9716 Federal Register / Vol. 83, No. 45 / Wednesday, March 7, 2018 / Proposed Rules 

1 In this preamble, substantial owners and 

majority owners are referred to interchangeably as 

‘‘owner-participants.’’ 

with the petition that is the subject of 

this notice on public display at the 

Dockets Management Staff (see 

ADDRESSES) for public review and 

comment. 

We will also place on public display, 

in the Dockets Management Staff and at 

https://www.regulations.gov, any 

amendments to, or comments on, the 

petitioner’s environmental assessment 

without further announcement in the 

Federal Register. If, based on our 

review, we find that an environmental 

impact statement is not required, and 

this petition results in a regulation, we 

will publish the notice of availability of 

our finding of no significant impact and 

the evidence supporting that finding 

with the regulation in the Federal 

Register in accordance with 21 CFR 

25.51(b). 

Dated: March 1, 2018. 

Leslie Kux, 

Associate Commissioner for Policy. 

[FR Doc. 2018–04619 Filed 3–6–18; 8:45 am] 

BILLING CODE 4164–01–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4001, 4022, 4041, 4043, 

and 4044 

RIN 1212–AB24 

Owner-Participant Changes to 

Guaranteed Benefits and Asset 

Allocation 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Proposed rule. 

SUMMARY: The Pension Benefit Guaranty 

Corporation (PBGC) proposes to amend 

its regulations on guaranteed benefits 

and asset allocation. These amendments 

would incorporate statutory changes to 

the rules for participants with certain 

ownership interests in a plan sponsor. 

PBGC seeks public comment on its 

proposal. 

DATES:

Deadline for comments: Comments 

must be submitted on or before May 7, 

2018. 

Applicability: Like the provisions of 

the Pension Protection Act of 2006 (PPA 

2006) that this rule would incorporate, 

the amendments in this proposed rule 

would be applicable to plan 

terminations— 

(A) under section 4041(c) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA) with respect to 

which notices of intent to terminate are 

provided under section 4041(a)(2) of 

ERISA after December 31, 2005, and 

(B) under section 4042 of ERISA with 

respect to which notices of 

determination are provided under that 

section after December 31, 2005. 

ADDRESSES: Comments, identified by 

Regulation Identifier Number (RIN) 

1212–AB24, may be submitted by any of 

the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. (Follow the online 

instructions for submitting comments.) 

• Email: reg.comments@pbgc.gov. 

• Mail or Hand Delivery: Regulatory 

Affairs Division, Office of the General 

Counsel, Pension Benefit Guaranty 

Corporation, 1200 K Street NW, 

Washington, DC 20005–4026. 

All submissions must include the RIN 

for this rulemaking (RIN 1212–AB24). 

Comments received will be posted to 

www.pbgc.gov. Copies of comments may 

also be obtained by writing to 

Disclosure Division, Office of the 

General Counsel, Pension Benefit 

Guaranty Corporation, 1200 K Street 

NW, Washington, DC 20005–4026, or 

calling 202–326–4040 during normal 

business hours. (TTY users may call the 

Federal relay service toll-free at 800– 

877–8339 and ask to be connected to 

202–326–4040.) 

FOR FURTHER INFORMATION CONTACT: 

Samantha M. Lowen (lowen.samantha@

pbgc.gov), Attorney, Regulatory Affairs 

Division, Office of the General Counsel, 

Pension Benefit Guaranty Corporation, 

1200 K Street NW, Washington, DC 

20005–4026; 202–326–4400, extension 

3786. (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 3786.) 

SUPPLEMENTARY INFORMATION: 

Executive Summary 

Purpose of the Regulatory Action 

This proposed rule is necessary to 

conform the regulations of PBGC to 

current law and practice. PBGC 

proposes to incorporate statutory 

changes affecting guaranteed benefits 

and asset allocation when a plan has 

one or more participants with certain 

ownership interests in the plan sponsor. 

PBGC’s legal authority for this action 

comes from sections 4002(b)(3), 4022, 

and 4044 of ERISA. Section 4002(b)(3) 

authorizes PBGC to issue regulations to 

carry out the purposes of title IV of 

ERISA. Sections 4022 and 4044 

authorize PBGC to prescribe regulations 

regarding the determination of 

guaranteed benefits and the allocation of 

assets within priority categories, 

respectively. 

Major Provisions 

This proposed rule would amend 

PBGC’s benefit payment regulation by 

replacing the guarantee limitations 

applicable to substantial owners with a 

new limitation applicable to majority 

owners.1 Additionally, this proposed 

rule would amend PBGC’s asset 

allocation regulation by prioritizing 

funding of all other benefits in priority 

category 4 ahead of those benefits that 

would be guaranteed but for the new, 

owner-participant limitation. The 

proposed rule also clarifies that plan 

administrators may continue to use the 

simplified calculation in the existing 

rule to estimate benefits funded by plan 

assets. Finally, it provides new 

examples to aid in implementation. 

Background 

PBGC administers the pension 

insurance program under title IV of 

ERISA. ERISA sections 4022 and 4044 

cover PBGC’s guarantee of plan benefits 

and allocation of plan assets, 

respectively, under terminated singleemployer plans. Special provisions 

within these sections apply to ‘‘ownerparticipants,’’ who have certain 

ownership interests in their plan 

sponsors. PPA 2006 made changes to 

these provisions. PBGC has been 

operating in accordance with the 

amended provisions since they became 

effective, but has not yet updated its 

regulations nor issued guidance on 

implementation. With this rulemaking, 

PBGC intends to increase transparency 

into its operations and to clarify for plan 

administrators the impact of the 

statutory changes. 

Before PPA 2006, the ownerparticipant provisions applied to any 

participant who was a ‘‘substantial 

owner’’ at any time within the 60 

months preceding the date on which the 

determination was made. ERISA defines 

a substantial owner as an individual 

who owns the entire interest in an 

unincorporated trade or business, or a 

partner or shareholder who owns more 

than 10 percent of the partnership or 

corporation. PPA 2006 revised the 

owner-participant provisions, in large 

part, by making them applicable to 

‘‘majority owners’’ instead of substantial 

owners. ERISA defines a majority owner 

as an individual who owns the entire 

interest in an unincorporated trade or 

business, or a partner or shareholder 

who owns 50 percent or more of the 

entity. 


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2Strictly speaking, this description applies to 

benefits in ‘‘net PC4,’’ given that ‘‘PC4’’ (or, more 

accurately, ‘‘gross PC4’’) technically includes the 

three kinds of benefits listed, as well as all benefits 

in higher priority categories. Without using the 

terms ‘‘gross’’ or ‘‘net,’’ PBGC’s asset allocation 

regulation makes this distinction at paragraph (c) of 

§ 4044.10 (‘‘[t]he value of each participant’s basictype benefit or benefits in a priority category shall 

be reduced by the value of the participant’s benefit 

of the same type that is assigned to a higher priority 

category’’). Nevertheless, PBGC recognizes that 

colloquial descriptions of benefits in a given 

priority category usually refer to the net benefits in 

that category, and this preamble follows that 

common usage, unless otherwise indicated. 

Guaranteed Benefits Before and After 

PPA 2006 

ERISA section 4022 imposes several 

limitations on PBGC’s guarantee of plan 

benefits, including the ‘‘phase-in 

limitation.’’ As the name of this 

limitation suggests, PBGC’s guarantee of 

a plan’s benefits is phased in over a 

specified time period. Before PPA 2006, 

this time period was drastically 

different for owner-participants and for 

all other participants; the benefits of 

owner-participants were phased in over 

30 years, whereas the benefits of nonowner-participants were phased in over 

five years. In addition, the extent to 

which an owner-participant’s benefit 

was phased in was unique to each 

owner-participant and based on the 

number of years he or she was an active 

participant in the plan; whereas the 

extent to which all other participants’ 

benefits were phased in was based on 

the number of years a plan provision— 

specifically, one that increased 

benefits—was in effect before the plan 

terminated. 

PPA 2006 greatly simplified the 

method for determining PBGC’s 

guarantee of owner-participants’ 

benefits by eliminating the 30-year 

phase-in and making the five-year 

phase-in of benefit increases applicable 

to owner-participants and non-ownerparticipants alike. PPA 2006 then 

applies a separate, additional 

limitation—the ‘‘owner-participant 

limitation’’—to an owner-participant’s 

otherwise guaranteed benefit. This 

owner-participant limitation is similar 

to the five-year phase-in limitation on 

benefit increases, as it is calculated 

based on a plan’s age; however, it is 

based on the length of time the original 

plan was in existence, regardless of 

whether the plan increased benefits, and 

the phase-in period is 10 years. The 

owner-participant limitation bears little 

resemblance to the 30-year phase-in 

limitation, and the calculations are 

much simpler. This proposed rule 

would incorporate these changes to 

PBGC’s benefit payment regulation. 

Phase-In Limitation 

Sections 4022.25 and 4022.26 of 

PBGC’s benefit payment regulation 

provide the procedures for calculating 

the five-year phase-in of benefit 

increases for non-owner-participants 

and the 30-year phase-in of all benefits 

for owner-participants, respectively. 

Section 4022.25 provides, generally, 

that benefit increases (as defined in 

§ 4022.2) of non-owner-participants are 

phased in by the greater of $20 or 20 

percent of the increase for each full year 

the increase was effective. Section 

4022.26 provides the much more 

complicated procedures for calculating 

the guaranteed benefits of ownerparticipants—based on a 30-year phasein—before PPA 2006; different 

procedures apply depending on whether 

or not there have been any benefit 

increases. As explained above, PPA 

2006 eliminated the 30-year phase-in 

limitation and made the five-year phasein of benefit increases applicable to all 

participants, including ownerparticipants. Accordingly, PBGC 

proposes to amend the benefit payment 

regulation by removing the distinction 

between owner-participants and all 

other participants under § 4022.25, and 

PBGC proposes to amend § 4022.26 by 

replacing the 30-year phase-in 

limitation with a new ‘‘ownerparticipant limitation,’’ as discussed 

next. 

Owner-Participant Limitation 

PPA 2006 provided a new formula for 

determining PBGC’s guarantee of an 

owner-participant’s benefit. Under this 

owner-participant limitation, an ownerparticipant’s guaranteed benefit is 

limited to the product of the ownerparticipant’s otherwise-guaranteed 

benefit and a fraction, not to exceed one. 

The numerator of this fraction equals 

the number of years that the plan was 

in existence (from the later of its 

effective date or adoption date), and the 

denominator equals 10. 

Compared to the 30-year phase-in 

under the old statute—implemented at 

§ 4022.26 of the benefit payment 

regulation—the owner-participant 

limitation is much simpler to calculate 

and generally provides a much more 

generous guarantee. Before PPA 2006, 

PBGC needed to make individualized 

determinations about the length of time 

each substantial owner was an active 

participant in a plan over a 30-year 

period. Additionally, a substantial 

owner needed to have been an active 

participant for at least 30 years in order 

for his or her benefit to be fully 

guaranteed (to the extent that other 

limitations on PBGC’s guarantee did not 

apply). Under PPA 2006, PBGC needs 

only to calculate a single fraction, based 

on the age of the plan, and then to 

multiply the benefit of each majority 

owner under the plan by that same 

fraction. In addition, all majority 

owners’ benefits are now fully 

guaranteed (to the extent that other 

limitations on PBGC’s guarantee do not 

apply) once a plan has been in existence 

for 10 years. 

Consistent with these statutory 

changes, PBGC proposes to amend the 

benefit payment regulation by replacing 

references to ‘‘substantial owner’’ with 

‘‘majority owner’’ and by revising 

§ 4022.26 to provide the formula for 

calculating the owner-participant 

limitation, in the place of the 30-year 

phase-in limitation. 

Asset Allocation in Priority Category 4 

Before and After PPA 2006 

ERISA section 4044 prescribes the 

method for allocating a terminated 

single-employer plan’s assets to its 

benefit liabilities. Under section 4044, 

plan assets must be allocated to six 

priority categories (PC1 through PC6, 

with PC1 being the highest) into which 

all plan benefits are sorted. Benefits 

affected by the owner-participant 

limitation are assigned to priority 

category 4 (PC4). PPA 2006 changed the 

method for allocating assets within PC4 

when there are benefits affected by the 

owner-participant limitation. 

PC4 includes three kinds of benefits: 

(1) Guaranteed benefits, other than 

employee contributions and benefits 

that could have been in pay status three 

or more years before a plan’s 

termination (or before the plan 

sponsor’s bankruptcy filing date, for 

plans subject to ERISA section 4022(g)); 

(2) benefits that would be guaranteed 

but for the aggregate limit of ERISA 

section 4022B; and (3) benefits that 

would be guaranteed but for the ownerparticipant limitation (based on 

substantial ownership before PPA 2006 

and majority ownership after PPA 

2006).2 If a plan’s assets are sufficient to 

cover all PC4 benefits or are insufficient 

to cover any PC4 benefits, the PPA 2006 

changes for owner-participants have no 

bearing on the allocation; however, if 

assets are sufficient to cover some, but 

not all, PC4 benefits (i.e., if assets are 

‘‘exhausted in PC4’’), the allocation 

rules differ before and after PPA 2006. 

Before PPA 2006, if assets were 

exhausted in PC4, then assets were to be 

allocated pro rata among all three kinds 

of PC4 benefits. Under PPA 2006, if 

assets are exhausted in PC4, then assets 

must first be allocated to the first two 

PC4 groups; only if assets cover all 

benefits in these two groups will any 

assets be allocated to benefits that 


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9718 Federal Register / Vol. 83, No. 45 / Wednesday, March 7, 2018 / Proposed Rules 

3A participant’s asset-funded benefit is 

essentially the portion of the participant’s plan 

benefit that plan assets are sufficient to fund when 

assets are allocated according to the distribution 

rules of ERISA section 4044. 

4PBGC’s benefit payment regulation does not 

currently include the term ‘‘estimated asset-funded 

benefit’’; the term ‘‘estimated title IV benefit’’ is 

used instead. As discussed later in this preamble, 

PBGC proposes to replace the term ‘‘estimated title 

IV benefit’’ with ‘‘estimated asset-funded benefit.’’ 

Consistent with the proposed terminology change, 

this preamble refers to estimated asset-funded 

benefits and not to estimated title IV benefits, 

except where otherwise indicated. 

5The PC4 funding ratio excludes assets and 

benefits that are attributable to employee 

contributions. See 29 CFR 4022.63(d)(2). 

6See note 5. 

would be guaranteed but for the 

majority-owner limitation. In 

accordance with these statutory 

changes, PBGC proposes to amend the 

asset allocation regulation by 

prioritizing assets in PC4 to other 

benefits ahead of benefits affected by the 

majority-owner limitation. 

Calculation of Estimated Benefits 

In a distress termination, § 4022.61 of 

the benefit payment regulation— 

implementing section 4041(c)(3)(D) of 

ERISA—requires plan administrators to 

limit benefit payments to estimates of 

the amounts that PBGC is expected to 

pay, in order to minimize potential 

overpayments and exhaustion of plan 

assets before PBGC becomes trustee and 

is able to assume benefit payments. As 

trustee, PBGC pays each participant the 

greater of his or her guaranteed benefit 

or asset-funded benefit.3 Accordingly, 

§ 4022.61 requires plan administrators 

to limit benefits in pay status to the 

greater of each participant’s estimated 

guaranteed benefit or estimated assetfunded benefit, beginning on the 

proposed termination date.4

Estimated Guaranteed Benefits 

A participant’s estimated guaranteed 

benefit is determined as of the proposed 

termination date and is the portion of 

the participant’s plan benefit (viz., the 

benefit to which the participant would 

be entitled under the terms of the plan 

if the plan did not terminate) that does 

not exceed the estimated legal limits of 

PBGC’s guarantee. Section 4022.62 of 

the benefit payment regulation 

prescribes the method for estimating 

PBGC’s guarantee limitations and for 

calculating a participant’s estimated 

guaranteed benefit. 

As discussed above, the changes 

under PPA 2006 greatly affected the 

calculation of guaranteed benefits of 

owner-participants. Therefore, in order 

to ensure that administrators of plans 

with owner-participants understand 

how to accurately estimate these 

benefits in distress terminations, PBGC 

must update the calculation procedures. 

Section 4022.62 provides two 

methods for calculating estimated 

guaranteed benefits. One method—given 

at paragraph 4022.62(c)—applies to nonowner-participants, while the other— 

given at paragraph 4022.62(d)—applies 

to owner-participants. Both methods’ 

calculations use the amount calculated 

under paragraph 4022.62(b) as a starting 

point. Paragraph 4022.62(b) estimates a 

participant’s benefit that would be 

guaranteed before application of any 

phase-in limitation. Paragraph 

4022.62(c) estimates the effect of the 

five-year phase-in limitation on the 

4022.62(b) amount. Paragraph 

4022.62(d) estimates the effect of the 30- 

year phase-in limitation applicable to 

owner-participants before PPA 2006 on 

the 4022.62(b) amount. 

In order to reflect the changes to 

PBGC’s guarantee limitations for ownerparticipants under PPA 2006, PBGC 

proposes to revise paragraph 4022.62(d) 

in its entirety. As revised, paragraph 

4022.62(d) would no longer estimate the 

effect of the 30-year phase-in limitation 

on the 4022.62(b) amount; rather, 

paragraph 4022.62(d) would estimate 

the effect of the owner-participant 

limitation (using the n/10 ratio that PPA 

2006 introduced) on the 4022.62(c) 

amount. The revised paragraph 

4022.62(d) would use the 4022.62(c) 

amount instead of the 4022.62(b) 

amount because the five-year phase-in 

limitation is now applicable to all 

participants (including majority 

owners). 

Estimated Asset-Funded Benefits 

A participant’s estimated asset-funded 

benefit is the portion of the participant’s 

plan benefit that plan assets are 

expected to be sufficient to fund 

through PC4, based on estimated plan 

assets and benefits in each priority 

category. Section 4022.63 of the benefit 

payment regulation prescribes two 

methods for calculating estimated assetfunded benefits; one applies to nonowner-participants and the other 

applies to owner-participants. 

Essentially, § 4022.63 provides that a 

non-owner-participant’s estimated assetfunded benefit equals his or her 

estimated PC3 benefit and that an 

owner-participant’s estimated assetfunded benefit equals the greater of his 

or her estimated PC3 benefit or 

estimated PC4 benefit. The PPA 2006 

changes for owner-participants have no 

bearing on estimated PC3 benefits; 

however, the PPA 2006 change to asset 

allocation has the potential to affect the 

calculation of estimated PC4 benefits, 

which are payable only to ownerparticipants. 

An owner-participant’s estimated PC4 

benefit equals the product of what 

would be his or her estimated 

guaranteed benefit if the participant 

were not an owner-participant and the 

‘‘PC4 funding ratio.’’ The PC4 funding 

ratio is calculated one of two ways, 

depending on whether a plan has any 

benefits in PC3 (viz., whether a plan has 

benefits that were or could have been in 

pay status three years before the 

proposed termination date). If a plan has 

no PC3 benefits, the PC4 funding ratio 

essentially equals the estimated amount 

of plan assets divided by the estimated 

amount of vested benefits under the 

plan.5 If a plan has PC3 benefits, the 

PC4 funding ratio essentially equals the 

estimated amount of plan assets minus 

the present value of all benefits in pay 

status, all divided by the estimated 

amount of vested benefits not in pay 

status.6

By calculating and then using a plan’s 

PC4 funding ratio, an administrator is 

able to estimate the amount of assets 

available to fund all benefits in PC4. 

This ratio does not distinguish between 

owner-participants’ benefits and all 

other benefits in PC4, as this distinction 

was not necessary before PPA 2006, 

when assets were to be allocated equally 

among the three kinds of PC4 benefits. 

As a result, while the PC4 funding ratio 

is a useful tool for estimating assets 

available to fund all benefits in PC4 

(including those of substantial owners 

before PPA 2006), it does not account 

for the requirement under PPA 2006 to 

fund the benefits of majority owners 

only if assets remain after funding all 

other benefits in PC4. 

Under PPA 2006, continued use of the 

PC4 funding ratio is more likely to 

result in an inflated estimate of assets 

available to fund a majority owner’s 

benefit. While this potential 

overestimation increases the likelihood 

that a majority owner’s estimated 

benefit will exceed his or her actual 

benefit entitlement, it has no bearing 

on—in particular, it does not reduce— 

the estimated benefits of other 

participants. This is because the PC4 

ratio is used only when calculating the 

estimated asset-funded benefit of an 

owner-participant. As stated above, the 

estimated asset-funded benefits of nonowner-participants equal the 

participants’ estimated PC3 benefits. 

Because PC3 benefits receive higher 

allocation priority than PC4 benefits, the 

estimated asset-funded benefit of any 

non-owner-participant would not be 

affected by the allocation of assets in 

PC4. 


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7See 76 FR 34590, 34596 (June 14, 2011) (‘‘[t]he 

final regulation provides that for any PPA 2006 

bankruptcy termination, those estimated benefits 

[calculated under 29 CFR 4022.62–4022.63] are 

based on the rules described above relating to the 

bankruptcy filing date’’). 

Even without any potential harm to 

other participants, the concern remains 

for potentially overpaying majority 

owners who receive estimated benefits. 

Weighed against this concern is 

consideration of the potential burden on 

plan administrators that more robust 

estimation procedures would impose. 

Modifying the PC4 funding ratio to 

account for the funding prioritization of 

other PC4 benefits ahead of those of 

majority owners would require 

additional calculations that would seem 

to undermine the requirement of 

administrators to ‘‘estimate’’ assetfunded benefits, as opposed to 

performing more precise calculations 

outright. Moreover, far fewer 

participants are likely to be majority 

owners, compared to the number likely 

to have been substantial owners before 

PPA 2006. This is because majority 

owners must have an ownership interest 

of at least 50 percent and because the 

majority-owner limitation does not 

apply to any plan that existed for at 

least 10 years before terminating. 

Having weighed the concerns and 

chiefly recognizing the limited number 

of cases where a plan will have one or 

more majority owners as well as assets 

sufficient to fund some, but not all, 

benefits in PC4, PBGC proposes to leave 

its estimated asset-funded benefit 

provisions at § 4022.63 substantively 

unchanged, with the sole exception of 

revising Example 2 under paragraph (e). 

Example 2 illustrates how to calculate 

the estimated asset-funded benefit of an 

owner-participant and describes the 

related calculation of the ownerparticipant’s estimated guaranteed 

benefit under § 4022.62. The proposed 

revisions to Example 2 would reflect the 

proposed changes to § 4022.62 

discussed above. 

Related Regulatory Amendments 

PBGC proposes to make conforming 

amendments to its regulations on 

Terminology, Termination of Singleemployer Plans, and Reportable Events 

and Certain Other Notification 

Requirements. 

PBGC also proposes to correct 

paragraph (e) of § 4022.62, which 

currently provides that in a PPA 2006 

bankruptcy termination, ‘‘bankruptcy 

filing date’’ is substituted for ‘‘proposed 

termination date’’ in paragraph (c) of 

§ 4022.62, by making the substitution 

applicable to both paragraph (c) 

(applicable to non-owner-participants) 

and paragraph (d) (applicable to ownerparticipants) of § 4022.62. It is clear 

from the preamble to the final rule that 

added paragraph (e) that PBGC 

intended, consistent with PPA 2006, to 

have the applicable ‘‘bankruptcy filing 

date’’ substituted when calculating the 

estimated benefits of all participants, 

regardless of ownership status.7

Amendments Unrelated to PPA 2006 

PBGC proposes to make minor, nonsubstantive changes to the examples not 

involving owner-participants at 

§§ 4022.62 and 4022.63 of the benefit 

payment regulation, in order to improve 

readability. Additionally, PBGC 

proposes to correct two clerical errors 

that were made when PBGC previously 

amended the regulation; the first 

duplicated paragraph (f) of § 4022.62, 

and the second duplicated the 

designation of paragraph (c)(1) of 

§ 4022.63. Lastly, PBGC proposes to 

replace the term ‘‘estimated title IV 

benefit’’ with ‘‘estimated asset-funded 

benefit’’ at § 4022.63. 

The use of the term ‘‘estimated title IV 

benefit’’ at § 4022.63 of the benefit 

payment regulation is confusing, in light 

of the definition of ‘‘title IV benefit’’ at 

§ 4001.2 of the terminology regulation. 

Section 4001.2 provides, generally, that 

a participant’s title IV benefit equals the 

greater of his or her guaranteed benefit 

or asset-funded benefit. Given this 

definition, one might assume that the 

estimated title IV benefit equals the 

greater of the estimate of a participant’s 

guaranteed benefit or the estimate of a 

participant’s asset-funded benefit; 

however, § 4022.63 provides that the 

estimated title IV benefit is essentially 

an estimate of a participant’s assetfunded benefit (through PC4) only. 

Accordingly, PBGC proposes to rename 

the ‘‘estimated title IV benefit’’ referred 

to in § 4022.63 as the ‘‘estimated assetfunded benefit.’’ This term only appears 

in § 4022.63; the proposed change 

would not require any conforming 

amendments elsewhere in PBGC’s 

regulations. 

Compliance With Rulemaking 

Guidelines 

Executive Orders 12866, 13563, and 

13771 

PBGC has determined that this 

rulemaking is not a ‘‘significant 

regulatory action’’ under Executive 

Order 12866 and, accordingly, that the 

provisions of Executive Order 13771 do 

not apply. Because this rulemaking is 

not a significant regulatory action, OMB 

has not reviewed this proposed rule. 

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, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. If a 

regulatory action is significant under 

Executive Order 12866, Executive Order 

13771 imposes additional requirements 

on the agency. 

Although this is not a significant 

regulatory action under Executive Order 

12866, PBGC has examined the 

economic implications of this proposed 

rule. PBGC has concluded that because 

the key aspects of this proposed rule 

would merely incorporate statutory 

changes that have been effective since 

2006, neither the public nor PBGC 

would assume any additional costs due 

to this regulatory action. Moreover, 

because PBGC has been following the 

statute as amended in 2006, and not the 

inconsistent provisions in its 

regulations, this proposal would 

improve the transparency of PBGC 

operations to the public and would 

provide helpful guidance to plan 

administrators. By leaving unchanged 

the estimated asset-funded benefit 

calculation procedures under § 4022.63, 

PBGC would enable plan administrators 

to continue to rely confidently on these 

relatively simple procedures, rather 

than creating more complex procedures 

that could be contemplated in light of 

the statutory changes. Finally, the 

proposed revisions to the examples at 

§§ 4022.62 and 4022.63 would assist 

plan administrators in complying with 

the law. Accordingly, this proposed rule 

would result in a net benefit to the 

public. 

Regulatory Flexibility Act 

Under the Regulatory Flexibility Act 

(5 U.S.C. 601 et seq.), federal agencies 

must comply with additional 

requirements when engaging in certain 

rulemaking activities that are subject to 

notice and public comment. An agency 

must satisfy these requirements if a 

proposed rule is likely to have a 

significant economic impact on a 

substantial number of small entities. 

Unless an agency determines that a 

proposed rule is not likely to have a 

significant economic impact on a 

substantial number of small entities, 

section 603 of the Regulatory Flexibility 

Act requires that the agency present an 

initial regulatory flexibility analysis at 

the time of the publication of the 


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8See, 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. 

9See, 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. 

10See, e.g., DOL’s final rule on Prohibited 

Transaction Exemption Procedures, 76 FR 66637, 

66644 (Oct. 27, 2011). 

proposed rule. The agency’s analysis 

must describe the impact of the rule on 

small entities, and the agency must seek 

public comment on the impact. Small 

entities include small businesses, 

organizations, and governmental 

jurisdictions. 

For purposes of the Regulatory 

Flexibility Act, with respect to this 

proposed rule, PBGC considers a small 

entity to be a plan with fewer than 100 

participants. This criterion is consistent 

with certain requirements in title I of 

ERISA 8 and the Internal Revenue 

Code,9 as well as the definition of a 

small entity that the Department of 

Labor (DOL) has used for purposes of 

the Regulatory Flexibility Act.10 While 

some large employers maintain both 

small and large plans, most small plans 

are maintained by small employers. In 

light of this, PBGC believes that 

assessing the impact of the proposed 

rule on small plans is an appropriate 

substitute for evaluating the effect on 

small entities. Notably, the definition of 

small entity considered appropriate for 

this purpose differs from the definition 

of small business—based on size 

standards—at 13 CFR 0121.201, which 

the Small Business Administration 

promulgated pursuant to the Small 

Business Act. Therefore, PBGC requests 

public comment on its proposed 

definition of small entity, as applied to 

this proposed rule. 

PBGC certifies under section 605(b) of 

the Regulatory Flexibility Act that this 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

This certification is based on the fact 

that this proposed rule is not likely to 

have a significant economic impact on 

any entity, regardless of size. This is 

because nearly all aspects of this 

proposed rule would merely incorporate 

statutory changes that have been 

effective for more than a decade, while, 

as discussed in the context of Executive 

Order 12866 above, the remaining few 

would provide clarity on the accurate 

estimation of benefits required by law, 

at no additional cost to the public. 

List of Subjects 

29 CFR Part 4001 

Business and industry, Employee 

benefit plans, Pension insurance. 

29 CFR Parts 4022, 4041, and 4043 

Employee benefit plans, Pension 

insurance, Reporting and recordkeeping 

requirements. 

29 CFR Part 4044 

Employee benefit plans, Pension 

insurance. 

In consideration of the foregoing, 

PBGC proposes to amend 29 CFR parts 

4001, 4022, 4041, 4043, and 4044 as 

follows. 

PART 4001—TERMINOLOGY 

■ 1. The authority citation for part 4001 

continues to read as follows: 

Authority: 29 U.S.C. 1301, 1302(b)(3). 

■ 2. In § 4001.2: 

■ a. Add in alphabetical order a 

definition for ‘‘majority owner’’; and 

■ b. Remove the definition of 

‘‘substantial owner’’. 

The addition reads as follows: 

§ 4001.2 Definitions. 

* * * * * 

Majority owner means, with respect to 

a contributing sponsor of a singleemployer plan, an individual who 

owns, directly or indirectly (taking into 

account the constructive ownership 

rules of section 414(b) and (c) of the 

Code)— 

(1) The entire interest in an 

unincorporated trade or business; 

(2) 50 percent or more of the capital 

interest or the profits interest in a 

partnership; or 

(3) 50 percent or more of either the 

voting stock of a corporation or the 

value of all of the stock of a corporation. 

* * * * * 

PART 4022—BENEFITS PAYABLE IN 

TERMINATED SINGLE-EMPLOYER 

PLANS 

■ 3. 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. 

§ 4022.2 [Amended] 

■ 4. In § 4022.2 introductory text: 

■ a. Remove the words ‘‘guaranteed 

benefit’’ and add in their place the 

words ‘‘guaranteed benefit, majority 

owner’’; and 

■ b. Remove the words ‘‘substantial 

owner,’’; 

■ 5. Amend § 4022.24 by revising 

paragraphs (a) and (b) to read as follows: 

§ 4022.24 Benefit increases. 

(a) Scope. This section applies to all 

benefit increases, as defined in § 4022.2, 

that have been in effect for less than five 

years preceding the termination date. 

(b) General rule. Benefit increases 

described in paragraph (a) of this 

section are guaranteeable only to the 

extent provided in § 4022.25. 

* * * * * 

§ 4022.25 [Amended] 

■ 6. In § 4022.25: 

■ a. Amend the section heading by 

removing the words ‘‘for participants 

other than substantial owners’’; and 

■ b. Amend paragraph (a) by removing 

the words ‘‘with respect to participants 

other than substantial owners’’. 

■ 7. Revise § 4022.26 to read as follows: 

§ 4022.26 Benefit guarantee for 

participants who are majority owners. 

(a) Scope. This section applies to the 

guarantee of all benefits described in 

subpart A of this part (subject to the 

limitations in § 4022.21) with respect to 

participants who are majority owners at 

the termination date or who were 

majority owners at any time within the 

five-year period preceding that date. 

(b) Formula. Benefits provided by a 

plan are guaranteed to the extent 

provided in the following formula: The 

amount of the participant’s benefit that 

PBGC would otherwise guarantee under 

section 4022 of ERISA and this part if 

the participant were not a majority 

owner, multiplied by a fraction not to 

exceed one, the numerator of which is 

the number of full years from the later 

of the effective date or the adoption date 

of the plan to the termination date, and 

the denominator of which is 10. 

■ 8. In § 4022.62: 

■ a. Amend paragraphs (a) and (c) 

introductory text by removing the four 

instances of the word ‘‘substantial’’ and 

adding in their place the word 

‘‘majority’’; 

■ b. Revise paragraph (d); 

■ c. Amend paragraph (e) by removing 

the words ‘‘paragraph (c)’’ and adding in 

their place the words ‘‘paragraphs (c) 

and (d)’’; 

■ d. Remove the first paragraph (f); and 

■ e. Revise remaining paragraph (f). 

The revisions read as follows: 

§ 4022.62 Estimated guaranteed benefit. 

* * * * * 

(d) Estimated guaranteed benefit 

payable with respect to a majority 

owner. For benefits payable with respect 

to each participant who is a majority 

owner, the estimated guaranteed benefit 

is the benefit to which he or she would 

be entitled under paragraph (c) of this 

section but for his or her status as a 


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Federal Register / Vol. 83, No. 45 / Wednesday, March 7, 2018 / Proposed Rules 9721 

majority owner, multiplied by a 

fraction, not to exceed one, the 

numerator of which is the number of 

full years from the later of the effective 

date or the adoption date of the plan to 

the proposed termination date and the 

denominator of which is 10. 

* * * * * 

(f) Examples. This section is 

illustrated by the following examples. 

(For an example addressing issues 

specific to a PPA 2006 bankruptcy 

termination, see § 4022.25(f).) 

(1) Example 1. (i) Facts. A participant who 

is not a majority owner retired on December 

31, 2011, at age 60 and began receiving a 

benefit of $600 per month. On January 1, 

2009, the plan had been amended to allow 

participants to retire with unreduced benefits 

at age 60. Previously, a participant who 

retired before age 65 was subject to a 

reduction of 1⁄15 for each year by which his 

or her actual retirement age preceded age 65. 

On January 1, 2012, the plan’s benefit 

formula was amended to increase benefits for 

participants who retired before January 1, 

2012. As a result, the participant’s benefit 

was increased to $750 per month. There have 

been no other pertinent amendments. The 

proposed termination date is December 15, 

2012. 

(ii) Estimated guaranteed benefit. No 

reduction is required under § 4022.61(b) or 

(c) because the participant’s benefit does not 

exceed either the participant’s accrued 

benefit at normal retirement age or the 

maximum guaranteeable benefit. (Postretirement benefit increases are not 

considered as increasing accrued benefits 

payable at normal retirement age.) 

The amendment as of January 1, 2009, 

resulted in a ‘‘new benefit’’ because the 

reduction in the age at which the participant 

could receive unreduced benefits increased 

the participant’s benefit entitlement at actual 

retirement age by 5⁄15, which is more than the 

20-percent increase threshold under 

paragraph (c)(2)(i) of this section. The 

amendment of January 1, 2012, which 

increased the participant’s benefit to $750 

per month, is a ‘‘benefit improvement’’ 

because it is an increase in the amount of 

benefit for persons in pay status. (No 

percentage test applies in determining 

whether an increase in a pay status benefit 

is a benefit improvement.) 

The multiplier for computing the amount 

of the estimated guaranteed benefit is taken 

from the third row of Table I (because the last 

new benefit had been in effect for three full 

years as of the proposed termination date) 

and column (c) (because there was a benefit 

improvement within the one-year period 

preceding the proposed termination date). 

This multiplier is 0.55. Therefore, the 

amount of the participant’s estimated 

guaranteed benefit is $412.50 (0.55 × $750) 

per month. 

(2) Example 2. (i) Facts. A participant who 

is not a majority owner terminated 

employment on December 31, 2010. On 

January 1, 2012, she reached age 65 and 

began receiving a benefit of $250 per month. 

She had completed three years of service at 

her termination of employment and was fully 

vested in her accrued benefit. The plan’s 

vesting schedule had been amended on July 

1, 2008. Under the schedule in effect before 

the amendment, a participant with five years 

of service was 100 percent vested. There have 

been no other pertinent amendments. The 

proposed termination date is December 31, 

2012. 

(ii) Estimated guaranteed benefit. No 

reduction is required under § 4022.61(b) or 

(c) because the participant’s benefit does not 

exceed either her accrued benefit at normal 

retirement age or the maximum 

guaranteeable benefit. The plan’s change of 

vesting schedule created a new benefit for the 

participant. Because the amendment was in 

effect for four full years before the proposed 

termination date, the second row of Table I 

is used to determine the applicable 

multiplier for estimating the amount of the 

participant’s guaranteed benefit. Because the 

participant did not receive any benefit 

improvement during the 12-month period 

ending on the proposed termination date, 

column (b) of the table is used. Therefore, the 

multiplier is 0.80, and the amount of the 

participant’s estimated guaranteed benefit is 

$200 (0.80 × $250) per month. 

(3) Example 3. (i) Facts. A participant who 

is a majority owner retired before the 

proposed termination date of April 30, 2012. 

The plan was in effect for seven full years as 

of the proposed termination date. On the 

proposed termination date he was entitled to 

receive a benefit of $2,000 per month. No 

reduction of this benefit is required under 

§ 4022.61(b) or (c). 

(ii) Estimated guaranteed benefit. 

Paragraph (d) of this section is used to 

compute the amount of the estimated 

guaranteed benefit of majority owners. 

Consequently, the amount of this 

participant’s estimated guaranteed benefit is 

$1,400 ($2,000 × 7⁄10) per month. 

(4) Example 4. (i) Facts. A participant who 

is a majority owner retired before the 

proposed termination date of April 30, 2012. 

The plan was in effect for 12 full years as of 

the proposed termination date. On the 

proposed termination date he was entitled to 

receive a benefit of $2,000 per month. No 

reduction of this benefit is required under 

§ 4022.61(b) or (c). 

(ii) Estimated guaranteed benefit. 

Paragraph (d) of this section is used to 

compute the amount of the estimated 

guaranteed benefit of majority owners. Since 

the plan was in effect for more than 10 years 

as of the proposed termination date, the 

amount of this participant’s estimated 

guaranteed benefit is $2,000 per month. 

■ 9. In § 4022.63: 

■ a. Revise the section heading; 

■ b. Amend paragraph (a) by removing 

the two instances of the word 

‘‘substantial’’ and adding in their place 

the word ‘‘majority’’ and by removing 

the three instances of the words 

‘‘estimated title IV benefit’’ and adding 

in their place the words ‘‘estimated 

asset-funded benefit’’; 

■ c. Amend paragraph (b) introductory 

text by removing the two instances of 

the word ‘‘substantial’’ and adding in 

their place the word ‘‘majority’’ and by 

removing the words ‘‘estimated title IV 

benefit’’ and adding in their place the 

words ‘‘estimated asset-funded benefit’’; 

■ d. Amend paragraph (c)(1) by 

removing the two instances of the word 

‘‘substantial’’ and adding in their the 

word ‘‘majority’’ and by removing the 

two instances of the words ‘‘estimated 

title IV benefit’’ and adding in the place 

of each the words ‘‘estimated assetfunded benefit’’; 

■ e. Amend paragraphs (d) introductory 

text by removing the two instances of 

the word ‘‘substantial’’ and adding in 

the place the word ‘‘majority’’ and by 

removing the two instances of the words 

‘‘estimated title IV benefit’’ and adding 

in the place of each the words 

‘‘estimated asset-funded benefit’’; 

■ f. Amend paragraph (d)(1) and by 

removing the two instances of the word 

‘‘substantial’’ and adding in the place 

the word ‘‘majority’’; and 

■ g. Revise paragraph (e). 

The revisions read as follows: 

§ 4022.63 Estimated asset-funded benefit. 

* * * * * 

(e) Examples. This section is 

illustrated by the following examples: 

(1) Example 1. (i) Facts. A participant who 

is not a majority owner was eligible to retire 

3.5 years before the proposed termination 

date. The participant retired two years before 

the proposed termination date with 20 years 

of service. Her final five years’ average salary 

was $45,000, and she was entitled to an 

unreduced early retirement benefit of $1,500 

per month payable as a single life annuity. 

This retirement benefit does not exceed the 

limitation in § 4022.61(b) or (c). 

On the participant’s benefit 

commencement date, the plan provided for a 

normal retirement benefit of 2 percent of the 

final five years’ salary times the number of 

years of service. Five years before the 

proposed termination date, the percentage 

was 1.5 percent. The amendments improving 

benefits were put into effect 3.5 years before 

the proposed termination date. There were 

no other amendments during the five-year 

period. 

The participant’s estimated guaranteed 

benefit computed under § 4022.62(c) is 

$1,500 per month times 0.90 (the factor from 

column (b) of Table I in § 4022.62(c)(2)), or 

$1,350 per month. It is assumed that the plan 

meets the conditions set forth in paragraph 

(b) of this section, and the plan administrator 

is therefore required to estimate the title IV 

benefit. 

(ii) Estimated asset-funded benefit. For a 

participant who is not a majority owner, the 

amount of the estimated asset-funded benefit 

is the estimated priority category 3 benefit 

computed under paragraph (c) of this section. 

This amount is computed by multiplying the 

participant’s benefit under the plan as of the 

later of the proposed termination date or the 

benefit commencement date by the ratio of 


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9722 Federal Register / Vol. 83, No. 45 / Wednesday, March 7, 2018 / Proposed Rules 

the normal retirement benefit under the 

provisions of the plan in effect five years 

before the proposed termination date and the 

normal retirement benefit under the plan 

provisions in effect on the proposed 

termination date. 

Thus, the numerator of the ratio is the 

benefit that would be payable to the 

participant under the normal retirement 

provisions of the plan five years before the 

proposed termination date, based on her age, 

service, and compensation on her benefit 

commencement date. The denominator of the 

ratio is the benefit that would be payable to 

the participant under the normal retirement 

provisions of the plan in effect on the 

proposed termination date, based on her age, 

service, and compensation as of the earlier of 

her benefit commencement date or the 

proposed termination date. Since the only 

different factor in the numerator and 

denominator is the salary percentage, the 

amount of the estimated asset-funded benefit 

is $1,125 (0.015/0.020 × $1,500) per month. 

This amount is less than the estimated 

guaranteed benefit of $1,350 per month. 

Therefore, in accordance with § 4022.61(d), 

the benefit payable to the participant is 

$1,350 per month. 

(iii) PPA 2006 bankruptcy termination. In 

a PPA 2006 bankruptcy termination, the 

methodology would be the same, but 

‘‘bankruptcy filing date’’ would be 

substituted for ‘‘proposed termination date’’ 

each place that ‘‘proposed termination date’’ 

appears in the example, and the numbers 

would change accordingly. 

(2) Example 2. (i) Facts. A participant who 

is a majority owner retired on the proposed 

termination date of October 31, 2012. The 

original plan had been in effect for seven full 

years as of the proposed termination date. 

Under the provisions of the plan in effect five 

years before the proposed termination date, 

the participant is entitled to a single life 

annuity of $500 per month. The plan was 

amended to increase benefits three full years 

before the proposed termination date. Under 

these plan amendments, the participant is 

entitled to a single life annuity of $1,000 per 

month. 

The participant’s estimated guaranteed 

benefit computed under § 4022.62(d) is $455 

per month ($1,000 × 0.65 × 7⁄10). 

It is assumed that all of the conditions in 

paragraph (b) of this section have been met. 

Plan assets equal $2 million. The present 

value of all benefits in pay status is $1.5 

million based on applicable PBGC interest 

rates. There are no employee contributions 

and the present value of all vested benefits 

that are not in pay status is $0.75 million 

based on applicable PBGC interest rates. 

(ii) Estimated asset-funded benefit. 

Paragraph (d) of this section provides that the 

amount of the estimated asset-funded benefit 

payable with respect to a participant who is 

a majority owner is the higher of the 

estimated priority category 3 benefit 

computed under paragraph (c) of this section 

or the estimated priority category 4 benefit 

computed under paragraph (d) of this 

section. 

Under paragraph (c), the participant’s 

estimated priority category 3 benefit is $500 

($1,000 × $500/$1,000) per month. 

Under paragraph (d), the participant’s 

estimated priority category 4 benefit is the 

estimated guaranteed benefit computed 

under § 4022.62(c) (i.e., as if the participant 

were not a majority owner) multiplied by the 

priority category 4 funding ratio. Since the 

plan has priority category 3 benefits, the ratio 

is determined under paragraph (d)(2)(i). The 

numerator of the ratio is plan assets minus 

the present value of benefits in pay status. 

The denominator of the ratio is the present 

value of all vested benefits that are not in pay 

status. The participant’s estimated 

guaranteed benefit under § 4022.62(c) is 

$1,000 per month times 0.65 (the factor from 

column (b) of Table I in § 4022.62(c)(2)), or 

$650 per month. Multiplying $650 by the 

category 4 funding ratio of 2⁄3 (($2 million ¥ 

$1.5 million)/$0.75 million) produces an 

estimated category 4 benefit of $433.33 per 

month. 

Because the estimated category 4 benefit so 

computed is less than the estimated category 

3 benefit so computed, the estimated category 

3 benefit is the estimated asset-funded 

benefit. Because the estimated category 3 

benefit so computed is greater than the 

estimated guaranteed benefit of $455 per 

month, in accordance with § 4022.61(d), the 

benefit payable to the participant is the 

estimated priority category 3 benefit of $500 

per month. 

PART 4041—TERMINATION OF 

SINGLE-EMPLOYER PLANS 

■ 10. The authority citation for part 

4041 continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3), 1341, 

1344, 1350. 

§ 4041.2 [Amended] 

■ 11. In § 4041.2: 

■ a. Amend the introductory text by 

removing the words ‘‘mandatory 

employee contributions’’ and adding in 

their place the words ‘‘majority owner, 

mandatory employee contributions’’; 

and 

■ b. Remove the definition of ‘‘majority 

owner’’. 

PART 4043—REPORTABLE EVENTS 

AND CERTAIN OTHER 

NOTIFICATIONS 

■ 12. The authority citation for part 

4043 continues to read as follows: 

Authority: 29 U.S.C. 1083(k), 1302(b)(3), 

1343. 

■ 13. In § 4043.2: 

■ a. Amend the introductory text by 

removing the words ‘‘single-employer 

plan, and substantial owner’’ and by 

adding in their place the words ‘‘and 

single-employer plan’’. 

■ b. Add in alphabetical order a 

definition for ‘‘substantial owner’’. 

The addition reads as follows: 

§ 4043.2 Definitions. 

* * * * * 

Substantial owner means a substantial 

owner as defined in section 4021(d) of 

ERISA. 

* * * * * 

PART 4044—ALLOCATION OF 

ASSETS IN SINGLE-EMPLOYER 

PLANS 

■ 14. The authority citation for part 

4044 continues to read as follows: 

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

1341, 1344, 1362. 

§ 4044.2 [Amended] 

■ 15. In § 4044.2(a): 

■ a. Remove the words ‘‘irrevocable 

commitment’’ and add in their place the 

words ‘‘irrevocable commitment, 

majority owner’’; and 

■ b. Remove the words ‘‘substantial 

owner,’’. 

■ 16. Amend § 4044.10 by revising 

paragraph (e) to read as follows: 

§ 4044.10 Manner of allocation. 

* * * * * 

(e) Allocating assets within priority 

categories. Except for priority categories 

4 and 5, if the plan assets available for 

allocation to any priority category are 

insufficient to pay for all benefits in that 

priority category, those assets shall be 

distributed among the participants 

according to the ratio that the value of 

each participant’s benefit or benefits in 

that priority category bears to the total 

value of all benefits in that priority 

category. If the plan assets available for 

allocation to priority category 4 are 

insufficient to pay for all benefits in that 

category, the assets shall be allocated, 

first, to the value of all participants’ 

nonforfeitable benefits that would be 

assigned to priority category 4 other 

than those impacted by the majorityowner limitation under § 4022.26. If 

assets available for allocation to priority 

category 4 are sufficient to fully satisfy 

the value of those other benefits, the 

remaining assets shall then be allocated 

to the value of the benefits that would 

be guaranteed but for the majorityowner limitation. These remaining 

assets shall be distributed among the 

majority owners according to the ratio 

that the value of each majority owner’s 

benefit that would be guaranteed but for 

the majority-owner limitation bears to 

the total value of all benefits that would 

be guaranteed but for the majorityowner limitation. If the plan assets 

available for allocation to priority 

category 5 are insufficient to pay for all 

benefits in that category, the assets shall 

be allocated, first, to the value of each 

participant’s nonforfeitable benefits that 

would be assigned to priority category 5 

under § 4044.15 after reduction for the 


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Federal Register / Vol. 83, No. 45 / Wednesday, March 7, 2018 / Proposed Rules 9723 

value of benefits assigned to higher 

priority categories, based only on the 

provisions of the plan in effect at the 

beginning of the five-year period 

immediately preceding the termination 

date. If assets available for allocation to 

priority category 5 are sufficient to fully 

satisfy the value of those benefits, assets 

shall then be allocated to the value of 

the benefit increase under the oldest 

amendment during the five-year period 

immediately preceding the termination 

date, reduced by the value of benefits 

assigned to higher priority categories 

(including higher subcategories in 

priority category 5). This allocation 

procedure shall be repeated for each 

succeeding plan amendment within the 

five-year period until all plan assets 

available for allocation have been 

exhausted. If an amendment decreased 

benefits, amounts previously allocated 

with respect to each participant in 

excess of the value of the reduced 

benefit shall be reduced accordingly. In 

the subcategory in which assets are 

exhausted, the assets shall be 

distributed among the participants 

according to the ratio that the value of 

each participant’s benefit or benefits in 

that subcategory bears to the total value 

of all benefits in that subcategory. 

* * * * * 

§ 4044.14 [Amended] 

■ 17. In § 4044.14, remove the word 

‘‘phase-in’’ and add the word 

‘‘guarantee’’ in its place; and remove the 

word ‘‘substantial’’ and add the word 

‘‘majority’’ in its place. 

Issued in Washington, DC. 

W. Thomas Reeder, 

Director, Pension Benefit Guaranty 

Corporation. 

[FR Doc. 2018–04609 Filed 3–6–18; 8:45 am] 

BILLING CODE 7709–02–P 


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