[Federal Register Volume 82, Number 245 (Friday, December 22, 2017)]
[Rules and Regulations]
[Pages 60800-60833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27515]
[[Page 60799]]
Vol. 82
Friday,
No. 245
December 22, 2017
Part II
Pension Benefit Guaranty Corporation
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29 CFR Parts 4000, 4001, 4003, et al.
Missing Participants; Final Rule
Federal Register / Vol. 82 , No. 245 / Friday, December 22, 2017 /
Rules and Regulations
[[Page 60800]]
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PENSION BENEFIT GUARANTY CORPORATION
29 CFR Parts 4000, 4001, 4003, 4041, 4041A, and 4050
RIN 1212-AB13
Missing Participants
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Final rule.
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SUMMARY: The Pension Benefit Guaranty Corporation (PBGC) administers a
program to hold retirement benefits for missing participants and
beneficiaries in terminated retirement plans and to help those
participants and beneficiaries find and receive the benefits being held
for them. The existing program is limited to single-employer defined
benefit pension plans covered by the pension insurance system under the
Employee Retirement Income Security Act of 1974 (ERISA). With this
final regulation, PBGC revises the existing program to simplify
procedures and remove unnecessary rules and, as authorized by the
Pension Protection Act of 2006, establishes similar programs for most
defined contribution plans, multiemployer plans covered by the pension
insurance system, and certain defined benefit plans that are not
covered.
DATES: Effective date: This rule is effective January 22, 2018.
Applicability date: This rule applies to termination of a plan
other than a multiemployer plan covered by title IV of ERISA where the
date of plan termination is after calendar year 2017. This rule applies
to the close-out of a multiemployer plan covered by title IV of ERISA
where the close-out is completed after calendar year 2017. This rule
does not apply to PBGC's payment of missing participant benefits
attributable to prior terminations. The provisions of 29 CFR part 4050
as in effect immediately before January 22, 2018 apply to PBGC's
payment of missing participant benefits attributable to prior
terminations.
FOR FURTHER INFORMATION CONTACT: Stephanie Cibinic, Deputy Assistant General Counsel for
Regulatory Affairs, 202-326-4400 extension 6352; or Deborah C. Murphy, Assistant General Counsel, Office of the
General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street
NW, Washington, DC 20005-4026; 202-326-4400 extension 3451. (TTY and
TDD users may call the Federal relay service toll-free at 800-877-8339
and ask to be connected to 202-326-4400 extension 3451 or 202-326-4400
extension 6352.)
SUPPLEMENTARY INFORMATION:
Executive Summary
Purpose of the Regulatory Action
This regulation is needed to implement changes in the statutory
basis for the missing participants program. The changes provide for
expansion of the program to cover defined contribution (individual
account) plans, multiemployer pension plans, and small professional
service employer plans not covered by title IV of ERISA.
PBGC's legal authority for this action comes from section
4002(b)(3) of ERISA, which authorizes PBGC to issue regulations to
carry out the purposes of title IV of ERISA, and section 4050 of ERISA,
which gives PBGC authority to prescribe regulations regarding missing
persons owed benefits under terminated retirement plans, including
rules on the amounts to be paid to and from the program and how to
search for missing participants and beneficiaries.
Major Provisions of the Regulatory Action
The final regulation streamlines requirements and eliminates
unnecessary provisions in the existing missing participants program,
expands the program to most terminated defined contribution plans, to
terminated multiemployer plans covered by title IV, and to terminated
professional service plans with 25 or fewer participants. Under the
regulatory action, PBGC will charge fees for plans to transfer benefits
into the program; the fees will not exceed PBGC's costs. Responding to
comments on the proposed rule, the regulatory action modifies the
criteria for being ``missing,'' provides more flexibility in the
diligent search rules for defined benefit plans, and simplifies the
existing procedures for defined benefit plans to determine the
appropriate sum to transfer to PBGC on behalf of a missing participant
or beneficiary.
Background
In General
The Pension Benefit Guaranty Corporation (PBGC) administers the
pension plan termination insurance program under title IV of the
Employee Retirement Income Security Act of 1974 (ERISA), which applies
to most defined benefit (DB) plans. In general terms, a DB plan is a
retirement plan that provides specified benefits and is subject to
certain funding requirements. Within statutory limits, PBGC guarantees
benefits of participants and their beneficiaries upon the underfunded
termination of a plan covered by title IV. PBGC also monitors the
termination of covered plans that are fully funded for guaranteed
benefits, which must follow procedures provided under title IV.
The process of closing out a terminated retirement plan involves
the disposition of plan assets to satisfy the benefits of plan
participants and beneficiaries. One difficulty faced by a plan
administrator in closing out a terminated plan is how to provide for
the benefits of missing persons. This problem was addressed for single-
employer plans subject to the title IV insurance program by the
creation, under the Retirement Protection Act of 1994 (RPA '94), of a
program administered by PBGC to deal with the benefits of missing
participants and beneficiaries in terminated plans.\1\ Section 4050 of
ERISA, as added by RPA '94, requires a plan administrator to undertake
a diligent search (subject to definition in PBGC regulations) for each
missing participant or beneficiary. It further describes procedures for
a plan to follow in calculating the amount to be transferred to PBGC
for a person who is missing, and for PBGC to follow in providing
benefits to the person when the person ultimately appears--also subject
to PBGC regulations. PBGC implemented the program in part 4050 of its
regulations in 1996.
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\1\ Not all terminated plans are included. ERISA section
4050(a)(1) refers to plans subject to ERISA section 4041(b)(3)(A).
That includes plans in standard terminations (as stated in section
4041(b)(3)(A)) and plans in ``sufficient distress terminations'' (as
provided for in section 4041(c)(3)(B)(i) and (ii)), but not plans
trusteed by PBGC.
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Authorization of Expanded Program
The Pension Protection Act of 2006 amended section 4050 of ERISA to
expand its scope dramatically--offering the prospect of participation
in the missing participants program to terminated multiemployer plans
covered by title IV and several categories of terminated non-covered
plans, including most defined contribution (DC) plans. In general
terms, a DC plan is a retirement plan that provides for a participant
to receive whatever is in the vested portion of the participant's
retirement account. Section 4050(c) of ERISA provides for program
participation for title IV multiemployer plans similar to that for
title IV single-employer plans now in the program (although close-out
of a multiemployer plan may not follow immediately upon plan
termination). Non-title IV plans described under
[[Page 60801]]
section 4050(d) of ERISA would be eligible (but not required) to turn
benefits of missing participants and beneficiaries over to PBGC, and
PBGC is further authorized (but not required) to provide for non-title
IV plans to report how they dealt with missing persons' benefits not
placed either with PBGC or another retirement plan. To develop a better
understanding of the DC plan community's needs and desires for, and
likely responses to, an expanded missing participants program, PBGC
published a request for information (RFI) on June 21, 2013 (at 78 FR
37598). The RFI sought information about the number of missing
participants in terminated plans, the size of their benefits, and how
the benefits were handled. PBGC received 22 responses. Commenters
embraced expansion of PBGC's missing participants program to accept
accounts from terminated DC plans and to include those owed money in a
searchable database of missing participants and beneficiaries.\2\ There
was broad support for coordination among federal agencies on issues
related to sponsor obligations. Commenters urged the need for both
flexibility and safe harbors.
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\2\ See http://www.pbgc.gov/documents/2013-14834.pdf.
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In November 2013, the Advisory Council on Employee Welfare and
Pension Benefit Plans (ERISA Advisory Council) issued a report \3\ on
Locating Missing and Lost Participants based on hearings at which a
PBGC staff member testified (among other things) about responses to
PBGC's RFI. The Advisory Council report recommended development of
effective methods for and guidance on searching for missing
participants, including use of web search and commercial locator
services. It also recommended that, if PBGC implemented a missing
participants program for terminated DC plans, compliance with the PBGC
program should be accorded safe harbor status under ERISA. And it urged
cooperation among federal agencies, in particular to develop and
implement PBGC's missing participants program.
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\3\ See http://www.dol.gov/ebsa/publications/2013ACreport3.html.
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On August 14, 2014, the Employee Benefits Security Administration
(EBSA) of the Department of Labor (DOL) issued Field Assistance
Bulletin No. 2014-01 on Fiduciary Duties And Missing Participants In
Terminated Defined Contribution Plans (the FAB).\4\ The FAB provides
guidance about required search steps and distribution options for
benefits of missing participants in terminated DC plans.
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\4\ See http://www.dol.gov/ebsa/regs/fab2014-1.html.
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Coordination and Consultation
As recommended by the ERISA Advisory Council, PBGC staff consulted
with EBSA staff and staff at the Solicitor of Labor's Plan Benefits
Security Division, as well as the Internal Revenue Service (IRS) and
the Department of the Treasury. Those consultations were very helpful
in developing the proposed and final regulations.
In those consultations, the IRS informed PBGC that it anticipates a
DC plan would not fail to be qualified solely because it transfers
appropriate amounts to PBGC in accordance with PBGC's missing
participants program pursuant to section 4050(a)(2) of ERISA.
IRS also informed PBGC that, consistent with existing treatment of
transfers to PBGC from terminated single-employer DB plans covered by
title IV of ERISA, amounts transferred by terminated DC and other plans
to PBGC under the expanded missing participants program are not taxable
distributions subject to withholding or reporting.
The Department of Labor advised PBGC that it intends to review and
possibly revise its regulations and guidance to coordinate with PBGC's
implementation of a final rule on missing participants. For instance,
the Department of Labor indicated its intent to review its fiduciary
safe harbor regulation entitled ``Safe Harbor for Distributions from
Terminated Individual Account Plans,'' which provides for distributions
to individual retirement plans in such circumstances as when the
participant or beneficiary was furnished a notice but failed to elect a
form of distribution in a timely manner,\5\ and thus would be
considered missing under this final rule.\6\ As part of its review, the
Department of Labor said it specifically intends to consider transfers
to PBGC appropriate in these same circumstances. The Department of
Labor also indicated its intent to review its regulation on Termination
of Abandoned Individual Account Plans, which currently provides for
distributions generally to individual retirement plans in circumstances
identical to those set forth in the Safe Harbor for Distributions from
Terminated Individual Account Plans.\7\
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\5\ See 29 CFR 2550.404a-3. In certain limited circumstances,
the Department of Labor's safe harbor permits a fiduciary to
distribute a missing participant's account balance to a federally
insured savings account in the missing participant's name or a State
unclaimed property fund in lieu of a rollover to an individual
retirement plan.
\6\ See 29 CFR 4050.202.
\7\ See 29 CFR 2578.1.
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Proposed Regulation
On September 20, 2016, PBGC published a proposed regulation (at 81
FR 64700) to expand the missing participants program to terminated
multiemployer plans covered by title IV of ERISA similar to the program
for covered single-employer plans. The proposal also provided for a
voluntary program for terminated defined contribution plans and small
professional service defined benefit plans not covered by PBGC
insurance. PBGC received 14 written comments on the proposal from
across the retirement community, including comments from plan sponsors,
third party administrators, financial institutions, representatives of
participants and beneficiaries, and participants themselves. PBGC
adopted a few changes in the final regulation in response to comments,
but the regulation is substantially similar to what was proposed. An
overview of the program's features, the regulation's organization, and
the comments and PBGC's responses are discussed below.
Introduction
Features of the Program
This final rulemaking lays the legal foundation for a program whose
features extend far beyond the confines of the missing participants
regulation. Major features of the new program include:
A new option for DC plans to deal with missing
participants and beneficiaries when closing out the plan and to make it
more likely that missing persons will receive their benefits.
A unified unclaimed pension database of information about
missing participants and their benefits from terminated DB and DC
plans.
A centralized, reliable, easy-to-use directory through
which persons who may be owed retirement benefits from DB or DC plans
could find out whether benefits are being held for them.
Robust features to protect private information about
missing participants and their beneficiaries from inadvertent
disclosure.
Periodic active searches by PBGC for missing participants.
Considerable benefits gained by reuniting missing
participants with their lost retirement money that far outweigh the
modest costs to plans and participants.
Provision for a one-time administrative fee to be charged
for
[[Page 60802]]
plans that transfer missing participants' benefits into the program; no
fee for benefits of $250 or less, no ongoing maintenance fees, and no
distribution charge.
Treating participants or beneficiaries as ``missing'' if
they fail to make necessary benefit elections upon plan termination or
fail to accept lump sum benefits, such as where there are uncashed
checks.
Fewer benefit categories and fewer sets of actuarial
assumptions for DB plans determining the amount to transfer to PBGC and
a free on-line calculator to do certain actuarial calculations.
Elimination of unnecessary rules.
Organization of the Regulation
While the basic requirements are the same across all four types of
plans, because some terminology and processes may vary with each plan
type, the final regulation is divided into four subparts for
readability, with each subpart describing the requirements for one of
the four categories of plans. The four subparts of the regulation are:
A revised version of the existing program for single-
employer DB plans covered by the title IV insurance program (subpart
A),
New requirements for DC plans (subpart B),\8\
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\8\ These are plans that would be described in section 4021 of
ERISA but for section 4021(b)(1), (5), (12), and (13) of ERISA and
that could transfer benefits to PBGC in money (even if stock were
used for other purposes) including plans described in section 403(b)
of the Code under which benefits are provided through custodial
accounts described in section 403(b)(7) of the Code. PBGC's reading
of section 4050(d)(4) of ERISA as plausibly encompassing certain
plans described in section 403(b) of the Code applies with respect
to title IV of ERISA only and should not be read to suggest that the
Internal Revenue Service would interpret this language similarly
with respect to the application of sections 401(a) and 403(b) of the
Code or for any other purpose under the Code.
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New requirements for small professional service DB plans
(subpart C),\9\ and
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\9\ These are plans that would be described in section 4021 of
ERISA but for section 4021(b)(13) of ERISA.
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New requirements for multiemployer plans covered by the
title IV insurance program (subpart D).
Each subpart contains seven sections, dealing with ``Purpose and
scope,'' ``Definitions,'' ``Duties'' (and options for non-PBGC-insured
plans), ``Diligent search,'' ``Filing with PBGC'' (including fees),
``Missing participant benefits,'' and ``PBGC discretion.''
Used throughout the regulation is the term ``distributee.'' The
regulation that is being replaced, following the statute, used the
phrase ``missing participant'' to refer to either a beneficiary or a
participant. To reduce possible confusion from using the word
``participant'' in a phrase that may refer to a beneficiary, the final
regulation (like the proposed) uses the term ``missing distributee'' to
refer to a missing participant or missing beneficiary. However, some
headings in the regulation and some discussion in this preamble refer
to missing participants, the more familiar phrase.
Discussion of Final Regulation and Public Comments
The public comments focused exclusively on the revised rules for
PBGC-insured single-employer DB plans and the new rules for DC plans
(which are not insured by PBGC). There were no comments specific to
multiemployer plans and non-PBGC-insured small professional service DB
plans. However, because the diligent search rules, benefit transfer
(pay-in) rules, and rules PBGC follows for paying benefits to located
participants (pay-out rules) are the same across all DB plans, changes
made to those requirements for PBGC-insured single-employer DB plans
are carried over into the requirements for the other two types of DB
plans. Similarly, because the program is voluntary for all non-PBGC-
insured plans, any changes to rules implementing the voluntary features
for DC plans are carried into the same rules for small professional
service DB plans.
Scope
Terminated Plans
As authorized by the Pension Protection Act of 2006 (PPA), this
final regulation makes PBGC's missing participants program--heretofore
limited to terminated single-employer DB plans covered by title IV's
insurance program--available to other terminated retirement plans.
Commenters commended PBGC for opening up the missing participants
program to terminated DC plans in particular, and six commenters
expressed support for going even further. They encouraged PBGC to look
past a plan's terminated status and assert authority to permit ongoing
plans (particularly ongoing DC plans) with missing participants to use
the program too.
Commenters explained that whether ongoing or terminated, plans face
challenges handling the benefits of participants they can't locate. Two
commenters explained that the challenges will grow as the number of
missing participants continues to grow along with an increasingly
mobile workforce, automatic enrollment in DC plans, etc. Others stated
that PBGC's unclaimed pension search database would be more
comprehensive if it also included information about missing
participants from ongoing plans. Two mentioned legislative efforts in
the last Congress to create another government repository for missing
participant information and accounts, and noted that coordination and
inclusion of ongoing plans in PBGC's program could discourage
duplication, complication, and inefficiencies that might follow from
potential multiple federal programs.\10\ Notwithstanding the importance
of the issues raised by these commenters, such an expansion of the
program is beyond the scope of this rulemaking.
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\10\ See, S. 3078, the Retirement Savings Lost and Found Act of
2016, 114th Congress, which would have required the Department of
the Treasury and the Social Security Administration to create an
online ``lost and found'' for missing participant accounts.
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Voluntary Reporting for DC Plans
The final regulation, like the proposed, provides that PBGC's
missing participants program is voluntary for terminated non-PBGC-
insured plans, e.g., DC plans, and that a non-PBGC-insured plan that
chooses to use the program may elect to be a ``transferring plan'' or a
``notifying plan.'' A transferring plan sends the benefit amounts of
missing distributees to PBGC's missing participants program. A
notifying plan informs PBGC of the disposition of the benefits of one
or more of its missing distributees. PBGC received comments both
supporting and opposing this voluntary reporting program for DC plans.
Section 4050(d)(1) of ERISA permits but does not require non-PBGC-
insured plans covered by the program to turn missing participants'
benefits over to PBGC. Section 4050(d)(2) of ERISA, on the other hand,
says that (to the extent provided in PBGC regulations) non-PBGC-insured
plans must upon plan termination provide information about the
disposition of missing participants' benefits that are not transferred
to another pension plan. PBGC's 2013 request for information (RFI)
flagged this reporting provision for public comment. There were some
differences of opinion on whether reporting should be required or just
permitted. In general, employer advocates considered mandatory
reporting unnecessarily burdensome, while participant advocates
considered it an essential part of an effective pension search program.
PBGC proposed to begin by making participation in the missing
participants
[[Page 60803]]
program voluntary for such plans. PBGC received the same division of
comment on the proposal as on the RFI. Participant advocates denied
reporting would be burdensome to plans and employers since information
needed to establish an individual retirement account (IRA) on behalf of
the participant should be the same information needed to report to
PBGC. They also continued to support mandatory reporting as essential
to having a complete unclaimed pension search database and effective
missing participants program. Employers, practitioners, and financial
institutions supported a voluntary program to ensure that plan
fiduciaries continue to have options in handling missing participant
benefits.
PBGC again considered the comments from both sides and decided to
maintain the direction taken in the proposal--that is, to keep
reporting voluntary for plans not covered by title IV--but to
reevaluate the decision after plans and PBGC gain actual experience
with the program. That will allow PBGC to use experience to determine
the need for and costs of a mandatory requirement weighed against the
completeness of the unclaimed pension search database.
Anti-Cherry-Picking for Transferring DC Plans
Under the final regulation, as under the proposed, a DC plan that
chooses to participate in the missing participants program and elects
to be a transferring plan must transfer the benefits of all its missing
participants into the missing participants program. In the preamble to
the proposal, PBGC stated that it was concerned about the possibility
of ``cherry-picking''--that is, selective use of the missing
participants program--by transferring plans. For example, a plan might
turn over all its small accounts to PBGC, while larger accounts that
can generate larger maintenance fees for commercial individual
retirement plan providers might be turned over to private-sector
institutions that charge asset-based fees. PBGC proposed that if a DC
plan voluntarily participates in the missing participants program as a
transferring plan, it may not pick and choose the missing distributees
whose benefits it turns over to PBGC. PBGC invited public comment on
the validity of its concerns about cherry-picking and on its proposal
for dealing with those concerns.
PBGC received four comments: Three supporting the anti-cherry-
picking rule and one objecting to it. Two supporters asserted that the
rule would increase the number of individuals about whom PBGC has
information in the unclaimed pension search database, making the
database and overall missing participants program more effective, with
one adding that the rule would simplify program administration and
alleviate participant confusion. Another said it did not object if PBGC
believes such a rule improves the program's ability to succeed. The
commenter opposing the rule stated the rule is inconsistent with, and
unnecessary to, a voluntary program. In the commenter's experience, the
market hasn't failed to adequately handle larger missing participant
accounts, which can be rolled over into IRAs, and some commercial
providers have routinely taken in smaller automatic rollover accounts.
The same commenter noted that the rule in any event may be unnecessary
because most missing participant accounts are small.
PBGC considered the commenters' arguments. PBGC disagrees that the
anti-cherry-picking rule changes the voluntary nature of the program;
DC plans may participate in PBGC's missing participants program as
transferring or notifying plans, or not at all. Further, the rule
ensures that the amount in a missing participant's account, and the
ability of that account to withstand fees charged by IRA providers,
aren't factors in whether a plan transfers accounts into the missing
participants program or into IRAs. The rule is consonant with section
4050 of ERISA, which does not put upper or lower limits on the size of
the accounts DC plans may transfer into the missing participants
program. Therefore, PBGC has adopted the anti-cherry-picking rule with
respect to transferring plans without change in the final regulation.
Scope of DB Plan Program
The final regulation, like the proposed, defines what is a DB plan
for purposes of the rules under subparts A (single-employer), C (small
professional service), and D (multiemployer). For all three types of DB
plans, the regulation provides that individual account plans (DC plans)
are not included in the scope of the program for DB plans. One
commenter asked PBGC to clarify that the regulation treats ``rollover
accounts'' in DB plans like DC plans.
The IRS regulations under Code section 414(l) are instructive in
responding to this comment. For purposes of 26 CFR 1.414(l)-1 (dealing
with mergers and consolidations), a plan is a ``single plan'' if and
only if, on an ongoing basis, all of the plan assets are available to
pay benefits to plan participants and beneficiaries. Where a plan
document provides that a portion of the assets is reserved for payment
of individual account benefits and another portion for payment of
pension annuities, the two portions of the assets pertain to two
distinct plans. For example, see Code section 414(k).\11\ When a DB
plan under section 414(k) of the Code terminates, the DB portion and
the individual account portion must each be terminated according to the
rules associated with each kind of benefit. It follows that if the
terminated plan has missing participants in the DB portion, individual
account portion, or both, the DB portion would follow the processes
with respect to those missing participants under the relevant subpart
for DB plans, and the individual account portion would follow the
processes under subpart B for DC plans.
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\11\ Under Code section 414(k), a DB plan that provides a
benefit derived from employer contributions based partly on the
balance of a participant's separate account is treated as a DC plan
for certain purposes and as a DB plan for other purposes.
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In other cases, a participant may roll over a distribution from the
participant's DC plan into the same sponsor's DB plan, pursuant to
section 402(c) of the Code, to enable payment of a larger annuity
benefit under the DB plan. These rollovers increase the participant's
benefit under the DB plan and there is no separate DC account
maintained in the DB plan.\12\ If the participant is missing upon
close-out of the plan, for purposes of the missing participants
program, the entire benefit would be treated under the rules for DB
plans, including how plans calculate the benefit and how PBGC pays the
benefit when the participant is located.
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\12\ See 79 FR 70090 (November 25, 2014); such a rollover is
discussed in Rev. Rul. 2012-4, 2012-8 IRB 386.
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Fees
PBGC stated in the preamble to its proposed regulation that it will
charge fees for participation in the missing participants program. PBGC
received five comments on fees, which are discussed below.
PBGC determined in the proposal to set fees at levels not to exceed
its costs to run the missing participants program and provide essential
services, such as periodically looking for participants and paying
benefits. PBGC's methodology for setting fees under the missing
participants program would incorporate the following elements and
principles:
(1) PBGC would set fees in a manner consistent with the
requirements of 31 U.S.C. 9701 and relevant guidance of the Office of
Management and Budget \13\ and the Government Accountability
[[Page 60804]]
Office.\14\ Fees would be based on PBGC's costs, the value of the
program to plans and participants, policy considerations (of plans,
sponsors, practitioners, and participants and beneficiaries,
encouraging plan participation in the program, and with due regard for
private-sector providers' concerns), and other relevant factors.
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\13\ See OMB Circular A-25, User Charges, https://www.whitehouse.gov/omb/circulars_a025.
\14\ See GAO reports numbers GAO-12-193, User Fees: Additional
Guidance and Documentation Could Further Strengthen IRS's Biennial
Review of Fees, http://www.gao.gov/assets/590/586448.html, and GAO-
08-386SP, Federal User Fees: A Design Guide, http://www.gao.gov/assets/210/203357.pdf.
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(2) PBGC would set fees with a view to collecting, on average and
over time, no more than its out-of-pocket costs for performance of non-
governmental functions in support of the missing participants program.
PBGC would not seek to recover through fees the value of performance of
governmental functions by government employees.
(3) PBGC would set fees as one-time charges, payable when benefits
are paid to PBGC, without any obligation to pay PBGC continuing
``maintenance'' fees or a distribution fee. Fees would not be charged
for reporting to PBGC the disposition of benefits where no amount is
transferred to PBGC.
After considering various fee structures, PBGC proposed a flat fee
that would be simple to understand and easy for plans to administer.
The fee was based on preliminary cost estimates to provide services for
an estimated number of DB and DC missing participants coming into the
new expanded program each year. Based on those estimates, PBGC will
charge a one-time $35 fee per missing distributee, payable when benefit
transfer amounts are paid to PBGC. There will be no charge for amounts
transferred to PBGC of $250 or less. There will be no charge for plans
that only send to PBGC information about where benefits are held (such
as in an IRA or under an annuity contract). Fees will be set forth in
the program's forms and instructions.
Most of the five commenters agreed that $35 is reasonable. Three
commenters suggested PBGC would further increase the value and
encourage the use of its missing participants program by increasing the
size of the benefit exempt from the fee. Commenters suggested a range
of benefit amounts--from $1,000 or less, to $700 or $500 or less--to
exempt from the one-time fee. The commenter that recommended a fee
exemption for accounts of $1,000 or less suggested, alternatively, a
tiered fee structure for small accounts up to $1,000. Another commenter
added that plan sponsors should pay the fee because they make the
decisions to terminate plans.
Whether an expense is properly paid by the sponsor or the plan (or
charged to a participant's account in the case of a DC plan) is an
issue outside the scope of this rule. With respect to the suggestions
for raising the benefit amount exempt from the fee, the various amounts
presented show there isn't consensus supporting a fee amount or
structure different from what PBGC initially proposed, and no
quantitative data to back up one amount over another. Therefore, PBGC
has decided not to change its initial fee structure. PBGC will review
both the amount of the fee and fee structure to determine what is
appropriate based on PBGC's actual experience with the new program and
the principles stated herein.
Concurrently with publication of this final regulation, PBGC has
posted on its website (www.pbgc.gov) forms and instructions for the
missing participants program, which include the statement of fees, for
which approval by the Office of Management and Budget has been
requested.
Missing
Missing--Proposed Regulation
The proposed regulation provided that a distributee is ``missing''
if, for a DB plan, the plan does not know where the distributee is on
close-out. A DB plan distributee also would be missing if the
distributee's benefit was subject to mandatory ``cash-out'' under the
terms of the plan and the distributee failed to elect a method of
distribution on close-out of the plan.\15\ For a DC plan, the proposal
provided that a distributee is missing if the distributee failed to
elect a method of distribution on close-out of the plan.
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\15\ A qualified plan is permitted to require a mandatory cash
out of a participant's benefit pursuant to section 203(e) of ERISA
and section 411(a)(11) of the Code.
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PBGC distinguished in the proposed rule DB plan distributees with
benefits not subject to mandatory cash-out under plan terms, i.e.,
distributees with a right to an annuity. No benefit election is
generally required of these distributees, and absent an election, the
distributee's benefit would be annuitized, preserving the distributee's
rights and options under the DB plan. Accordingly, the proposed rule
provided that DB plan distributees who are not subject to mandatory
cash out under plan terms are missing only if the plan did not know
where they were. The proposed definition of ``missing'' for DC plans
followed Department of Labor regulations,\16\ which treat DC plan
distributees who cannot be found following a diligent search similar to
distributees whose whereabouts are known but who do not elect a form of
distribution.\17\
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\16\ See 29 CFR 2550.404a-3 and 2578.1.
\17\ A missing distributee in a terminated DC plan would include
a distributee who fails to elect a form of distribution in response
to a notice meeting the requirements of 29 CFR 2550.404a-3. If the
notice is returned as undeliverable, the DC plan administrator must
conduct a diligent search that meets the requirements of section 404
of ERISA.
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Missing--Final Regulation
The final rule adopts the proposed rule's definition of ``missing''
for DB plans and the proposed rule's definition of ``missing'' for DC
plans, but with some refinements.
The criterion of not knowing the whereabouts of a distributee was
stated expressly for DB plans in the proposed rule. It is stated
expressly for DB and DC plans in the final rule. PBGC also reconsidered
the language in the proposed rule describing the concept of a
distributee as being missing if the plan does not know where the
distributee is on close-out. If this language were taken literally, a
plan may never know with absolute certainty where a distributee is on
close-out. The final rule provides that one of the conditions for
``missing'' is that the plan does not know ``with reasonable
certainty'' (e.g., if a notice from the plan to a distributee's last
known address was returned as undeliverable) the location of the
distributee on close-out.
In addition to the above refinements, PBGC further modified the
definition of ``missing,'' and clarified the definition in the
preamble, in response to several comments. Those comments are discussed
below.
Uncashed Benefit Checks
Two commenters recommended that PBGC clarify that plans may
transfer into the missing participants program assets being held for
distributees who do not accept lump sum distributions due them, for
example amounts held to pay uncashed benefit distribution checks issued
by a terminated plan. Under the proposed regulation, a distributee was
not considered missing if the distributee had elected a form of
distribution upon close-out of the plan. This definition would not have
included a distributee whose benefit was being paid from the plan by
check even if the check subsequently went uncashed.
PBGC considered the commenters' recommendations and modified
``missing'' for DB and DC plans in the
[[Page 60805]]
final regulation. Under the revised definition, a distributee is
treated as missing if, upon close-out, the distributee does not accept
a lump sum distribution made in accordance with the terms of the plan
and, if applicable, any election made by the distributee. For example,
if a check issued pursuant to a distributee's election of a lump sum
remains uncashed after the last date prescribed on the check or an
accompanying notice (e.g., by the bank or the plan) for cashing it (the
``cash-by'' date), the distributee is considered not to have accepted
the lump sum. The ``cash-by'' date must be a date that is at least 45
days after issuance of the check. If there is no such ``cash-by'' date,
the lump sum is considered unaccepted if the check remains uncashed
after its stale date. This definition applies regardless of whether the
lump sum distribution was the result of a mandatory cash out provision
or a voluntary election.
The benefit transfer amount for a missing distributee who does not
cash a distribution check is to be determined in the same way as for
any other missing distributee. The distributee's benefit transfer
amount must reflect the total value of the benefit without any
reduction for tax withholding.\18\ PBGC will withhold taxes as
appropriate when a missing distributee is found and paid. However, PBGC
believes that there is room for flexibility in how the benefit is paid
to PBGC in circumstances where it may not be practical to reflect the
total value of the benefit in the amount transferred. For example, it
would be permissible for the qualified termination administrator (QTA)
of an abandoned DC plan (as defined under Department of Labor
regulations at 29 CFR 2578.1) to transfer to PBGC the net amount of the
uncashed check. PBGC believes that the final rule's provision allowing
discretion to promote the purposes of the missing participants program
provides PBGC with the necessary flexibility to accommodate such
situations.
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\18\ A payor or plan administrator may file with the IRS to
request a refund of tax amounts withheld. See IRS Internal Revenue
Manual 21.7.2.4.6. Adjusted Employer's Federal Tax Return or Claim
for Refund.
---------------------------------------------------------------------------
PBGC believes this modified definition of ``missing'' for DB and DC
plans relieves some administrative burden on plans trying to complete a
termination when a distributee's benefit check remains uncashed. And it
gives distributees some protection by allowing transfer of the benefit
amount to the missing participants program where the distributee can
search and be searched for and retirement benefits eventually claimed.
Conditional Forfeitures
Two commenters asked PBGC to clarify whether participants for whom
benefits were previously forfeited pursuant to Department of the
Treasury regulation Sec. 1.411(a)-4(b)(6), because the plan could not
locate them, may be treated as missing under the final regulation.
Treasury regulation Sec. 1.411(a)-4(b)(6) provides that a right to a
benefit isn't treated as forfeitable ``merely because the benefit is
forfeitable on account of the inability to find the participant or
beneficiary to whom payment is due, provided that the plan provides for
reinstatement of the benefit if a claim is made by the participant or
beneficiary for the forfeited benefit.'' PBGC believes that such a
claim to benefits isn't lost on plan termination, and so the final
missing participants regulation treats these individuals the same as
any other missing participant. Thus, for example, in a single-employer
DB plan covered by title IV of ERISA, the plan must either purchase an
irrevocable commitment from an insurer or transfer the benefits to
PBGC's program. In a DC plan, the plan may use PBGC's program as either
a transferring or notifying plan. PBGC takes no position on the
permissibility of conditional forfeitures under title I of ERISA.
One commenter requested that if the final regulation treats these
individuals as any other missing participant (as it does), that PBGC
provide transition guidance for terminating single-employer DB plans.
The commenter stated that some plans may not have the records necessary
to value the benefit of a missing participant whose benefit was
conditionally forfeited under Treas. Reg. Sec. 1.411(a)-4(b)(6).
Because forfeiture is conditioned on the right to reinstatement if a
claim is made for the benefits, the plan necessarily should have the
records to determine the benefits the plan must reinstate if a
participant makes a claim. PBGC therefore assumes plans will have such
records. PBGC would expect to deal with defects in such records as it
would with defects in any records on a case-by-case basis.
PBGC also recognizes that QTAs of abandoned DC plans for which
there is no plan sponsor may not be able to reinstate benefits if there
have been conditional forfeitures. As stated elsewhere with respect to
abandoned DC plans, PBGC believes that the final rule's provision
allowing discretion to promote the purposes of the missing participants
program provides flexibility to accommodate this situation if it
arises.
DB Plan De Minimis Benefits Rolled Over Into IRAs
As stated above, the final regulation modifies the existing
definition of ``missing'' for DB plans to include a non-responsive
distributee, i.e., a distributee whose benefit is to be paid as a lump
sum and who has not responded to a notice about the distribution of the
distributee's benefit, or has not accepted the distribution, upon
close-out of the plan. Two commenters requested that PBGC clarify how
it will treat a distributee's benefit that was subject to mandatory
cash-out under the plan and rolled over into an IRA around the time of
the plan's termination. Commenters questioned whether terminating
single-employer DB plans that have rolled over mandatory cash-out
amounts to IRAs could be required to recover those amounts and transfer
them into the missing participants program.
Distributions made in contemplation of plan termination but before
the formal commencement of termination proceedings under title IV of
ERISA have been a matter of concern to PBGC because those to whom such
distributions are made do not receive the protections that the
termination process is designed to give distributees on termination.
Transfers made just before the formal commencement of termination
proceedings in a form that would be improper for a transfer upon plan
termination deserve particular scrutiny. If such a distribution were
found to be in violation of title IV,\19\ the appropriate remedy might
be to reverse it.
---------------------------------------------------------------------------
\19\ 29 CFR 4044.4 Violations.
---------------------------------------------------------------------------
In general, however, distributions made by an on-going DB plan in
accordance with plan provisions and consistent with the plan's pre-
termination practices would not be swept into the termination process.
``Distributee'' under this final rule refers to a person entitled to a
distribution pursuant to close-out of a plan. Someone whose benefit is
rolled over to an IRA before plan termination is not entitled to a
distribution pursuant to close-out because the benefit has already been
distributed. The final rule does not contemplate the undoing of pre-
termination rollovers.
Diligent Search
Whom To Search For
As discussed under Missing, some distributees may be considered
[[Page 60806]]
``missing'' because they are non-responsive, without regard to whether
their plan knows with reasonable certainty their location. If a plan
does indeed know where a non-responsive distributee is, there is
clearly nothing to be gained by a diligent search for that distributee.
The proposed rule provided that a diligent search was required for
every missing participant, but contained a proviso (in the section on
plan duties) that a diligent search was not required for a missing
distributee if the plan knew where the distributee was. PBGC concluded
that this way of expressing the applicability of the diligent search
requirement was potentially confusing. Accordingly, PBGC in the final
rule in both the section on plan duties and the section on diligent
search states that diligent searches are required only for missing
distributees whose location the plan doesn't know with reasonable
certainty.
As in the proposed rule, whether a distributee is considered
missing depends on the distributee's status upon close-out; and
likewise, whether a plan knows with reasonable certainty a missing
distributee's whereabouts, for purposes of the diligent search
requirement, is determined as of close-out.
Diligent Search Methods for DC Plans
The final regulation, like the proposed, provides that a DC plan
must search for each missing distributee whose location the plan does
not know with reasonable certainty. The plan must search in accordance
with regulations and other applicable guidance issued by the Secretary
of Labor under section 404 of ERISA. Compliance with that guidance
satisfies PBGC's ``diligent search'' standard for DC plans.\20\ PBGC
received several comments on this topic, with two commenters
specifically commending PBGC for harmonizing the DC program with search
guidance already established by the Department of Labor and followed by
terminated plans. Another commenter recommended PBGC incorporate
specific search methods into the final regulation (much the same as for
DB plans). In that way, PBGC, as the agency administering the missing
participants program, would have control over the search methods used
to meet the diligent search standard. The same commenter recommended
that the Department of Labor in turn harmonize its search guidance for
DC plans with PBGC's diligent search standard. Another commenter
recommended waiving use of a commercial locator service to find a
participant with an account balance of less than $200 as fees for
locator services can be charged to DC plan accounts and may reduce
small accounts by large percentages.
---------------------------------------------------------------------------
\20\ A distribution generally is permitted under the Department
of Labor's safe harbor regulation with no additional search beyond
the notification sent to the last known address of the participant
or beneficiary in accordance with the requirements of 29 CFR
2520.104b-1(b)(1). If a notice is returned to the plan as
undeliverable, the plan fiduciary must, consistent with its duties
under section 404(a)(1) of ERISA, take steps to locate the
participant or beneficiary and provide notice before making the
distribution. See EBSA's FAB 2014-01 for guidance on search steps.
---------------------------------------------------------------------------
Harmonization is the hallmark of the DC plan missing participants
program. The ERISA Advisory Council in its 2013 report (see the
discussion above in Background) urged cooperation among federal
agencies to develop and implement the missing participants program.
Commenters to the RFI also urged agreement in guidance and rules from
the Department of the Treasury (and Internal Revenue Service), the
Department of Labor's Employee Benefits Security Administration (EBSA),
and the Pension Benefit Guaranty Corporation that affect searching for
and distributing the benefits of missing participants. Guidance from
EBSA on searching for missing participants of terminated DC plans has
been available since 2004 and was updated in 2014. The Department of
Labor's (DOL's) regulatory safe harbor for terminated plans was
effective in 2006. Noting the existing fiduciary guidance on search
requirements for terminated DC plans, PBGC determined that double
search standards established by two agencies applicable to one type of
plan (DCs) would create unnecessary administrative burden and confusion
for plans, service providers, and participants. PBGC therefore adopts
in the final regulation without change the provision that compliance
with DOL's fiduciary search guidance satisfies PBGC's diligent search
standard.
As for waiving use of a commercial locator service, EBSA has
advised PBGC that use of a commercial locator service is not
necessarily required for DC plans. As explained in FAB 2014-01, a plan
fiduciary at a minimum should take certain steps to find a participant.
If those steps fail, ERISA's duties of prudence and loyalty require the
fiduciary to consider if additional search steps are appropriate. In
making this determination, the fiduciary should consider the size of
the participant's account balance and cost of further search efforts.
As a result, the specific additional steps that a plan fiduciary takes
to locate a missing participant may vary depending on the facts and
circumstances. Possible additional search steps include the use of
internet search tools, commercial locator services, credit reporting
agencies, information brokers, investigation databases and analogous
services that may involve charges.
Unknown Beneficiary of a Deceased DC Plan Participant
As noted in the preamble to the proposed regulation, where a DC
plan knows a participant is deceased and has no known beneficiary, the
unknown beneficiary is a distributee under the missing participants
program. In the context of an abandoned DC plan (as defined under
Department of Labor regulations at 29 CFR 2578.1), one commenter asked
for clarification on how to handle benefits where a beneficiary can't
be determined based on available information. The commenter said that a
QTA of an abandoned plan particularly may not have adequate information
to determine beneficiaries as the QTA may not have been the plan's
contractor for services such as maintaining beneficiary designations or
providing qualified domestic relations order (QDRO) review.
PBGC expects that there will be instances where a DC plan knows a
participant is deceased but has little or no information about a
beneficiary. Where an unknown beneficiary of a deceased participant is
missing, as defined in the final regulation, the account balance of the
deceased participant may be transferred into the missing participants
program. PBGC will take into account the fact that there is no known
person to search for in evaluating the plan's fulfillment of the
diligent search requirement for any such distributee. Plan fiduciaries
and QTAs would file in accordance with the forms and instructions for
DC plans what information they have about the participant and
beneficiary. See the section on Filing with PBGC, below, about
flexibilities in filing for abandoned DC plans.
Diligent Search Methods for DB Plans
The search standard for DB plans in the proposed regulation was
based on the requirements in the existing regulation with modifications
inspired by the guidelines in EBSA's FAB.\21\ The proposed standard
listed five specific search methods. The first three were to
[[Page 60807]]
seek information from records of the plan that is closing out, from the
employer, and from other plans of the employer (including health
plans), and to mine these sources for information to locate the missing
individual as well as leads to beneficiaries. The fourth method was to
use a no-fee internet search engine or database, and the fifth was to
use a commercial locator service as specifically defined in the
regulation. PBGC received several comments on the proposed DB plan
diligent search requirement, which are described below.
---------------------------------------------------------------------------
\21\ Under the existing regulation, the diligent search rules
for single-employer DB plans covered by title IV imposed three
requirements: Timeliness, seeking information from beneficiaries of
a missing participant, and use of a commercial locator service.
---------------------------------------------------------------------------
While PBGC's proposed regulation attempted to bring its existing
search rules into closer alignment with the search guidance in the FAB,
PBGC believed that DB plans would welcome a more explicit and concrete
``checklist'' of steps as outlined in the proposal. PBGC sought comment
on whether DB plans would be better served by a different or less
prescriptive search standard. The one response affirmed PBGC's belief
that a more explicit checklist for DB plans is warranted. Therefore the
final regulation, like the proposed, retains this structure.
PBGC also invited comment on searching using a commercial locator
service. The proposed regulation gave meaning to what is a commercial
locator service for purposes of a diligent search to ensure a more
robust, but also necessarily more expensive search, which might not be
cost-effective for distributees with relatively small benefits. PBGC
proposed to address this issue by reserving to itself the authority to
place limits in the missing participants forms and instructions on the
requirement for DB plans to use a commercial locator service. PBGC
asked whether a waiver should be based on the monthly amount of a
distributee's benefit or the present value of the benefit or on some
other criterion, and on whether the waiver should be codified in the
regulation.
In response, two commenters said they supported waiving use of the
commercial locator service method for certain DB distributees and
codifying such waiver. One commenter suggested a waiver for small plans
(not small benefits) with fewer than 500 participants because a locator
service may not be cost-effective for these plans. Another suggested a
waiver for monthly annuity benefits of less than $100. One of these
commenters added that codification would give plans notice that a
waiver is available and if a waiver is subsequently changed.
PBGC considered the commenters' feedback and re-structured the
final regulation so that a DB plan need not use the commercial locator
service method for a distributee with a very small monthly benefit. The
final regulation provides that a plan administrator must have
diligently searched for a missing distributee using one of two search
methods: A commercial locator service or, as an alternative for a
distributee with a very small benefit, i.e., a distributee whose normal
retirement benefit is $50 or less per month, the ``records search
method.'' PBGC did not draw the line at plan size, as recommended by
one commenter, because small plans may have distributees with large
benefits. With more at stake, more expense is justified. In contrast,
the smaller the benefit, the weaker the justification for requiring use
of an expensive search method. Therefore, the final regulation provides
that DB plans can choose to use, instead of a commercial locator
service, a potentially less costly search method (the ``records search
method'') for a participant with a very small benefit.
The ``records search method'' includes the following steps:
Searching the records of the plan that is closing out, of the employer,
and of each retirement or welfare plan of the employer, for information
to locate the distributee; contacting each beneficiary of the
distributee identified from the records; and using an internet search
for which no fee is charged, such as a search engine, a network
database, a public record database (such as those for licenses,
mortgages, and real estate taxes) or a ``social media'' website.
PBGC received comments on two search steps in the proposal that are
now part of the final rule's ``records search method''--searching using
no-fee internet search engines and databases, and searching employer
records.
Regarding no-fee internet searches, one commenter recommended that
a plan that has used a commercial locator service but has not found a
distributee be permitted to skip a no-charge internet search for that
distributee. The commenter argued that no-fee internet searches are
unwieldy for plans with large numbers of missing participants and that
search results can be hard to verify. As stated above, the final
regulation provides that a DB plan must have diligently searched for a
distributee who is missing upon close-out using only one of two search
methods, a commercial locator service or the ``records search method.''
If a DB plan uses a commercial locator service and does not locate the
distributee, regardless of whether the benefit is large or small, no
further searching is required. Similarly, if the ``records search
method'' does not locate the distributee with a very small benefit, no
further searching is required.
Two commenters recommended that PBGC modify or eliminate a search
of the records of the employer that last employed the distributee and
maintained the plan, claiming that this search could be more burdensome
than useful. One commenter's suggestion was to limit the period for
searching to the last employer that employed the participant within the
previous 12 months. Another suggested the method should be optional to
account for situations where a plan is acquired by another employer and
the missing participant is a terminated vested participant of the
former sponsor. In this case, the former sponsor is unlikely to have
kept records on the separated employee.
PBGC considered the potential burden and fruitfulness of records
searches that could go back many years or require searching the records
of another employer. To that end and to keep the cost of the ``records
search method'' in general reasonable, the final regulation provides
that its requirements (e.g., searching the records of the employer (the
contributing sponsor) that most recently maintained the plan and
employed the distributee) apply only to the extent reasonably feasible
and affordable. Searching is not affordable to the extent that the cost
(including the value of labor) is more than a reasonable fraction of
the benefit of the distributee being searched for. What is reasonable
is a matter of judgment and plan fiduciaries are familiar with
reasonableness requirements. See for example ERISA section
404(a)(1)(A)(ii). Spending more to search for a distributee than the
value of the distributee's benefit would seem clearly unreasonable.
Searching is not feasible to the extent that it is thwarted by legal or
practical lack of access to records.
All these requirements are designed to support the basic function
of a diligent search--to demonstrate that an appropriate level of
effort has gone into finding a person who remains missing. To that end,
plan administrators are expected to the extent possible to search using
as much information about a distributee as possible, such as name,
social security number, date of birth, and last known address. As one
commenter explained, searches using multiple data points reduce false
positives and oversized search results, producing a more effective
search.
A plan (DB or DC) that uses PBGC's missing participants program to
provide for the benefits of, or to provide information about the
disposition of
[[Page 60808]]
benefits for, a person whose whereabouts are unknown, must have
followed the diligent search requirements and failed to locate the
participant.
Diligent Search Timeframe
Under the proposed regulation, a diligent search must have been
completed within six months before the last distribution to a non-
missing distributee (if the plan is sending information to PBGC) or
within six months before the date the benefit is transferred to PBGC's
program. One commenter recommended allowing a period longer than six
months to do a diligent search. Experience shows that missing
distributees can be found, and it is more efficient--and typically more
advantageous for the distributee--to be found before close-out, so that
benefits can be distributed in the normal manner. The fact that a
distributee could not be found in the past does not mean that the
distributee is forever lost. PBGC thus believes that diligent searches
should be relatively recent. But after considering the comment, PBGC
has concluded that nine months--rather than the six months provided in
the proposal--is a reasonable time frame for a diligent search.
As stated above, the proposed regulation measured the diligent
search period from a different date depending on whether PBGC received
money or just information about a missing distributee. PBGC believes
different dates aren't necessary and may be unworkable, for example if
a plan has only missing distributees. So, the final regulation uses the
same date for all cases. The nine-month period ends when the
distributee is identified as missing in a filing with PBGC.
Amounts To Be Transferred
DC Plan Pay-In Rules
The amount to be transferred to PBGC on behalf of a missing
distributee--the ``benefit transfer amount''--is relatively simple for
DC plans: It is the amount available for distribution to the
distributee in connection with the close-out of the plan. PBGC received
no comments on its proposed definition of benefit transfer amount for
DC plans, and the final regulation follows the proposed in this regard.
For a missing distributee who was a participant, the benefit transfer
amount would generally be the participant's account balance, but might
not be if (for example) a qualified domestic relations order (QDRO)
required distribution of a portion of the account to another person.
The benefit transfer amount for a DC plan missing distributee also
might (but might not) reflect the deduction of expenses. PBGC will not
inquire into whether an account balance has been reduced for
administrative expenses before it was transferred to PBGC. Whether plan
termination expenses were properly allocated among all plan
participants by the plan's fiduciary before the transfer is beyond the
scope of this regulation.
DB Plan Pay-In Rules--Proposal
For DB plans, the proposed regulation provided that the amount to
be transferred to PBGC is the ``benefit transfer amount'' of a missing
distributee (and a ``plan make-up amount'' if applicable). The benefit
transfer amount would be the present value of future payments of an
annuity.
The proposed valuation rules for determining the benefit transfer
amount represented a significant departure from the existing valuation
rules (for benefits from single-employer plans covered by title IV
insurance). The proposal abandoned a four-category approach to valuing
benefits in the existing regulation in favor of a leaner three-category
approach consistent with that of the statute.\22\ The four benefit
categories under the existing regulation were arrived at by breaking
the first statutory category into two: Benefits actually subject to
mandatory cash-out under plan terms, and benefits that could be
involuntarily cashed out under the law but not under plan terms. The
existing regulation prescribed three sets of assumptions: Plan lump sum
assumptions and two sets of PBGC missing participant assumptions
(``missing participant lump sum assumptions'' and ``missing participant
annuity assumptions).'' \23\ Whichever assumptions were used, the
existing regulation specified that they were to be applied to the most
valuable benefit. Thus, the plan had to value each benefit separately
for a starting date in each year out into the future in order to find
the most valuable one.
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\22\ Section 4050 of ERISA describes three benefit categories:
``de minimis'' benefits that a plan could lawfully cash out without
consent; benefits payable only as annuities; and benefits for which
a lump sum is elective. A plan is to use its own lump sum
assumptions to value benefits in the first category; PBGC missing
participant assumptions for those in the second category; and for
the third category, whichever of the two sets of assumptions
produces the greater present value.
\23\ Under the existing regulation, benefits actually subject to
mandatory cash-out under plan terms are to be valued using plan
assumptions. Benefits that could be involuntarily cashed out under
the law but not under plan terms are to be valued using the
``missing participant lump sum assumptions.'' Benefits not subject
to either voluntary cash-out under the plan or mandatory cash-out
under the statute are to be valued using the ``missing participant
annuity assumptions.'' Finally, benefits that could not be
involuntarily cashed out under the law but for which a lump sum
option is available are to be valued using either the ``missing
participant annuity assumptions'' or plan assumptions, whichever
produces the greater value. Among missing participants whose
benefits are transferred to PBGC under the current program, about 87
percent have benefits that are de minimis under plan or PBGC
assumptions.
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In addition to discarding the four-category approach to benefit
valuations, PBGC proposed to abandon the ``missing participant lump sum
assumptions'' and to modify the ``missing participant annuity
assumptions'' (which were closer to termination assumptions in PBGC's
regulation on Allocation of Assets in Single-Employer Plans (29 CFR
part 4044)) into a new, single set of ``PBGC missing participant
assumptions.'' The proposed ``PBGC missing participant assumptions''
included no adjustment for expenses--neither the adjustment that is
part of the 4044 assumptions nor the load that is part of the missing
participant annuity assumptions in the existing regulation. Mortality
and interest under the proposed new assumptions were to be the same as
under the existing old assumptions, except that the interest assumption
in effect for valuations in January would be used for the entire
calendar year.
Also under the proposal, pre-retirement death benefits were to be
disregarded and the benefit to be valued was to be a straight life
annuity beginning at the expected retirement age (XRA).\24\ Using XRA
avoided the requirement to value the benefit at every age to determine
the most valuable benefit and made the new assumptions more like the
4044 assumptions.
---------------------------------------------------------------------------
\24\ Special ``XRA'' rules would apply to pay-status
distributees and non-participant distributees.
---------------------------------------------------------------------------
A plan that pays no lump sums (even for de minimis amounts) would
have no ``plan assumptions'' for lump sums. Under the existing
regulation, such plans used ``missing participant lump sum
assumptions'' to value all benefits that could lawfully be cashed out.
With the elimination of the ``missing participant lump sum
assumptions'' and the associated benefit valuation category, the
proposed regulation provided that such plans should use assumptions
specified under section 205(g)(3) of ERISA and section 417(e)(3) of the
Code (dealing with determination of the present value of certain
benefits).
Benefits were to be valued as of the date the benefit transfer
amount was paid to PBGC (the ``benefit transfer date''). PBGC invited
comment on this point. Valuing benefits as of the benefit transfer date
would eliminate the need for the rules in the existing regulation about
interest on transfers to PBGC
[[Page 60809]]
between the valuation date and the payment date, since those two dates
would be the same.
Plans were to account separately for the value of benefits payable
in the future (the ``benefit transfer amount'') and the value of
benefit payments missed (or treated as missed) in the past (the ``plan
make-up amount''). The value of a missed payment would be the
accumulated value of the payment (reflecting interest from the date the
payment was due to the date of the plan's payment to PBGC), without
reduction for mortality--that is, on the assumption that the annuitant
was alive. Interest was to be calculated in the same way as for
underpayments of guaranteed benefits by PBGC under PBGC's regulation on
Benefits Payable in Terminated Single-Employer Plans (29 CFR part 4022)
using the Federal mid-term rate described in section 1274(d) of the
Code with monthly compounding. PBGC was to use the same interest
assumption for crediting interest between the date of receipt of a
payment from a plan and the date of payment of a lump sum by PBGC. This
rate, to be called the ``missing participants interest rate,'' is the
same rate prescribed in the existing missing participants regulation as
the ``designated benefit interest rate.''
The proposed plan make-up amount was to include not only missed
payments to distributees who became missing after they had begun to
receive benefit payments, but also payments not made after the required
beginning date under section 401(a)(9)(C) of the Code, regardless of
which assumptions (PBGC or Plan) were used to determine the transfer
amount.
DB Plan Pay-In Rules--Final; Benefit Determination Date
PBGC received three comments dealing with determining the value of
benefits as of the benefit transfer date. One appreciated the clarity
and consistency of valuing benefits as of the benefit transfer date as
proposed. But two commenters expressed concern that the proposal would
create undue complications and additional work where the actual
transfer took place after the anticipated close-out date, especially
with respect to lump sums. Commenters noted that plans determine the
lump sum amounts payable to participants as of an assumed payment date,
generally the anticipated close-out date. However, in some cases, a
plan might not know that a participant is missing at the time the
calculations are done. If the plan finds out that someone is missing
after the fact, the actual benefit transfer date might be a month or
two later than originally anticipated (i.e., not the assumed date used
to determine the lump sum amount). In such situations, the proposal
would seem to require that the plan recalculate the missing
participant's benefit transfer amount on the participant's actual
benefit transfer date, which adds cost and burden to the termination
process. In addition, one commenter said that recalculation using a
much-later-than-anticipated benefit transfer date could affect whether
a participant is still subject to mandatory cash-out and treated as
missing.
Commenters recommended PBGC apply either a 30-day grace period
during which no adjustment to the benefit transfer amount is required,
or essentially go back to the existing rule under which interest is
owed if payment to PBGC is made significantly after the assumed payment
date underlying the calculation of the benefit transfer amount.
In response, the final regulation departs significantly from the
proposed, with a view to reducing burden and simplifying the procedures
DB plans must follow. The benefit transfer date is replaced by a
benefit determination date. The benefit transfer amount will be
determined as of the benefit determination date and will not change
even if it is paid to PBGC on a later date. When paying lump sums, PBGC
will pay a participant the value of the participant's benefit plus
interest for the full period from the date as of which the benefit was
valued by the plan to the date PBGC pays the participant. But for
administrative convenience, PBGC will allow DB plans a 90-day grace
period from the benefit determination date before it collects interest
for amounts not yet transferred. However, if payment is more than 90
days after the benefit determination date, interest at the Federal mid-
term rate will be owed for the period after 90 days through the actual
transfer date. (For a DC plan, the benefit determination date is the
same as the date the plan pays PBGC, because the plan simply pays PBGC
the amount in the account on that date.)
The benefit determination date will be selected by the plan subject
to the limitation that it be within the period from the first
distribution to a non-missing distributee to the last such
distribution.
DB Plan Pay-In Rules--Final; Reported Amounts
While the proposed regulation recognized that benefits must begin
no later than the required beginning date under section 401(a)(9)(C) of
the Code, it did not consider that some plans do not actuarially
increase benefits for terminated vested participants that commence
after normal retirement date and instead provide a lump sum to account
for the accumulated value of benefits that weren't paid from normal
retirement date to the benefit commencement date. For such plans, the
proposal had a few shortcomings. For example, with respect to a missing
participant under age 55 with a non-de minimis benefit, the proposal
anticipated that a plan would be required to report the monthly
straight life annuity payable at each integral age from 55 through the
required beginning date. When the participant was located, the annuity
PBGC would have provided would have been based on those reported
amounts. For a plan that doesn't actuarially increase benefits after
normal retirement age, the amounts reported to PBGC would have been the
same at each age from normal retirement date through required beginning
date, so the monthly benefit PBGC would have provided had the
participant been located and commenced payment after normal retirement
age would have been the same as if the participant had commenced
payment at normal retirement date. Since there was no ``pay-out''
provision to account for missing payments before the required beginning
date in the proposal, that participant would have been shortchanged.
To take plans of this type into account while still having a
simplified approach that works for all DB plans, the final regulation
modifies the pay-out rules for post-normal retirement age start dates,
and the methodology for determining benefit transfer amounts using
``PBGC missing participant assumptions,'' for non-pay status
participants past normal retirement age (with a corresponding change in
the filing requirements).
Under the revised approach, a plan is required to report the
monthly straight life annuity payable at each integral age from 55
through the normal retirement date (or in some cases accrual cessation
date as explained below). When the participant is located, the annuity
PBGC provides is based on those reported amounts (with missed payments
paid as a lump sum with interest). With this approach, participants
whose benefits aren't actuarially increased after normal retirement
date aren't short-changed, and neither are participants who accrued
benefits after normal retirement date.
DB Plans--Final; Normal Retirement Date and Accrual Cessation Date
As stated above, the normal retirement date, or if later, the date
the participant stopped accruing benefits
[[Page 60810]]
(i.e., ``accrual cessation date'') replaces the required beginning
date.
In the proposal, for purposes of determining the present value of
future benefits using PBGC missing participant assumptions, the assumed
benefit start date (for determining the annuity to value) for a
participant past normal retirement date but not yet past required
beginning date, was the benefit transfer date and for a participant
past required beginning date, the required beginning date. In the final
rule, the assumed benefit start date for a participant past normal
retirement date is generally the normal retirement date. However, to
account for situations where a non-pay status missing participant
accrued benefits after the plan's normal retirement date, the final
rule provides that the assumed benefit start date in this situation is
the date the participant ceased accruals. (The final rule does this to
ensure that the annuity PBGC will provide to such a missing participant
when found is no less than what the plan would have provided.)
With respect to participants not yet past normal retirement age,
participants in pay status, and beneficiaries, the final rule retains
the assumed benefit start date provisions from the proposed regulation
for purposes of determining pay-in amounts.
In summary, under the final pay-in rules, the assumed benefit start
date for purposes of the PBGC missing participant assumptions is:
The expected retirement age (XRA) in PBGC's valuation
regulation, for a participant not in pay status who has not reached
normal retirement date;
The normal retirement date (or accrual cessation date if
later), for a participant not in pay status who has reached normal
retirement date;
The actual benefit start date, for a participant in pay
status; and
For a beneficiary, the later of the benefit determination
date or the earliest date the beneficiary could receive benefits under
the plan.
PBGC has created an on-line spreadsheet that will calculate the
present value of a missing participant's benefit expected to be paid on
or after the benefit determination date with the new PBGC missing
participant assumptions. A person would simply enter data, such as
eligibility for early and unreduced retirement and benefit amounts, and
the spreadsheet would do the calculations--including XRA calculations--
necessary to determine the present value of benefits, thus making the
new PBGC missing participant assumptions easier to use.
Except for making the change from required beginning date to normal
retirement date (or accrual cessation date if later), the final
regulation retains the other PBGC missing participant assumptions in
the proposed regulation (e.g., mortality, interest, form of payment).
DB Plans--Final; Missed Payments
Under the proposed regulation, the amount transferred to PBGC for
some distributees--those in pay status or past the required beginning
date--included both the benefit transfer amount and a ``plan make-up
amount,'' representing payments that should have been made but were
missed. The plan make-up amount accumulated the missed payments with
interest at the Federal mid-term rate. In reconsidering its proposal as
described above, PBGC found itself questioning whether the proposed
manner of valuing missed payments, and the requirement to include it in
the amount transferred, was appropriate in situations where benefits
are valued using plan lump sum assumptions. For example, if a plan
determines lump sum amounts for participants past normal retirement age
as the present value of an actuarially increased benefit, there is no
need for a plan make up amount (i.e., the value of post-normal
retirement age missed payments is built into the present value
calculation). In addition, it seems unlikely that plans generally would
use the Federal mid-term rate to accumulate missed payments in
calculating lump sums. Accordingly, PBGC in the final regulation has
revised how the benefit transfer amount is determined for calculations
based on plan lump sum assumptions to provide that missed payments are
to be valued in whatever way the plan would ordinarily value them.
Thus, the term ``plan make-up amount'' is eliminated. However, the
concept is retained for calculations determined using PBGC missing
participant assumptions. For those calculations, the amount of missed
payments with interest is added to the present value of future benefits
to yield the benefit transfer amount.
Filing With PBGC
What To File
The proposed regulation specified certain items to be filed for
each missing distributee, such as the benefit transfer amount or
information about where the missing distributee's benefit is being
held, diligent search documentation and other information, fees, and
certifications.
There was some support among the comments for documentation of
diligent searches, and PBGC considered this matter in developing the
final regulation. With a view primarily to reducing burden, PBGC
decided that it would not initially require that a plan submit specific
documentation of diligent searches with its filing, since compliance
with the regulation (including the performance of diligent searches)
must be certified on the form. PBGC might revisit this decision if it
appears necessary to encourage compliance with the diligent search
requirements.
PBGC decided further to make the regulation less specific about
documentation generally. PBGC realized, for example, that information
would be required not just for each missing distributee (as the
proposed regulation said) but also for the filing plan. Rather than
trying to be more inclusive about data to be filed, the final rule
simply refers to the missing participant forms and instructions for
data required. The final rule does, however, list the three types of
payments required: fees, benefit transfer amounts, and interest on the
latter (for DB plans, if owed). And it retains the supplemental filing
requirement from the proposed regulation for a plan to submit
additional information if PBGC requests. But the nature of supplemental
information that may be requested is more generally stated.
Not within the scope of this rule are documentation, recordkeeping
and other requirements of plans and plan terminations elsewhere under
ERISA and the Code. While PBGC as administrator of the title IV
insurance program can and will audit ERISA title IV plans (such as
single-employer DB plans under a standard termination), such other
requirements for non-title IV plans are properly subject to the audit
and enforcement mechanisms under title I of ERISA and the Code for
ensuring that terminations are properly carried out.
Forms and Instructions
The missing participants forms and instructions for DB plans
require the reporting of the monthly amount of each missing
participant's accrued benefit (if not de minimis) in straight-life form
assuming commencement at each integral age going forward from the later
of the benefit determination date or age 55 to the normal retirement
date (or accrual cessation date if later).\25\ Because of the change in
the final rule from the required beginning date to the normal
retirement date as the last date
[[Page 60811]]
when benefits can be paid or begin to be paid, plans will have fewer
amounts to calculate and report for missing participants with non-de
minimis benefits.
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\25\ PBGC would interpolate where necessary to obtain figures
for fractional ages.
---------------------------------------------------------------------------
Information on missing participants forms filed for DB and DC plans
with PBGC must be certified. A commenter suggested that PBGC add a
checkbox to the forms requiring filers to assert that benefit transfer
amounts are correct, to remind filers of their obligations. PBGC
believes the general certification is sufficient and that adding
another check box to the form is unlikely to increase compliance.
One commenter recommended that some questions be added to the Form
5500 Annual Return/Report of Employee Benefit Plan about whether and
how DC plans used the missing participants program. PBGC will consider
this comment as part of its review of the Form 5500.
Filing for Abandoned DC Plans
The final regulation, like the proposed, provides that the
requirements to use the missing participants program, including filing
requirements and forms and instructions, apply to all terminated DC
plans that choose to use the program, including abandoned plans and
QTAs winding up such plans. One commenter asked PBGC to clarify filing
requirements for abandoned DC plans with respect to diligent searches.
The commenter noted that a QTA may not have or have access to the kinds
of records that typically yield participant contact information as part
of a diligent search.
The diligent search requirement for DC plans, including abandoned
DC plans, is basically the same as the corresponding guidance for
fiduciaries issued by the Department of Labor under section 404 of
ERISA. PBGC expects that any documentation sufficient to demonstrate
compliance with the fiduciary duty to search for missing participants
would likewise satisfy any filing requirements PBGC might impose for
diligent searches.\26\ As indicated under What to file above, PBGC has
decided not to require submission of diligent search documentation with
missing participants forms; but if it were to do so, such documentation
would most naturally relate to the QTA's search efforts rather than to
the content of historical records.
---------------------------------------------------------------------------
\26\ See, FAB 2014-01, which states: ``Plan fiduciaries must be
able to demonstrate compliance with ERISA's fiduciary standards for
all decisions made to locate missing participants and distribute
benefits on their behalf. If audited, plan fiduciaries could
demonstrate compliance using paper or electronic records.''
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Missing or incomplete historical records can present a challenge to
any plan, not just abandoned DC plans (although the latter as a group
are particularly likely to suffer from this problem). PBGC expects the
challenges of making, keeping, finding, and using records to be dealt
with carefully, skillfully, prudently, and diligently, and where that
is the case, PBGC believes this final rule provides flexibility to
accommodate difficulties of the kind contemplated by the commenter.
Filing Deadline
In the proposed regulation, the filing deadline for title IV
single-employer DB plans would have been 90 days after the distribution
deadline in PBGC's regulation on Termination of Single-Employer Plans
(29 CFR part 4041). (For plans undergoing sufficient distress
terminations, the distribution deadline reflects such plans' special
circumstances.) For all other plans, including DC plans, the filing
deadline would be 90 days after completion of all distributions not
subject to the missing participants program.
One commenter expressed concern that the proposed filing deadline
for DC plans--90 days after the last distribution to a participant who
isn't missing--might not give DC plans enough time to complete diligent
search and other termination tasks if the plan potentially has many
missing participants. The commenter suggested the timeframe be extended
to 180 days. There was also a question from a commenter as to whether
payment from DC plans (of the benefit transfer amount and fees, if any)
would be required when forms were filed. PBGC responds to this latter
comment that it expects that forms and any required payment would be
sent simultaneously.
As to the former, PBGC has given new thought to its administrative
procedures for processing filings and now believes that the mechanics
of filing are better left to the missing participants forms and
instructions, where there is a bit more flexibility than if the
procedures were hard-wired in the regulatory text. With regard to
filing deadlines for DC plans, while PBGC wants plans to act promptly,
it does not want to set standards that discourage DC plan
participation. PBGC's understanding is that plans not covered by title
IV of ERISA must distribute all assets to participants and
beneficiaries as soon as administratively feasible after the plan's
termination date. As a rule of thumb, plans are expected to complete
termination within one year. Accordingly, the filing instructions set
the filing deadline for plans not covered by title IV as the later of
90 days after the last distribution not subject to the missing
participants regulation or one year after the plan's termination date
under IRS Rev. Rul. 89-87.\27\
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\27\ 1989-2 CB 81.
---------------------------------------------------------------------------
For single-employer plans covered by title IV, the filing deadline
set in the filing instructions is the same as under the existing
regulations, the date the post-distribution certification is due, i.e.,
within 30 days after the last distribution date. This deadline was
changed back to the existing rule from what was in the proposed
regulation to maintain consistency in filing for single-employer DB
plans undergoing standard terminations.
PBGC Reliance
The vast majority of plans using the expanded missing participants
program will be DC plans, over which (beyond their participation in the
program) PBGC has no authority. The same is true of small professional
service DB plans. This circumstance has led PBGC to re-evaluate its
function under the missing participants program with respect to all
plans covered by the program; that re-evaluation is reflected in the
revision of the administrative review regulation including noting that
a participant's recourse is against the plan or plan sponsor, and not
PBGC, if a plan incorrectly calculated a benefit transfer amount (see
Administrative Review under Related Regulatory Amendments below). PBGC
has concluded that in its role as administrator of the missing
participants program, it has and may exercise only very constrained
authority. Accordingly, PBGC has removed from the final regulation
provisions dealing with audits and related matters and replaced them
with provisions making clear that as the missing participants program
administrator, PBGC relies on information from plans participating in
the program and accepts that information. PBGC holds the information
and funds entrusted to it and passes them on to proper claimants. While
this does not mean that mistakes cannot be corrected, it does mean that
the missing participants program will not be expected to take the
initiative in making corrections. However, PBGC's role as administrator
of the missing participants program does not detract from its authority
as administrator of the title IV insurance program, including as to
matters bearing on the missing participants program (such as the amount
of benefit a missing distributee
[[Page 60812]]
may be entitled to from a plan terminated in a standard termination).
The extent of that authority is not a proper subject of the missing
participants regulation. Neither is the extent of the authority of
other federal agencies to pursue violations of ERISA and the Code
including with respect to plan terminations and the distribution of
assets to participants missing or not. No provision of the missing
participants regulation detracts from that authority.
Benefits Paid to Located Participants
Pay-Out Rules Common to DB and DC Plans
One principle that carries over from the existing regulation to the
final regulation is that PBGC will receive money for the benefits of
some missing distributees but only information about the benefits of
others. As under the current program, therefore, there will be two ways
PBGC may connect claimants with their benefits. PBGC may pay benefits
itself (where PBGC has received a benefit transfer amount from the
claimant's plan) or may provide information to the claimant from the
plan about how benefits not transferred to PBGC can be claimed (for
example, where they have been annuitized with an insurer or transferred
to an IRA). The final regulation, like the proposed, modifies the
language about PBGC's providing information to clarify that PBGC's role
in such circumstances (which is subject to the Privacy Act) does not
include resolution of questions about entitlement to a benefit held by
another entity (such as an insurance company). Those questions, and
questions about revealing personal information about such a missing
participant to a different claimant, are more properly resolved by the
entity (for example, insurer or custodian) holding the benefit.
A concept common to both DB and DC plans in the final regulation,
as in the proposed, is that of ``qualified survivors,'' who would be
entitled to benefits with respect to a missing participant in
situations involving--for example--deceased missing participants
without spouses.
The difference between the proposed and final rules is that for
both DB and DC plans, PBGC in the final rule would look to beneficiary
designations provided by the plan in its filing with PBGC as part of
determining who would be entitled to benefits with respect a deceased
missing participant. The proposed rule only included this provision for
DC plans. While it may be uncommon that a DB plan would have a valid
beneficiary designation on file before a benefit election is made, it
is not unheard-of. To recognize these cases, PBGC included in the
definition of ``qualified survivor'' for DB plans reference to
beneficiary designations provided by the plan in its filing with PBGC.
The final rule, therefore, provides that PBGC will identify
qualified survivors for both DB and DC plan missing distributees by
looking first to provisions of any applicable QDRO; then, PBGC will
look to the plan's filing with PBGC for identification of persons
potentially entitled to benefits with respect to the decedent under
plan provisions (including beneficiary designations consistent with
plan provisions); finally, if the plan's filing did not identify a
person entitled to benefits with respect to a decedent, PBGC will refer
to a list of relatives that echoes Sec. 4022.93 of PBGC's regulation
on Benefits Payable in Terminated Single-Employer Plans, but includes
just four categories: \28\ Spouses, children, parents, and
siblings.\29\
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\28\ The final rule does not include on this list the two other
categories of Sec. 4022.93 which are: Estates, if open, and next of
kin in accordance with applicable state law.
\29\ In PBGC's view, this terminology includes adoptive
relationships (but not ``step'' relationships); thus the terminology
is used without qualifying adjectives (such as ``natural or
adopted'').
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When PBGC finds a participant, depending on whether the amount is
de minimis, the participant has a choice of distribution options and
methods. Several commenters queried whether PBGC could distribute lump
sum retirement savings to found participants in a direct rollover to a
qualified plan or IRA. PBGC does offer participants the option of tax-
free rollovers directly into a qualified retirement plan or IRA. PBGC
also allows for partial rollovers, rollovers to Roth IRAs, and taxable
direct deposit into a savings or checking account (and participants may
choose to be paid out by check). In addition, PBGC believes the missing
participants program complies with all applicable tax withholding and
reporting rules with respect to retirement plan money held in the
program and rolled over or otherwise distributed to found participants.
The final regulation, like the proposed, does not provide pay-out
rules for situations involving DB participants whose benefits went into
pay status under the plan before they became missing. Nor does it
provide pay-out rules for situations--under either DB or DC plans--
involving missing beneficiaries (such as situations involving missing
alternate payees or situations where a plan knows a participant is dead
and has a beneficiary, but the beneficiary is missing). PBGC considers
such circumstances sufficiently uncommon that the new regulation need
not address them. PBGC had invited public comment about whether the
regulation should address such circumstances and if so, how. One
commenter acknowledged PBGC's conclusion, but suggested that PBGC might
find those circumstances more common under the new program. While PBGC
did not make a change in the final regulation, it intends to review
whether pay-out rules may be necessary in such circumstances as it
gains experience with the new missing participants program.
For both DB and DC plans, the final regulation does not deal (as
the existing regulation does) with details such as election of annuity
starting dates, which are left to policies and procedures reflected in
PBGC's missing participants forms and instructions.
DC Plan Pay-Out Rules
The DC plan pay-out rules in the final regulation, like the
proposed, are relatively simple. The rules specify that PBGC will pay
lump sums to found participants whose benefit transfer amounts are de
minimis (defined under section 411(a)(11) of the Code and section
203(e) of ERISA as $5,000 or less). A found distributee whose benefit
transfer amount is non-de minimis will be paid an annuity (a 50 percent
joint and survivor annuity if married), unless the distributee elects
(with spousal consent if married) a lump sum (or another type of
annuity) instead. PBGC will make available the same annuity forms that
it does for participants in trusteed plans under Sec. 4022.8.
One commenter pointed out that most DC plans don't include annuity
options and are designed to satisfy the statutory exception under the
Code and ERISA (section 401(a)(11)(B)(iii) of the Code and section
205(b)(1)(C) of ERISA) from the qualified joint and survivor annuity
rules. The commenter questioned why PBGC would propose a pay-out rule
for participants with non-de minimis benefits contrary to the
distribution options these DC plan participants might be expecting.
Another commenter stated its support for having annuity options as the
default pay-out for non-de minimis accounts.
As stated above, found participants with de minimis benefit
transfer amounts will receive their distribution in a lump sum, as will
the survivors of a deceased participant with no living spouse. This
makes sense where benefits are small or spouses don't exist. PBGC
believes found participants (and
[[Page 60813]]
their spouses) with larger benefits should have a choice of
distribution options, which include various annuity forms and lump
sums. Participants are not prevented from choosing a lump sum, and PBGC
makes valuable lifetime income options available to them regardless of
whether the plan did so. PBGC has retained this choice for DC plan
participants and adopted the proposed pay-out rules in the final
regulation without change.
Additionally, as in the proposed regulation, lump sum distributions
will include interest at the Federal mid-term rate. Conversions to
annuities will be made using assumptions under section 205(g)(3) of
ERISA and section 417(e)(3) of the Code. For elections before the
participant's age 55, PBGC will provide information on all available
payment options for the individual's consideration, including annuity
benefits, which are only available at 55 or later.
DB Plan Pay-Out Rules
As discussed above (under DB Plans--Final; Reported Amounts), PBGC
in the final regulation recognizes that some DB plans require that
benefits begin no later than the normal retirement date. Thus, wherever
the proposed regulation specified the required beginning date, the
final regulation specifies the normal retirement date (or accrual
cessation date if later), to maintain a simplified approach consistent
with the rules for valuing benefit transfer amounts.
The pay-out rules that PBGC proposed for DB plan participants were
generally standardized, rather than reflecting each participant's plan
provisions. To collect, retain (perhaps for decades), interpret, and
apply plan provisions for hundreds of plans, some of which might apply
to only one missing distributee, seemed (and still seems) a daunting
administrative challenge--a challenge out of proportion to the ideal of
paying the benefits of found distributees as their plans would have
paid them. Instead, PBGC focused on two pay-out features that loomed
largest as having the most value to participants--eligibility for lump
sums and early retirement subsidies--and proposed to preserve those,
while in other respects treating all distributees according to common
rules.
Two commenters recommended that PBGC preserve more of the features
of each participant's plan--such as the early retirement date--or even
that PBGC follow all pay-out provisions of each distributee's plan.
PBGC understands the allure of reproducing the features of every
distributee's plan, but believes it has drawn the line at a reasonable
place. Accordingly, the pay-out rules are personalized in the final
regulation only as much as in the proposed.
Flowing from the principle of preserving certain material rights
under plans, PBGC will no longer compute annuity benefits for a
participant as the actuarial equivalent of the benefit transfer amount
(as under the existing regulation). Rather, PBGC will provide annuity
benefits based on what the plan would have provided, including any
early retirement subsidies to which participants would have been
entitled had they not been missing. This is possible because plans must
report the straight life annuity payable to the participant commencing
at each integral age from age 55 to normal retirement date (or accrual
cessation date if later).
Another commenter recommended that lump-sum pay-outs by PBGC for
non-de minimis benefits be based on the value of distributees' benefits
determined using plan assumptions. The benefit transfer amount is the
larger of the amount determined using plan assumptions or the amount
determined using PBGC missing participant assumptions. Thus, accepting
this recommendation would appear to require additional reporting by
plans and record-keeping by PBGC and to result in somewhat lower
benefits for some distributees. PBGC has concluded on balance that the
recommendation would introduce unnecessary administrative complexity
without providing a clearly commensurate advantage. Accordingly, PBGC
has not adopted this suggestion.
In the proposed rule, PBGC provided pay-out rules for deceased
missing participants in DB plans that were the same whether the benefit
was de minimis or non-de minimis. PBGC has rethought this approach in
light of the fact that its benefit payment policy for trusteed plans
treats the two categories of benefits differently. Lump sums are
routinely paid to participants with de minimis benefits and become
available for distribution to participants' heirs. In contrast, non-de
minimis benefits are routinely paid as annuities. PBGC anticipates less
opportunity for confusion in processing payments to located
participants if its approach to deceased missing participants with de
minimis benefits follows more closely its approach to deceased
participants with de minimis benefits in trusteed plans. Accordingly,
PBGC has revised the proposed DB pay-out rules for deceased
participants to make those rules applicable to non-de minimis benefits
only, and has added a new provision for payment of a deceased missing
participant's de minimis benefit to the participant's qualified
survivors as a lump sum.
The main elements of the DB pay-out rules are:
Mandatory lump sums paid if the amount transferred to PBGC
is $5,000 or less.
Elective lump sums available if available under the plan
and the amount transferred to PBGC is over $5,000 (subject to spousal
consent if married).
A variety of annuity payment forms available if the amount
transferred to PBGC is over $5,000.
Annuities available as early as age 55 if the amount
transferred to PBGC is over $5,000.
Amount of a straight life annuity starting at an integral
age equal to the amount the plan would have paid at that age (as
reported by the plan) (with linear interpolation between integral ages
\30\); amounts of other annuity forms determined using PBGC conversion
methodology.
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\30\ For example, a monthly benefit starting at age 55\3/4\
would be 75 percent of the age 56 amount plus 25 percent of the age
55 amount.
---------------------------------------------------------------------------
Annuity payments starting after normal retirement date
calculated as if the annuity began at normal retirement date (or
accrual cessation date if later), with missed payments paid as a lump
sum with interest.
Pre-retirement death benefits available if a married
missing participant dies before the normal retirement date; but not if
the participant is unmarried.
Post-retirement death benefits available if a missing
participant dies after normal retirement date whether married or not.
If the annuity PBGC would pay a participant is not a straight life
annuity, the payments would be set to make the benefit actuarially
equivalent to the straight life annuity that would have been payable
starting at the same time. PBGC will use the actuarial assumptions
under its regulation dealing with optional forms of benefit in trusteed
plans (29 CFR 4022.8(c)(7)) to make the conversion. If, on the other
hand, PBGC pays a lump sum, it would be equal to the amount transferred
to PBGC plus interest at the Federal mid-term rate.
Lump sums--where available--are payable at any age (while annuities
are not paid before a participant's age 55). Spousal consent is
required if a participant wants to receive a non-de minimis benefit in
any form other than a joint and 50-percent survivor annuity. In
situations requiring spousal consent to payment of a lump sum before
age 55,
[[Page 60814]]
PBGC will provide the participant with information about the
availability of payment options.
If an annuity begins later than the participant's normal retirement
date (or accrual cessation date if later), missed payments with
interest (make-up amount) will be paid in a lump sum. If the
participant dies before normal retirement age, the survivor annuity
will be deemed to begin on the later of the participant's 55th birthday
or date of death. If the participant dies on or after the normal
retirement date, the survivor annuity will be deemed to begin at the
normal retirement date (or accrual cessation date if later). For
missing participants under contributory plans, PBGC will pay benefits
(including pre-retirement death benefits) at least equal to the
accumulated mandatory employee contributions.
PBGC Discretion
It is impossible to anticipate and appropriately provide for every
state of events in an undertaking like the missing participants
program. To preserve as much flexibility as possible while treating
like cases in like manner, the final regulation, like the proposed,
incorporates in each subpart a section authorizing PBCG to grant
waivers, extend deadlines, and in general adapt to unforeseen
circumstances, with the proviso that similar treatment be given to
similar situations. This provision takes the place of Sec. 4050.12(g).
No comments were received on the proposed provision and it is adopted
without change in the final regulation.
Repeal of Unnecessary Provisions
Most of the special provisions in Sec. Sec. 4050.11 and 4050.12 of
the existing regulation are repealed as unnecessary or inappropriate:
References to the maximum benefit under Code section 415
(if any) (Sec. 4050.5(a) of the existing regulation) and the minimum
benefit under a contributory plan (Sec. 4050.12(c)(1)). Those
limitations apply to the provisions and administration of plans
generally and are not specific to the missing participants program.
The exclusive benefit provision in Sec. 4050.11(a) and
the limitation on benefits to the amount transferred to PBGC by a plan
for a missing participant (Sec. 4050.11(a) and (b)). The first of
these seems unnecessary and the second would no longer be true.
Relationship of benefits paid to the guaranteed benefit
(Sec. 4050.11(c)), benefits payable in a sufficient distress
termination (Sec. 4050.12(e)), and benefits payable on audit or other
events (Sec. 4050.12(f)).
Limitations on the annuity starting date (Sec.
4050.11(d)). PBGC plans to deal with such matters in its policies for
administering the expanded missing participants program.
Disposition of voluntary contributions (Sec.
4050.12(c)(2)) and residual assets (Sec. 4050.12(d)). PBGC
specifically solicited comment on repeal of the treatment of residual
assets (assets not needed to satisfy plan benefits), but received none.
Provisions regarding missing participants located quickly
by PBGC (Sec. 4050.12(a)). This provision has not been used, and PBGC
believes that enforcement measures where a plan misrepresents its
compliance with diligent search requirements will be more effective
than this provision.
QDROs (Sec. 4050.12(b)). PBGC provides in the pay-out
rules that allowance be made for QDROs.
Payments beginning after the required beginning date
(Sec. 4050.12(h)). This subject is dealt with in the benefit pay-out
provisions.
Related Regulatory Amendments
In General
PBGC is making conforming amendments to its regulations on Filing,
Issuance, Computation of Time, and Record Retention (29 CFR part 4000),
Terminology (29 CFR part 4001), Termination of Single-Employer Plans
(29 CFR part 4041), and Termination of Multiemployer Plans (29 CFR part
4041A).
Administrative Review
PBGC's regulation on Rules for Administrative Review of Agency
Decisions (29 CFR part 4003) sets forth the determinations, listed in
Sec. 4003.1(b), for which aggrieved persons are required to seek
administrative review, (i.e., in the form of administrative appeals or
reconsiderations) before they may seek judicial review. Section
4003.1(b)(11) applies to the missing participants program. Subparagraph
(i) of Sec. 4003.1(b)(11) relates to a determination about the
benefits payable by PBGC based on the amount paid to PBGC under the
program (assuming the amount paid to PBGC was correct). Subparagraph
(ii) of Sec. 4003.1(b)(11) relates to a determination as to the
correctness of an amount paid to PBGC under the program (to the extent
that the benefit to be paid does not exceed the guaranteed benefit).
PBGC proposed changes to the administrative review regulation and
received no comment on the proposed changes. The changes, which are
adopted in the final regulation, are as follows. PBGC is changing Sec.
4003.1(b)(11) by revising the content of paragraph (b)(11)(i) and
eliminating paragraph (b)(11)(ii). Therefore section 4003.1(b)(11) will
no longer have two subparagraphs. Section 4003.1(b)(11) does not refer
to benefits based on an amount paid to PBGC, because in some cases
benefits paid by PBGC under the new program will be monthly annuities
based on information, such as calculations, reported by the plan, not
on amounts paid to PBGC. Thus, an appeal right based on a determination
pursuant to revised Sec. 4003.1(b)(11) relates simply to a
determination of the benefit payable under section 4050 of ERISA and
the missing participants regulation.
An appeal based on a determination made under existing regulation
Sec. 4003.1(b)(11)(ii)--that the right amount was paid to PBGC--is no
longer permitted. PBGC does not make determinations about the amounts
to be transferred to PBGC by plans under the missing participants
program; rather, it is plans themselves that determine how much to
transfer. Thus, there is no PBGC action for a person to be aggrieved by
or for PBGC to revoke or change. Recourse must be against the plan or,
if the plan no longer exists, the plan sponsor. If a claimant's benefit
is guaranteed by PBGC, and the claimant is unable to collect from the
plan or sponsor, the claimant may have a right to payment of the
guaranteed benefit by PBGC, and a dispute about PBGC's determination of
the amount of that benefit is subject to the requirement to pursue
administrative review under Sec. 4003.1(b)(8).
Cost-Benefit Analysis
In General
This rulemaking is not subject to the requirements of Executive
Order 13771 because it results in no more than de minimis net costs.
The rule has been determined to be ``significant'' under Executive
Order 12866. The Office of Management and Budget has reviewed this
final rule under E.O. 12866.
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, and public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes retrospective review of regulations, harmonizing
rules, and promoting flexibility. E.O. 13771 directs agencies
[[Page 60815]]
to offset new incremental costs imposed by new regulations by the
elimination of existing costs associated with two prior regulations;
where there are no new incremental costs, as here, this requirement
does not apply.
Executive Orders 12866 and 13563 require that a comprehensive
regulatory impact analysis be performed for any economically
significant regulatory action, defined as an action that would result
in an annual effect of $100 million or more on the national economy or
which would have other substantial impacts. It has been determined that
this final rule is not economically significant. Thus a comprehensive
regulatory impact analysis is not required. PBGC has nonetheless
examined the economic and policy implications of this rule and has
concluded that the net effect of the action is to reduce costs in
relation to benefits.
This final rule repeals part 4050 of PBGC's regulations and
substitutes an expanded but simpler and more cost-effective part.
This final rule is the cornerstone of a freshly designed program
that expects to improve the process of reconnecting American workers
with lost retirement benefits, at a relatively tiny cost. Here's how
the program will work.
PBGC will accept the retirement benefits and record
information of missing participants from terminating retirement plans.
PBGC will maintain a pension search directory where
missing participants can find their lost retirement benefits.
PBGC will actively search for missing participants.
The benefits held by PBGC will earn interest and be
protected against investment losses.
When missing participants are found, PBGC will pay their
benefits in annuity or lump sum form.
This program will save retirement plans time and money in dealing
with the benefits of missing participants. More participants will
receive their retirement benefits because the centralized pension
search directory will make finding lost benefits much easier and PBGC
will search for missing participants.
PBGC has been successfully operating a small-scale version of this
program for years, limited to single-employer DB plans covered by title
IV of ERISA. Allowing the far greater number of DC plans into the
program will permit economies of scale. PBGC estimates that the
transfer impacts of this final rule will be close to $19 million, as
shown in the table below.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual transfer amounts Before final rule After final rule Net transfer
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits recovered................. $7 million........................... $26 million.......................... $19 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual cost amounts Before final rule.................... After final rule..................... Net cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Filling out forms.................. $456,590............................. $645,750............................. $189,160.
Valuing benefits (DB).............. No change............................
Searching (DB)..................... $19,100.............................. $32,500.............................. $13,400.
--------------------------------------------------------------------------------------------------------------------
Total.......................... $0.5 million......................... $0.7 million......................... $0.2 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
The ``before'' column of the table shows benefits and costs if the
final rule did not become effective. The ``after'' column shows
benefits and costs if the final rule becomes effective. The ``net''
column shows the effect of the final rule (the ``after'' column minus
the ``before'' column). (The costs for DC plans are not imposed by the
final rule, but arise from plans' voluntary election to participate in
the program.)
Benefits Recovered
The missing participants program provides the promise of a ``one-
stop shop'' for workers to find lost benefits from terminated
retirement plans, augmented by active searches by PBGC to find those to
whom benefits are owed. By expanding the number of those who benefit
from the current program, both absolutely and in relation to associated
costs, this final rule cuts costs in relation to benefits.
For fiscal years 2013-2015, PBGC restored about $2.27 million in
lost benefits annually to those entitled to them, while taking in about
955 missing participants per year from about 200 DB plans.
Extrapolating from data gleaned from the existing single-employer DB
program and Form 5500 filings, PBGC is projecting that its intake under
this final rule will expand by 10,000 missing participants per year
from 3,100 DC plans. In the proposed rule, PBGC calculated the
anticipated benefit recovery based on the increase in the number of
plans (about a 16-fold increase). PBGC believes a better and more
conservative approach is to calculate its anticipated payment of
benefits based on the projected increase in the number of missing
participants (about an 11-fold increase). Accordingly, PBGC is
projecting that it will unite missing participants with an estimated
$26 million worth of lost retirement benefits each year under this
final rule ($2.27 million x 10,955/955).\31\
---------------------------------------------------------------------------
\31\ Benefits paid out each year are not limited to those of
missing participants taken into the program that year. It may take
years to find a missing participant. But the number of participants
entering the program is an indication of the program's size.
---------------------------------------------------------------------------
As noted above, PBGC's current benefit pay-out is about $2.27
million. But this is for DB plans only. Although DC plans have not been
able to participate in the centralized missing participants program,
PBGC assumes that some lost DC benefits are recovered. PBGC also
assumes that the difference between the ease of finding benefits in a
single centralized governmental data base versus many fragmented
private-sector ones means that the benefit recovery ratio is far more
favorable for the former. Accordingly, PBGC assumes that, among the DC
plans that will choose to participate in the expanded missing
participants program, the amount of benefits that would be recovered
without the program is about 20 percent of the amount recoverable with
the program, or about $4.75 million. Thus the total benefits that PBGC
assumes would be reunited with those entitled to them in the absence of
this final rule is about $7 million. The effect of the final rule will
be to increase benefits by $19 million.
Filling Out Forms
As discussed in the proposal, the burden of using PBGC's existing
forms (or comparable forms) for the expanded program would be about
$861,000 (for 3,300 plans per year), assuming two hours per plan. In
the absence of this final rule, the portion of this cost attributable
to 200 DB plans (about $52,180) would still be incurred. In addition,
the 3,100 DC plans that PBGC expects to participate in the expanded
[[Page 60816]]
program would, in the absence of this final rule, have to provide
comparable information about their missing participants to whatever
financial institutions were to hold the participants' benefits. PBGC
thinks it likely that such institutions would require plans to spend at
least an hour filling out forms or otherwise providing information
about missing participants. Using the same assumptions for pricing
paperwork burden, this represents a cost of about $404,410. Thus in the
absence of this rule, the cost incurred for filling out forms would be
about $456,590.
PBGC has redesigned its missing participants forms for use in the
new program. The new forms contain only about 75 percent as many blanks
to fill in as the current forms. Accordingly, PBGC is revising the
assumed cost of filing under the final rule to 75 percent of the
$861,000 previously assumed, or $645,750. For DB plans, this represents
a decrease in costs. For DC plans, the costs will only be incurred by
plans that decide to use the missing participants program. If, as PBGC
assumes, 3,100 DC plans make that decision, the impact of the final
rule is to increase costs by $189,160.
Valuing Benefits
Since DC plans simply send missing participants' account balances
to PBGC, they incur no cost for benefit valuation. And although the
final rule changes the valuation rules for DB plans, the changes tend
to offset each other. As indicated in the proposed rule, therefore,
PBGC believes that the final rule makes no significant change in costs
or benefits associated with valuing benefits.
Searching
Since the final rule imposes no search requirement on DC plans
beyond what is already required under title I of ERISA, DC search costs
are the same with or without the final rule and thus can be ignored in
considering the changes in benefits and costs attributable to adoption
of the final rule.
In the proposed rule, PBGC discussed DB search costs on a plan-by-
plan basis, consistent with the proposal that the same search rules
(records searches plus a commercial locator service search) apply to
all missing participants. The final rule generally requires a
commercial locator service search, but permits plans to use a simple
records search method for participants with normal retirement benefits
of not more than $50 a month. Accordingly, the analysis must now be
participant-by-participant.
PBGC believes its estimate that a search using a commercial locator
service as defined in the final rule costs about $40 per participant is
conservative. PBGC further believes that under the existing program
(without a definition of ``commercial locator service''), many plans
are incurring such costs, although many are not, and thus that it is
reasonable to estimate that on average, search costs under the existing
regulation are $20 per participant. On that basis, search costs under
the existing program may be estimated at $19,100 ($20 each for 955
missing participants).
PBGC does not currently collect data on missing participants'
normal retirement benefits because it simply pays annuities that are
actuarially equivalent to the amounts plans deposit with PBGC. But the
actuarial value of a $50 normal retirement benefit can be calculated
for any age, and PBGC has statistics on the distribution of ages and
benefit sizes among missing participants. Using this information, PBGC
estimates that 80 percent of missing participants have normal
retirement benefits of not more than $50. Out of 955 missing
participants, therefore, PBGC expects 764 to be searched for by the
commercial locator service method at a cost of $40 each (total
$30,560).
Plans could choose to use commercial locator services for the 191
other missing participants, but since this group includes some very
small benefits, PBGC assumes that simple records searches will be done
for them. For smaller benefits, the ``affordability'' limitation in the
final rule will keep costs low. For larger benefits, the cost of
records searches will vary with the availability and format of records,
but PBGC expects many record systems to be electronic, permitting
nearly instantaneous searching. For purposes of this analysis, PBGC is
putting a figure of $10 on the records search process. That makes the
search cost for this group $1,910, and the total cost of searching
under the final rule $32,470.
Fees
While actions establishing or changing fees for governmental
services are not considered costs requiring offsets, as explained in
OMB guidance on the requirements of E.O. 13771,\32\ fees are taken into
account for purposes of analyzing the transfers, costs and benefits of
a rulemaking under E.O. 12866. Therefore, the missing participant
program administrative fee is described here.
---------------------------------------------------------------------------
\32\ M-17-21, Guidance Implementing Executive Order 13771,
Titled ``Reducing Regulation and Controlling Regulatory Costs.,''
Q&A 13, April 5, 2017.
---------------------------------------------------------------------------
As noted above, PBGC's working hypothesis is that opening the
missing participants program to DC plans will add 10,000 missing
participants per year to the current figure of 955. The fee is only
paid on benefits transferred that are greater than $250. Statistics on
the current DB-only program indicate that about 86 percent of missing
participants have benefits worth over $250. Extrapolating to the new
combined program, PBGC expects $35 fees to be paid for about 9,420
missing participants, a total of about $330,000.
Under the current DB-only program, fees are paid in the form of a
``load'' of $300 built into the actuarial assumptions for valuing
benefits over $5,000. About 210 (22 percent) of the 955 missing
participants currently entering the program annually have benefits at
least that high; thus annual fees are currently running at about
$63,000. But fees are a factor in the placement of retirement benefits
outside PBGC's program as well. One commenter described the exhaustion
of a $100 account within months due to a combination of set-up and
maintenance fees. Fees for account statements and for processing
withdrawals are also common. Because it may be years before a missing
participant finds and claims a benefit, maintenance or management fees
can cumulate to very substantial levels. For the 10,000 missing
participants that PBGC assumes DC plans would choose to bring into the
PBGC missing participants program, the burden of fees in the absence of
the program--in the absence of the final rule--can conservatively be
considered equivalent to a single up-front charge of $100. For an
assumed 10,000 missing participants, that amounts to $1 million a year.
Thus, in the absence of this final rule, fees would be running about
$1.06 million a year.
Accordingly, the effect of the final rule will be to reduce fees by
about $730,000.
Regulatory Flexibility Act
The Regulatory Flexibility Act imposes certain requirements with
respect to rules that are subject to the notice and comment
requirements of section 553(b) of the Administrative Procedure Act and
that are likely to have a significant economic impact on a substantial
number of small entities. Unless an agency determines that a final rule
is not likely to have a significant economic impact on a substantial
number of small entities, section 604 of the Regulatory Flexibility Act
requires
[[Page 60817]]
that the agency present a final regulatory flexibility analysis at the
time of the publication of the final rule describing the impact of the
rule on small entities and steps taken to minimize the impact. Small
entities include small businesses, organizations and governmental
jurisdictions.
Small Entities
For purposes of the Regulatory Flexibility Act requirements with
respect to this final rule, PBGC considers a small entity to be a plan
with fewer than 100 participants. This is consistent with certain
requirements in title I of ERISA \33\ and the Internal Revenue
Code,\34\ as well as the definition of a small entity that the
Department of Labor (DOL) has used for purposes of the Regulatory
Flexibility Act.\35\
---------------------------------------------------------------------------
\33\ See, e.g., ERISA section 104(a)(2), which permits the
Secretary of Labor to prescribe simplified annual reports for
pension plans that cover fewer than 100 participants.
\34\ See, e.g., Code section 430(g)(2)(B), which permits single-
employer plans with 100 or fewer participants to use valuation dates
other than the first day of the plan year.
\35\ See, e.g., DOL's final rule on Prohibited Transaction
Exemption Procedures, 76 FR 66,637, 66,644 (Oct. 27, 2011).
---------------------------------------------------------------------------
Further, while some large employers may have small plans, in
general most small plans are maintained by small employers. Thus, PBGC
believes that assessing the impact of the final rule on small plans is
an appropriate substitute for evaluating the effect on small entities.
The definition of small entity considered appropriate for this purpose
differs, however, from a definition of small business based on size
standards promulgated by the Small Business Administration (13 CFR
121.201) pursuant to the Small Business Act. PBGC therefore requested
comments on the appropriateness of the size standard used in evaluating
the impact of the proposed rule on small entities. PBGC received no
comments on this point.
Certification
PBGC certifies under section 605(b) of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) that the amendments in this rule will not
have a significant economic impact on a substantial number of small
entities. Accordingly, as provided in section 605 of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.), sections 603 and 604 do not
apply. This certification is based on PBGC's estimate (discussed above)
that the economic impact of the final rule on any entity would be
insignificant. PBGC believes that the expanded missing participants
program will be particularly helpful to small DC plans and that the
improvements to the existing program will be helpful to small DB plans.
Paperwork Reduction Act
PBGC is submitting the information collection requirements under
part 4050 to the Office of Management and Budget (OMB) for review and
approval under the Paperwork Reduction Act. The collection of
information under part 4050 is currently approved under OMB control
number 1212-0036 (expires November 30, 2017). That control number also
covers PBGC's information collection on plan termination. PBGC is
seeking paperwork approval of the new missing participants forms and
instructions under a new control number. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid OMB control number.
PBGC needs the information submitted by plans under part 4050 to
identify the entities that are to provide benefits with respect to
missing distributees whose benefits are not transferred to PBGC; and to
attempt to find missing distributees whose benefits are transferred to
PBGC and to pay their benefits.
PBGC estimates that the time for a plan to comply with the
collection of information for the current program is 2 hours. But PBGC
has significantly simplified its forms, reducing the number of items by
a quarter. PBGC thus estimates that the burden of compliance will be 75
percent of the burden estimated in the proposed rule. As discussed in
this final rulemaking, there would be about 3,300 respondents each
year, and the total hours spent on the information collection would be
4,950. PBGC estimates that 20 percent of the work will be done in-house
and 80 percent contracted out. Thus the hour burden for plans is
estimated at about 990 hours (20 percent of 4,950 hours). The dollar
burden of the 3,960 hours contracted out (80 percent of 4,950 hours) is
estimated at about $621,750. The dollar equivalent of the 990 in-house
hours is about $24,000. Total paperwork burden is estimated at
$646,000.
List of Subjects
29 CFR Part 4000
Employee benefit plans, Pension insurance, Pensions, Reporting and
recordkeeping requirements.
29 CFR Part 4001
Employee benefit plans, Pension insurance, Pensions.
29 CFR Part 4003
Administrative practice and procedure, Employee benefit plans,
Pension insurance, Pensions.
29 CFR Part 4041
Employee benefit plans, Pension insurance, Pensions.
29 CFR Part 4041A
Employee benefit plans, Pension insurance, Pensions.
29 CFR Part 4050
Employee benefit plans, Pension insurance, Pensions, Reporting and
recordkeeping requirements.
In consideration of the foregoing, PBGC amends 29 CFR parts 4000,
4001, 4003, 4041, 4041A, and 4050 as follows:
PART 4000--FILING, ISSUANCE, COMPUTATION OF TIME, AND RECORD
RETENTION
0
1. The authority citation for part 4000 continues to read as follows:
Authority: 29 U.S.C. 1083(k), 1302(b)(3).
Sec. 4000.41 [Amended]
0
2. In Sec. 4000.41, remove ``(premium payments), Sec. 4050.6(d)(3)
of this chapter (payment of designated benefits for missing
participants)'' and add in its place ``(premium payments)''.
PART 4001--TERMINOLOGY
0
3. The authority citation for part 4001 continues to read as follows:
Authority: 29 U.S.C. 1301, 1302(b)(3).
0
4. In Sec. 4001.1:
0
a. The existing text is designated as paragraph (a) with the paragraph
heading ``In general.'' added.
0
b. Paragraph (b) is added to read as follows:
Sec. 4001.1 Purpose and scope.
* * * * *
(b) Title IV coverage. Coverage by section 4050 of ERISA is not and
does not result in or confer coverage by title IV of ERISA.
Sec. 4001.2 [Amended]
0
5. In Sec. 4001.2, the definition of ``Distribution date'' is amended
as follows:
0
a. Paragraph (2) and paragraph (1) introductory text are removed.
0
b. Paragraphs (1)(i) and (ii) are redesignated as paragraphs (1) and
(2), respectively.
[[Page 60818]]
PART 4003--RULES FOR ADMINISTRATIVE REVIEW OF AGENCY DECISIONS
0
6. The authority citation for part 4003 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3).
0
7. In Sec. 4003.1, paragraph (b)(11) is revised to read as follows:
Sec. 4003.1 Purpose and scope.
* * * * *
(b) * * *
(11) Determinations with respect to benefits payable by PBGC under
section 4050 of ERISA and part 4050 of this chapter.
* * * * *
PART 4041--TERMINATION OF SINGLE-EMPLOYER PLANS
0
8. The authority citation for part 4041 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350.
0
9. In Sec. 4041.28:
0
a. Paragraph (a)(3) is added;
0
b. Paragraph (c)(5) is amended by removing ``part 4050'' and adding in
its place ``subpart A of part 4050 of this chapter''.
The addition reads as follows:
Sec. 4041.28 Closeout of plan.
(a) * * *
(3) Missing participants and beneficiaries. The distribution
deadline is considered met with respect to a missing distributee to
whom subpart A of part 4050 of this chapter applies if the benefit
transfer amount for the missing distributee is considered timely
transferred to PBGC under subpart A of part 4050 of this chapter.
* * * * *
PART 4041A--TERMINATION OF MULTIEMPLOYER PLANS
0
10. The authority citation for part 4041A continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1341a, 1441.
0
11. In Sec. 4041A.42:
0
a. The existing text of Sec. 4041A.42 is designated as paragraph (a)
with the paragraph heading ``In general.'' added.
0
b. Paragraph (b) is added to read as follows:
Sec. 4041A.42 Method of distribution.
* * * * *
(b) Missing participants and beneficiaries. The plan sponsor must
distribute plan benefits of missing distributees in accordance with
subpart D of part 4050 of this chapter.
0
12. Part 4050 is revised to read as follows:
PART 4050--MISSING PARTICIPANTS
Subpart A--Single-Employer Plans Covered by Title IV
Sec.
4050.101 Purpose and scope.
4050.102 Definitions.
4050.103 Duties of plan administrator.
4050.104 Diligent search.
4050.105 Filing with PBGC.
4050.106 Missing participant benefits.
4050.107 PBGC discretion.
Subpart B--Defined Contribution Plans
4050.201 Purpose and scope.
4050.202 Definitions.
4050.203 Options and duties of plan.
4050.204 Diligent search.
4050.205 Filing with PBGC.
4050.206 Missing participant benefits.
4050.207 PBGC discretion.
Subpart C--Certain Defined Benefit Plans Not Covered by Title IV
4050.301 Purpose and scope.
4050.302 Definitions.
4050.303 Options and duties of plan administrator.
4050.304 Diligent search.
4050.305 Filing with PBGC.
4050.306 Missing participant benefits.
4050.307 PBGC discretion.
Subpart D--Multiemployer Plans Covered by Title IV
4050.401 Purpose and scope.
4050.402 Definitions.
4050.403 Duties of plan sponsor.
4050.404 Diligent search.
4050.405 Filing with PBGC.
4050.406 Missing participant benefits.
4050.407 PBGC discretion.
Authority: 29 U.S.C. 1302(b)(3), 1350.
Subpart A--Single-Employer Plans Covered by Title IV
Sec. 4050.101 Purpose and scope.
(a) In general. This subpart describes PBGC's missing participants
program for single-employer defined benefit retirement plans covered by
title IV of ERISA. The missing participants program is a program to
hold retirement benefits for missing participants and beneficiaries in
terminated retirement plans and to help them find and receive the
benefits being held for them. For a plan to which this subpart applies,
this subpart describes what the plan must do upon plan termination if
it has missing participants or beneficiaries who are entitled to
distributions. This subpart applies to a plan only if it is a single-
employer defined benefit plan that--
(1) Is described in section 4021(a) of ERISA and not in any
paragraph of section 4021(b) of ERISA and
(2) Terminates in a standard termination or in a distress
termination described in section 4041(c)(3)(B)(i) or (ii) of ERISA
(``sufficient distress termination'').
(b) Plans that terminate but do not close out. This subpart does
not apply to a plan that terminates but does not close out, such as a
plan that terminates in a distress termination described in section
4041(c)(3)(B)(iii) of ERISA (``insufficient distress termination'').
(c) Individual account plans. This subpart does not apply to an
individual account plan under section 3(34) of ERISA, even if it is
described in the same plan document as a plan to which this subpart
applies. This subpart also does not apply to a plan to the extent that
it is treated as an individual account plan under section 3(35)(B) of
ERISA. For example, this subpart does not apply to employee
contributions (or interest or earnings thereon) held as an individual
account. (Subpart B deals with individual account plans.)
Sec. 4050.102 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
Annuity, Code, ERISA, insurer, irrevocable commitment, PBGC, person,
and plan administrator. In addition, for purposes of this subpart:
Accrual cessation date for a participant under a subpart A plan
means the date the participant stopped accruing benefits under the
terms of the plan.
Accumulated single sum means, with respect to a missing
distributee, the distributee's benefit transfer amount accumulated at
the missing participants interest rate from the benefit determination
date to the date when PBGC makes or commences payment to or with
respect to the distributee.
Benefit determination date with respect to a subpart A plan means
the single date selected by the plan administrator for valuing benefits
under Sec. 4050.103(d); this date must be during the period beginning
on the first day a distribution is made pursuant to close-out of the
plan to a distributee who is not a missing distributee and ending on
the last day such a distribution is made.
Benefit transfer amount for a missing distributee of a subpart A
plan means the amount determined by the plan administrator under Sec.
4050.103(d) in the close-out of the plan.
Close-out or close out with respect to a subpart A plan means the
process of the final distribution or transfer of assets pursuant to the
termination of the plan.
De minimis means, with respect to the value of a benefit (or other
amount), that the value does not exceed the amount specified under
section 203(e)(1) of ERISA and section 411(a)(11)(A) of the
[[Page 60819]]
Code (without regard to plan provisions).
Distributee means, with respect to a subpart A plan, a participant
or beneficiary entitled to a distribution under the plan pursuant to
the close-out of the plan.
Missing, with respect to a distributee under a subpart A plan,
means that any one or more of the following three conditions exists
upon close-out of the plan.
(1) The plan administrator does not know with reasonable certainty
the location of the distributee.
(2) Under the terms of the plan, the distributee's benefit is to be
paid in a lump sum without the distributee's consent, and the
distributee has not responded to a notice about the distribution of the
lump sum.
(3) Under the terms of the plan and any election made by the
distributee, the distributee's benefit is to be paid in a lump sum, but
the distributee does not accept the lump sum. For this purpose, a lump
sum paid by check is not accepted if the check remains uncashed after--
(i) A ``cash-by'' date prescribed (on the check or in an
accompanying notice) that is at least 45 days after the issuance of the
check, or
(ii) If no such ``cash-by'' date is so prescribed, the check's
stale date.
Missing participants forms and instructions means the forms and
instructions provided by PBGC for use in connection with the missing
participants program.
Missing participants interest rate means, for each month, the
applicable federal mid-term rate (as determined by the Secretary of the
Treasury pursuant to section 1274(d)(1)(C)(ii) of the Code) for that
month, compounded monthly.
Normal retirement date for a participant under a subpart A plan
means the normal retirement date of the participant under the terms of
the plan.
Pay-status or pay status means one of the following (according to
context):
(1) With respect to a benefit, that payment of the benefit has
actually started before the benefit determination date; or
(2) With respect to a distributee, that payment of the
distributee's benefit has actually started before the benefit
determination date.
PBGC missing participants assumptions means the actuarial
assumptions prescribed in Sec. Sec. 4044.51 through 4044.57 of this
chapter with the following modifications:
(1) The present value is determined as of the benefit determination
date instead of the plan termination date.
(2) The mortality assumption is a fixed blend of 50 percent of the
healthy male mortality rates in Sec. 4044.53(c)(1) of this chapter and
50 percent of the healthy female mortality rates in Sec. 4044.53(c)(2)
of this chapter.
(3) No adjustment is made for loading expenses under Sec.
4044.52(d) of this chapter.
(4) The interest assumption used is the assumption applicable to
valuations occurring in January of the calendar year in which the
benefit determination date occurs.
(5) The assumed payment form of a benefit not in pay status is a
straight life annuity.
(6) Pre-retirement death benefits are disregarded.
(7) Notwithstanding the expected retirement age (XRA) assumptions
in Sec. Sec. 4044.55 through 4044.57 of this chapter,--
(i) In the case of a participant who is not in pay status and whose
normal retirement date is on or after the benefit determination date,
benefits are assumed to commence at the XRA, determined using the high
retirement rate category under Table II-C of Appendix D to part 4044 of
this chapter;
(ii) In the case of a participant who is not in pay status and
whose normal retirement date is before the benefit determination date,
benefits are assumed to commence on the participant's normal retirement
date (or accrual cessation date if later);
(iii) In the case of a participant who is in pay status, benefits
are assumed to commence on the date on which benefits actually
commenced; and
(iv) In the case of a beneficiary, benefits are assumed to commence
on the benefit determination date or, if later, the earliest date the
beneficiary can begin to receive benefits.
Plan lump sum assumptions means, with respect to a subpart A plan,
the following:
(1) If the plan specifies actuarial assumptions and methods to be
used to calculate a lump sum distribution, such actuarial assumptions
and methods, or
(2) Otherwise, the actuarial assumptions specified under section
205(g)(3) of ERISA and section 417(e)(3) of the Code, determined as of
the benefit determination date, including use of the missing
participants interest rate to calculate the present value as of the
benefit determination date of a payment or payments missed in the past.
QDRO means a qualified domestic relations order as defined in
section 206(d)(3) of ERISA and section 414(p) of the Code.
Qualified survivor of a participant or beneficiary under a subpart
A plan means, for any benefit with respect to the participant or
beneficiary,--
(1) A person who survives the participant or beneficiary and is
entitled under applicable provisions of a QDRO to receive the benefit;
(2) A person that is identified by the plan in a submission to PBGC
by the plan as being entitled under applicable plan provisions
(including elections, designations, and waivers consistent with such
provisions) to receive the benefit; or
(3) If no such person is so entitled, a survivor of the participant
or beneficiary who is the participant's or beneficiary's living--
(i) Spouse, or if none,
(ii) Child, or if none,
(iii) Parent, or if none,
(iv) Sibling.
Subpart A plan or plan means a plan to which this subpart A
applies, as described in Sec. 4050.101.
Sec. 4050.103 Duties of plan administrator.
(a) Providing for benefits. For each distributee who is missing
upon close-out of a subpart A plan, the plan administrator must provide
for the distributee's plan benefits either--
(1) By purchasing an irrevocable commitment from an insurer, or
(2) By--
(i) Determining the distributee's benefit transfer amount under
paragraph (d) of this section, and
(ii) Transferring to PBGC as described in this subpart A an amount
equal to the distributee's benefit transfer amount.
(b) Diligent search. For each distributee whose location the plan
administrator does not know with reasonable certainty upon close-out of
a subpart A plan, the plan administrator must have conducted a diligent
search as described in Sec. 4050.104.
(c) Filing with PBGC. For each distributee who is missing upon
close-out of a subpart A plan, the plan administrator must file with
PBGC as described in Sec. 4050.105.
(d) Benefit transfer amount. The benefit transfer amount for a
missing distributee is the amount determined by the plan administrator
as of the benefit determination date using whichever one of the
following three methods applies:
(1) De minimis. If the single sum actuarial equivalent of the
distributee's benefits (including any payments missed in the past)
determined using plan lump sum assumptions is de minimis, then the
missing distributee's benefit transfer amount is equal to that single
sum.
(2) Non-de minimis; single sum payment cannot be elected. If the
single sum actuarial equivalent of the distributee's benefits
(including any payments missed in the past)
[[Page 60820]]
determined using plan lump sum assumptions is not de minimis, and a
single sum payment cannot be elected, then the missing distributee's
benefit transfer amount is the present value of the distributee's
accrued benefit determined using PBGC missing participants assumptions,
plus
(i) For a missing distributee not in pay status whose normal
retirement date (or accrual cessation date if later) precedes the
benefit determination date, the aggregate value of payments of the
straight life annuity that would have been payable beginning on the
normal retirement date (or accrual cessation date if later),
accumulated at the missing participants interest rate from the date
each payment would have been made to the benefit determination date,
assuming that the distributee survived to the benefit determination
date, as determined by the plan administrator; or
(ii) For a missing distributee in pay status, the aggregate value
of payments of the pay status annuity due but not made, accumulated at
the missing participants interest rate from each payment due date to
the benefit determination date, assuming that the distributee survived
to the benefit determination date.
(3) Non-de minimis; single sum payment can be elected. If the
single sum actuarial equivalent of the distributee's benefits
(including any payments missed in the past) determined using plan lump
sum assumptions is not de minimis, and a single sum payment can be
elected, then the missing distributee's benefit transfer amount is the
greater of the amounts determined using the methodology in paragraph
(d)(1) or (d)(2) of this section.
Sec. 4050.104 Diligent search.
(a) Search requirement. The plan administrator of a subpart A plan
must, within the time frame described in paragraph (d) of this section,
have diligently searched for each distributee of the plan whose
location the plan administrator does not know with reasonable certainty
upon close-out, using one of the following two methods:
(1) For any distributee, regardless of the size of the
distributee's benefit, the commercial locator service method described
in paragraph (b) of this section; or
(2) For a distributee whose normal retirement benefit is not more
than $50 per month, the records search method described in paragraph
(c) of this section.
(b) Commercial locator service method--(1) In general. Using the
commercial locator service method means paying a commercial locator
service to search for information to locate a distributee.
(2) Meaning of ``commercial locator service.'' For purposes of this
section, a commercial locator service is a business that holds itself
out as a finder of lost persons for compensation using information from
a database maintained by a consumer reporting agency (as defined in 15
U.S.C. 1681a(f)).
(c) Records search method--(1) In general. Using the records search
method means searching for information to locate a distributee by doing
all of the following to the extent reasonably feasible and affordable:
(i) Searching the records of the plan for information to locate the
distributee.
(ii) Searching the records of the plan's contributing sponsor that
is the most recent employer of the distributee for information to
locate the distributee.
(iii) Searching the records of each retirement or welfare plan of
the plan's contributing sponsor in which the distributee was a
participant for information to locate the distributee.
(iv) Contacting each beneficiary of the distributee identified from
the records referred to in paragraphs (c)(1)(i), (ii), and (iii) of
this section for information to locate the distributee.
(v) Using an internet search method for which no fee is charged,
such as a search engine, a network database, a public record database
(such as those for licenses, mortgages, and real estate taxes) or a
``social media'' website.
(2) Limits on method. For purposes of this section--
(i) Searching is not feasible to the extent that, as a practical
matter, it is thwarted by legal or practical lack of access to records,
and
(ii) Searching is not affordable to the extent that the cost of
searching (including the value of labor) is more than a reasonable
fraction of the benefit of the distributee being searched for. In no
event would searching need to be pursued beyond the point where the
cost equals the value of the benefit.
(d) Time frame. A search for a distributee under this section must
have been made within nine months before a filing is made under Sec.
4050.105 identifying the distributee as a missing distributee.
Sec. 4050.105 Filing with PBGC.
(a) What to file. The plan administrator of a subpart A plan must
file with PBGC the information specified in the missing participants
forms and instructions and, for a missing distributee referred to in
Sec. 4050.103(a)(2), payment of--
(1) The benefit transfer amount for the missing distributee;
(2) If the benefit transfer amount is paid more than 90 days after
the benefit determination date, interest on the benefit transfer amount
computed at the missing participants interest rate for the period
beginning on the 90th day after the benefit determination date and
ending on the date the benefit transfer amount is paid to PBGC; and
(3) Any fee provided for in the missing participants forms and
instructions.
(b) When to file. The plan administrator must file the information
and payments referred to in paragraph (a) of this section in accordance
with the missing participants forms and instructions. Payment of a
benefit transfer amount will, if considered timely made for purposes of
this paragraph (b), be considered timely made for purposes of part 4041
of this chapter.
(c) Place, method and date of filing; time periods. (1) For rules
about where to file, see Sec. 4000.4 of this chapter.
(2) For rules about permissible methods of filing with PBGC under
this subpart, see subpart A of part 4000 of this chapter.
(3) For rules about the date that a submission under this subpart
was filed with PBGC, see subpart C of part 4000 of this chapter.
(4) For rules about any time period for filing under this subpart,
see subpart D of part 4000 of this chapter.
(d) Supplemental information. Within 30 days after a written
request by PBGC (or such other time as may be specified in the
request), the plan administrator of a subpart A plan required to file
under paragraph (a) of this section must file with PBGC supplemental
information for any proper purpose under the missing participants
program.
(e) Reliance. As administrator of the missing participants program,
PBGC will rely on determinations made and information reported by plan
administrators in connection with the program. This reliance does not
affect PBGC's authority as administrator of the title IV insurance
program to audit or make inquiries of subpart A plans, including about
the amount to which a missing distributee may be entitled.
Sec. 4050.106 Missing participant benefits.
(a) In general--(1) Benefit transfer amount not paid. If a subpart
A plan files with PBGC information about an irrevocable commitment
provided by the subpart A plan for a missing distributee, PBGC will
provide information about the irrevocable commitment to the distributee
or another claimant that may be entitled to
[[Page 60821]]
payment pursuant to the irrevocable commitment.
(2) Benefit transfer amount paid. If a subpart A plan pays PBGC a
benefit transfer amount for a missing distributee, PBGC will pay
benefits with respect to the missing distributee in accordance with
this section, subject to the provisions of a QDRO.
(b) Benefits for missing distributees who are participants.
Paragraphs (c), (d), (e), and (k) of this section describe the benefits
that PBGC will pay to a non-pay status missing participant of a subpart
A plan who claims a benefit under the missing participants program.
(c) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (b) of this section is de minimis,
PBGC will pay the participant a lump sum equal to the accumulated
single sum.
(d) Non-de minimis benefit of unmarried participant. If the benefit
transfer amount of an unmarried participant described in paragraph (b)
of this section is not de minimis, PBGC will pay the participant either
the annuity described in paragraph (d)(1) of this section, beginning
not before age 55, and (if applicable) the make-up amount described in
paragraph (d)(2) of this section; or, if the participant could have
elected a lump sum under the subpart A plan, and the participant so
elects under the missing participants program, the lump sum described
in paragraph (d)(3) of this section.
(1) Annuity. The annuity described in this paragraph (d)(1) is
either--
(i) Straight life annuity. A straight life annuity in the amount
that the subpart A plan would have paid the participant, starting at
the date that PBGC payments start (or, if earlier, the later of the
participant's normal retirement date or accrual cessation date), as
reported to PBGC by the subpart A plan (including any early retirement
subsidies), or through linear interpolation for participants who start
payments between integral ages; or
(ii) Other form of annuity. At the participant's election, any form
of annuity available to the participant under Sec. 4022.8 of this
chapter, in an amount that is actuarially equivalent to the straight
life annuity in paragraph (d)(1)(i) of this section as of the date that
PBGC payments start (or, if earlier, the later of the participant's
normal retirement date or accrual cessation date), determined using the
actuarial assumptions in Sec. 4022.8(c)(7) of this chapter.
(2) Make-up amount. If PBGC begins to pay the annuity under
paragraph (d)(1) of this section after the normal retirement date (or
accrual cessation date if later), the make-up amount described in this
paragraph (d)(2) is a lump sum equal to the aggregate value of payments
of the annuity that would have been payable to the participant (in the
elected form) beginning on the normal retirement date (or accrual
cessation date if later), accumulated at the missing participants
interest rate from the date each payment would have been made to the
date when PBGC begins to pay the annuity.
(3) Lump sum. The lump sum described in this paragraph (d)(3) is
equal to the participant's accumulated single sum.
(e) Non-de minimis benefit of married participant. If the benefit
transfer amount of a married participant described in paragraph (b) of
this section is not de minimis, PBGC will pay the participant either
the annuity described in paragraph (e)(1) of this section, beginning
not before age 55, and (if applicable) the make-up amount described in
paragraph (e)(2) of this section; or, if the participant could have
elected a lump sum under the subpart A plan, and the participant so
elects under the missing participants program with the consent of the
participant's spouse, the lump sum described in paragraph (e)(3) of
this section.
(1) Annuity. The annuity described in this paragraph (e)(1) is
either--
(i) Joint and survivor annuity. A joint and 50 percent survivor
annuity in an amount that is actuarially equivalent to the straight
life annuity under paragraph (d)(1)(i) of this section as of the date
that PBGC payments start (or, if earlier, the later of the
participant's normal retirement date or accrual cessation date),
determined using the actuarial assumptions in Sec. 4022.8(c)(7) of
this chapter; or
(ii) Other form of annuity. At the participant's election, with the
consent of the participant's spouse, any form of annuity available to
the participant under Sec. 4022.8 of this chapter, in an amount that
is actuarially equivalent to the joint and 50 percent survivor annuity
under paragraph (e)(1)(i) of this section as of the date that PBGC
payments start (or, if earlier, the later of the participant's normal
retirement date or accrual cessation date), determined using the
actuarial assumptions in Sec. 4022.8(c)(7) of this chapter.
(2) Make-up amount. If PBGC begins to pay the annuity under
paragraph (e)(1) of this section after the normal retirement date (or
accrual cessation date if later), the make-up amount described in this
paragraph (e)(2) is a lump sum equal to the aggregate value of payments
of the annuity that would have been payable to the participant
beginning on the normal retirement date (or accrual cessation date if
later), accumulated at the missing participants interest rate from the
date each payment would have been made to the date when PBGC begins to
pay the annuity.
(3) Lump sum. The lump sum described in this paragraph (e)(3) is
equal to the participant's accumulated single sum.
(f) Benefits with respect to deceased missing distributees who were
participants. Paragraphs (g), (h), (i), (j), and (k) of this section
describe the benefits that PBGC will pay with respect to a non-pay
status missing participant of a subpart A plan who dies without
receiving a benefit under the missing participants program.
(g) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (f) of this section is de minimis,
PBGC will pay to the qualified survivor(s) of the participant a lump
sum equal to the participant's accumulated single sum.
(h) Non-de minimis benefit; unmarried participant. In the case of
an unmarried participant described in paragraph (f) of this section
whose benefit transfer amount is not de minimis,--
(1) Death before normal retirement date. If the participant dies
before the normal retirement date (or accrual cessation date if later),
PBGC will pay no benefits with respect to the participant; and
(2) Death after normal retirement date. If the participant dies on
or after the normal retirement date (or accrual cessation date if
later), PBGC will pay to the participant's qualified survivor(s) an
amount equal to the aggregate value of payments of the straight life
annuity described in paragraph (d)(1)(i) of this section that would
have been payable to the participant from the normal retirement date
(or accrual cessation date if later) to the participant's date of
death, accumulated at the missing participants interest rate from the
date each payment would have been made to the date when PBGC pays the
qualified survivor(s).
(i) Non-de minimis benefit; married participant with living spouse.
In the case of a married participant described in paragraph (f) of this
section whose benefit transfer amount is not de minimis and whose
spouse survives the participant and claims a benefit under the missing
participants program, PBGC will pay the spouse, beginning not before
the participant would have reached age 55, the annuity (if any)
described in paragraph (i)(1) of this section and the make-up amounts
(if applicable) described in paragraph (i)(2)
[[Page 60822]]
of this section, except that PBGC will pay the spouse, as a lump sum,
the small benefit described in paragraph (i)(3) of this section.
(1) Annuity. The annuity described in this paragraph (i)(1) is the
survivor portion of a joint and 50 percent survivor annuity that is
actuarially equivalent as of the assumed starting date (determined
using the actuarial assumptions in Sec. 4022.8(c)(7) of this chapter)
to the straight life annuity in the amount that the subpart A plan
would have paid the participant with an assumed starting date of--
(i) The date when the participant would have reached age 55, if the
participant died before that date, or
(ii) The participant's date of death, if the participant died
between age 55 and the normal retirement date (or accrual cessation
date if later), or
(iii) The normal retirement date (or accrual cessation date if
later), if the participant died after that date.
(2) Make-up amounts. The make-up amounts described in this
paragraph (i)(2) are the amounts described in paragraphs (i)(2)(i) and
(ii) of this section.
(i) Payments from participant's death or 55th birthday to
commencement of survivor annuity. The make-up amount described in this
paragraph (i)(2)(i) is a lump sum equal to the aggregate value of
payments of the survivor portion of the joint and 50 percent survivor
annuity described in paragraph (i)(1) of this section that would have
been payable to the spouse beginning on the later of the participant's
date of death or the date when the participant would have reached age
55, accumulated at the missing participants interest rate from the date
each payment would have been made to the date when PBGC pays the
spouse.
(ii) Payments from normal retirement date to participant's death.
The make-up amount described in this paragraph (i)(2)(ii) is a lump sum
equal to the aggregate value of payments (if any) of the joint portion
of the joint and 50 percent survivor annuity described in paragraph
(i)(1) of this section that would have been payable to the participant
from the normal retirement date (or accrual cessation date if later) to
the participant's date of death thereafter, accumulated at the missing
participants interest rate from the date each payment would have been
made to the date when PBGC pays the spouse.
(3) Small benefit. If the sum of the actuarial present value of the
annuity described in paragraph (i)(1) of this section plus the make-up
amounts described in paragraph (i)(2) of this section is de minimis,
then the lump sum that PBGC will pay the spouse under this paragraph
(i)(3) is an amount equal to that sum. For this purpose, the actuarial
present value of the annuity is determined using the actuarial
assumptions in Sec. 4022.8(c)(7) of this chapter as of the date when
PBGC pays the spouse.
(j) Non-de minimis benefit; married participant with deceased
spouse. In the case of a married participant described in paragraph (f)
of this section whose benefit transfer amount is not de minimis and
whose spouse survives the participant but dies without receiving a
benefit under the missing participants program, PBGC will pay to the
qualified survivor(s) of the participant's spouse the make-up amount
described in paragraph (j)(1) of this section and to the qualified
survivor(s) of the participant the make-up amount described in
paragraph (j)(2) of this section.
(1) Payments from participant's death or 55th birthday to spouse's
death. The make-up amount described in this paragraph (j)(1) is a lump
sum equal to the aggregate value of payments of the survivor portion of
the joint and 50 percent survivor annuity described in paragraph (i)(1)
of this section that would have been payable to the spouse from the
later of the participant's date of death or the date when the
participant would have reached age 55 to the spouse's date of death,
accumulated at the missing participants interest rate from the date
each payment would have been made to the date when PBGC pays the
spouse's qualified survivor(s).
(2) Payments from normal retirement date to participant's death.
The make-up amount described in this paragraph (j)(2) is a lump sum
equal to the aggregate value of payments of the joint portion of the
joint and 50 percent survivor annuity described in paragraph (i)(1) of
this section that would have been payable to the participant from the
normal retirement date (or accrual cessation date if later) to the
participant's date of death thereafter, accumulated at the missing
participants interest rate from the date each payment would have been
made to the date when PBGC pays the participant's qualified
survivor(s).
(k) Benefits under contributory plans. If a subpart A plan reports
to PBGC that a portion of a missing participant's benefit transfer
amount represents accumulated contributions as described in section
204(c)(2)(C) of ERISA and section 411(c)(2)(C) of the Code, PBGC will
pay with respect to the missing participant at least the amount of
accumulated contributions as reported by the subpart A plan,
accumulated at the missing participants interest rate from the benefit
determination date to the date when PBGC makes payment.
(l) Date for determining marital status. For purposes of this
section, whether a participant is married, and if so the identity of
the spouse, is determined as of the earlier of--
(1) The date the participant receives or begins to receive a
benefit, or
(2) The date the participant dies.
Sec. 4050.107 PBGC discretion.
PBGC may in appropriate circumstances extend deadlines, excuse
noncompliance, and grant waivers with regard to any provision of this
subpart to promote the purposes of the missing participants program and
title IV of ERISA. Like circumstances will be treated in like manner
under this section.
Subpart B--Defined Contribution Plans
Sec. 4050.201 Purpose and scope.
(a) In general. This subpart describes PBGC's missing participants
program for single-employer and multiemployer defined contribution
retirement plans. The missing participants program is a program to hold
retirement benefits for missing participants and beneficiaries in
terminated retirement plans and to help them find and receive the
benefits being held for them. For a plan to which this subpart applies,
this subpart describes what the plan must do upon plan termination if
it elects to use the missing participants program for missing
participants and beneficiaries who are entitled to distributions. This
subpart applies to a plan only if it is a plan--
(1) That--
(i) Is a defined contribution (individual account) plan described
in section 3(34) of ERISA; or
(ii) Is treated as a defined contribution (individual account) plan
under section (3)(35) of ERISA (to the extent so treated);
(2) That is described in section 4021(a) of ERISA and not in any
paragraph of section 4021(b) of ERISA other than paragraph (1), (5),
(12), or (13), including a plan described in section 403(b) of the Code
under which benefits are provided through custodial accounts described
in section 403(b)(7) of the Code;
(3) That, if it is a transferring plan, pays all benefit transfer
amounts to PBGC in money, consistent with plan provisions and
applicable law; and
(4) That terminates and closes out.
(b) Defined contribution plans that are part of defined benefit
plans. This subpart does not fail to apply to a plan
[[Page 60823]]
merely because the plan is described in the same plan document as a
defined benefit plan (to which this subpart does not apply). For
example, this subpart may apply to employee contributions (or interest
or earnings thereon) held as an individual account under a defined
benefit plan.
(c) Defined contribution plans that are abandoned plans. This
subpart does not fail to apply to a plan merely because the plan is an
abandoned plan, as defined in 29 CFR 2578.1.
Sec. 4050.202 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
Annuity, Code, ERISA, PBGC, and person. In addition, for purposes of
this subpart:
Accumulated single sum means, with respect to a missing
distributee, the distributee's benefit transfer amount accumulated at
the missing participants interest rate from the date when the subpart B
plan pays PBGC the benefit transfer amount for the missing distributee
to the date when PBGC makes or commences payment to or with respect to
the distributee.
Benefit conversion assumptions means, with respect to an annuity,
the applicable mortality table and applicable interest rate under
section 205(g)(3) of ERISA and section 417(e)(3) of the Code for
January of the calendar year in which PBGC begins paying the annuity.
Benefit transfer amount for a missing distributee in a transferring
plan means the amount available for distribution to the distributee in
connection with the close-out of the subpart B plan.
Close-out or close out with respect to a subpart B plan means the
process of the final distribution or transfer of assets pursuant to the
termination of the subpart B plan.
De minimis means, with respect to the value of a benefit (or other
amount), that the value does not exceed the amount specified under
section 203(e)(1) of ERISA and section 411(a)(11)(A) of the Code
(without regard to plan provisions).
Distributee means, with respect to a subpart B plan, a participant
or beneficiary entitled to a distribution under the plan pursuant to
the close-out of the plan, except that a person is not a distributee if
the subpart B plan transfers assets to another pension plan (within the
meaning of section 3(2) of ERISA) to pay the person's benefits.
Missing, with respect to a distributee under a subpart B plan,
means that any one or more of the following three conditions exists
upon close-out of the plan.
(1) The plan does not know with reasonable certainty the location
of the distributee.
(2) The distributee has not elected a form of distribution in
response to a notice about the distribution.
(3) Under the terms of the plan and any election made by the
distributee, the distributee's benefit is to be paid in a lump sum, but
the distributee does not accept the lump sum. For this purpose, a lump
sum paid by check is not accepted if the check remains uncashed after--
(i) A ``cash-by'' date prescribed (on the check or in an
accompanying notice) that is at least 45 days after the issuance of the
check, or
(ii) If no such ``cash-by'' date is so prescribed, the check's
stale date.
Missing participants forms and instructions means the forms and
instructions provided by PBGC for use in connection with the missing
participants program.
Missing participants interest rate means, for each month, the
applicable federal mid-term rate (as determined by the Secretary of the
Treasury pursuant to section 1274(d)(1)(C)(ii) of the Code) for that
month, compounded monthly.
Notifying plan means a subpart B plan that elects notifying plan
status in accordance with Sec. 4050.203.
QDRO means a qualified domestic relations order as defined in
section 206(d)(3) of ERISA and section 414(p) of the Code.
Qualified survivor of a participant or beneficiary under a subpart
B plan means, for any benefit with respect to the participant or
beneficiary,--
(1) A person who survives the participant or beneficiary and is
entitled under applicable provisions of a QDRO to receive the benefit;
(2) A person that is identified by the plan in a submission to PBGC
by the plan as being entitled under applicable plan provisions
(including elections, designations, and waivers consistent with such
provisions) to receive the benefit; or
(3) If no such person is so entitled, a survivor of the participant
or beneficiary who is the participant's or beneficiary's living--
(i) Spouse, or if none,
(ii) Child, or if none,
(iii) Parent, or if none,
(iv) Sibling.
Subpart B plan or plan means a plan to which this subpart B
applies, as described in Sec. 4050.201.
Transferring plan means a subpart B plan that elects transferring
plan status in accordance with Sec. 4050.203.
Sec. 4050.203 Options and duties of plan.
(a) Options. A subpart B plan that is closing out upon plan
termination may (but need not) elect, by filing under Sec. 4050.205,
that the subpart B plan--
(1) Will be a ``transferring plan,'' that is, will pay a benefit
transfer amount to PBGC for each distributee who is missing upon close-
out of the plan and will be bound by the provisions of this subpart B
to the extent that they apply to transferring plans, or
(2) Will be a ``notifying plan,'' that is, will notify PBGC of the
disposition of the benefits of each distributee identified in the
filing who is missing upon close-out of the plan and will, with respect
to those distributees, be bound by the provisions of this subpart B to
the extent that they apply to notifying plans.
(b) Diligent search--(1) In general. Except as provided in
paragraph (b)(2) of this section, for each distributee whose location
the plan does not know with reasonable certainty upon close-out of a
subpart B plan, the plan must have conducted a diligent search as
described in Sec. 4050.204.
(2) Notifying plans. For a notifying plan, the requirement of
paragraph (b)(1) of this section applies only to distributees
identified in the filing with PBGC.
(c) Filing with PBGC--(1) In general. Except as provided in
paragraph (c)(2) of this section, for each distributee who is missing
upon close-out of a subpart B plan, the plan must file with PBGC as
described in Sec. 4050.205.
(2) Notifying plans. For a notifying plan, the requirement of
paragraph (c)(1) of this section applies only to distributees
identified in the filing with PBGC.
Sec. 4050.204 Diligent search.
(a) Search requirement--(1) In general. Except as provided in
paragraph (a)(2) of this section, a subpart B plan must, within the
time frame described in paragraph (b) of this section, have diligently
searched for each distributee of the plan whose location the plan does
not know with reasonable certainty upon close-out in accordance with
regulations and other applicable guidance issued by the Secretary of
Labor under section 404 of ERISA.
(2) Notifying plans. For a notifying plan, the requirement of
paragraph (a)(1) of this section applies only to distributees
identified in the filing with PBGC.
(b) Time frame. A search for a missing distributee must be made
within nine months before a filing is made under
[[Page 60824]]
Sec. 4050.205 identifying the distributee as a missing distributee.
Sec. 4050.205 Filing with PBGC.
(a) What to file. A subpart B plan must file with PBGC the
information specified in the missing participants forms and
instructions, and if the plan is a transferring plan, payment of--
(1) The benefit transfer amount for the missing distributee; and
(2) Any fee provided for in the missing participants forms and
instructions.
(b) When to file. The plan must file the information and payments
referred to in paragraph (a) of this section in accordance with the
missing participants forms and instructions.
(c) Place, method and date of filing; time periods. (1) For rules
about where to file, see Sec. 4000.4 of this chapter.
(2) For rules about permissible methods of filing with PBGC under
this subpart, see subpart A of part 4000 of this chapter.
(3) For rules about the date that a submission under this subpart
was filed with PBGC, see subpart C of part 4000 of this chapter.
(4) For rules about any time period for filing under this subpart,
see subpart D of part 4000 of this chapter.
(d) Supplemental information. Within 30 days after a written
request by PBGC (or such other time as may be specified in the
request), the plan administrator of a subpart B plan required to file
under paragraph (a) of this section must file with PBGC supplemental
information for any proper purpose under the missing participants
program.
(e) Reliance. As administrator of the missing participants program,
PBGC will rely on determinations made and information reported by plans
in connection with the program.
Sec. 4050.206 Missing participant benefits.
(a) In general--(1) Notifying plan. If a notifying plan files with
PBGC information about a disposition of benefits made by the subpart B
plan for a missing distributee, PBGC will provide information about the
disposition of benefits to the distributee or another claimant that may
be entitled to the benefits.
(2) Transferring plan. If a transferring plan pays PBGC a benefit
transfer amount for a missing distributee, PBGC will pay benefits with
respect to the missing distributee in accordance with this section,
subject to the provisions of a QDRO.
(b) Benefits for missing distributees who are participants.
Paragraphs (c), (d), and (e) of this section describe the benefits that
PBGC will pay to a missing participant of a subpart B plan who claims a
benefit under the missing participants program.
(c) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (b) of this section is de minimis,
PBGC will pay the participant a lump sum equal to the accumulated
single sum.
(d) Non-de minimis benefit of unmarried participant. If the benefit
transfer amount of an unmarried participant described in paragraph (b)
of this section is not de minimis, PBGC will pay the participant either
the annuity described in paragraph (d)(1) of this section, beginning
not before age 55; or, if the participant so elects, the lump sum
described in paragraph (d)(2) of this section.
(1) Annuity. The annuity described in this paragraph (d)(1) is, at
the participant's election, any form of annuity available to the
participant under Sec. 4022.8 of this chapter, in an amount that is
actuarially equivalent, under the benefit conversion assumptions, to
the participant's accumulated single sum.
(2) Lump sum. The lump sum described in this paragraph (d)(2) is
the participant's accumulated single sum.
(e) Non-de minimis benefit of married participant. If the benefit
transfer amount of a married participant described in paragraph (b) of
this section is not de minimis, PBGC will pay the participant either
the annuity described in paragraph (e)(1) of this section, beginning
not before age 55; or, if the participant so elects with the consent of
the participant's spouse, the lump sum described in paragraph (e)(2) of
this section.
(1) Annuity. The annuity described in this paragraph (e)(1) is
either--
(i) Joint and survivor annuity. A joint and 50 percent survivor
annuity in an amount that is actuarially equivalent, under the benefit
conversion assumptions, to the participant's accumulated single sum; or
(ii) Other form of annuity. At the participant's election, with the
consent of the participant's spouse, any form of annuity available to
the participant under Sec. 4022.8 of this chapter, in an amount that
is actuarially equivalent, under the benefit conversion assumptions, to
the participant's accumulated single sum.
(2) Lump sum. The lump sum described in this paragraph (e)(2) is
the participant's accumulated single sum.
(f) Benefits with respect to deceased missing distributees who were
participants. Paragraphs (g), (h), and (i) of this section describe the
benefits that PBGC will pay with respect to a missing participant of a
subpart B plan who dies without receiving a benefit under the missing
participants program.
(g) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (f) of this section is de minimis,
and the participant's qualified survivor claims a benefit under the
missing participants program, PBGC will pay the claimant a lump sum
equal to the participant's accumulated single sum.
(h) Non-de minimis benefit; non-spousal qualified survivor. If the
benefit transfer amount of a married or unmarried participant described
in paragraph (f) of this section is not de minimis, and the
participant's qualified survivor is not the participant's surviving
spouse and claims a benefit under the missing participants program,
PBGC will pay the claimant a lump sum equal to the participant's
accumulated single sum.
(i) Non-de minimis benefit; surviving spouse is qualified survivor.
If the benefit transfer amount of a married participant described in
paragraph (f) of this section is not de minimis, and the participant's
qualified survivor is the participant's surviving spouse and claims a
benefit under the missing participants program, PBGC will, at the
spouse's election, either pay the spouse, beginning not before the
participant would have reached age 55, the annuity described in
paragraph (i)(1) of this section; or pay the spouse the lump sum
described in paragraph (i)(2) of this section.
(1) Annuity. The annuity described in this paragraph (i)(1) is a
straight life annuity for the life of the spouse in an amount that is
actuarially equivalent, under the benefit conversion assumptions, to
the participant's accumulated single sum.
(2) Lump sum. The lump sum described in this paragraph (i)(2) is a
lump sum equal to the participant's accumulated single sum.
(j) Date for determining marital status. For purposes of this
section, whether a participant is married, and if so the identity of
the spouse, is determined as of the earlier of--
(1) The date the participant receives or begins to receive a
benefit, or
(2) The date the participant dies.
Sec. 4050.207 PBGC discretion.
PBGC may in appropriate circumstances extend deadlines, excuse
noncompliance, and grant waivers with regard to any provision of this
subpart to promote the purposes of the missing participants program and
title IV of ERISA. Like circumstances will be
[[Page 60825]]
treated in like manner under this section.
Subpart C--Certain Defined Benefit Plans Not Covered by Title IV
Sec. 4050.301 Purpose and scope.
(a) In general. This subpart describes PBGC's missing participants
program for small professional service defined benefit retirement plans
not covered by title IV of ERISA. The missing participants program is a
program to hold retirement benefits for missing participants and
beneficiaries in terminated retirement plans and to help them find and
receive the benefits being held for them. For a plan to which this
subpart applies, this subpart describes what the plan must do upon plan
termination if it elects to use the missing participants program for
missing participants and beneficiaries who are entitled to
distributions. This subpart applies to a plan only if it is a single-
employer defined benefit plan that--
(1) Is described in section 4021(a) of ERISA and not in any
paragraph of section 4021(b) of ERISA other than paragraph (13), and
(2) Terminates and closes out with sufficient assets to satisfy all
liabilities with respect to employees and their beneficiaries.
(b) Individual account plans. This subpart does not apply to an
individual account plan under section 3(34) of ERISA, even if it is
described in the same plan document as a plan to which this subpart
applies. This subpart also does not apply to a plan to the extent that
it is treated as an individual account plan under section 3(35)(B) of
ERISA. For example, this subpart does not apply to employee
contributions (or interest or earnings thereon) held as an individual
account. (Subpart B deals with individual account plans.)
Sec. 4050.302 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
Annuity, Code, ERISA, PBGC, person, and plan administrator. In
addition, for purposes of this subpart:
Accrual cessation date for a participant under a subpart C plan
means the date the participant stopped accruing benefits under the
terms of the plan.
Accumulated single sum means, with respect to a missing
distributee, the distributee's benefit transfer amount accumulated at
the missing participants interest rate from the benefit determination
date to the date when PBGC makes or commences payment to or with
respect to the distributee.
Benefit determination date with respect to a subpart C plan means
the single date selected by the plan administrator for valuing benefits
under Sec. 4050.303(d); this date must be during the period beginning
on the first day a distribution is made pursuant to close-out of the
plan to a distributee who is not a missing distributee and ending on
the last day such a distribution is made.
Benefit transfer amount for a missing distributee in a transferring
plan means the amount determined by the plan administrator under Sec.
4050.303(d) in the close-out of the subpart C plan.
Close-out or close out with respect to a subpart C plan means the
process of the final distribution or transfer of assets pursuant to the
termination of the subpart C plan.
De minimis means, with respect to the value of a benefit (or other
amount), that the value does not exceed the amount specified under
section 203(e)(1) of ERISA and section 411(a)(11)(A) of the Code
(without regard to plan provisions).
Distributee means, with respect to a subpart C plan, a participant
or beneficiary entitled to a distribution under the subpart C plan
pursuant to the close-out of the subpart C plan, except that a person
is not a distributee if the subpart C plan transfers assets to another
pension plan (within the meaning of section 3(2) of ERISA) to pay the
person's benefits.
Missing, with respect to a distributee under a subpart C plan,
means that any one or more of the following three conditions exists
upon close-out of the plan.
(1) The plan administrator does not know with reasonable certainty
the location of the distributee.
(2) Under the terms of the plan, the distributee's benefit is to be
paid in a lump sum without the distributee's consent, and the
distributee has not responded to a notice about the distribution of the
lump sum.
(3) Under the terms of the plan and any election made by the
distributee, the distributee's benefit is to be paid in a lump sum, but
the distributee does not accept the lump sum. For this purpose, a lump
sum paid by check is not accepted if the check remains uncashed after--
(i) A ``cash-by'' date prescribed (on the check or in an
accompanying notice) that is at least 45 days after the issuance of the
check, or
(ii) If no such ``cash-by'' date is so prescribed, the check's
stale date.
Missing participants forms and instructions means the forms and
instructions provided by PBGC for use in connection with the missing
participants program.
Missing participants interest rate means, for each month, the
applicable federal mid-term rate (as determined by the Secretary of the
Treasury pursuant to section 1274(d)(1)(C)(ii) of the Code) for that
month, compounded monthly.
Normal retirement date for a participant under a subpart C plan
means the normal retirement date of the participant under the terms of
the plan.
Notifying plan means a subpart C plan for which the plan
administrator elects notifying plan status in accordance with Sec.
4050.303.
Pay-status or pay status means one of the following (according to
context):
(1) With respect to a benefit, that payment of the benefit has
actually started before the benefit determination date; or
(2) With respect to a distributee, that payment of the
distributee's benefit has actually started before the benefit
determination date.
PBGC missing participants assumptions means the actuarial
assumptions prescribed in Sec. Sec. 4044.51 through 4044.57 of this
chapter with the following modifications:
(1) The present value is determined as of the benefit determination
date instead of the plan termination date.
(2) The mortality assumption is a fixed blend of 50 percent of the
healthy male mortality rates in Sec. 4044.53(c)(1) of this chapter and
50 percent of the healthy female mortality rates in Sec. 4044.53(c)(2)
of this chapter.
(3) No adjustment is made for loading expenses under Sec.
4044.52(d) of this chapter.
(4) The interest assumption used is the assumption applicable to
valuations occurring in January of the calendar year in which the
benefit determination date occurs.
(5) The assumed payment form of a benefit not in pay status is a
straight life annuity.
(6) Pre-retirement death benefits are disregarded.
(7) Notwithstanding the expected retirement age (XRA) assumptions
in Sec. Sec. 4044.55 through 4044.57 of this chapter,--
(i) In the case of a participant who is not in pay status and whose
normal retirement date is on or after the benefit determination date,
benefits are assumed to commence at the XRA, determined using the high
retirement rate category under Table II-C of Appendix D to part 4044 of
this chapter;
(ii) In the case of a participant who is not in pay status and
whose normal retirement date is before the benefit determination date,
benefits are
[[Page 60826]]
assumed to commence on the participant's normal retirement date (or
accrual cessation date if later);
(iii) In the case of a participant who is in pay status, benefits
are assumed to commence on the date on which benefits actually
commenced; and
(iv) In the case of a beneficiary, benefits are assumed to commence
on the benefit determination date or, if later, the earliest date the
beneficiary can begin to receive benefits.
Plan lump sum assumptions means, with respect to a subpart C plan,
the following:
(1) If the plan specifies actuarial assumptions and methods to be
used to calculate a lump sum distribution, such actuarial assumptions
and methods, or
(2) Otherwise, the actuarial assumptions specified under section
205(g)(3) of ERISA and section 417(e)(3) of the Code, determined as of
the benefit determination date, including use of the missing
participants interest rate to calculate the present value as of the
benefit determination date of a payment or payments missed in the past.
QDRO means a qualified domestic relations order as defined in
section 206(d)(3) of ERISA and section 414(p) of the Code.
Qualified survivor of a participant or beneficiary under a subpart
C plan means, for any benefit with respect to the participant or
beneficiary--
(1) A person who survives the participant or beneficiary and is
entitled under applicable provisions of a QDRO to receive the benefit;
(2) A person that is identified by the plan in a submission to PBGC
by the plan as being entitled under applicable plan provisions
(including elections, designations, and waivers consistent with such
provisions) to receive the benefit; or
(3) If no such person is so entitled, a survivor of the participant
or beneficiary who is the participant's or beneficiary's living--
(i) Spouse, or if none,
(ii) Child, or if none,
(iii) Parent, or if none,
(iv) Sibling.
Subpart C plan or plan means a plan to which this subpart C
applies, as described in Sec. 4050.301.
Transferring plan means a subpart C plan for which the plan
administrator elects transferring plan status in accordance with Sec.
4050.303.
Sec. 4050.303 Options and duties of plan administrator.
(a) Options. The plan administrator of a subpart C plan that is
closing out upon plan termination may (but need not), by filing under
Sec. 4050.305, elect that the subpart C plan--
(1) Will be a ``transferring plan,'' that is, will pay a benefit
transfer amount to PBGC for each distributee who is missing upon close-
out of the subpart C plan and will be bound by the provisions of this
subpart C to the extent that they apply to transferring plans, or
(2) Will be a ``notifying plan,'' that is, will notify PBGC of the
disposition of the benefits of each distributee identified in the
filing who is missing upon close-out of the plan and will, with respect
to those distributees, be bound by the provisions of this subpart C to
the extent that they apply to notifying plans.
(b) Diligent search--(1) In general. Except as provided in
paragraph (b)(2) of this section, for each distributee whose location
the plan administrator does not know with reasonable certainty upon
close-out of a subpart C plan, the plan administrator must have
conducted a diligent search as described in Sec. 4050.304.
(2) Notifying plans. For a notifying plan, the requirement of
paragraph (b)(1) of this section applies only to distributees
identified in the filing with PBGC.
(c) Filing with PBGC--(1) In general. Except as provided in
paragraph (c)(2) of this section, for each distributee who is missing
upon close-out of a subpart C plan, the plan administrator must file
with PBGC as described in Sec. 4050.305.
(2) Notifying plans. For a notifying plan, the requirement of
paragraph (c)(1) of this section applies only to distributees
identified in the filing with PBGC.
(d) Benefit transfer amount. The benefit transfer amount for a
missing distributee is the amount determined by the plan administrator
as of the benefit determination date using whichever one of the
following three methods applies:
(1) De minimis. If the single sum actuarial equivalent of the
distributee's benefits (including any payments missed in the past)
determined using plan lump sum assumptions is de minimis, then the
missing distributee's benefit transfer amount is equal to that single
sum.
(2) Non-de minimis; single sum payment cannot be elected. If the
single sum actuarial equivalent of the distributee's benefits
(including any payments missed in the past) determined using plan lump
sum assumptions is not de minimis, and a single sum payment cannot be
elected, then the missing distributee's benefit transfer amount is the
present value of the distributee's accrued benefit determined using
PBGC missing participants assumptions, plus
(i) For a missing distributee not in pay status whose normal
retirement date (or accrual cessation date if later) precedes the
benefit determination date, the aggregate value of payments of the
straight life annuity that would have been payable beginning on the
normal retirement date (or accrual cessation date if later),
accumulated at the missing participants interest rate from the date
each payment would have been made to the benefit determination date,
assuming that the distributee survived to the benefit determination
date, as determined by the plan administrator; or
(ii) For a missing distributee in pay status, the aggregate value
of payments of the pay status annuity due but not made, accumulated at
the missing participants interest rate from each payment due date to
the benefit determination date, assuming that the distributee survived
to the benefit determination date.
(3) Non-de minimis; single sum payment can be elected. If the
single sum actuarial equivalent of the distributee's benefits
(including any payments missed in the past) determined using plan lump
sum assumptions is not de minimis, and a single sum payment can be
elected, then the missing distributee's benefit transfer amount is the
greater of the amounts determined using the methodology in paragraph
(d)(1) or (d)(2) of this section.
Sec. 4050.304 Diligent search.
(a) Search requirement. For each distributee of a subpart C plan
who is described in Sec. 4050.303(b), the plan administrator must,
within the time frame described in paragraph (d) of this section, have
diligently searched for each distributee of the plan whose location the
plan administrator does not know with reasonable certainty upon close
out, using one of the following two methods:
(1) For any distributee, regardless of the size of the
distributee's benefit, the commercial locator service method described
in paragraph (b) of this section; or
(2) For a distributee whose normal retirement benefit is not more
than $50 per month, the records search method described in paragraph
(c) of this section.
(b) Commercial locator service method--(1) In general. Using the
commercial locator service method means paying a commercial locator
service to search for information to locate a distributee.
(2) Meaning of ``commercial locator service.'' For purposes of this
section, a commercial locator service is a business
[[Page 60827]]
that holds itself out as a finder of lost persons for compensation
using information from a database maintained by a consumer reporting
agency (as defined in 15 U.S.C. 1681a(f)).
(c) Records search method--(1) In general. Using the records search
method means searching for information to locate a distributee by doing
all of the following to the extent reasonably feasible and affordable:
(i) Searching the records of the plan for information to locate the
distributee.
(ii) Searching the records of the plan's contributing sponsor that
is the most recent employer of the distributee for information to
locate the distributee.
(iii) Searching the records of each retirement or welfare plan of
the plan's contributing sponsor in which the distributee was a
participant for information to locate the distributee.
(iv) Contacting each beneficiary of the distributee identified from
the records referred to in paragraphs (c)(1)(i), (ii), and (iii) of
this section for information to locate the distributee.
(v) Using an internet search method for which no fee is charged,
such as a search engine, a network database, a public record database
(such as those for licenses, mortgages, and real estate taxes) or a
``social media'' website.
(2) Limits on method. For purposes of this section--
(i) Searching is not feasible to the extent that, as a practical
matter, it is thwarted by legal or practical lack of access to records,
and
(ii) Searching is not affordable to the extent that the cost of
searching (including the value of labor) is more than a reasonable
fraction of the benefit of the distributee being searched for. In no
event would searching need to be pursued beyond the point where the
cost equals the value of the benefit.
(d) Time frame. A search for a distributee under this section must
have been made within nine months before a filing is made under Sec.
4050.305 identifying the distributee as a missing distributee.
Sec. 4050.305 Filing with PBGC.
(a) What to file. The plan administrator of a subpart C plan must
file with PBGC the information specified in the missing participants
forms and instructions, and if the plan is a transferring plan, payment
of--
(1) The benefit transfer amount for the missing distributee;
(2) If the benefit transfer amount is paid more than 90 days after
the benefit determination date, interest on the benefit transfer amount
computed at the missing participants interest rate for the period
beginning on the 90th day after the benefit determination date and
ending on the date the benefit transfer amount is paid to PBGC; and
(3) Any fee provided for in the missing participants forms and
instructions.
(b) When to file. The plan administrator must file the information
and payments referred to in paragraph (a) of this section in accordance
with the missing participants forms and instructions.
(c) Place, method and date of filing; time periods.
(1) For rules about where to file, see Sec. 4000.4 of this
chapter.
(2) For rules about permissible methods of filing with PBGC under
this subpart, see subpart A of part 4000 of this chapter.
(3) For rules about the date that a submission under this subpart
was filed with PBGC, see subpart C of part 4000 of this chapter.
(4) For rules about any time period for filing under this subpart,
see subpart D of part 4000 of this chapter.
(d) Supplemental information. Within 30 days after a written
request by PBGC (or such other time as may be specified in the
request), the plan administrator of a subpart C plan required to file
under paragraph (a) of this section must file with PBGC supplemental
information for any proper purpose under the missing participants
program.
(e) Reliance. As administrator of the missing participants program,
PBGC will rely on determinations made and information reported by plan
administrators in connection with the program.
Sec. 4050.306 Missing participant benefits.
(a) In general--(1) Notifying plan. If a notifying plan files with
PBGC information about a disposition of benefits made by the subpart C
plan for a missing distributee, PBGC will provide information about the
disposition of benefits to the distributee or another claimant that may
be entitled to the benefits.
(2) Transferring plan. If a transferring plan pays PBGC a benefit
transfer amount for a missing distributee, PBGC will pay benefits with
respect to the missing distributee in accordance with this section,
subject to the provisions of a QDRO.
(b) Benefits for missing distributees who are participants.
Paragraphs (c), (d), (e), and (k) of this section describe the benefits
that PBGC will pay to a non-pay status missing participant of a subpart
C plan who claims a benefit under the missing participants program.
(c) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (b) of this section is de minimis,
PBGC will pay the participant a lump sum equal to the accumulated
single sum.
(d) Non-de minimis benefit of unmarried participant. If the benefit
transfer amount of an unmarried participant described in paragraph (b)
of this section is not de minimis, PBGC will pay the participant either
the annuity described in paragraph (d)(1) of this section, beginning
not before age 55, and (if applicable) the make-up amount described in
paragraph (d)(2) of this section; or, if the participant could have
elected a lump sum under the subpart C plan, and the participant so
elects under the missing participants program, the lump sum described
in paragraph (d)(3) of this section.
(1) Annuity. The annuity described in this paragraph (d)(1) is
either--
(i) Straight life annuity. A straight life annuity in the amount
that the subpart C plan would have paid the participant, starting at
the date that PBGC payments start (or, if earlier, the later of the
participant's normal retirement date or accrual cessation date), as
reported to PBGC by the subpart C plan (including any early retirement
subsidies), or through linear interpolation for participants who start
payments between integral ages; or
(ii) Other form of annuity. At the participant's election, any form
of annuity available to the participant under Sec. 4022.8 of this
chapter, in an amount that is actuarially equivalent to the straight
life annuity in paragraph (d)(1)(i) of this section as of the date that
PBGC payments start (or, if earlier, the later of the participant's
normal retirement date or accrual cessation date), determined using the
actuarial assumptions in Sec. 4022.8(c)(7) of this chapter.
(2) Make-up amount. If PBGC begins to pay the annuity under
paragraph (d)(1) of this section after the normal retirement date (or
accrual cessation date if later), the make-up amount described in this
paragraph (d)(2) is a lump sum equal to the aggregate value of payments
of the annuity that would have been payable to the participant (in the
elected form) beginning on the normal retirement date (or accrual
cessation date if later), accumulated at the missing participants
interest rate from the date each payment would have been made to the
date when PBGC begins to pay the annuity.
(3) Lump sum. The lump sum described in this paragraph (d)(3) is
equal to the participant's accumulated single sum.
(e) Non-de minimis benefit of married participant. If the benefit
transfer
[[Page 60828]]
amount of a married participant described in paragraph (b) of this
section is not de minimis, PBGC will pay the participant either the
annuity described in paragraph (e)(1) of this section, beginning not
before age 55, and (if applicable) the make-up amount described in
paragraph (e)(2) of this section; or, if the participant could have
elected a lump sum under the subpart C plan, and the participant so
elects under the missing participants program with the consent of the
participant's spouse, the lump sum described in paragraph (e)(3) of
this section.
(1) Annuity. The annuity described in this paragraph (e)(1) is
either--
(i) Joint and survivor annuity. A joint and 50 percent survivor
annuity in an amount that is actuarially equivalent to the straight
life annuity under paragraph (d)(1)(i) of this section as of the date
that PBGC payments start (or, if earlier, the later of the
participant's normal retirement date or accrual cessation date),
determined using the actuarial assumptions in Sec. 4022.8(c)(7) of
this chapter; or
(ii) Other form of annuity. At the participant's election, with the
consent of the participant's spouse, any form of annuity available to
the participant under Sec. 4022.8 of this chapter, in an amount that
is actuarially equivalent to the joint and 50 percent survivor annuity
under paragraph (e)(1)(i) of this section as of the date that PBGC
payments start (or, if earlier, the later of the participant's normal
retirement date or accrual cessation date), determined using the
actuarial assumptions in Sec. 4022.8(c)(7) of this chapter.
(2) Make-up amount. If PBGC begins to pay the annuity under
paragraph (e)(1) of this section after the normal retirement date (or
accrual cessation date if later), the make-up amount described in this
paragraph (e)(2) is a lump sum equal to the aggregate value of payments
of the annuity that would have been payable to the participant
beginning on the normal retirement date (or accrual cessation date if
later), accumulated at the missing participants interest rate from the
date each payment would have been made to the date when PBGC begins to
pay the annuity.
(3) Lump sum. The lump sum described in this paragraph (e)(3) is
equal to the participant's accumulated single sum.
(f) Benefits with respect to deceased missing distributees who were
participants. Paragraphs (g), (h), (i), (j), and (k) of this section
describe the benefits that PBGC will pay with respect to a non-pay
status missing participant of a subpart C plan who dies without
receiving a benefit under the missing participants program.
(g) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (f) of this section is de minimis,
PBGC will pay to the qualified survivor(s) of the participant a lump
sum equal to the participant's accumulated single sum.
(h) Non-de minimis benefit; unmarried participant. In the case of
an unmarried participant described in paragraph (f) of this section
whose benefit transfer amount is not de minimis,--
(1) Death before normal retirement date. If the participant dies
before the normal retirement date (or accrual cessation date if later),
PBGC will pay no benefits with respect to the participant; and
(2) Death after normal retirement date. If the participant dies on
or after the normal retirement date (or accrual cessation date if
later), PBGC will pay to the participant's qualified survivor(s) an
amount equal to the aggregate value of payments of the straight life
annuity described in paragraph (d)(1)(i) of this section that would
have been payable to the participant from the normal retirement date
(or accrual cessation date if later) to the participant's date of
death, accumulated at the missing participants interest rate from the
date each payment would have been made to the date when PBGC pays the
qualified survivor(s).
(i) Non-de minimis benefit; married participant with living spouse.
In the case of a married participant described in paragraph (f) of this
section whose benefit transfer amount is not de minimis and whose
spouse survives the participant and claims a benefit under the missing
participants program, PBGC will pay the spouse, beginning not before
the participant would have reached age 55, the annuity (if any)
described in paragraph (i)(1) of this section and the make-up amounts
(if applicable) described in paragraph (i)(2) of this section, except
that PBGC will pay the spouse, as a lump sum, the small benefit
described in paragraph (i)(3) of this section.
(1) Annuity. The annuity described in this paragraph (i)(1) is the
survivor portion of a joint and 50 percent survivor annuity that is
actuarially equivalent as of the assumed starting date (determined
using the actuarial assumptions in Sec. 4022.8(c)(7) of this chapter)
to the straight life annuity in the amount that the subpart C plan
would have paid the participant with an assumed starting date of--
(i) The date when the participant would have reached age 55, if the
participant died before that date, or
(ii) The participant's date of death, if the participant died
between age 55 and the normal retirement date (or accrual cessation
date if later), or
(iii) The normal retirement date (or accrual cessation date if
later), if the participant died after that date.
(2) Make-up amounts. The make-up amounts described in this
paragraph (i)(2) are the amounts described in paragraphs (i)(2)(i) and
(ii) of this section.
(i) Payments from participant's death or 55th birthday to
commencement of survivor annuity. The make-up amount described in this
paragraph (i)(2)(i) is a lump sum equal to the aggregate value of
payments of the survivor portion of the joint and 50 percent survivor
annuity described in paragraph (i)(1) of this section that would have
been payable to the spouse beginning on the later of the participant's
date of death or the date when the participant would have reached age
55, accumulated at the missing participants interest rate from the date
each payment would have been made to the date when PBGC pays the
spouse.
(ii) Payments from normal retirement date to participant's death.
The make-up amount described in this paragraph (i)(2)(ii) is a lump sum
equal to the aggregate value of payments (if any) of the joint portion
of the joint and 50 percent survivor annuity described in paragraph
(i)(1) of this section that would have been payable to the participant
from the normal retirement date (or accrual cessation date if later) to
the participant's date of death thereafter, accumulated at the missing
participants interest rate from the date each payment would have been
made to the date when PBGC pays the spouse.
(3) Small benefit. If the sum of the actuarial present value of the
annuity described in paragraph (i)(1) of this section plus the make-up
amounts described in paragraph (i)(2) of this section is de minimis,
then the lump sum that PBGC will pay the spouse under this paragraph
(i)(3) is an amount equal to that sum. For this purpose, the actuarial
present value of the annuity is determined using the actuarial
assumptions in Sec. 4022.8(c)(7) of this chapter as of the date when
PBGC pays the spouse.
(j) Non-de minimis benefit; married participant with deceased
spouse. In the case of a married participant described in paragraph (f)
of this section whose benefit transfer amount is not de minimis and
whose spouse survives the participant but dies without receiving a
[[Page 60829]]
benefit under the missing participants program, PBGC will pay to the
qualified survivor(s) of the participant's spouse the make-up amount
described in paragraph (j)(1) of this section and to the qualified
survivor(s) of the participant the make-up amount described in
paragraph (j)(2) of this section.
(1) Payments from participant's death or 55th birthday to spouse's
death. The make-up amount described in this paragraph (j)(1) is a lump
sum equal to the aggregate value of payments of the survivor portion of
the joint and 50 percent survivor annuity described in paragraph (i)(1)
of this section that would have been payable to the spouse from the
later of the participant's date of death or the date when the
participant would have reached age 55 to the spouse's date of death,
accumulated at the missing participants interest rate from the date
each payment would have been made to the date when PBGC pays the
spouse's qualified survivor(s).
(2) Payments from normal retirement date to participant's death.
The make-up amount described in this paragraph (j)(2) is a lump sum
equal to the aggregate value of payments of the joint portion of the
joint and 50 percent survivor annuity described in paragraph (i)(1) of
this section that would have been payable to the participant from the
normal retirement date (or accrual cessation date if later) to the
participant's date of death thereafter, accumulated at the missing
participants interest rate from the date each payment would have been
made to the date when PBGC pays the participant's qualified
survivor(s).
(k) Benefits under contributory plans. If a subpart C plan reports
to PBGC that a portion of a missing participant's benefit transfer
amount represents accumulated contributions as described in section
204(c)(2)(C) of ERISA and section 411(c)(2)(C) of the Code, PBGC will
pay with respect to the missing participant, at least the amount of
accumulated contributions as reported by the subpart C plan,
accumulated at the missing participants interest rate from the benefit
determination date to the date when PBGC makes payment.
(l) Date for determining marital status. For purposes of this
section, whether a participant is married, and if so the identity of
the spouse, is determined as of the earlier of--
(1) The date the participant receives or begins to receive a
benefit, or
(2) The date the participant dies.
Sec. 4050.307 PBGC discretion.
PBGC may in appropriate circumstances extend deadlines, excuse
noncompliance, and grant waivers with regard to any provision of this
subpart to promote the purposes of the missing participants program and
title IV of ERISA. Like circumstances will be treated in like manner
under this section.
Subpart D--Multiemployer Plans Covered by Title IV
Sec. 4050.401 Purpose and scope.
(a) In general. This subpart describes PBGC's missing participants
program for multiemployer defined benefit retirement plans covered by
title IV of ERISA. The missing participants program is a program to
hold retirement benefits for missing participants and beneficiaries in
retirement plans that are closing out and to help them find and receive
the benefits being held for them. For a plan to which this subpart
applies, this subpart describes what the plan must do upon plan
termination if it has missing participants or beneficiaries who are
entitled to distributions. This subpart applies to a plan only if it is
a multiemployer defined benefit plan that--
(1) Is described in section 4021(a) of ERISA and not in any
paragraph of section 4021(b) of ERISA, and
(2) Completes the process of closing out under subpart D of PBGC's
regulation on Termination of Multiemployer Plans (29 CFR part 4041A).
(b) Plans that terminate but do not close out. This subpart does
not apply to plans that terminate but do not close out.
(c) Individual account plans. This subpart does not apply to an
individual account plan under section 3(34) of ERISA, even if it is
described in the same plan document as a plan to which this subpart
applies. This subpart also does not apply to a plan to the extent that
it is treated as an individual account plan under section 3(35)(B) of
ERISA. For example, this subpart does not apply to employee
contributions (or interest or earnings thereon) held as an individual
account. (Subpart B deals with individual account plans.)
Sec. 4050.402 Definitions.
The following terms are defined in Sec. 4001.2 of this chapter:
Annuity, Code, ERISA, insurer, PBGC, person, and plan sponsor. In
addition, for purposes of this subpart:
Accrual cessation date for a participant under a subpart D plan
means the date the participant stopped accruing benefits under the
terms of the plan.
Accumulated single sum means, with respect to a missing
distributee, the distributee's benefit transfer amount accumulated at
the missing participants interest rate from the benefit determination
date to the date when PBGC makes or commences payment to or with
respect to the distributee.
Benefit determination date with respect to a subpart D plan means
the single date selected by the plan sponsor for valuing benefits under
Sec. 4050.103(d); this date must be during the period beginning on the
first day a distribution is made pursuant to close-out of the plan to a
distributee who is not a missing distributee and ending on the last day
such a distribution is made.
Benefit transfer amount for a missing distributee of a subpart D
plan means the amount determined by the plan sponsor under Sec.
4050.403(d) in the close-out of the plan.
Close-out or close out with respect to a subpart D plan means the
process of the final distribution or transfer of assets in satisfaction
of plan benefits.
De minimis means, with respect to the value of a benefit (or other
amount), that the value does not exceed the amount specified under
section 203(e)(1) of ERISA and section 411(a)(11)(A) of the Code
(without regard to plan provisions).
Distributee means, with respect to a subpart D plan, a participant
or beneficiary entitled to a distribution under the subpart D plan
pursuant to the close-out of the subpart D plan.
Missing, with respect to a distributee under a subpart D plan,
means that any one or more of the following three conditions exists
upon close-out of the plan.
(1) The plan sponsor does not know with reasonable certainty the
location of the distributee.
(2) Under the terms of the plan, the distributee's benefit is to be
paid in a lump sum without the distributee's consent, and the
distributee has not responded to a notice about the distribution of the
lump sum.
(3) Under the terms of the plan and any election made by the
distributee, the distributee's benefit is to be paid in a lump sum, but
the distributee does not accept the lump sum. For this purpose, a lump
sum paid by check is not accepted if the check remains uncashed after--
(i) A ``cash-by'' date prescribed (on the check or in an
accompanying notice) that is at least 45 days after the issuance of the
check, or
(ii) If no such ``cash-by'' date is so prescribed, the check's
stale date.
Missing participants forms and instructions means the forms and
instructions provided by PBGC for use
[[Page 60830]]
in connection with the missing participants program.
Missing participants interest rate means, for each month, the
applicable federal mid-term rate (as determined by the Secretary of the
Treasury pursuant to section 1274(d)(1)(C)(ii) of the Code) for that
month, compounded monthly.
Normal retirement date for a participant under a subpart D plan
means the normal retirement date of the participant under the terms of
the plan.
Pay-status or pay status means one of the following (according to
context):
(1) With respect to a benefit, that payment of the benefit has
actually started before the benefit determination date; or
(2) With respect to a distributee, that payment of the
distributee's benefit has actually started before the benefit
determination date.
PBGC missing participants assumptions means the actuarial
assumptions prescribed in Sec. Sec. 4044.51 through 4044.57 of this
chapter with the following modifications:
(1) The present value is determined as of the benefit determination
date instead of the plan termination date.
(2) The mortality assumption is a fixed blend of 50 percent of the
healthy male mortality rates in Sec. 4044.53(c)(1) of this chapter and
50 percent of the healthy female mortality rates in Sec. 4044.53(c)(2)
of this chapter.
(3) No adjustment is made for loading expenses under Sec.
4044.52(d) of this chapter.
(4) The interest assumption used is the assumption applicable to
valuations occurring in January of the calendar year in which the
benefit determination date occurs.
(5) The assumed payment form of a benefit not in pay status is a
straight life annuity.
(6) Pre-retirement death benefits are disregarded.
(7) Notwithstanding the expected retirement age (XRA) assumptions
in Sec. Sec. 4044.55 through 4044.57 of this chapter,--
(i) In the case of a participant who is not in pay status and whose
normal retirement date is on or after the benefit determination date,
benefits are assumed to commence at the XRA, determined using the high
retirement rate category under Table II-C of Appendix D to part 4044 of
this chapter;
(ii) In the case of a participant who is not in pay status and
whose normal retirement date is before the benefit determination date,
benefits are assumed to commence on the participant's normal retirement
date (or accrual cessation date if later);
(iii) In the case of a participant who is in pay status, benefits
are assumed to commence on the date on which benefits actually
commenced; and
(iv) In the case of a beneficiary, benefits are assumed to commence
on the benefit determination date or, if later, the earliest date the
beneficiary can begin to receive benefits.
Plan lump sum assumptions means, with respect to a subpart D plan,
the following:
(1) If the plan specifies actuarial assumptions and methods to be
used to calculate a lump sum distribution, such actuarial assumptions
and methods, or
(2) Otherwise, the actuarial assumptions specified under section
205(g)(3) of ERISA and section 417(e)(3) of the Code, determined as of
the benefit determination date, including use of the missing
participants interest rate to calculate the present value as of the
benefit determination date of a payment or payments missed in the past.
QDRO means a qualified domestic relations order as defined in
section 206(d)(3) of ERISA and section 414(p) of the Code.
Qualified survivor of a participant or beneficiary under a subpart
D plan means, for any benefit with respect to the participant or
beneficiary,--
(1) A person who survives the participant or beneficiary and is
entitled under applicable provisions of a QDRO to receive the benefit;
(2) A person that is identified by the plan in a submission to PBGC
by the plan as being entitled under applicable plan provisions
(including elections, designations, and waivers consistent with such
provisions) to receive the benefit; or
(3) If no such person is so entitled, a survivor of the participant
or beneficiary who is the participant's or beneficiary's living--
(i) Spouse, or if none,
(ii) Child, or if none,
(iii) Parent, or if none,
(iv) Sibling.
Subpart D plan or plan means a plan to which this subpart D
applies, as described in Sec. 4050.401.
Sec. 4050.403 Duties of plan sponsor.
(a) Providing for benefits. For each distributee who is missing
upon close-out of a subpart D plan, the plan sponsor must provide for
the distributee's plan benefits either--
(1) By purchase of an annuity contract from an insurer; or
(2) By--
(i) Determining the distributee's benefit transfer amount under
paragraph (e) of this section, and
(ii) Transferring to PBGC as described in this subpart D an amount
equal to the distributee's benefit transfer amount.
(b) Diligent search. For each distributee whose location the plan
sponsor does not know with reasonable certainty upon close-out of a
subpart D plan, the plan sponsor must have conducted a diligent search
as described in Sec. 4050.404.
(c) Filing with PBGC. For each distributee who is missing upon
close-out of a subpart D plan, the plan sponsor must file with PBGC as
described in Sec. 4050.405.
(d) Benefit transfer amount. The benefit transfer amount for a
missing distributee is the amount determined by the plan sponsor as of
the benefit determination date using whichever one of the following
three methods applies:
(1) De minimis. If the single sum actuarial equivalent of the
distributee's benefits (including any payments missed in the past)
determined using plan lump sum assumptions is de minimis, then the
missing distributee's benefit transfer amount is equal to that single
sum.
(2) Non-de minimis; single sum payment cannot be elected. If the
single sum actuarial equivalent of the distributee's benefits
(including any payments missed in the past) determined using plan lump
sum assumptions is not de minimis, and a single sum payment cannot be
elected, then the missing distributee's benefit transfer amount is the
present value of the distributee's accrued benefit determined using
PBGC missing participants assumptions, plus
(i) For a missing distributee not in pay status whose normal
retirement date (or accrual cessation date if later) precedes the
benefit determination date, the aggregate value of payments of the
straight life annuity that would have been payable beginning on the
normal retirement date (or accrual cessation date if later),
accumulated at the missing participants interest rate from the date
each payment would have been made to the benefit determination date,
assuming that the distributee survived to the benefit determination
date, as determined by the plan sponsor; or
(ii) For a missing distributee in pay status, the aggregate value
of payments of the pay status annuity due but not made, accumulated at
the missing participants interest rate from each payment due date to
the benefit determination date, assuming that the distributee survived
to the benefit determination date.
(3) Non-de minimis; single sum payment can be elected. If the
single sum actuarial equivalent of the distributee's benefits
(including any payments missed in the past) determined using plan lump
sum
[[Page 60831]]
assumptions is not de minimis, and a single sum payment can be elected,
then the missing distributee's benefit transfer amount is the greater
of the amounts determined using the methodology in paragraph (d)(1) or
(d)(2) of this section.
Sec. 4050.404 Diligent search.
(a) Search requirement. The plan sponsor of a subpart D plan must,
within the time frame described in paragraph (d) of this section, have
diligently searched for each distributee of the plan whose location the
plan sponsor does not know with reasonable certainty upon close-out,
using one of the following two methods:
(1) For any distributee, regardless of the size of the
distributee's benefit, the commercial locator service method described
in paragraph (b) of this section; or
(2) For a distributee whose normal retirement benefit is not more
than $50 per month, the records search method described in paragraph
(c) of this section.
(b) Commercial locator service method--(1) In general. Using the
commercial locator service method means paying a commercial locator
service to search for information to locate a distributee.
(2) Meaning of ``commercial locator service.'' For purposes of this
section, a commercial locator service is a business that holds itself
out as a finder of lost persons for compensation using information from
a database maintained by a consumer reporting agency (as defined in 15
U.S.C. 1681a(f)).
(c) Records search method--(1) In general. Using the records search
method means searching for information to locate a distributee by doing
all of the following to the extent reasonably feasible and affordable:
(i) Searching the records of the plan for information to locate the
distributee.
(ii) Searching the records of the contributing sponsor that is the
most recent employer of the distributee for information to locate the
distributee.
(iii) Searching the records of each retirement or welfare plan of
the contributing sponsor in which the distributee was a participant for
information to locate the distributee.
(iv) Contacting each beneficiary of the distributee identified from
the records referred to in paragraphs (c)(1)(i), (ii), and (iii) of
this section for information to locate the distributee.
(v) Using an internet search method for which no fee is charged,
such as a search engine, a network database, a public record database
(such as those for licenses, mortgages, and real estate taxes) or a
``social media'' website.
(2) Limits on method. For purposes of this section,--
(i) Searching is not feasible to the extent that, as a practical
matter, it is thwarted by legal or practical lack of access to records,
and
(ii) Searching is not affordable to the extent that the cost of
searching (including the value of labor) is more than a reasonable
fraction of the benefit of the distributee being searched for. In no
event would searching need to be pursued beyond the point where the
cost equals the value of the benefit.
(d) Time frame. A search for a distributee under this section must
have been made within nine months before a filing is made under Sec.
4050.405 identifying the distributee as a missing distributee.
Sec. 4050.405 Filing with PBGC.
(a) What to file. The plan sponsor of a subpart D plan must file
with PBGC the information specified in the missing participants forms
and instructions and, for a missing distributee referred to in Sec.
4050.403(a)(2), payment of--
(1) The benefit transfer amount for the missing distributee;
(2) If the benefit transfer amount is paid more than 90 days after
the benefit determination date, interest on the benefit transfer amount
computed at the missing participants interest rate for the period
beginning on the 90th day after the benefit determination date and
ending on the date the benefit transfer amount is paid to PBGC; and
(3) Any fee provided for in the missing participants forms and
instructions.
(b) When to file. The plan sponsor must file the information and
payments referred to in paragraph (a) of this section in accordance
with the missing participants forms and instructions. Payment of a
benefit transfer amount will, if considered timely made for purposes of
this paragraph (b), be considered timely made for purposes of part
4041A of this chapter.
(c) Place, method and date of filing; time periods. (1) For rules
about where to file, see Sec. 4000.4 of this chapter.
(2) For rules about permissible methods of filing with PBGC under
this subpart, see subpart A of part 4000 of this chapter.
(3) For rules about the date that a submission under this subpart
was filed with PBGC, see subpart C of part 4000 of this chapter.
(4) For rules about any time period for filing under this subpart,
see subpart D of part 4000 of this chapter.
(d) Supplemental information. Within 30 days after a written
request by PBGC (or such other time as may be specified in the
request), the plan sponsor of a subpart D plan required to file under
paragraph (a) of this section must file with PBGC supplemental
information for any proper purpose under the missing participants
program.
(e) Reliance. As administrator of the missing participants program,
PBGC will rely on determinations made and information reported by plan
sponsors in connection with the program. This reliance does not affect
PBGC's authority as administrator of the title IV insurance program to
audit or make inquiries of subpart D plans, including about the amount
to which a missing distributee may be entitled.
Sec. 4050.406 Missing participant benefits.
(a) In general--(1) Benefit transfer amount not paid. If a subpart
D plan files with PBGC information about an annuity contract purchased
by the subpart D plan from an insurer for a missing distributee, PBGC
will provide information about the annuity contract to the distributee
or another claimant that may be entitled to payment pursuant to the
contract.
(2) Benefit transfer amount paid. If a subpart D plan pays PBGC a
benefit transfer amount for a missing distributee, PBGC will pay
benefits with respect to the missing distributee in accordance with
this section, subject to the provisions of a QDRO.
(b) Benefits for missing distributees who are participants.
Paragraphs (c), (d), (e), and (k) of this section describe the benefits
that PBGC will pay to a non-pay status missing participant of a subpart
D plan who claims a benefit under the missing participants program.
(c) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (b) of this section is de minimis,
PBGC will pay the participant a lump sum equal to the accumulated
single sum.
(d) Non-de minimis benefit of unmarried participant. If the benefit
transfer amount of an unmarried participant described in paragraph (b)
of this section is not de minimis, PBGC will pay the participant either
the annuity described in paragraph (d)(1) of this section, beginning
not before age 55, and (if applicable) the make-up amount described in
paragraph (d)(2) of this section; or, if the participant could have
elected a lump sum under the subpart D plan, and the participant so
elects under the missing participants program, the lump sum described
in paragraph (d)(3) of this section.
(1) Annuity. The annuity described in this paragraph (d)(1) is
either--
(i) Straight life annuity. A straight life annuity in the amount
that the subpart
[[Page 60832]]
D plan would have paid the participant, starting at the date that PBGC
payments start (or, if earlier, the later of the participant's normal
retirement date or accrual cessation date), as reported to PBGC by the
subpart D plan (including any early retirement subsidies), or through
linear interpolation for participants who start payments between
integral ages; or
(ii) Other form of annuity. At the participant's election, any form
of annuity available to the participant under Sec. 4022.8 of this
chapter, in an amount that is actuarially equivalent to the straight
life annuity in paragraph (d)(1)(i) of this section as of the date that
PBGC payments start (or, if earlier, the later of the participant's
normal retirement date or accrual cessation date), determined using the
actuarial assumptions in Sec. 4022.8(c)(7) of this chapter.
(2) Make-up amount. If PBGC begins to pay the annuity under
paragraph (d)(1) of this section after the normal retirement date (or
accrual cessation date if later), the make-up amount described in this
paragraph (d)(2) is a lump sum equal to the aggregate value of payments
of the annuity that would have been payable to the participant (in the
elected form) beginning on the normal retirement date (or accrual
cessation date if later), accumulated at the missing participants
interest rate from the date each payment would have been made to the
date when PBGC begins to pay the annuity.
(3) Lump sum. The lump sum described in this paragraph (d)(3) is
equal to the participant's accumulated single sum.
(e) Non-de minimis benefit of married participant. If the benefit
transfer amount of a married participant described in paragraph (b) of
this section is not de minimis, PBGC will pay the participant either
the annuity described in paragraph (e)(1) of this section, beginning
not before age 55, and (if applicable) the make-up amount described in
paragraph (e)(2) of this section; or, if the participant could have
elected a lump sum under the subpart D plan, and the participant so
elects under the missing participants program with the consent of the
participant's spouse, the lump sum described in paragraph (e)(3) of
this section.
(1) Annuity. The annuity described in this paragraph (e)(1) is
either--
(i) Joint and survivor annuity. A joint and 50 percent survivor
annuity in an amount that is actuarially equivalent to the straight
life annuity under paragraph (d)(1)(i) of this section as of the date
that PBGC payments start (or, if earlier, the later of the
participant's normal retirement date or accrual cessation date),
determined using the actuarial assumptions in Sec. 4022.8(c)(7) of
this chapter; or
(ii) Other form of annuity. At the participant's election, with the
consent of the participant's spouse, any form of annuity available to
the participant under Sec. 4022.8 of this chapter, in an amount that
is actuarially equivalent to the joint and 50 percent survivor annuity
under paragraph (e)(1)(i) of this section as of the date that PBGC
payments start (or, if earlier, the later of the participant's normal
retirement date or accrual cessation date), determined using the
actuarial assumptions in Sec. 4022.8(c)(7) of this chapter.
(2) Make-up amount. If PBGC begins to pay the annuity under
paragraph (e)(1) of this section after the normal retirement date (or
accrual cessation date if later), the make-up amount described in this
paragraph (e)(2) is a lump sum equal to the aggregate value of payments
of the annuity that would have been payable to the participant
beginning on the normal retirement date (or accrual cessation date if
later), accumulated at the missing participants interest rate from the
date each payment would have been made to the date when PBGC begins to
pay the annuity.
(3) Lump sum. The lump sum described in this paragraph (e)(3) is
equal to the participant's accumulated single sum.
(f) Benefits with respect to deceased missing distributees who were
participants. Paragraphs (g), (h), (i), (j), and (k) of this section
describe the benefits that PBGC will pay with respect to a non-pay
status missing participant of a subpart D plan who dies without
receiving a benefit under the missing participants program.
(g) De minimis benefit. If the benefit transfer amount of a
participant described in paragraph (f) of this section is de minimis,
PBGC will pay to the qualified survivor(s) of the participant a lump
sum equal to the participant's accumulated single sum.
(h) Non-de minimis benefit; unmarried participant. In the case of
an unmarried participant described in paragraph (f) of this section
whose benefit transfer amount is not de minimis--
(1) Death before normal retirement date. If the participant dies
before the normal retirement date (or accrual cessation date if later),
PBGC will pay no benefits with respect to the participant; and
(2) Death after normal retirement date. If the participant dies on
or after the normal retirement date (or accrual cessation date if
later), PBGC will pay to the participant's qualified survivor(s) an
amount equal to the aggregate value of payments of the straight life
annuity described in paragraph (d)(1)(i) of this section that would
have been payable to the participant from the normal retirement date
(or accrual cessation date if later) to the participant's date of
death, accumulated at the missing participants interest rate from the
date each payment would have been made to the date when PBGC pays the
qualified survivor(s).
(i) Non-de minimis benefit; married participant with living spouse.
In the case of a married participant described in paragraph (f) of this
section whose benefit transfer amount is not de minimis and whose
spouse survives the participant and claims a benefit under the missing
participants program, PBGC will pay the spouse, beginning not before
the participant would have reached age 55, the annuity (if any)
described in paragraph (i)(1) of this section and the make-up amounts
(if applicable) described in paragraph (i)(2) of this section, except
that PBGC will pay the spouse, as a lump sum, the small benefit
described in paragraph (i)(3) of this section.
(1) Annuity. The annuity described in this paragraph (i)(1) is the
survivor portion of a joint and 50 percent survivor annuity that is
actuarially equivalent as of the assumed starting date (determined
using the actuarial assumptions in Sec. 4022.8(c)(7) of this chapter)
to the straight life annuity in the amount that the subpart D plan
would have paid the participant with an assumed starting date of--
(i) The date when the participant would have reached age 55, if the
participant died before that date, or
(ii) The participant's date of death, if the participant died
between age 55 and the normal retirement date (or accrual cessation
date if later), or
(iii) The normal retirement date (or accrual cessation date if
later), if the participant died after that date.
(2) Make-up amounts. The make-up amounts described in this
paragraph (i)(2) are the amounts described in paragraphs (i)(2)(i) and
(ii) of this section.
(i) Payments from participant's death or 55th birthday to
commencement of survivor annuity. The make-up amount described in this
paragraph (i)(2)(i) is a lump sum equal to the aggregate value of
payments of the survivor portion of the joint and 50 percent survivor
annuity described in paragraph (i)(1) of this section that would have
been payable to the spouse beginning on the later of the participant's
date of death or the date when the participant would
[[Page 60833]]
have reached age 55, accumulated at the missing participants interest
rate from the date each payment would have been made to the date when
PBGC pays the spouse.
(ii) Payments from normal retirement date to participant's death.
The make-up amount described in this paragraph (i)(2)(ii) is a lump sum
equal to the aggregate value of payments (if any) of the joint portion
of the joint and 50 percent survivor annuity described in paragraph
(i)(1) of this section that would have been payable to the participant
from the normal retirement date (or accrual cessation date if later) to
the participant's date of death thereafter, accumulated at the missing
participants interest rate from the date each payment would have been
made to the date when PBGC pays the spouse.
(3) Small benefit. If the sum of the actuarial present value of the
annuity described in paragraph (i)(1) of this section plus the make-up
amounts described in paragraph (i)(2) of this section is de minimis,
then the lump sum that PBGC will pay the spouse under this paragraph
(i)(3) is an amount equal to that sum. For this purpose, the actuarial
present value of the annuity is determined using the actuarial
assumptions in Sec. 4022.8(c)(7) of this chapter as of the date when
PBGC pays the spouse.
(j) Non-de minimis benefit; married participant with deceased
spouse. In the case of a married participant described in paragraph (f)
of this section whose benefit transfer amount is not de minimis and
whose spouse survives the participant but dies without receiving a
benefit under the missing participants program, PBGC will pay to the
qualified survivor(s) of the participant's spouse the make-up amount
described in paragraph (j)(1) of this section and to the qualified
survivor(s) of the participant the make-up amount described in
paragraph (j)(2) of this section.
(1) Payments from participant's death or 55th birthday to spouse's
death. The make-up amount described in this paragraph (j)(1) is a lump
sum equal to the aggregate value of payments of the survivor portion of
the joint and 50 percent survivor annuity described in paragraph (i)(1)
of this section that would have been payable to the spouse from the
later of the participant's date of death or the date when the
participant would have reached age 55 to the spouse's date of death,
accumulated at the missing participants interest rate from the date
each payment would have been made to the date when PBGC pays the
spouse's qualified survivor(s).
(2) Payments from normal retirement date to participant's death.
The make-up amount described in this paragraph (j)(2) is a lump sum
equal to the aggregate value of payments of the joint portion of the
joint and 50 percent survivor annuity described in paragraph (i)(1) of
this section that would have been payable to the participant from the
normal retirement date (or accrual cessation date if later) to the
participant's date of death thereafter, accumulated at the missing
participants interest rate from the date each payment would have been
made to the date when PBGC pays the participant's qualified
survivor(s).
(k) Benefits under contributory plans. If a subpart D plan reports
to PBGC that a portion of a missing participant's benefit transfer
amount represents accumulated contributions as described in section
204(c)(2)(C) of ERISA and section 411(c)(2)(C) of the Code, PBGC will
pay with respect to the missing participant, at least the amount of
accumulated contributions as reported by the subpart D plan,
accumulated at the missing participants interest rate from the benefit
determination date to the date when PBGC makes payment.
(l) Date for determining marital status. For purposes of this
section, whether a participant is married, and if so the identity of
the spouse, is determined as of the earlier of--
(1) The date the participant receives or begins to receive a
benefit, or
(2) The date the participant dies.
Sec. 4050.407 PBGC discretion.
PBGC may in appropriate circumstances extend deadlines, excuse
noncompliance, and grant waivers with regard to any provision of this
subpart to promote the purposes of the missing participants program and
title IV of ERISA. Like circumstances will be treated in like manner
under this section.
Issued in Washington, DC.
W. Thomas Reeder,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2017-27515 Filed 12-21-17; 8:45 am]
BILLING CODE 7709-02-P