[Federal Register: May 15, 2003 (Volume 68, Number 94)]

[Rules and Regulations]               

[Page 26206-26208]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr15my03-7]                         



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PENSION BENEFIT GUARANTY CORPORATION



29 CFR Parts 4022 and 4044



 

Benefits Payable in Terminated Single-Employer Plans; Allocation 

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

and Paying Benefits



AGENCY: Pension Benefit Guaranty Corporation.



ACTION: Final rule.



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SUMMARY: The Pension Benefit Guaranty Corporation's regulations on 

Benefits Payable in Terminated Single-Employer Plans and Allocation of 

Assets in Single-Employer Plans prescribe interest assumptions for 

valuing and paying benefits under terminating single-employer plans. 

This final rule amends the regulations to adopt interest assumptions 

for plans with valuation dates in June 2003. Interest assumptions are 

also published on the PBGC's Web site (http://www.pbgc.gov).



EFFECTIVE DATE: June 1, 2003.



FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General 

Counsel, Office of the General Counsel, Pension Benefit Guaranty 

Corporation, 1200 K Street, NW., Washington, DC 20005, 202-326-4024. 

(TTY/TDD users may call the Federal relay service toll-



[[Page 26207]]



free at 1-800-877-8339 and ask to be connected to 202-326-4024.)



SUPPLEMENTARY INFORMATION: The PBGC's regulations prescribe actuarial 

assumptions--including interest assumptions--for valuing and paying 

plan benefits of terminating single-employer plans covered by title IV 

of the Employee Retirement Income Security Act of 1974. The interest 

assumptions are intended to reflect current conditions in the financial 

and annuity markets.

    Three sets of interest assumptions are prescribed: (1) A set for 

the valuation of benefits for allocation purposes under section 4044 

(found in Appendix B to part 4044), (2) a set for the PBGC to use to 

determine whether a benefit is payable as a lump sum and to determine 

lump-sum amounts to be paid by the PBGC (found in Appendix B to part 

4022), and (3) a set for private-sector pension practitioners to refer 

to if they wish to use lump-sum interest rates determined using the 

PBGC's historical methodology (found in Appendix C to part 4022).

    Accordingly, this amendment (1) adds to Appendix B to part 4044 the 

interest assumptions for valuing benefits for allocation purposes in 

plans with valuation dates during June 2003, (2) adds to Appendix B to 

part 4022 the interest assumptions for the PBGC to use for its own 

lump-sum payments in plans with valuation dates during June 2003, and 

(3) adds to Appendix C to part 4022 the interest assumptions for 

private-sector pension practitioners to refer to if they wish to use 

lump-sum interest rates determined using the PBGC's historical 

methodology for valuation dates during June 2003.

    For valuation of benefits for allocation purposes, the interest 

assumptions that the PBGC will use (set forth in Appendix B to part 

4044) will be 4.70 percent for the first 20 years following the 

valuation date and 5.25 percent thereafter. These interest assumptions 

represent a decrease (from those in effect for May 2003) of 0.20 

percent for the first 20 years following the valuation date and are 

otherwise unchanged.

    The interest assumptions that the PBGC will use for its own lump-

sum payments (set forth in Appendix B to part 4022) will be 3.50 

percent for the period during which a benefit is in pay status and 4.00 

percent during any years preceding the benefit's placement in pay 

status. These interest assumptions are unchanged from those in effect 

for May 2003.

    For private-sector payments, the interest assumptions (set forth in 

Appendix C to part 4022) will be the same as those used by the PBGC for 

determining and paying lump sums (set forth in Appendix B to part 

4022).

    The PBGC has determined that notice and public comment on this 

amendment are impracticable and contrary to the public interest. This 

finding is based on the need to determine and issue new interest 

assumptions promptly so that the assumptions can reflect, as accurately 

as possible, current market conditions.

    Because of the need to provide immediate guidance for the valuation 

and payment of benefits in plans with valuation dates during June 2003, 

the PBGC finds that good cause exists for making the assumptions set 

forth in this amendment effective less than 30 days after publication.

    The PBGC has determined that this action is not a ``significant 

regulatory action'' under the criteria set forth in Executive Order 

12866.

    Because no general notice of proposed rulemaking is required for 

this amendment, the Regulatory Flexibility Act of 1980 does not apply. 

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



List of Subjects



29 CFR Part 4022



    Employee benefit plans, Pension insurance, Pensions, Reporting and 

recordkeeping requirements.



29 CFR Part 4044



    Employee benefit plans, Pension insurance, Pensions.



0

In consideration of the foregoing, 29 CFR parts 4022 and 4044 are 

amended as follows:



PART 4022--BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS



0

1. The authority citation for part 4022 continues to read as follows:



    Authority: 29 U.S.C. 1302, 1322, 1322b, 1341(c)(3)(D), and 1344.





0

2. In appendix B to part 4022, Rate Set 116, as set forth below, is 

added to the table. (The introductory text of the table is omitted.)



Appendix B to Part 4022--Lump Sum Interest Rates For PBGC Payments



* * * * *



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

                                                    For plans with a valuation date              Immediate           Deferred annuities (percent)

                                        -------------------------------------------------------   annuity   --------------------------------------------

                Rate set                                                                            rate

                                                 On or after                   Before            (percent)     i 1      i 2      i 3      n 1      n 2

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



                                                                      * * * * * * *

116....................................  6-1-03....................  7-1-03...................         3.50     4.00     4.00     4.00        7        8

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





0

3. In appendix C to part 4022, Rate Set 116, as set forth below, is 

added to the table. (The introductory text of the table is omitted.)



Appendix C to Part 4022--Lump Sum Interest Rates For Private-Sector 

Payments



* * * * *



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

                                                    For plans with a valuation date              Immediate           Deferred annuities (percent)

                                        -------------------------------------------------------   annuity   --------------------------------------------

                Rate set                                                                            rate

                                                 On or after                   Before            (percent)     i 1      i 2      i 3      n 1      n 2

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



                                                                      * * * * * * *

116....................................  6-1-03....................  7-1-03...................         3.50     4.00     4.00     4.00        7        8

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





[[Page 26208]]



PART 4044--ALLOCATION OF ASSETS IN SINGLE-EMPLOYER PLANS



0

4. The authority citation for part 4044 continues to read as follows:



    Authority: 29 U.S.C. 1301(a), 1302(b)(3), 1341, 1344, 1362.



0

5. In appendix B to part 4044, a new entry, as set forth below, is 

added to the table. (The introductory text of the table is omitted.)



Appendix B to Part 4044--Interest Rates Used to Value Benefits



* * * * *



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                                                                      The values of it are:

  For valuation dates occuring in the month--  -----------------------------------------------------------------

                                                   i t       for t=      i t       for t=      i t       for t=

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



                                                  * * * * * * *

June 2003.....................................      .0470       1-20      .0525