[Federal Register: December 29, 2008 (Volume 73, Number 249)]

[Rules and Regulations]               

[Page 79362-79363]

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





29 CFR Part 4044


Allocation of Assets in Single-Employer Plans; Interest 

Assumptions for Valuing Benefits

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.


SUMMARY: Pension Benefit Guaranty Corporation's regulation on 

Allocation of Assets in Single-Employer Plans prescribes interest 

assumptions for valuing benefits under terminating single-employer 

plans. This final rule amends the asset allocation regulation to adopt 

interest assumptions for plans with valuation dates in the first 

quarter of 2009. As discussed below, PBGC has published a separate 

final rule dealing with interest assumptions under its regulation on 

Benefits Payable in Terminated Single-Employer Plans for January 2009. 

Interest assumptions are also published on PBGC's Web site (


DATES: Effective January 1, 2009.


Regulatory and Policy Division, Legislative and Regulatory Department, 

Pension Benefit Guaranty Corporation, 1200 K Street, NW., Washington, 

DC 20005, 202-326-4024. (TTY/TDD users may call the Federal relay 

service toll-free at 1-800-877-8339 and ask to be connected to 202-326-


SUPPLEMENTARY INFORMATION: 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 (ERISA). The 

interest assumptions are intended to reflect current conditions in the 

financial and annuity markets.

    These interest assumptions are found in two PBGC regulations: The 

regulation on Benefits Payable in Terminated Single-Employer Plans (29 

CFR Part 4022) and the regulation on Allocation of Assets in Single-

Employer Plans (29 CFR Part 4044). PBGC normally updates the 

assumptions under the two regulations each month in a single rulemaking 

document. Because of delays in obtaining data used in setting the 

assumptions for January 2009, PBGC is publishing two rulemaking 

documents to update the two regulations. This document is a final rule 

updating the asset allocation

[[Page 79363]]

regulation for January through March 2009.

    The interest assumptions prescribed under the asset allocation 

regulation (found in Appendix B to Part 4044) are used for the 

valuation of benefits for allocation purposes under ERISA section 4044, 

and for other purposes. When used in conjunction with the mortality 

tables specified in Appendix A to Part 4044, these interest assumptions 

are intended to produce benefit values that match as closely as 

possible the prices charged by insurers in the private-sector group 

annuity market to annuitize comparable benefits. See 70 FR 72205 

(December 2, 2005) (preamble to final rule adopting more current 

mortality tables); 58 FR 5128 (January 19, 1993) (preamble to proposed 

rule amending PBGC's valuation regulations).

    As explained in the preamble to the 2005 amendment (at 70 FR 

72205), PBGC determines prices in the private-sector group annuity 

market based on quarterly surveys of insurers conducted for PBGC by the 

American Council of Life Insurers (ACLI). Using those surveys, PBGC 

derives interest factors that, when combined with PBGC's mortality 

assumptions, provide the best fit for the average market prices 

obtained from the ACLI surveys.

    PBGC's practice has been to recalibrate its interest factors each 

January based on the two most recent ACLI surveys and subsequent 

changes in the yield on long-term corporate investment-grade bonds. 

Between the annual recalibrations, PBGC has used this corporate bond 

market data to make monthly adjustments to the interest factors.

    The recent turmoil in the financial markets has prompted PBGC to 

further examine its current practice. Based on an examination of 

historical data, PBGC has concluded that (1) increasing the frequency 

of the recalibrations from annually to quarterly and (2) basing the 

interest factors on the ACLI surveys alone can be expected to provide a 

better fit for average group annuity market prices than current 


    The recalibration reflected in this rule and future quarterly 

recalibrations will be based on an averaging of the prices from the two 

most recent ACLI surveys. The interest factors so determined will 

remain in effect for three months--in this rule, from January through 

March of 2009.

    Accordingly, this amendment adds to Appendix B to Part 4044 the 

interest assumptions for valuing benefits for allocation purposes in 

plans with valuation dates during January, February, and March 2009. 

The interest assumptions that PBGC will use for these purposes (set 

forth in Appendix B to part 4044) will be 6.02 percent for the first 20 

years following the valuation date and 5.48 percent thereafter. These 

interest assumptions represent a decrease (from those in effect for 

December 2008) of 1.90 percent for the first 20 years following the 

valuation date and 1.51 percent for all years thereafter.

    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 current market 

conditions as accurately as possible.

    Because of the need to provide immediate guidance for the valuation 

of benefits in plans with valuation dates during January 2009, PBGC 

finds that good cause exists for making the assumptions set forth in 

this amendment effective less than 30 days after publication.

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

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


    Because no general notice of proposed rulemaking is required for 

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

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

List of Subjects in 29 CFR Part 4044

    Employee benefit plans, Pension insurance, Pensions.


In consideration of the foregoing, 29 CFR part 4044 is amended as 




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

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


2. In appendix B to part 4044, new entries for January, February, and 

March 2009, as set forth below, are added to the table.

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

* * * * *


                                                                      The values of it are:

 For valuation dates occurring in the month--  -----------------------------------------------------------------

                                                    it      for t =       it      for t =       it      for t =


                                                  * * * * * * *

January 2009..................................     0.0602       1-20      0.548        >20      (\1\)      (\1\)

February 2009.................................     0.0602       1-20      0.548        >20      (\1\)      (\1\)

March 2009....................................     0.0602       1-20      0.548        >20      (\1\)      (\1\)


\1\ Not applicable.

    Issued in Washington, DC, on this 19th day of December 2008.

Vincent K. Snowbarger,

Deputy Director for Operations, Pension Benefit Guaranty Corporation

[FR Doc. E8-30768 Filed 12-24-08; 8:45 am]