[Federal Register: July 15, 1996 (Volume 61, Number 136)]
[Rules and Regulations]
[Page 36967-36969]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15jy96-13]
[[Page 36967]]
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Part II
Pension Benefit Guaranty Corporation
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29 CFR Part 4044
Allocation of Assets in Single-Employer Plans; Interest Rates and
Assumptions Used in Making Benefits Valuations; Final Rule and Notice
[[Page 36968]]
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 4044
Allocation of Assets in Single-Employer Plans; Interest Rate for
Valuing Benefits
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Final rule.
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SUMMARY: This final rule amends the Pension Benefit Guaranty
Corporation's regulation on Allocation of Assets in Single-Employer
Plans. The regulation prescribes interest assumptions for valuing
benefits under terminating single-employer plans. This rule adopts
interest assumptions for plans with valuation dates in August 1996 and
advises the public of the new assumptions. These interest assumptions
are also used under the PBGC's regulation on Duties of Plan Sponsor
Following Mass Withdrawal.
EFFECTIVE DATE: August 1, 1996.
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
(202-326-4179 for TTY and TDD).
SUPPLEMENTARY INFORMATION: This rule adopts the August 1996 interest
assumptions to be used in benefit valuations for terminating single-
employer plans. Before July 1996, the interest assumptions used for
such benefit valuations were contained in PBGC regulations codified at
29 CFR part 2619. In a final rule effective July 1, 1996 (61 FR 34001),
the PBGC reorganized and renumbered its regulations. The single-
employer benefit valuation provisions are now codified in the PBGC's
regulation on Allocation of Assets in Single-Employer Plans at 29 CFR
part 4044, and this rule amends that regulation. As discussed in a
notice published elsewhere in today's Federal Register, these interest
assumptions are also used in valuations of multiemployer plans
following mass withdrawal.
Part 4044 prescribes actuarial assumptions for valuing plan
benefits of terminating single-employer plans covered by title IV of
the Employee Retirement Income Security Act of 1974. Under ERISA
section 4041(c), a single-employer plan administrator wishing to
terminate the plan in a distress termination must value guaranteed
benefits and ``benefit liabilities'' (i.e., all benefits provided under
the plan as of the plan termination date) in accordance with part 4044.
(Benefit liabilities may also be valued in accordance with part 4044
for purposes of the Standard Termination Notice filed with the PBGC by
a plan terminating in a standard termination, although this is not
required.) In addition, when the PBGC terminates an underfunded plan
involuntarily pursuant to ERISA section 4042(a), it values benefits in
accordance with part 4044 to determine the amount of the plan's
underfunding.
Among the actuarial assumptions prescribed in part 4044 are
interest rates and factors, which are set forth in appendix B to part
4044. Because these interest rates and factors are intended to reflect
current conditions in the financial and annuity markets, it is
necessary to update the rates and factors periodically.
Two sets of interest rates and factors are prescribed, one set for
the valuation of benefits to be paid as annuities and one set for the
valuation of benefits to be paid as lump sums. This amendment adds to
appendix B to part 4044 the two sets of interest rates and factors for
valuing benefits in plans with valuation dates during August 1996.
For annuity benefits, the interest rates will be 6.30 percent for
the first 20 years following the valuation date and 4.75 percent
thereafter. For benefits to be paid as lump sums, the interest
assumptions to be used by the PBGC will be 5.25 percent for the period
during which benefits are in pay status, 4.50 percent during the seven-
year period directly preceding the benefit's placement in pay status,
and 4.00 percent during any other years preceding the benefit's
placement in pay status. The annuity interest assumptions represent an
increase (from those in effect for July 1996) of 0.10 percent for the
first 20 years following the valuation date and are otherwise
unchanged. The lump sum interest assumptions represent an increase
(from those in effect for July 1996) of 0.25 percent for the period
during which benefits are in pay status and the seven years directly
preceding that period and are otherwise unchanged.
Generally, the interest rates and factors under part 4044 are in
effect for at least one month. However, the PBGC publishes its interest
assumptions each month regardless of whether they represent a change
from the previous month's assumptions. The assumptions are normally
published in the Federal Register on or about the 15th of the preceding
month.
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 rates
and factors promptly so that the rates and factors can reflect, as
accurately as possible, current market conditions.
Because of the need to provide immediate guidance for the valuation
of benefits in plans with valuation dates during August 1996, the PBGC
finds that good cause exists for making the rates and factors 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 in 29 CFR Part 4044
Pension insurance, Pensions.
In consideration of the foregoing, part 4044 of chapter XL, title
29, Code of Federal Regulations, is hereby amended as follows:
PART 4044--[AMENDED]
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.
Appendix B to Part 4044--[Amended]
2. In appendix B, a new entry is added to Table I, and Rate Set 34
is added to Table II, as set forth below. The introductory text of each
table is republished for the convenience of the reader and remains
unchanged.
Appendix B to Part 4044--Interest Rates Used to Value Annuities and
Lump Sums
[[Page 36969]]
Table I.--Annuity Valuations
[This table sets forth, for each indicated calendar month, the interest rates (denoted by i<INF>1, i<INF>2, * * *, and
referred to generally as i<INF>t) assumed to be in effect between specified anniversaries of a valuation date that
occurs within that calendar month; those anniversaries are specified in the columns adjacent to the rates. The
last listed rate is assumed to be in effect after the last listed anniversary date]
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The values of i<INF>t are:
For valuation dates occurring in -----------------------------------------------------------------------------
the month-- i<INF>t for t= i<INF>t for t= i<INF>t for t=
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* * * * * *
August 1996....................... .0630 1-20 .0475 >20 N/A N/A
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Table II.--Lump Sum Valuations
[In using this table: (1) For benefits for which the participant or beneficiary is entitled to be in pay status on the valuation date, the immediate
annuity rate shall apply; (2) For benefits for which the deferral period is y years (where y is an integer and 0 < y <ls-thn-eq> n<INF>1), interest rate i<INF>1
shall apply from the valuation date for a period of y years, and thereafter the immediate annuity rate shall apply; (3) For benefits for which the
deferral period is y years (where y is an integer and n<INF>1 < y <ls-thn-eq> n<INF>1 + n<INF>2), interest rate i<INF>2 shall apply from the valuation date for a period of
y - n<INF>1 years, interest rate i<INF>1 shall apply for the following n<INF>1 years, and thereafter the immediate annuity rate shall apply; (4) For benefits for which
the deferral period is y years (where y is an integer and y > n<INF>1 + n<INF>2), interest rate i<INF>3 shall apply from the valuation date for a period of y - n<INF>1 - n<INF>2
years, interest rate i<INF>2 shall apply for the following n<INF>2 years, interest rate i<INF>1 shall apply for the following n<INF>1 years, and thereafter the immediate
annuity rate shall apply]
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For plans with a valuation date Immediate Deferred annuities (percent)
Rate set ---------------------------------- annuity rate ------------------------------------------------------------------------------------
On or after Before (percent) i<INF>1 i<INF>2 i<INF>3 n<INF>1 n<INF>2
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* * * * * * *
34.............. 08-1-96 09-1-96 5.25 4.50 4.00 4.00 7 8
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Issued in Washington, DC, on this 5th day of July 1996.
Martin Slate,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 96-17792 Filed 7-12-96; 8:45 am]
BILLING CODE 7708-01-P