 4208.4(b)(1), the condition under this paragraph is satisfied if, for the two consecutive plan years referred to in Sec. 4208.4(b)(1), the employer's contribution base units for any reentered facility or agreement exceed 30 percent of the number of contribution base units with respect to which the employer had an obligation to contribute for that facility or under that agreement for the base year (as defined in paragraph (d) of this section). (ii) With respect to a resumption of work under Sec. 4208.4(b)(2), the condition under this paragraph is satisfied if, for the two consecutive plan years referred to in Sec. 4208.4(b)(2), the employer's contribution base units for any reentered facility or agreement exceed 90 percent of the number of contribution base units with respect to which the employer had an obligation to contribute for that facility or under that agreement for the base year (as defined in paragraph (d) of this section). (iii) The employer's reduced withdrawal liability and, if any, the reduced annual payments of the liability shall be determined by adding the average number of contribution base units that the employer is required to contribute for those two consecutive years for that facility(ies) or agreement(s) to the numerator of the fraction described in section 4206(a)(2)(A) of ERISA. The amount of any remaining partial withdrawal liability shall be paid over the schedule originally established starting with the first payment due after the revised payment schedule is issued under Sec. 4208.3(c)(4). (d) Base Year. For purposes of this section, the base year contribution base units for a reentered facility(ies) or under a reentered agreement(s) are the average number of contribution base units for the facility(ies) or under the agreement(s) for the two plan years for which the employer's contribution base units for that facility(ies) or under that agreement(s) were highest within the five plan years immediately preceding the partial withdrawal. Sec. 4208.9 Plan adoption of additional abatement conditions. (a) General rule. A plan may by amendment, subject to the approval of the PBGC, adopt rules for the reduction or waiver of partial withdrawal liability under conditions other than those specified in Sec. 4208.4, provided that such conditions relate to events occurring or factors existing subsequent to a partial withdrawal year. The request for PBGC approval shall be filed after the amendment is adopted. PBGC approval shall also be required for any subsequent modification of the amendment, other than repeal of the amendment. A plan amendment under this section may not be put into effect until it is approved by the PBGC. An amendment that is approved by the PBGC may apply retroactively. (b) Who may request. The plan sponsor, or a duly authorized representative acting on behalf of the plan sponsor, shall sign and submit the request. (c) Where to file. The request shall be addressed to Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026. (d) Information. Each request shall contain the following information: (1) The name and address of the plan for which the plan amendment is being submitted and the telephone number of the plan sponsor or its duly authorized representative. (2) The nine-digit Employer Identification Number (EIN) assigned to the plan sponsor by the IRS and the three-digit Plan Identification Number (PIN) assigned to the plan by the plan sponsor, and, if different, also the EIN-PIN last filed with the PBGC. If an EIN-PIN has not been assigned, that should be indicated. (3) A copy of the executed amendment, including-- (i) the date on which the amendment was adopted; (ii) the proposed effective date; (iii) the full text of the rules on the reduction or waiver of partial withdrawal liability; and (iv) the full text of the rules adjusting the reduction in the employer's liability for a subsequent partial or complete withdrawal, as required by section 4206(b)(1) of ERISA. (4) A copy of the most recent actuarial valuation report of the plan. (5) A statement certifying that notice of the adoption of the amendment and of the request for approval filed under this section has been given to all employers that have an obligation to contribute under the plan and to all [[Page 34097]] employee organizations representing employees covered under the plan. (e) Supplemental information. In addition to the information described in paragraph (d) of this section, a plan may submit any other information that it believes is pertinent to its request. The PBGC may require the plan sponsor to submit any other information that the PBGC determines that it needs to review a request under this section. (f) Criteria for PBGC approval. The PBGC shall approve a plan amendment authorized by paragraph (a) of this section if it determines that the rules therein are consistent with the purposes of ERISA. An abatement amendment is not consistent with the purposes of ERISA unless the PBGC determines that-- (1) The amendment is not adverse to the interests of plan participants and beneficiaries in the aggregate; and (2) The amendment would not significantly increase the PBGC's risk of loss with respect to the plan. (Approved by the Office of Management and Budget under control no. 1212-0039) PART 4211--ALLOCATING UNFUNDED VESTED BENEFITS TO WITHDRAWING EMPLOYERS 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). Subpart A--General Sec. 4211.1 Purpose and scope. (a) Purpose. Section 4211 of ERISA provides four methods for allocating unfunded vested benefits to employers that withdraw from a multiemployer plan: the presumptive method (section 4211(b)); the modified presumptive method (section 4211(c)(2)); the rolling-5 method (section 4211(c)(3)); and the direct attribution method (section 4211(c)(4)). With the minor exceptions covered in Sec. 4211.3, a plan determines the amount of unfunded vested benefits allocable to a withdrawing employer in accordance with the presumptive method, unless the plan is amended to adopt an alternative allocative method. Generally, the PBGC must approve the adoption of an alternative allocation method. On September 25, 1984, 49 FR 37686, the PBGC granted a class approval of all plan amendments adopting one of the statutory alternative allocation methods. Subpart C sets forth the criteria and procedures for PBGC approval of nonstatutory alternative allocation methods. Section 4211(c)(5) of ERISA also permits certain modifications to the statutory allocation methods. The PBGC is to prescribe these modifications in a regulation, and plans may adopt them without PBGC approval. Subpart B contains the permissible modifications to the statutory methods. Plans may adopt other modifications subject to PBGC approval under subpart C. Finally, under section 4211(f) of ERISA, the PBGC is required to prescribe rules governing the application of the statutory allocation methods or modified methods by plans following merger of multiemployer plans. Subpart D sets forth alternative allocative methods to be used by merged plans. In addition, such plans may adopt any of the allocation methods or modifications described under subparts B and C in accordance with the rules under subparts B and C. (b) Scope. This part applies to all multiemployer plans covered by title IV of ERISA. Sec. 4211.2 Definitions. The following terms are defined in Sec. 4001.2 of this chapter: Code, employer, IRS, multiemployer plan, nonforfeitable benefit, PBGC, plan, and plan year. In addition, for purposes of this part: Initial plan year means a merged plan's first complete plan year that begins after the establishment of the merged plan. Initial plan year unfunded vested benefits means the unfunded vested benefits as of the close of the initial plan year, less the value as of the end of the initial plan year of all outstanding claims for withdrawal liability that can reasonably be expected to be collected from employers that had withdrawn as of the end of the initial plan year. Merged plan means a plan that is the result of the merger of two or more multiemployer plans. Merger means the combining of two or more multiemployer plans into one multiemployer plan. Prior plan means the plan in which an employer participated immediately before that plan became a part of the merged plan. Unfunded vested benefits means an amount by which the value of nonforfeitable benefits under the plan exceeds the value of the assets of the plan. Withdrawing employer means the employer for whom withdrawal liability is being calculated under section 4201 of ERISA. Withdrawn employer means an employer who, prior to the withdrawing employer, has discontinued contributions to the plan or covered operations under the plan and whose obligation to contribute has not been assumed by a successor employer within the meaning of section 4204 of ERISA. A temporary suspension of contributions, including a suspension described in section 4218(2) of ERISA, is not considered a discontinuance of contributions. Sec. 4211.3 Special rules for construction industry and IRC section 404(c) plans. (a) Construction plans. Except as provided in Secs. 4211.11(b) and 4211.21(b), a plan that primarily covers employees in the building and construction industry shall use the presumptive method for allocating unfunded vested benefits. (b) Section 404(c) plans. A plan described in section 404(c) of the Code or a continuation of such a plan shall allocate unfunded vested benefits under the rolling-5 method unless the plan, by amendment, adopts an alternative method or modification. [[Page 34098]] Subpart B--Changes Not Subject to PBGC Approval Sec. 4211.11 Changes not subject to PBGC approval. (a) General rule. A plan, other than a plan that primarily covers employees in the building and construction industry, may adopt, by amendment, any of the statutory allocation methods and any of the modifications set forth in Secs. 4211.12 and 4211.13, without the approval of the PBGC. (b) Building and construction industry plans. A plan that primarily covers employees in the building and construction industry may adopt, by amendment, any of the modifications to the presumptive rule set forth in Sec. 4211.12 without the approval of the PBGC. Sec. 4211.12 Modifications to the presumptive, modified presumptive and rolling-5 methods. (a) ``Contributions made'' and ``total amount contributed''. Each of the allocation fractions used in the presumptive, modified presumptive and rolling-5 methods is based on contributions that certain employers have made to the plan for a five-year period. For purposes of these methods, and except as provided in paragraph (b) of this section, ``the sum of all contributions made'' or ``total amount contributed'' by employers for a plan year means the amounts (other than withdrawal liability payments) considered contributed to the plan for the plan year for purposes of section 412(b)(3)(A) of the Code. For plan years before section 412 applies to the plan, ``the sum of all contributions made'' or ``total amount contributed'' means the amount reported to the IRS or the Department of Labor as total contributions for the plan year; for example, for plan years in which the plan filed the Form 5500, the amount reported as total contributions on that form. Employee contributions, if any, shall be excluded from the totals. (b) Changing the period for counting contributions. A plan sponsor may amend a plan to modify the denominators in the presumptive, modified presumptive and rolling-5 methods in accordance with one of the alternatives described in this paragraph. Except as provided in paragraph (b)(4) of this section, any amendment adopted under this paragraph shall be applied consistently to all plan years. Contributions counted for one plan year may be not counted for any other plan year. If a contribution is counted as part of the ``total amount contributed'' for any plan year used to determine a denominator, that contribution may not also be counted as a contribution owed with respect to an earlier year used to determine the same denominator, regardless of when the plan collected that contribution. (1) A plan sponsor may amend a plan to provide that ``the sum of all contributions made'' or ``total amount contributed'' for a plan year means the amount of contributions that the plan actually received during the plan year, without regard to whether the contributions are treated as made for that plan year under section 412(b)(3)(A) of the Code. (2) A plan sponsor may amend a plan to provide that ``the sum of all contributions made'' or ``total amount contributed'' for a plan year means the amount of contributions actually received during the plan year, increased by the amount of contributions received during a specified period of time after the close of the plan year not to exceed the period described in section 412(c)(10) of the Code and regulations thereunder. (3) A plan sponsor may amend a plan to provide that ``the sum of all contributions made'' or ``total amount contributed'' for a plan year means the amount of contributions actually received during the plan year, increased by the amount of contributions accrued during the plan year and received during a specified period of time after the close of the plan year not to exceed the period described in section 412(c)(10) of the Code and regulations thereunder. (4) A plan sponsor may amend a plan to provide that-- (i) For plan years ending before September 26, 1980, ``the sum of all contributions made'' or ``total amount contributed'' means the amount of total contributions reported on Form 5500 and, for years before the plan was required to file Form 5500, the amount of total contributions reported on any predecessor reporting form required by the Department of Labor or the IRS; and (ii) For subsequent plan years, ``the sum of all contributions made'' or ``total amount contributed'' means the amount described in paragraph (a) of this section, or the amount described in paragraph (b)(1), (b)(2) or (b)(3) of this section. (c) Excluding contributions of significant withdrawn employers. Contributions of certain withdrawn employers are excluded from the denominator in each of the fractions used to determine a withdrawing employer's share of unfunded vested benefits under the presumptive, modified presumptive and rolling-5 methods. Except as provided in paragraph (c)(1) of this section, contributions of all employers that permanently cease to have an obligation to contribute to the plan or permanently cease covered operations before the end of the period of plan years used to determine the fractions for allocating unfunded vested benefits under each of those methods (and contributions of all employers that withdrew before September 26, 1980) are excluded from the denominators of the fractions. (1) The plan sponsor of a plan using the presumptive, modified presumptive or rolling-5 method may amend the plan to provide that only the contributions of significant withdrawn employers shall be excluded from the denominators of the fractions used in those methods. (2) For purposes of this paragraph (c), ``significant withdrawn employer'' means-- (i) An employer to which the plan has sent a notice of withdrawal liability under section 4219 of ERISA; or (ii) A withdrawn employer that in any plan year used to determine the denominator of a fraction contributed at least $250,000 or, if less, 1% of all contributions made by employers for that year. (3) If a group of employers withdraw in a concerted withdrawal, the plan shall treat the group as a single employer in determining whether the members are significant withdrawn employers under paragraph (c)(2) of this section. A ``concerted withdrawal'' means a cessation of contributions to the plan during a single plan year-- (i) By an employer association; (ii) By all or substantially all of the employers covered by a single collective bargaining agreement; or (iii) By all or substantially all of the employers covered by agreements with a single labor organization. Sec. 4211.13 Modifications to the direct attribution method. (a) Error in direct attribution method. The unfunded vested benefits allocated to a withdrawing employer under the direct attribution method are the sum of the employer's attributable liability, determined under section 4211(c)(4) (A)(i) and (B) of ERISA, and the employer's share of the plan's unattributable liability, determined under section 4211(c)(4)(E) and allocated to the employer under section 4211(c)(4)(F). Plan sponsors should allocate unattributable liabilities on the basis of the employer's share of the attributable liabilities. However, section 4211(c)(4)(F) of ERISA, which describes the allocation of unattributable liabilities, contains a typographical [[Page 34099]] error. Therefore, plans adopting the direct attribution method shall modify the phrase ``as the amount determined under subparagraph (C) for the employer bears to the sum of the amounts determined under subparagraph (C) for all employers under the plan'' in section 4211(c)(4)(F) by substituting ``subparagraph (B)'' for ``subparagraph (C)'' in both places it appears. (b) Allocating unattributable liability based on contributions in period before withdrawal. A plan that is amended to adopt the direct attribution method may provide that instead of allocating the unattributable liability in accordance with section 4211(c)(4)(F) of ERISA, the employer's share of the plan's unattributable liability shall be determined by multiplying the plan's unattributable liability determined under section 4211(c)(4)(E) by a fraction-- (1) The numerator of which is the total amount of contributions required to be made by the withdrawing employer over a period of consecutive plan years (not fewer than five) ending before the withdrawal; and (2) The denominator of which is the total amount contributed under the plan by all employers for the same period of years used in paragraph (b)(1) of this section, decreased by any amount contributed by an employer that withdrew from the plan during those plan years. Subpart C--Changes Subject to PBGC Approval Sec. 4211.21 Changes subject to PBGC approval. (a) General rule. Subject to the approval of the PBGC pursuant to this subpart, a plan, other than a plan that primarily covers employees in the building and construction industry, may adopt, by amendment, any allocation method or modification to an allocation method that is not permitted under subpart B of this part. (b) Building and construction industry plans. Subject to the approval of the PBGC pursuant to this subpart, a plan that primarily covers employees in the building and construction industry may adopt, by amendment, any allocation method or modification to an allocation method that is not permitted under Sec. 4211.12 if the method or modification is applicable only to its employers that are not construction industry employers within the meaning of section 4203(b)(1)(A) of ERISA. (c) Substantial overallocation not allowed. No plan may adopt an allocation method or modification to an allocation method that results in a systematic and substantial overallocation of the plan's unfunded vested benefits. (d) Use of method prior to approval. A plan may implement an alternative allocation method or modification to an allocation method that requires PBGC approval before that approval is given. However, the plan sponsor shall assess liability in accordance with this paragraph. (1) Demand for payment. Until the PBGC approves the allocation method or modification, a plan may not demand withdrawal liability under section 4219 of ERISA in an amount that exceeds the lesser of the amount calculated under the amendment or the amount calculated under the allocation method that the plan would be required to use if the PBGC did not approve the amendment. The plan must inform each withdrawing employer of both amounts and explain that the higher amount may become payable depending on the PBGC's decision on the amendment. (2) Adjustment of liability. When necessary because of the PBGC decision on the amendment, the plan shall adjust the amount demanded from each employer under paragraph (c)(1) of this section and the employer's withdrawal liability payment schedule. The length of the payment schedule shall be increased, as necessary. The plan shall notify each affected employer of the adjusted liability and payment schedule and shall collect the adjusted amount in accordance with the adjusted schedule. Sec. 4211.22 Requests for PBGC approval. (a) General. A plan shall submit a request for approval of an alternative allocation method or modification to an allocation method to the PBGC in accordance with the requirements of this section as soon as practicable after the adoption of the amendment. (b) Who shall submit. The plan sponsor, or a duly authorized representative acting on behalf of the plan sponsor, shall sign the request. (c) Where to submit. The plan shall submit the request by first class mail or courier service to Reports Processing, Insurance Operations Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, DC 20005-4026, or by hand to the above address. (d) Content. Each request shall contain the following information: (1) The name, address and telephone number of the plan sponsor, and of the duly authorized representative, if any, of the plan sponsor. (2) The name of the plan. (3) The nine-digit Employer Identification Number (EIN) that the Internal Revenue Service assigned to the plan sponsor and the three- digit Plan Identification Number (PIN) that the plan sponsor assigned to the plan, and, if different, also the EIN-PIN that the plan last filed with the PBGC. If the plan has no EIN-PIN, the request shall so indicate. (4) The date the amendment was adopted. (5) A copy of the amendment, setting forth the full text of the alternative allocation method or modification. (6) The allocation method that the plan currently uses and a copy of the plan amendment (if any) that adopted the method. (7) A statement certifying that notice of the adoption of the amendment has been given to all employers that have an obligation to contribute under the plan and to all employee organizations that represent employees covered by the plan. (e) Additional information. In addition to the information listed in paragraph (d) of this section, the PBGC may require the plan sponsor to submit any other information that the PBGC determines is necessary for the review of an alternative allocation method or modification to an allocation method. (Approved by the Office of Management and Budget under control number 1212-0035) Sec. 4211.23 Approval of alternative method. (a) General. The PBGC shall approve an alternative allocation method or modification to an allocation method if the PBGC determines that adoption of the method or modification would not significantly increase the risk of loss to plan participants and beneficiaries or to the PBGC. (b) Criteria. An alternative allocation method or modification to an allocation method satisfies the requirements of paragraph (a) of this section if it meets the following three conditions: (1) The method or modification allocates a plan's unfunded vested benefits, both for the adoption year and for the five subsequent plan years, to the same extent as any of the statutory allocation methods, or any modification to a statutory allocation method permitted under subpart B. (2) The method or modification allocates unfunded vested benefits to each employer on the basis of either the employer's share of contributions to the plan or the unfunded vested benefits attributable to each employer. The method or modification may take into account differences in contribution rates paid by different employers and [[Page 34100]] differences in benefits of different employers' employees. (3) The method or modification fully reallocates among employers that have not withdrawn from the plan all unfunded vested benefits that the plan sponsor has determined cannot be collected from withdrawn employers, or that are not assessed against withdrawn employers because of sections 4209, 4219(c)(1)(B) or 4225 of ERISA. (c) PBGC action on request. The PBGC's decision on a request for approval shall be in writing. If the PBGC disapproves the request, the decision shall state the reasons for the disapproval and shall include a statement of the sponsor's right to request a reconsideration of the decision pursuant to part 4003 of this chapter. Sec. 4211.24 Special rule for certain alternative methods previously approved. A plan may not apply to any employer withdrawing on or after November 25, 1987, an allocation method approved by the PBGC before that date that allocates to the employer the greater of the amounts of unfunded vested benefits determined under two different allocation rules. Until a plan that has been using such a method is amended to adopt a valid allocation method, its allocation method shall be deemed to be the statutory allocation method that would apply if it had never been amended. Subpart D--Allocation Methods for Merged Multiemployer Plans Sec. 4211.31 Allocation of unfunded vested benefits following the merger of plans. (a) General Rule. Except as provided in paragraphs (b) through (d) of this section, when two or more multiemployer plans merge, the merged plan shall adopt one of the statutory allocation methods, in accordance with subpart B of this part, or one of the allocation methods prescribed in Secs. 4211.32 through 4211.35, and the method adopted shall apply to all employer withdrawals occurring after the initial plan year. Alternatively, a merged plan may adopt its own allocation method in accordance with subpart C of this part. If a merged plan fails to adopt an allocation method pursuant to this subpart or subpart B or C, it shall use the presumptive allocation method prescribed in Sec. 4211.32. In addition, a merged plan may adopt any of the modifications prescribed in Sec. 4211.36 or in subpart B of this part. (b) Construction plans. Except as provided in the next sentence, a merged plan that primarily covers employees in the building and construction industry shall use the presumptive allocation method prescribed in Sec. 4211.32. However, the plan may, with respect to employers that are not construction industry employers within the meaning of section 4203(b)(1)(A) of ERISA, adopt, by amendment, one of the alternative methods prescribed in Secs. 4211.33 through 4211.35 or any other allocation method. Any such amendment shall be adopted in accordance with subpart C of this part. A construction plan may, without the PBGC's approval, adopt by amendment any of the modifications set forth in Sec. 4211.36 or any of the modifications to the statutory presumptive method set forth in Sec. 4211.12. (c) Section 404(c) plans. A merged plan that is a continuation of a plan described in section 404(c) of the Code shall use the rolling-5 allocation method prescribed in Sec. 4211.34, unless the plan, by amendment, adopts an alternative method. The plan may adopt one of the statutory allocation methods or one of the allocation methods set forth in Secs. 4211.32 through 4211.35 without PBGC approval; adoption of any other allocation method is subject to PBGC approval under subpart B of this plan. The plan may, without the PBGC's approval, adopt by amendment any of the modifications set forth in Sec. 4211.36 or in subpart B of this part. (d) Withdrawals before the end of the initial plan year. For employer withdrawals after the effective date of a merger and prior to the end of the initial plan year, the amount of unfunded vested benefits allocable to a withdrawing employer shall be determined in accordance with Sec. 4211.37. Sec. 4211.32 Presumptive method for withdrawals after the initial plan year. (a) General rule. Under this section, the amount of unfunded vested benefits allocable to an employer that withdraws from a merged plan after the initial plan year is the sum (but not less than zero) of-- (1) The employer's proportional share, if any, of the unamortized amount of the plan's initial plan year unfunded vested benefits, as determined under paragraph (b) of this section; (2) The employer's proportional share of the unamortized amount of the change in the plan's unfunded vested benefits for plan years ending after the initial plan year, as determined under paragraph (c) of this section; and (3) The employer's proportional share of the unamortized amounts of the reallocated unfunded vested benefits (if any) as determined under paragraph (d) of this section. (b) Share of initial plan year unfunded vested benefits. An employer's proportional share, if any, of the unamortized amount of the plan's initial plan year unfunded vested benefits is the sum of the employer's share of its prior plan's liabilities (determined under paragraph (b)(1) of this section) and the employer's share of the adjusted initial plan year unfunded vested benefits (determined under paragraph (b)(2) of this section), with such sum reduced by five percent of the original amount for each plan year subsequent to the initial year. (1) Share of prior plan liabilities. An employer's share of its prior plan's liabilities is the amount of unfunded vested benefits that would have been allocable to the employer if it had withdrawn on the first day of the initial plan year, determined as if each plan had remained a separate plan. (2) Share of adjusted initial plan year unfunded vested benefits. An employer's share of the adjusted initial plan year unfunded vested benefits equals the plan's initial plan year unfunded vested benefits, less the amount that would be determined under paragraph (b)(1) of this section for each employer that had not withdrawn as of the end of the initial plan year, multiplied by a fraction-- (i) The numerator of which is the amount determined under paragraph (b)(1) of this section; and (ii) The denominator of which is the sum of the amounts that would be determined under paragraph (b)(1) of this section for each employer that had not withdrawn as of the end of the initial plan year. (c) Share of annual changes. An employer's proportional share of the unamortized amount of the change in the plan's unfunded vested for the plan years ending after the end of the initial plan year is the sum of the employer's proportional shares (determined under paragraph (c)(2) of this section) of the unamortized amount of the change in unfunded vested benefits (determined under paragraph (c)(1) of this section) for each plan year in which the employer has an obligation to contribute under the plan ending after the initial plan year and before the plan year in which the employer withdraws. (1) Change in plan's unfunded vested benefits. The change in a plan's unfunded vested benefits for a plan year is the amount by which the unfunded vested benefits at the end of a plan year, less the value as of the end of such year of all outstanding claims for withdrawal liability that can reasonably be expected [[Page 34101]] to be collected from employers that had withdrawn as of the end of the initial plan year, exceed the sum of the unamortized amount of the initial plan year unfunded vested benefits (determined under paragraph (c)(1)(i) of this section) and the unamortized amounts of the change in unfunded vested benefits for each plan year ending after the initial plan year and preceding the plan year for which the change is determined (determined under paragraph (c)(1)(ii) of this section). (i) Unamortized amount of initial plan year unfunded vested benefits. The unamortized amount of the initial plan year unfunded vested benefits is the amount of those benefits reduced by five percent of the original amount for each succeeding plan year. (ii) Unamortized amount of the change. The unamortized amount of the change in a plan's unfunded vested benefits with respect to a plan year is the change in unfunded vested benefits for the plan year, reduced by five percent of such change for each succeeding plan year. (2) Employer's proportional share. An employer's proportional share of the amount determined under paragraph (c)(1) of this section is computed by multiplying that amount by a fraction-- (i) The numerator of which is the total amount required to be contributed under the plan (or under the employer's prior plan) by the employer for the plan year in which the change arose and the four preceding full plan years; and (ii) The denominator of which is the total amount contributed under the plan (or under employer's prior plan) for the plan year in which the change arose and the four preceding full plan years by all employers that had an obligation to contribute under the plan for the plan year in which such change arose, reduced by any amount contributed by an employer that withdrew from the plan in the year in which the change arose. (d) Share of reallocated amounts. An employer's proportional share of the unamortized amounts of the reallocated unfunded vested benefits, if any, is the sum of the employer's proportional shares (determined under paragraph (d)(2) of this section) of the unamortized amount of the reallocated unfunded vested benefits (determined under paragraph (d)(1) of this section) for each plan year ending before the plan year in which the employer withdrew from the plan. (1) Unamortized amount of reallocated unfunded vested benefits. The unamortized amount of the reallocated unfunded vested benefits with respect to a plan year is the sum of the amounts described in paragraphs (d)(1)(i), (d)(1)(ii), and (d)(1)(iii) of this section for the plan year, reduced by five percent of such sum for each succeeding plan year. (i) Uncollectible amounts. Amounts included as reallocable under this paragraph are those that the plan sponsor determines in that plan year to be uncollectible for reasons arising out of cases or proceedings under Title 11, United States Code, or similar proceedings, with respect to an employer that withdrew after the close of the initial plan year. (ii) Relief amounts. Amounts included as reallocable under this paragraph are those that the plan sponsor determines in that plan year will not be assessed as a result of the operation of sections 4209, 4219(c)(1)(B), or 4225 of ERISA with respect to an employer that withdrew after the close of the initial plan year. (iii) Other amounts. Amounts included as reallocable under this paragraph are those that the plan sponsor determines in that plan year to be uncollectible or unassessable for other reasons under standards not inconsistent with regulations prescribed by the PBGC. (2) Employer's proportional share. An employer's proportional share of the amount of the reallocated unfunded vested benefits with respect to a plan year is computed by multiplying the unamortized amount of the reallocated unfunded vested benefits (as of the end of the year preceding the plan year in which the employer withdraws) by the allocation fraction described in paragraph (c)(2) of this section for the same plan year. Sec. 4211.33 Modified presumptive method for withdrawals after the initial plan year. (a) General rule. Under this section, the amount of unfunded vested benefits allocable to an employer that withdraws from a merged plan after the initial plan year is the sum of the employer's proportional share, if any, of the unamortized amount of the plan's initial plan year unfunded vested benefits (determined under paragraph (b) of this section) and the employer's proportional share of the unamortized amount of the unfunded vested benefits arising after the initial plan year (determined under paragraph (c) of this section). (b) Share of initial plan year unfunded vested benefits. An employer's proportional share, if any, of the unamortized amount of the plan's initial plan year unfunded vested benefits is the sum of the employer's share of its prior plan's liabilities, as determined under Sec. 4211.32(b)(1), and the employer's share of the adjusted initial plan year unfunded vested benefits, as determined under Sec. 4211.32(b)(2), with such sum reduced as if it were being fully amortized in level annual installments over fifteen years beginning with the first plan year after the initial plan year. (c) Share of unfunded vested benefits arising after the initial plan year. An employer's proportional share of the amount of the plan's unfunded vested benefits arising after the initial plan year is the employer's proportional share (determined under paragraph (c)(2) of this section) of the plan's unfunded vested benefits as of the end of the plan year preceding the plan year in which the employer withdraws, reduced by the amount of the plan's unfunded vested benefits as of the close of the initial plan year (determined under paragraph (c)(1) of this section). (1) Amount of unfunded vested benefits. The plan's unfunded vested benefits as of the end of the plan year preceding the plan year in which the employer withdraws shall be reduced by the sum of-- (i) The value as of that date of all outstanding claims for withdrawal liability that can reasonably be expected to be collected, with respect to employers that withdrew before that plan year; and (ii) The sum of the amounts that would be allocable under paragraph (b) of this section to all employers that have an obligation to contribute in the plan year preceding the plan year in which the employer withdraws and that also had an obligation to contribute in the first plan year ending after the initial plan year. (2) Employer's proportional share. An employer's proportional share of the amount determined under paragraph (c)(1) of this section is computed by multiplying that amount by a fraction-- (i) The numerator of which is the total amount required to be contributed under the plan (or under the employer's prior plan) by the employer for the last five full plan years ending before the date on which the employer withdraws; and (ii) The denominator of which is the total amount contributed under the plan (or under each employer's prior plan) by all employers for the last five full plan years ending before the date on which the employer withdraws, increased by the amount of any employer contributions owed with respect to earlier periods that were collected in those plan years, and decreased by any amount contributed by an employer that [[Continued on page 34102]]