71222 Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 

11B(EZ), and/or BE–11C, is required of 

each U.S. Reporter that, at the end of the 

Reporter’s fiscal year, had a foreign 

affiliate reportable on Form BE–11B(LF), 

(SF), (FN), (EZ), or BE–11C. Forms 

required and the criteria for reporting on 

each are as follows: 

(i) Form BE–11A (Report for U.S. 

Reporter) must be filed by each U.S. 

person having a foreign affiliate 

reportable on Form BE–11B(LF), (SF), 

(FN), (EZ), or BE–11C. If the U.S. 

Reporter is a corporation, Form BE–11A 

is required to cover the fully 

consolidated U.S. domestic business 

enterprise. However, where a U.S. 

Reporter’s primary line of business is 

not in banking (or related financial 

activities), but the Reporter also has 

ownership in a bank, the bank, 

including all of its domestic subsidiaries 

or units, must file on a separate Form 

BE–11A. The nonbanking U.S. 

operations not owned by the bank must 

also file on a Form BE–11A. 

(A) If for a U.S. Reporter any one of 

the following three items—total assets, 

sales or gross operating revenues 

excluding sales taxes, or net income 

after provision for U.S. income taxes—

was greater than $150 million (positive 

or negative) at the end of, or for, the 

Reporter’s fiscal year, the U.S. Reporter 

must file a complete Form BE–11A. It 

must also file a Form BE–11B(LF), (SF), 

(FN), (EZ), or BE–11C as applicable, for 

each nonexempt foreign affiliate. 

(B) If for a U.S. Reporter no one of the 

three items listed in paragraph 

(f)(3)(i)(A) of this section was greater 

than $150 million (positive or negative) 

at the end of, or for, the Reporter’s fiscal 

year, the U.S. Reporter is required to file 

on Form BE–11A only items 1 through 

31 and Part IV. It must also file a Form 

BE–11B(LF), (SF), (FN), (EZ), or BE–11C 

as applicable, for each nonexempt 

foreign affiliate. 

(ii) Forms BE–11B(LF), (SF), and (EZ) 

(Report for Majority-owned Nonbank 

Foreign Affiliate of Nonbank U.S. 

Reporter). 

(A) A BE–11B(LF)(Long Form) must 

be filed for each majority-owned 

nonbank foreign affiliate of a nonbank 

U.S. Reporter for which any one of the 

three items—total assets, sales or gross 

operating revenues excluding sales 

taxes, or net income after provision for 

foreign income taxes—was greater than 

$150 million (positive or negative) at the 

end of, or for, the affiliate’s fiscal year, 

unless the nonbank foreign affiliate is 

selected to be reported on Form BE–

11B(EZ). 

(B) A BE–11B(SF)(Short Form) must 

be filed for each majority-owned 

nonbank foreign affiliate of a nonbank 

U.S. Reporter for which any one of the 

three items listed in paragraph 

(f)(3)(ii)(A) of this section was greater 

than $40 million (positive or negative), 

but for which no one of these items was 

greater than $150 million (positive or 

negative), at the end of, or for, the 

affiliate’s fiscal year, unless the nonbank 

foreign affiliate is selected to be 

reported on Form BE–11B(EZ). 

(C) A BE–11B(EZ) must be filed for 

each nonbank foreign affiliate of a 

nonbank U.S. Reporter that is selected 

to be reported on this form in lieu of 

Form BE–11B(LF) or Form BE–11B(SF). 

(iii) Form BE–11B(FN) (Report for 

Foreign Affiliate of Bank U.S. Reporter 

and Bank Affiliate of Nonbank U.S. 

Reporter) must be filed for 1) each 

foreign affiliate (bank and nonbank) of 

a bank U.S. Reporter for which any one 

of the three items listed in paragraph 

(f)(3)(ii)(A) of this section was greater 

than $250 million (positive or negative) 

at the end of, or for, the affiliate’s fiscal 

year and 2) each bank foreign affiliate of 

a nonbank U.S. Reporter for which any 

one of the three items listed in 

paragraph (f)(3)(ii)(A) of this section was 

greater than $250 million (positive or 

negative) at the end of, or for, the 

affiliate’s fiscal year. 

(iv) Form BE–11C (Report for 

Minority-owned Nonbank Foreign 

Affiliate of Nonbank U.S. Reporter) 

must be filed for each minority-owned 

nonbank foreign affiliate of a nonbank 

U.S. Reporter that is owned at least 20 

percent, but not more than 50 percent, 

directly and/or indirectly, by all U.S. 

Reporters of the affiliate combined, and 

for which any one of the three items 

listed in paragraph (f)(3)(ii)(A) of this 

section was greater than $40 million 

(positive or negative) at the end of, or 

for, the affiliate’s fiscal year. In addition, 

for the report covering fiscal year 2007 

only, a Form BE–11C must be filed for 

each minority-owned nonbank foreign 

affiliate that is owned, directly or 

indirectly, at least 10 percent by one 

nonbank U.S. Reporter, but less than 20 

percent by all nonbank U.S. Reporters of 

the affiliate combined, and for which 

any one of the three items listed in 

paragraph (f)(3)(ii)(A) of this section was 

greater than $100 million (positive or 

negative) at the end of, or for, the 

affiliate’s fiscal year. 

(v) Based on the preceding, an affiliate 

is exempt from being reported if it meets 

any one of the following criteria: 

(A) For nonbank affiliates of nonbank 

U.S. Reporters, none of the three items 

listed in paragraph (f)(3)(ii)(A) of this 

section exceeds $40 million (positive or 

negative). However, affiliates that were 

established or acquired during the year 

and for which at least one of these items 

was greater than $10 million but not 

over $40 million must be listed, and key 

data items reported, on a supplement 

schedule on Form BE–11A. 

(B) For affiliates of bank U.S. 

Reporters and bank affiliates of nonbank 

U.S. Reporters, none of the three items 

listed in paragraph (f)(3)(ii)(A) of this 

section exceeds $250 million (positive 

or negative). However, affiliates that 

were established or acquired during the 

year and for which at least one of these 

items was greater than $10 million but 

not over $250 million must be listed, 

and key data items reported, on a 

supplement schedule on Form BE–11A. 

(C) For nonbank foreign affiliates of 

nonbank U.S. Reporters, for fiscal year 

2007 only, it is less than 20 percent 

owned, directly or indirectly, by all U.S. 

Reporters of the affiliate combined and 

none of the three items listed in 

paragraph (f)(3)(ii)(A) of this section 

exceeds $100 million (positive or 

negative). 

(D) For fiscal years other than 2007, 

it is less than 20 percent owned, directly 

or indirectly, by all U.S. Reporters of the 

affiliate combined. 

(vi) Notwithstanding paragraph 

(f)(3)(v) of this section, a Form BE–

11B(LF), (SF), (FN), (EZ) or BE–11C 

must be filed for a foreign affiliate of the 

U.S. Reporter that owns another nonexempt foreign affiliate of that U.S. 

Reporter, even if the foreign affiliate 

parent is otherwise exempt. That is, all 

affiliates upward in the chain of 

ownership must be reported. 

* * * * * 

[FR Doc. E7–24362 Filed 12–14–07; 8:45 am] 

BILLING CODE 3510–06–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4006 and 4007 

RIN 1212–AB10 

Premium Rates; Payment of 

Premiums; Flat Premium Rates, 

Variable-Rate Premium Cap, and 

Termination Premium; Deficit 

Reduction Act of 2005; Pension 

Protection Act of 2006 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Final rule. 

SUMMARY: This is a final rule to amend 

PBGC’s regulations on Premium Rates 

and Payment of Premiums to implement 

certain provisions of the Deficit 

Reduction Act of 2005 (Pub. L. 109–171) 

and the Pension Protection Act of 2006 

(Pub. L. 109–280) that are effective 

beginning in 2006 or 2007. The 


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Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 71223 

provisions implemented by this rule 

change the flat premium rate, cap the 

variable-rate premium in some cases, 

and create a new ‘‘termination 

premium’’ that is payable in connection 

with certain distress and involuntary 

plan terminations. This rule does not 

address other provisions of the Pension 

Protection Act of 2006 that deal with 

PBGC premiums. 

DATES: Effective January 16, 2008. 

FOR FURTHER INFORMATION CONTACT: John 

H. Hanley, Director, Legislative and 

Regulatory Department; or Catherine B. 

Klion, Manager, or Deborah C. Murphy, 

Attorney, Regulatory and Policy 

Division, Legislative and Regulatory 

Department, Pension Benefit Guaranty 

Corporation, 1200 K Street, NW., 

Washington DC 20005–4026; 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 

202–326–4024.) 

SUPPLEMENTARY INFORMATION: 

Background 

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). 

Pension plans covered by Title IV must 

pay premiums to PBGC. Section 4006 of 

ERISA deals with premium rates, and 

section 4007 of ERISA deals with the 

payment of premiums, including 

premium due dates, interest and 

penalties on premiums not timely paid, 

and persons liable for premiums. 

On February 8, 2006, the President 

signed into law the Deficit Reduction 

Act of 2005, Pub. L. 109–171 (DRA 

2005). Section 8101 of DRA 2005 

amends section 4006 of ERISA. Section 

8101(a) changes the per-participant flat 

premium rate for plan years beginning 

in 2006 from $19 to $30 for singleemployer plans and from $2.60 to $8 for 

multiemployer plans and provides for 

inflation adjustments to the flat rates for 

future years. Section 8101(b) creates a 

new ‘‘termination premium’’ (in 

addition to the flat-rate and variable-rate 

premiums under section 4006(a)(3)(A) 

and (E) of ERISA) that is payable for 

three years following certain distress 

and involuntary plan terminations that 

occur after 2005. 

On August 17, 2006, the President 

signed into law the Pension Protection 

Act of 2006, Public Law 109–280 (PPA 

2006). Sections 401(b) and 402(g)(2)(B) 

of PPA 2006 make changes to the 

termination premium rules of DRA 

2005. Section 405 of PPA 2006 amends 

section 4006 of ERISA to cap the 

variable-rate premium for plans of 

certain small employers beginning in 

2007. (PPA 2006 also makes other 

changes affecting PBGC premiums that 

are not addressed in this rule.) 

On February 20, 2007, PBGC 

published (at 72 FR 7755) a proposed 

rule to amend PBGC’s regulations on 

Premium Rates (29 CFR part 4006) and 

Payment of Premiums (29 CFR part 

4007) to conform to these requirements 

of DRA 2005 and PPA 2006 and to 

clarify how the requirements apply. 

PBGC received one public comment on 

the proposed rule. The comment 

focused on the termination premium 

and is discussed below. 

Flat-Rate Premium 

Until the enactment of DRA 2005, the 

flat-rate premium had remained 

unchanged for single-employer plans 

since 1991 and for multiemployer plans 

since 1989. Section 8101(a) of DRA 2005 

amends section 4006(a)(3)(A) of ERISA 

and adds new subparagraphs (F) and (G) 

to the end of section 4006(a)(3) of ERISA 

to raise the flat premium rates for 2006 

for both single- and multiemployer 

plans and to provide for inflation 

indexing for future years. 

Applicability 

Before amendment by DRA 2005, 

section 4006(a)(3)(A) of ERISA provided 

(in part) that ‘‘* * * the annual 

premium rate * * * is * * * in the case 

of a single-employer plan, for plan years 

beginning after December 31, 1990, an 

amount equal to the sum of $19 plus the 

[per-participant variable-rate premium] 

under subparagraph (E) for each * * * 

participant * * *.’’ Section 

8101(a)(1)(A) of DRA 2005 changes 

‘‘$19’’ to read ‘‘$30.’’ Thus, the amended 

text of ERISA, read literally, makes it 

appear that the $30 single-employer flatrate premium applies to plan years 

beginning after 1990. However, section 

8101(d)(1) of DRA 2005 (which does not 

amend ERISA) says that this change 

applies to plan years beginning after 

December 31, 2005. Accordingly, PBGC 

considers single-employer flat premium 

rates for plan years beginning before 

2006 to be unaffected by DRA 2005. 

Participant Count 

Section 8101(a)(2)(A)(ii) of DRA 2005 

adds a new clause (iv) to section 

4006(a)(3)(A) of ERISA providing that 

the flat premium rate for a 

multiemployer plan for a post-2005 plan 

year is ‘‘$8.00 for each individual who 

is a participant in such plan during the 

applicable plan year.’’ PBGC interprets 

this to mean that the participant count 

is to be taken as of the premium 

snapshot date described in the premium 

rates regulation and PBGC’s premium 

instructions (generally the last day of 

the plan year preceding the premium 

payment year). This is consistent with 

PBGC’s interpretation of the nearly 

identical language in existing section 

4006(a)(3)(A)(i) of ERISA. 

Flat Premium Rates 

This rule amends § 4006.3 of the 

premium rates regulation to reflect the 

changes to the flat-rate premium made 

by section 8101(a) of DRA 2005. 

Existing paragraphs (a)(1) and (a)(2) of 

§ 4006.3 (setting forth the $19 and $2.60 

flat rates) are removed, and a crossreference to new § 4006.3(c) is provided 

instead. Paragraph (1) of new § 4006.3(c) 

provides pre-2006 rates ($19 and $2.60); 

paragraph (2) provides 2006 rates ($30 

and $8); and paragraph (3) provides 

post-2006 rates (the greater of the 

preceding year’s rate or the inflationadjusted rate). 

Inflation Adjustments 

Section 8101(a)(1)(B) and (2)(B) of 

DRA 2005 add to section 4006(a)(3) of 

ERISA substantially identical new 

subparagraphs (F) and (G) providing for 

inflation adjustments to the $30 and $8 

flat rates for plan years beginning after 

2006. The adjustments are based on 

changes in the national average wage 

index as defined in section 209(k)(1) of 

the Social Security Act, with a two-year 

lag—for example, for 2007, it will be the 

2005 index that will be compared to the 

baseline (the 2004 index). However, 

new subparagraphs (F) and (G) are 

written in such a way that the premium 

rate can never go down; if the change in 

the national average wage index is 

negative, the premium rate remains the 

same as in the preceding year. Also, 

under new subparagraphs (F) and (G), 

premium rates are rounded to the 

nearest whole dollar. PBGC interprets 

this to mean that if the adjustment 

formula would produce an unrounded 

premium rate of some number of dollars 

plus 50 cents, the premium rate will be 

rounded up. The inflation adjustment is 

described in new § 4006.3(d). 

Variable-Rate Premium 

Section 405 of PPA 2006 amends 

section 4006(a)(3)(E)(i) of ERISA and 

adds new subparagraph (H) to the end 

of section 4006(a)(3) to cap the variablerate premium for certain plans, effective 

for plan years beginning after 2006. This 

rule revises § 4006.3(b) of the premium 

rates regulation to reflect the new cap. 

Plans Covered 

Clause (i) of new section 4006(a)(3)(H) 

of ERISA says that the new variable-rate 

premium cap applies ‘‘[i]n the case of an 

employer who has 25 or fewer 


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71224 Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 

employees on the first day of the plan 

year.’’ But clause (ii) of new section 

4006(a)(3)(H) of ERISA makes clear that 

the applicability of the new cap does 

not necessarily depend on the size of a 

single employer, but rather depends on 

the size of a plan’s controlled group, 

that is, the aggregate size of ‘‘all 

contributing sponsors and their 

controlled groups.’’ (See the definition 

of ‘‘controlled group’’ in § 4001.2 of 

PBGC’s regulation on Terminology (29 

CFR Part 4001), which provides that 

‘‘[a]ny reference to a plan’s controlled 

group means all contributing sponsors 

of the plan and all members of each 

contributing sponsor’s controlled 

group’’). Since a plan maintained by one 

contributing sponsor may or may not 

also be maintained by one or more other 

contributing sponsors that are not in the 

first sponsor’s controlled group, the 

applicability of the cap must be 

determined plan by plan, not employer 

by employer. New § 4006.3(b)(3) 

describes the plans eligible for the cap. 

Meaning of ‘‘Employee’’ 

New section 4006(a)(3)(H) of ERISA 

does not give guidance as to the 

meaning of the term ‘‘employee.’’ New 

§ 4006.3(b)(4) as added by this rule 

defines ‘‘employee’’ for this purpose by 

reference to section 410(b)(1) of the 

Internal Revenue Code, which deals 

with minimum coverage requirements 

for qualified plans and requires that 

employees be counted to evaluate the 

breadth of coverage of a plan. For this 

purpose, certain individuals may be 

counted as ‘‘employees’’ although they 

might not be considered common law 

employees of the employer—for 

example, affiliated service group 

employees (under Code section 414(m)) 

and leased employees (under Code 

section 414(n)). PBGC considers this 

approach appropriate to prevent an 

employer from qualifying for the cap by 

artificially lowering its employee count 

through the use of sophisticated 

business structuring devices. In 

addition, in order to ensure that all 

employees are counted, new 

§ 4006.3(b)(4) provides that the 

employee count is to be determined 

without regard to Code section 

410(b)(3), (4), and (5), which might be 

considered to exclude from the count 

collective bargaining employees, 

employees not meeting a plan’s age and 

service requirements, and employees in 

separate lines of business. 

Cap Amount 

Under new section 4006(a)(3)(H)(i) of 

ERISA, the per-participant variable-rate 

premium is capped at ‘‘$5 multiplied by 

the number of participants in the plan 

as of the close of the preceding plan 

year.’’ PBGC interprets this to mean that 

the participant count is to be taken as 

of the premium snapshot date described 

in the premium rates regulation and 

PBGC’s premium instructions (generally 

the last day of the plan year preceding 

the premium payment year). This is 

consistent with PBGC’s interpretation of 

the nearly identical language in existing 

section 4006(a)(3)(E)(i) of ERISA. This 

participant count is the same as the 

count used as a multiplier under section 

4006(a)(3)(A)(i) of ERISA for purposes of 

both the flat- and variable-rate 

premiums. Thus, an eligible plan’s total 

variable-rate premium is capped at an 

amount equal to $5 multiplied by the 

square of the participant count. The cap 

is described in new § 4006.3 (b)(2), 

which includes an example of the 

computation of the cap taken from page 

95 of the Technical Explanation of H.R. 

4, the ‘‘Pension Protection Act of 2006,’’

as Passed by the House on July 28, 2006, 

and as Considered by the Senate on 

August 3, 2006, Prepared by the Staff of 

the Joint Committee on Taxation 

(August 3, 2006) (http://www.house.gov/ 

jct/x-38–06.pdf). 

Termination Premium 

Section 8101(b) of DRA 2005 adds a 

new paragraph (7) to the end of section 

4006(a) of ERISA, creating a new 

‘‘termination premium’’ that applies 

only where certain distress and 

involuntary terminations occur and then 

only for three years. However, although 

only section 4006 of ERISA is amended, 

subparagraph (D) of new paragraph (7) 

in effect modifies section 4007 of ERISA 

as well. Sections 401(b) and 402(g)(2)(B) 

of PPA 2006 make changes to the 

termination premium rules of DRA 

2005. 

Termination Dates Covered 

Section 8101(d)(2)(A) of DRA 2005 

(which does not amend ERISA) restricts 

the new termination premium to ‘‘plans 

terminated after December 31, 2005.’’

(Section 401(b)(1) of PPA 2006 repeals 

new section 4006(a)(7)(E) of ERISA, 

added by DRA 2005, which provided 

that the termination premium would not 

apply ‘‘with respect to any plan 

terminated after December 31, 2010.’’) 

This time restriction is reflected in new 

§ 4007.13(a)(1) introductory text. 

Section 8101(d)(2)(B) of DRA 2005 

further restricts the application of the 

new termination premium in certain 

bankruptcy situations. If a plan ‘‘is 

terminated during the pendency of any 

bankruptcy reorganization proceeding 

under chapter 11 of title 11, United 

States Code (or under any similar law of 

a State or political subdivision of a 

State),’’ the new premium does not 

apply ‘‘if the proceeding is pursuant to 

a bankruptcy filing occurring before 

October 18, 2005.’’ Under section 

402(g)(2)(B)(ii) of PPA 2006, this 

limitation does not apply to an ‘‘eligible 

plan’’ under section 402(c)(1) of PPA 

2006 (generally a plan of a commercial 

passenger airline or airline catering 

service) while a funding election under 

section 402(a)(1) of PPA 2006 is in effect 

for the plan. These provisions are in 

new § 4007.13(a)(2) and (3). 

These time restrictions on the 

applicability of the new premium turn 

on when a plan is ‘‘terminated.’’ PBGC 

believes that the most natural reading of 

these provisions is that the date to look 

to is the termination date under section 

4048 of ERISA. Focusing on the section 

4048 termination date is also consistent 

with other provisions of DRA 2005 and 

implementing regulations discussed 

below. This interpretation is reflected 

throughout the termination premium 

provisions added by this rule. 

Types of Terminations Covered 

Under new section 4006(a)(7)(A) of 

ERISA, the termination premium 

applies where ‘‘there is a termination of 

a single-employer plan under clause (ii) 

or (iii) of section 4041(c)(2)(B) [of 

ERISA] or section 4042 [of ERISA].’’

Section 4041(c) of ERISA provides for 

distress terminations; ERISA section 

4042 provides for involuntary 

terminations. 

Under ERISA section 4041(c)(1), a 

distress termination of a plan may occur 

only if each contributing sponsor and 

each member of any contributing 

sponsor’s controlled group meets one of 

the ‘‘distress tests’’ in clauses (i), (ii), 

and (iii) of section 4041(c)(2)(B). The 

tests are that the person is the subject of 

a bankruptcy liquidation proceeding 

(clause (i)), that the person is the subject 

of a bankruptcy reorganization 

proceeding (clause (ii)), or that the 

person is suffering business hardship 

(clause (iii)). 

Although typically all contributing 

sponsors and controlled group members 

meet the same distress test, that is not 

required for a distress termination under 

section 4041(c). Thus, while 

terminations where all contributing 

sponsors and controlled group members 

meet the test in clause (i) seem to be 

excluded from applicability of the 

termination premium, it is not clear 

from the statutory language whether the 

termination premium is to apply to 

terminations where one or more 

contributing sponsors and/or controlled 

group members meet the clause (i) test 

but others meet the tests in clauses (ii) 

and/or (iii). Examples of such situations 


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Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 71225 

would be where there are two 

contributing sponsors, one liquidating 

and one reorganizing; where the sole 

contributing sponsor is liquidating but 

there are controlled group members that 

are reorganizing; and where the sole 

contributing sponsor is reorganizing but 

the controlled group members are 

liquidating. 

The statutory language provides no 

basis for distinguishing among these 

examples or others that might be cited. 

All contributing sponsors and 

controlled group members are liable for 

plan underfunding under ERISA section 

4062 and (as discussed below) for the 

termination premium (if it applies), and 

they must all satisfy one or another 

distress test under ERISA section 

4041(c)(2)(B) for a distress termination 

to take place. This suggests that all these 

entities should be considered 

responsible as a group for the 

consequences of plan termination and 

that the fact that one entity among 

several is liquidating should not shield 

the others from liability. PBGC thus 

interprets new section 4006(a)(7)(A) of 

ERISA as applying the termination 

premium in any distress termination 

case where at least one contributing 

sponsor or controlled group member 

meets the distress test in either clause 

(ii) or (iii) of section 4041(c)(2)(B) (i.e., 

is not liquidating). 

New § 4007.13(a)(1)(i) and (ii) deals 

with the types of terminations covered 

by the termination premium. 

Payers 

Section 4007(a) of ERISA places 

responsibility for paying PBGC 

premiums on the ‘‘designated payor’’ of 

a plan, and section 4007(e)(1)(A) of 

ERISA identifies the designated payor of 

a single-employer plan as the 

contributing sponsor or plan 

administrator. However, new section 

4006(a)(7)(D)(i)(II) of ERISA, as added 

by section 8101(b) of DRA 2005, 

provides that notwithstanding section 

4007, the designated payor of the new 

termination premium is ‘‘the person 

who is the contributing sponsor as of 

immediately before the termination 

date.’’ It thus appears that the 

designated payor is to be identified as 

of the day before the termination date 

under section 4048 of ERISA. Similarly, 

this rule provides for identification of 

members of the contributing sponsor’s 

controlled group (which are jointly and 

severally liable for premiums under 

section 4007(e)(2) of ERISA) as of the 

same day. These provisions are in new 

§ 4007.13(g). 

Participants 

Under new section 4006(a)(7)(A) of 

ERISA, the termination premium is 

based on the number of ‘‘participants in 

the plan immediately before the 

termination date.’’ It thus appears that 

participants are to be counted—for 

purposes of computing the termination 

premium—as of the day before the 

termination date under section 4048 of 

ERISA (the same day on which the 

contributing sponsor and controlled 

group members are determined). Section 

4006.6 of the premium rates regulation 

already includes a definition of 

‘‘participant’’ (which is used in 

computing the flat-rate premium), and 

DRA 2005 suggests no reason to depart 

from that definition for purposes of the 

termination premium. New § 4006.7(b) 

deals with these points. 

Due Dates 

The termination premium is payable 

each year for three years. Under new 

section 4006(a)(7)(D)(i)(I) of ERISA, as 

added by section 8101(b) of DRA 2005, 

the new premium is due within 30 days 

after the beginning of each of three 

‘‘applicable 12-month periods,’’ which 

are in turn described in new section 

4006(a)(7)(C). New section 

4006(a)(7)(C)(i)(I) provides that in 

general, the first applicable 12-month 

period starts with ‘‘the first month 

following the month in which the 

termination date occurs.’’ (From this it 

is evident that calendar months are 

meant.) Under new section 

4006(a)(7)(C)(i)(II), the second and third 

applicable 12-month periods are simply 

the two 12-month periods that follow 

the first applicable 12-month period. 

The general rule regarding termination 

premium due dates is in new 

§ 4007.13(d). 

But new section 4006(a)(7)(C)(ii) of 

ERISA defers the beginning of the first 

applicable 12-month period (and thus 

the due dates) in certain bankruptcy 

reorganization cases. This deferral rule 

comes into play where ‘‘the 

requirements of subparagraph (B) [of 

new section 4006(a)(7) of ERISA] are 

met in connection with the termination 

of the plan . . ..’’ (Section 401(b)(2) of 

PPA 2006 corrected an erroneous 

reference to ‘‘subparagraph (B)(i)(I)’’ in 

new section 4006(a)(7)(C)(ii) of ERISA.) 

Subparagraph (B) of new section 

4006(a)(7)(B) of ERISA defers the 

applicability of the termination 

premium for distress or involuntary 

plan terminations that occur when 

bankruptcy reorganization proceedings 

are pending for terminations ‘‘under 

section 4041(c)(2)(B)(ii) [of ERISA] or 

under section 4042 [of ERISA].’’

Following the same reasoning discussed 

above regarding new section 

4006(a)(7)(A) of ERISA (the general 

termination premium applicability 

provision), PBGC concludes that the 

bankruptcy reorganization deferral 

provision in new section 4006(a)(7)(B) 

of ERISA is meant to apply to a distress 

termination only when at least one 

contributing sponsor or controlled 

group member satisfies the bankruptcy 

reorganization test in section 

4041(c)(2)(B)(ii) . 

In order for the due date deferral rule 

in new section 4006(a)(7)(C)(ii) of 

ERISA to apply, the requirements of 

subparagraph (B) of section 4006(a)(7) of 

ERISA must be met ‘‘with respect to 1 

or more persons described in such 

subparagraph’’ (that is, one or more 

persons must be reorganizing in 

bankruptcy as described in 

subparagraph (B)). If so, then the first 

applicable 12-month period begins with 

‘‘the first month following the month 

which includes the earliest date as of 

which each such person is discharged or 

dismissed in the case described in such 

clause [sic] in connection with such 

person.’’ (The only clause mentioned in 

section 4006(a)(7)(C)(ii) of ERISA is 

clause (i)(I) of section 4006(a)(7)(C), 

which describes the first applicable 12- 

month period that applies if the special 

bankruptcy rule does not. Thus the 

reference to ‘‘such clause’’ appears to be 

intended to refer to ‘‘such 

subparagraph’’—that is, subparagraph 

(B)—and PBGC so interprets the 

reference.) 

However, although subparagraph (B) 

of new section 4006(a)(7) of ERISA 

describes a case—a bankruptcy case—it 

does not describe a person. The only 

person mentioned in subparagraph (B) 

is ‘‘such person,’’ with no crossreference to another place where the 

person is described. Nonetheless, it 

seems clear that the person referred to 

must be a person that has a relationship 

to both the plan and the bankruptcy 

proceeding mentioned in subparagraph 

(B). Subparagraph (B) contains 

parenthetical language that is essentially 

identical to parenthetical language that 

appears in section 4041(c)(2)(B)(ii) of 

ERISA (which describes the bankruptcy 

reorganization test for distress 

terminations). In section 

4041(c)(2)(B)(ii), the words ‘‘such 

person’’ in the parenthetical language 

refer to a contributing sponsor or 

member of a contributing sponsor’s 

controlled group. PBGC infers that 

‘‘such person’’ in new section 

4006(a)(7)(B) of ERISA is meant to refer 

likewise to a contributing sponsor of the 

terminated plan or member of a 

contributing sponsor’s controlled 


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71226 Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 

group—determined (consistent with the 

designated payor provision in new 

section 4007(a)(7)(D)(i)(II)) as of the day 

before the termination date under 

section 4048 of ERISA. 

This inference is supported by the 

observation that these same persons—

contributing sponsors and controlled 

group members—are the persons liable 

for the termination premium. It appears 

that Congress’s intent was to defer the 

due date for the termination premium 

until the persons liable to pay it were 

not in bankruptcy proceedings. 

Accordingly, where the special 

bankruptcy rule for due dates applies, it 

is necessary to identify every 

contributing sponsor and controlled 

group member that was involved in 

bankruptcy reorganization proceedings 

on the termination date and determine 

the date when each one left 

bankruptcy—through dismissal of or 

discharge in the proceeding—or ceased 

to exist. (If an entity ceases to exist, its 

failure to emerge from bankruptcy 

should not postpone the termination 

premium due date.) Under new section 

4006(a)(7)(C)(ii), the first applicable 12- 

month period for the termination will 

then begin with the calendar month that 

next begins following the last such date. 

This bankruptcy due date deferral 

provision is in new § 4007.13(e). 

One due date issue not addressed by 

the statute is that the agreement or court 

action establishing a plan’s termination 

date under ERISA section 4048 may 

occur well after the termination date so 

established. Where a termination date is 

thus set as a date in the past, one or 

more statutory due dates for the 

termination premium may already have 

passed when the termination date 

becomes known. Thus, termination 

premium payments could be overdue 

before it was determined that they were 

owed. 

In cases of that kind, PBGC considers 

it appropriate to provide that where the 

termination date set is in the past, the 

first applicable 12-month period does 

not begin immediately after the month 

in which the termination date falls, but 

rather begins immediately after the 

month in which the termination date is 

established. Where the special 

bankruptcy rule for due dates applies, 

this rule would come into play if the 

termination date was established after 

all contributing sponsors and controlled 

group members were out of bankruptcy 

reorganization proceedings, and would 

defer the beginning of the first 

applicable 12-month period until 

immediately after the month in which 

the termination date was established. 

This provision is in new § 4007.13(f). 

Other Bankruptcy Issues 

The parenthetical language in new 

section 4006(a)(7)(B) of ERISA—‘‘(or a 

case described in section 4041(c)(2)(B)(i) 

filed by or against such person has been 

converted, as of such date, to such a 

case in which reorganization is 

sought)’’—shows that Congress focused 

on the fact that bankruptcy proceedings 

can be converted back and forth 

between liquidation and reorganization 

proceedings. But neither section 

4006(a)(7)(B) nor section 

4006(a)(7)(C)(ii) (which describes the 

special first applicable 12-month 

period) mentions conversion of a 

reorganization case to a liquidation case 

as being sufficient to trigger the 

beginning of the first applicable 12- 

month period. It thus appears that if a 

plan terminates during pendency of a 

bankruptcy reorganization proceeding, 

the subsequent conversion of the 

proceeding to a liquidation proceeding 

would not keep the first applicable 12- 

month period from being postponed 

until the (liquidation) bankruptcy 

proceeding was dismissed or the 

contributing sponsor or controlled 

group member discharged. This could 

be of significance where there were 

other persons liable for the termination 

premium that were not (or were no 

longer) in bankruptcy. 

Section 8101(d)(2)(B) of DRA 2005 

(which, as discussed above, excludes 

from the termination premium 

terminations that occur during the 

pendency of bankruptcy reorganization 

proceedings pursuant to a filing before 

October 18, 2005) says nothing about 

the persons involved in such 

proceedings. Following the reasoning 

above, PBGC concludes that section 

8101(d)(2)(B) is intended to apply only 

where the subject of a pending 

bankruptcy proceeding is a contributing 

sponsor of the terminated plan or a 

member of a contributing sponsor’s 

controlled group (and that these persons 

are to be identified as of the day before 

the termination date under section 4048 

of ERISA). Section 8101(d)(2)(B) also 

does not mention conversion of a 

bankruptcy case from a liquidation 

proceeding to a reorganization, as new 

section 4006(a)(7)(B) of ERISA does. But 

the language of section 8101(d)(2)(B) is 

consistent with the interpretation that—

like section 4006(a)(7)(B)—it covers 

bankruptcy proceedings begun as 

liquidation proceedings and converted 

to reorganization proceedings before the 

termination date under section 4048 of 

ERISA. 

Termination Premium Rate 

Under new section 4006(a)(7) of 

ERISA as added by section 8101(b) of 

DRA 2005, the termination premium is 

$1,250 per participant per year for three 

years. But under section 402(g)(2)(B) of 

PPA 2006 (which does not amend 

ERISA), the rate is increased from 

$1,250 to $2,500 where a commercial 

passenger airline or airline catering 

service elects funding relief (an 

extended underfunding amortization 

period and lenient assumptions for 

valuing liabilities) for a frozen plan 

under section 402(a)(1) of PPA 2006, if 

the plan terminates during the first five 

years of the funding relief period, unless 

the Secretary of Labor determines that 

the termination resulted from 

extraordinary circumstances such as a 

terrorist attack or other similar event. 

This rule adds a new § 4006.7 to the 

premium rates regulation providing that 

the amount of the termination premium 

with respect to each applicable 12- 

month period is the premium rate 

(generally $1,250) times the number of 

participants, determined as of the day 

before the termination date, with a 

cross-reference from § 4006.3 (where the 

flat and variable premium rates are set 

forth). New § 4006.7(b) also explains the 

circumstances in which the termination 

premium rate is $2,500 rather than 

$1,250. 

Filing Requirements 

New § 4007.13(b) makes each 

contributing sponsor and controlled 

group member (determined as of the day 

before the termination date under 

section 4048 of ERISA) responsible for 

filing required termination premium 

information and payments, and (where 

there is more than one such person) 

provides that any one can file on behalf 

of all of them. This provision ensures 

that, so long as there is at least one 

person still in existence that is liable for 

the termination premium, there will be 

at least one identifiable entity with 

responsibility to file. This provision is 

similar to § 4010.3 of PBGC’s regulation 

on Annual Financial and Actuarial 

Information Reporting (Part 4010 of 

PBGC’s regulations) and § 4043.3(a) of 

PBGC’s regulation on Reportable Events 

and Certain Other Notification 

Requirements (Part 4043 of PBGC’s 

regulations). Thus, only a single filing of 

the premium and required premium 

information is required, but if it is not 

timely made, PBGC could seek 

enforcement against any or all 

contributing sponsors and controlled 

group members. 


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Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 71227 

Late Payment Penalty 

Section 4007.13(c) provides for a 

discretionary ‘‘facts-and-circumstances’’

penalty for failure to pay the 

termination premium timely, instead of 

the automatic 1 percent or 5 percent 

penalty that applies to late payment of 

flat- and variable-rate premiums under 

§ 4007.8(a). PBGC wants to preserve 

flexibility in penalizing failures to pay 

the new premium in full and on time 

while it gains experience with the new 

premium. The penalty is limited to 100 

percent of the amount of termination 

premium not timely filed. 

Other Regulatory Provisions 

In addition to the provisions 

discussed above, new § 4007.13 

supplements provisions in existing 

sections of Part 4007 that also apply to 

the termination premium. This rule also 

amends several sections in the existing 

premium payment regulation to 

eliminate inconsistencies or potential 

inconsistencies between existing 

language in those sections and the 

termination premium provisions. 

Public Comment 

PBGC received one public comment 

on the proposed rule. The comment 

addressed the termination premium. 

The commenter expressed concern that 

‘‘Congress may not have considered the 

financial ramifications of’’ the 

termination premium. The commenter 

requested that PBGC ‘‘adopt a facts-andcircumstance approach in collecting the 

termination premium fee’’ and 

‘‘consider limiting its recoveries of this 

termination premium to amounts that 

each company can afford to pay without 

jeopardizing its ability to stay in 

business.’’

PBGC has accepted less than full 

payment on its claims for unfunded 

benefit liabilities, unpaid funding 

contributions, and unpaid flat- and 

variable-rate premiums in 

circumstances in which, like other 

creditors, it is forced to compromise 

those claims. But the language of section 

8101(b) of DRA 2005 makes clear that a 

Congressional purpose in imposing the 

termination premium was to discourage 

the termination of underfunded pension 

plans. Congress has made clear that, 

when a plan terminates under the 

circumstances described in new section 

4006(a)(7)(B) of ERISA during the 

pendency of a bankruptcy 

reorganization, the liability for the 

termination premium arises after 

emergence from bankruptcy, indicating 

a specific intent to avoid a limited 

recovery of the termination premium in 

bankruptcy and to ensure a full recovery 

post-bankruptcy. In light of this 

Congressional intent, it would be 

inappropriate for PBGC to adopt a 

policy of routinely settling termination 

premium claims for less than the full 

amount. 

PBGC recognizes that plan sponsors 

may face difficult financial choices 

because of the termination premium. 

Accordingly, PBGC encourages sponsors 

that may be facing termination premium 

liability to contact PBGC as early as 

possible to discuss. 

Technical Changes 

PBGC is taking this opportunity to 

make some technical changes (unrelated 

to DRA 2005 or PPA 2006) to its 

regulations on Premium Rates and 

Payment of Premiums. 

Section 4006.3 of the premium rates 

regulation refers to basic benefits 

guaranteed under section 4022(a) of 

ERISA (which relates only to singleemployer plans) and omits mention of 

section 4022A(a) of ERISA (which 

relates to multiemployer plans). This 

rule adds a reference to section 

4022A(a). 

Section 4007.11(d) of the premium 

payment regulation states that where 

proration of the flat- and variable-rate 

premiums is available under § 4006.5(f) 

of the premium rates regulation, the unprorated premium must be paid in full 

(even if the plan would be entitled to a 

refund). This provision is anachronistic: 

PBGC now permits payment of the 

prorated amount under § 4006.5(f), 

rather than requiring that a filer pay the 

un-prorated amount and request a 

refund. This rule removes the outdated 

provision. 

Section 4007.11(e) of the premium 

payment regulation permits PBGC to 

return improper filings and consider 

them not made. PBGC is not exercising 

this authority, and the provision is 

unnecessary; PBGC has authority to 

assess penalties under ERISA section 

4071 for failure to submit material 

information under the premium 

payment regulation. This rule removes 

§ 4007.11(e). 

Applicability 

The regulatory changes made by this 

rule to implement the provisions of 

section 8101 of DRA 2005 apply (as 

section 8101 of DRA 2005 does) to plan 

years beginning after 2005 and to 

terminations with termination dates 

after 2005 (subject to the special rule for 

bankruptcies filed before October 18, 

2005). The regulatory changes made by 

this rule to implement the provisions of 

section 405 of PPA 2006 apply (as 

section 405 of PPA 2006 does) to plan 

years beginning after 2006. 

Compliance With Rulemaking 

Guidelines 

E.O. 12866 

PBGC has determined, in consultation 

with the Office of Management and 

Budget, that this final rule is a 

‘‘significant regulatory action’’ under 

Executive Order 12866. The Office of 

Management and Budget has therefore 

reviewed the rule under Executive 

Order 12866. Pursuant to section 1(b)(1) 

of E.O. 12866 (as amended by E.O. 

13422), PBGC identifies the following 

specific problems that warrant this 

agency action: 

• PBGC’s regulations do not reflect 

the statutory changes made by DRA 

2005 and PPA 2006 regarding the flat 

premium rate, the cap on the variablerate premium, and the termination 

premium. This problem is significant 

because, unless the regulations are 

revised, the public may be confused or 

misled by the anachronistic regulatory 

provisions. 

• PPA 2006 does not define the term 

‘‘employee’’ for purposes of the 

variable-rate premium cap for plans of 

small employers. This problem is 

significant because the absence of a 

definition will likely lead to 

inconsistent application of the cap rules 

among filers. 

• The termination premium language 

in DRA 2005 is complex and in some 

respects unclear. This problem is 

significant because the complexity and 

lack of clarity may lead to inconsistent 

interpretation of the termination 

premium rules among potential 

termination premium filers. 

• DRA 2005 does not deal with the 

situation where the termination date is 

set after the premium due date as 

described in the statute. This problem is 

significant because, without a relief 

rule, potential filers in such situations 

would be unable to comply with the 

filing requirements. 

• DRA 2005 does not specify the 

entities responsible for keeping 

termination premium records or making 

termination premium filings, and the 

existing provisions of PBGC’s 

regulations are inapposite. This problem 

is significant because the absence of a 

clear assignment of responsibility could 

impede enforcement. 

• Under PBGC’s existing regulations, 

late payment penalties are determined 

according to a formula. This is a 

significant problem in the termination 

premium area because the termination 

premium requirement is new, neither 

PBGC nor potential filers are familiar 

with it, and assessment of late payment 

penalties according to a mechanical 

formula could be inappropriate. 


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71228 Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 

Regulatory Flexibility Act 

PBGC certifies under section 605(b) of 

the Regulatory Flexibility Act that the 

amendments in this rule will not have 

a significant economic impact on a 

substantial number of small entities. 

This rule implements statutory changes 

made by Congress. It provides guidance 

on how to calculate, pay, and 

substantiate the premiums prescribed by 

statute and imposes no significant 

burden beyond the burden imposed by 

statute. Furthermore: 

• The statutorily imposed increase in 

the flat-rate premium is at most $11 per 

participant per year, which does not 

constitute a significant economic impact 

where a plan has a small number of 

participants. Although the flat-rate 

premium will increase as the number of 

participants increases, the economic 

impact of the flat-rate premium relative 

to the size of the entity will remain 

fairly constant and will not be 

significant for a substantial number of 

entities of any size. 

• The statutorily imposed cap on the 

variable-rate premium will save 

qualifying plans money. The rule 

simply interprets the statutory 

provisions. 

• The statutorily imposed termination 

premium will not affect a substantial 

number of entities of any size. 

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. 

Paperwork Reduction Act 

The information collection 

requirements relating to the flat-rate and 

variable-rate premiums have been 

approved by the Office of Management 

and Budget under the Paperwork 

Reduction Act (OMB control number 

1212–0009, expires April 30, 2008). 

The information collection 

requirements relating to the termination 

premium have been approved by the 

Office of Management and Budget under 

the Paperwork Reduction Act (OMB 

control number 1212–0064, expires 

October 31, 2010). 

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 information relating to 

the termination premium to identify the 

plan for which a termination premium 

is paid to PBGC, to verify the 

determination of the premium, and to 

identify the persons liable for the 

premium. PBGC has maximized the 

practical utility of the information 

collection and minimized the burden by 

designing the collection to provide the 

information PBGC needs to administer 

and enforce the termination premium 

requirements without requiring the 

submission of information that is 

extraneous to that function. Specifically, 

the Form T that PBGC has designed for 

submission of termination premium 

payments requests: 

• The name, Employer Identification 

Number, and Plan Number for the 

terminated plan last reported in a PBGC 

flat- and/or variable-rate premium filing 

(to identify the plan). 

• The date of plan termination (to 

identify the date as of which 

participants are counted and 

contributing sponsors and controlled 

group members liable for the premium 

are identified). 

• The participant count (on which the 

termination premium is based). 

• The termination premium rate 

(generally $1,250, but $2,500 for certain 

airline or airline-related plans). 

• The amount of the termination 

premium owed. 

• Whether this is the first, second, or 

third payment (some data should match 

from payment to payment, whereas 

other data may not). 

• The payment method (indicating 

whether PBGC should be looking for a 

check with the Form T or expecting an 

electronic funds transfer). 

• The name and address of the filer 

(to identify the filer). 

• A list of all persons (other than the 

filer) that are liable for the termination 

premium (for enforcement purposes). 

Because the number of plan 

terminations to which the termination 

premium applies is expected to be 

relatively small (about 25 per year), the 

total burden of compliance will be 

minimal. 

List of Subjects 

29 CFR Part 4006 

Pension insurance, Pensions. 

29 CFR Part 4007 

Penalties, Pension insurance, 

Pensions, Reporting and recordkeeping 

requirements. 

■ For the reasons given above, PBGC is 

amending 29 CFR parts 4006 and 4007 

as follows. 

PART 4006—PREMIUM RATES 

■ 1. The authority citation for part 4006 

continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3), 1306, 

1307. 

■ 2. In § 4006.3: 

■ a. The introductory text is amended 

by removing the words ‘‘§ 4006.5 

(dealing with exemptions and special 

rules)’’ and adding in their place the 

words ‘‘§ 4006.5 (dealing with 

exemptions and special rules) and 

§ 4006.7 (dealing with premiums for 

certain terminated single-employer 

plans)’’; and by removing the words 

‘‘section 4022(a)’’ and adding in their 

place the words ‘‘section 4022(a) or 

section 4022A(a)’’. 

■ b. Paragraph (a) introductory text is 

amended by removing the words 

‘‘multiplied by—’’ and adding in their 

place the words ‘‘multiplied by the 

applicable flat premium rate determined 

under paragraph (c) of this section.’’. 

■ c. Paragraphs (a)(1) and (a)(2) are 

removed. 

■ d. Paragraph (b) is revised, and new 

paragraphs (c) and (d) are added, to read 

as follows: 

§ 4006.3 Premium rate. 

* * * * * 

(b) Variable-rate premium. 

(1) In general. Subject to the 

limitation in paragraph (b)(2) of this 

section, the variable-rate premium is $9 

for each $1,000 of a single-employer 

plan’s unfunded vested benefits, as 

determined under § 4006.4. 

(2) Cap on variable-rate premium. If a 

plan is described in paragraph (b)(3) of 

this section for the premium payment 

year, the variable-rate premium does not 

exceed $5 multiplied by the square of 

the number of participants in the plan 

on the last day of the plan year 

preceding the premium payment year. 

For example, if the number of 

participants in the plan on the last day 

of the plan year preceding the premium 

payment year is 20, the variable-rate 

premium does not exceed $2,000 ($5 × 

202 = $5 × 400 = $2,000). 

(3) Plans eligible for cap. A plan is 

described in this paragraph (b)(3) for the 

premium payment year if the aggregate 

number of employees of all employers 

in the plan’s controlled group on the 

first day of the premium payment year 

is 25 or fewer. 

(4) Meaning of ‘‘employee.’’ For 

purposes of paragraph (b)(3) of this 

section, the aggregate number of 

employees is determined in the same 

manner as under section 410(b)(1) of the 

Code, taking into account the provisions 

of section 414(m) and (n) of the Code, 

but without regard to section 410(b)(3), 

(4), and (5) of the Code. 

(c) Applicable flat premium rate. The 

applicable flat premium rate is: 

(1) For a premium payment year 

beginning before 2006—

(i) For a single-employer plan, $19, 

and 

(ii) For a multi-employer plan, $2.60. 

(2) For a premium payment year 

beginning in 2006—


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Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 71229 

(i) For a single-employer plan, $30, 

and 

(ii) For a multi-employer plan, $8. 

(3) For a premium payment year 

beginning after 2006, the greater of—

(i) The applicable flat premium rate 

for plan years beginning in the calendar 

year preceding the calendar year in 

which the premium payment year 

begins, or 

(ii) The adjusted flat rate determined 

under paragraph (d) of this section for 

the premium payment year. 

(d) Adjusted flat rate. The adjusted 

flat rate for a premium payment year 

beginning after 2006 is determined by—

(1) Multiplying the applicable flat 

premium rate for 2006 by the ratio of—

(i) The national average wage index 

(as defined in section 209(k)(1) of the 

Social Security Act) for the first of the 

two calendar years preceding the 

calendar year in which the premium 

payment year begins, to 

(ii) The national average wage index 

(as so defined) for 2004; and 

(2) Rounding the result to the nearest 

multiple of $1 (rounding up any 

unrounded result that equals some 

whole number of dollars plus 50 cents). 

■ 3. New § 4006.7 is added to read as 

follows: 

§ 4006.7 Premium rate for certain 

terminated single-employer plans. 

(a) The premium under this section 

(‘‘termination premium’’) applies to a 

DRA 2005 termination described in 

§ 4007.13 of this chapter. 

(b) The amount of the premium under 

this section that is payable with respect 

to each applicable 12-month period (as 

described in § 4007.13 of this chapter) is 

the number of participants in the plan, 

determined as of the day before the 

termination date under section 4048 of 

ERISA, multiplied by the termination 

premium rate. In general, the 

termination premium rate is $1,250. 

However, the termination premium rate 

is $2,500 for an ‘‘eligible plan’’ under 

section 402(c)(1) of the Pension 

Protection Act of 2006 (dealing with 

certain plans of commercial passenger 

airlines and airline catering services) 

while an election under section 

402(a)(1) of the Pension Protection Act 

of 2006 (dealing with alternative 

funding schedules) is in effect for the 

plan if the plan terminates during the 

five-year period beginning on the first 

day of the first applicable plan year (as 

defined in section 402(c)(2) of that Act) 

with respect to the plan, unless the 

Secretary of Labor determines that the 

plan terminated as a result of 

extraordinary circumstances such as a 

terrorist attack or other similar event. 

(c) The premium under this section is 

in addition to any other premium under 

this part. 

(d) See § 4007.13 of this chapter for 

further rules about termination 

premiums. 

PART 4007—PAYMENT OF PREMIUMS 

■ 4. The authority citation for part 4007 

continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3), 1303(a), 

1306, 1307. 

■ 5. Section 4007.3 is amended by 

removing the words ‘‘The plan 

administrator’’ and adding in their place 

the words ‘‘Subject to the provisions of 

§ 4007.13, the plan administrator’’; and 

by removing ‘‘§ 4007.11’’ and adding in 

its place the words ‘‘this part’’. 

■ 6. In § 4007.7, paragraph (a) is 

amended by removing ‘‘§ 4007.11’’ and 

adding in its place the words ‘‘this 

part’’. 

■ 7. In § 4007.8: 

■ a. Paragraph (a) introductory text is 

amended by removing the words ‘‘If any 

premium payment due’’ and adding in 

their place the words ‘‘Subject to the 

provisions of § 4007.13, if any premium 

payment due’’; and by removing 

‘‘§ 4007.11’’ and adding in its place the 

words ‘‘this part’’. 

■ b. Paragraph (a)(1)(i) is amended by 

removing the word ‘‘plan’s’’. 

■ c. Paragraph (a)(1) introductory text is 

revised to read as follows: 

§ 4007.8 Late payment penalty charges. 

(a) * * * 

(1) Penalty rate; in general. Except as 

provided in paragraph (a)(2) of this 

section, the penalty rate is—

* * * * * 

■ 8. In § 4007.9, paragraph (a) is 

amended by removing the words ‘‘by a 

plan administrator’’; and by removing 

the words ‘‘that plan’s’’ and adding in 

their place the words ‘‘a plan’s’’. 

■ 9. In § 4007.10: 

■ a. Paragraph (a)(1) is amended by 

removing the words ‘‘plan 

administrator’’ and adding in their place 

the words ‘‘designated recordkeeper 

under paragraph (a)(3) of this section’’. 

■ b. Paragraph (a)(2) is amended by 

removing the words ‘‘The plan 

administrator’’ and adding in their place 

the words ‘‘A designated recordkeeper’’. 

■ c. Paragraph (b) is amended by 

removing the words ‘‘for any premium 

payment year’’. 

■ d. Paragraph (c)(1) is amended by 

removing the words ‘‘The plan 

administrator’’ and adding in their place 

the words ‘‘A designated recordkeeper’’. 

■ e. Paragraph (c)(2) is amended by 

removing the words ‘‘the plan 

administrator’’ and adding in their place 

the words ‘‘a designated recordkeeper’’. 

■ f. Paragraph (c)(2)(ii) is amended by 

removing the words ‘‘plan 

administrator’’ and adding in their place 

the words ‘‘designated recordkeeper’’. 

■ g. New paragraph (a)(3) is added to 

read as follows: 

§ 4007.10 Recordkeeping; audits; 

disclosure of information. 

(a) * * * 

(3) Designated recordkeepers. 

(i) With respect to the flat-rate and 

variable-rate premiums described in 

§ 4006.3 of this chapter, the plan 

administrator is the designated 

recordkeeper. 

(ii) With respect to the premium for 

certain terminated single-employer 

plans described in § 4006.7 of this 

chapter, each person who was a 

contributing sponsor of such a plan, or 

was a member of a contributing 

sponsor’s controlled group, as of the day 

before the plan’s termination date is a 

designated recordkeeper. 

* * * * * 

■ 10. In § 4007.11: 

■ a. Paragraph (a) introductory text is 

amended by removing the words ‘‘The 

premium filing due date for small 

plans’’ and adding in their place the 

words ‘‘For flat-rate and variable-rate 

premiums, the premium filing due date 

for small plans’’. 

■ b. Paragraph (a)(3) introductory text is 

amended by removing the words ‘‘the 

premium form or forms and payment or 

payments for the short plan year shall 

be filed by’’ and adding in their place 

the words ‘‘the due date or dates for the 

flat-rate premium and any variable-rate 

premium for the short plan year are’’; 

and by removing the words ‘‘for the 

premium forms and payments’’. 

■ c. Paragraph (c) introductory text is 

amended by removing the words ‘‘the 

premium form and all premium 

payments due for the first plan year of 

coverage of any new plan or newly 

covered plan shall be filed on or before’’

and adding in their place the words ‘‘the 

due date for the flat-rate premium and 

any variable-rate premium for the first 

plan year of coverage of any new plan 

or newly covered plan shall be’’. 

■ d. Paragraph (d) is amended by 

removing the words ‘‘to file the forms or 

forms prescribed by this part and to pay 

any premiums due’’ and adding in their 

place the words ‘‘to make flat-rate and 

(as applicable) variable-rate premium 

filings and payments under this part’’; 

and by removing the last sentence of the 

paragraph. 

■ e. Paragraph (e) is removed. 

■ 11. In § 4007.12, paragraph (a) is 

amended by removing the words ‘‘to file 


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71230 Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 

the applicable forms and to submit the 

premium payment’’ and adding in their 

place the words ‘‘to make flat-rate and 

variable-rate premium filings and 

payments under this part’’; and by 

removing the words ‘‘liable for premium 

payments’’ and adding in their place 

‘‘liable for flat-rate and variable-rate 

premium payments’’. 

■ 12. New § 4007.13 is added to read as 

follows: 

§ 4007.13 Premiums for certain terminated 

single-employer plans. 

(a) Applicability—(1) In general. This 

section applies where there is a ‘‘DRA 

2005 termination’’ of a plan. Subject to 

paragraph (a)(2) of this section, there is 

a DRA 2005 termination where a singleemployer plan’s termination date under 

section 4048 of ERISA is after 2005 and 

either—

(i) The plan terminates under section 

4042 of ERISA, or 

(ii) The plan terminates under section 

4041(c) of ERISA and at least one 

contributing sponsor or member of a 

contributing sponsor’s controlled group 

meets the requirements of section 

4041(c)(2)(B)(ii) or (iii) of ERISA. 

(2) Plans terminated during 

reorganization proceedings. Except as 

provided in paragraph (a)(3) of this 

section, a DRA 2005 termination of a 

plan does not occur where as of the 

plan’s termination date under section 

4048 of ERISA—

(i) A bankruptcy proceeding has been 

filed by or against any person that was 

a contributing sponsor of the plan on 

the day before the plan’s termination 

date or that was on that day a member 

of any controlled group of which any 

such contributing sponsor was a 

member, 

(ii) The proceeding is pending as a 

reorganization proceeding under 

chapter 11 of title 11, United States 

Code (or under any similar law of a 

State or political subdivision of a State), 

(iii) The person has not been 

discharged from the proceeding, and 

(iv) The proceeding was filed before 

October 18, 2005. 

(3) Special rule for certain airlinerelated plans. Paragraph (a)(2) of this 

section does not apply to an ‘‘eligible 

plan’’ under section 402(c)(1) of the 

Pension Protection Act of 2006 (dealing 

with certain plans of commercial 

passenger airlines and airline catering 

services) while an election under 

section 402(a)(1) of the Pension 

Protection Act of 2006 (dealing with 

alternative funding schedules) is in 

effect for the plan. 

(4) Termination premium. A premium 

as described in § 4006.7 of this chapter 

is payable to PBGC with respect to a 

DRA 2005 termination each year for 

three years after the termination (the 

‘‘termination premium’’). 

(b) Filing requirements; method of 

filing. Notwithstanding § 4007.3, in the 

case of a DRA 2005 termination of a 

plan, each person that was a 

contributing sponsor of the plan on the 

day before the plan’s termination date or 

that was on that day a member of any 

controlled group of which any such 

contributing sponsor was a member is 

responsible for filing prescribed 

termination premium information and 

payments. Any such person may file on 

behalf of all such persons. 

(c) Late payment penalty charges. 

Notwithstanding § 4007.8(a), if any 

required termination premium payment 

is not filed by the due date under 

paragraph (d) of this section, PBGC may 

assess a late payment penalty charge 

based on the facts and circumstances, 

subject to waiver under § 4007.8(b), (c), 

(d), or (e). The charge will not exceed 

the amount of termination premium not 

timely filed. 

(d) Due dates. Notwithstanding 

§ 4007.11, the due date for the 

termination premium is the 30th day of 

each of three applicable 12-month 

periods. The three applicable 12-month 

periods with respect to a DRA 2005 

termination of a plan are—

(1) First applicable 12-month period. 

Except as provided in paragraph (e) or 

(f) of this section, the period of 12 

calendar months beginning with the 

first calendar month following the 

calendar month in which occurs the 

plan’s termination date under section 

4048 of ERISA, and 

(2) Subsequent applicable 12-month 

periods. Each of the first two periods of 

12 calendar months that immediately 

follow the first applicable 12-month 

period. 

(e) Certain reorganization cases. (1) 

This paragraph (e) applies with respect 

to a DRA 2005 termination of a plan if 

the conditions in both paragraph (e)(2) 

and paragraph (e)(3) of this section are 

satisfied. 

(2) The condition of this paragraph 

(e)(2) is that either—

(i) The plan terminates under section 

4042 of ERISA, or 

(ii) The plan terminates under section 

4041(c) of ERISA and at least one 

contributing sponsor or member of a 

contributing sponsor’s controlled group 

meets the requirements of section 

4041(c)(2)(B)(ii) of ERISA. 

(3) The condition of this paragraph 

(e)(3) is that as of the plan’s termination 

date under section 4048 of ERISA—

(i) A bankruptcy proceeding has been 

filed by or against any person that was 

a contributing sponsor of the plan on 

the day before the plan’s termination 

date or that was on that day a member 

of any controlled group of which any 

such contributing sponsor was a 

member, 

(ii) The proceeding is pending as a 

reorganization proceeding under 

chapter 11 of title 11, United States 

Code (or under any similar law of a 

State or political subdivision of a State), 

and 

(iii) The person has not been 

discharged from the proceeding. 

(4) If this paragraph (e) applies with 

respect to a DRA 2005 termination of a 

plan, then except as provided in 

paragraph (f) of this section, the first 

applicable 12-month period with 

respect to the plan is the period of 12 

calendar months beginning with the 

first calendar month following the 

calendar month in which occurs the 

earliest date when, for every person that 

was a contributing sponsor of the plan 

on the day before the plan’s termination 

date under section 4048 of ERISA, or 

that was on that day a member of any 

controlled group of which any such 

contributing sponsor was a member, 

either—

(i) There is not pending any 

bankruptcy proceeding that was filed by 

or against such person and that was, as 

of the plan’s termination date under 

section 4048 of ERISA, a reorganization 

proceeding under chapter 11 of title 11, 

United States Code (or under any 

similar law of a State or political 

subdivision of a State), or 

(ii) The person has been discharged in 

any such proceeding, or 

(iii) The person no longer exists. 

(f) Plan termination date in past when 

set. If a plan’s termination date under 

section 4048 of ERISA is in the past 

when it is established by agreement or 

court action as described in section 

4048 of ERISA, then the first applicable 

12-month period for determining the 

due dates of the termination premium 

begins with the later of—

(1) The first calendar month following 

the calendar month in which the 

termination date is established by 

agreement or court action as described 

in section 4048 of ERISA, or 

(2) The first calendar month specified 

in paragraph (d)(1) of this section or (if 

paragraph (e) of this section applies) 

paragraph (e)(4) of this section. 

(g) Liability for termination premiums. 

In the case of a DRA 2005 termination 

of a plan, each person that was a 

contributing sponsor of the plan on the 

day before the plan’s termination date, 

or that was on that day a member of any 

controlled group of which any such 

contributing sponsor was a member, is 

jointly and severally liable for 


ebenthall on PROD1PC69 with RULES
Federal Register / Vol. 72, No. 241 / Monday, December 17, 2007 / Rules and Regulations 71231 

termination premiums with respect to 

the plan. 

Issued in Washington, DC, this 2nd day of 

November, 2007. 

Elaine L. Chao, 

Chairman, Board of Directors, Pension Benefit 

Guaranty Corporation. 

Issued on the date set forth above pursuant 

to a resolution of the Board of Directors 

authorizing its Chairman to issue this final 

rule. 

Judith R. Starr, 

Secretary, Board of Directors, Pension Benefit 

Guaranty Corporation. 

[FR Doc. E7–24423 Filed 12–14–07; 8:45 am] 

BILLING CODE 7709–01–P 

DEPARTMENT OF THE INTERIOR 

Minerals Management Service 

30 CFR Part 206 

RIN 1010–AD00 

Indian Oil Valuation 

AGENCY: Minerals Management Service, 

Interior. 

ACTION: Final rule. 

SUMMARY: The Minerals Management 

Service (MMS) is amending the existing 

regulations regarding valuation, for 

royalty purposes, of oil produced from 

Indian leases. These amendments will 

clarify and update the existing 

regulations. 

DATES: Effective February 1, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Sharron L. Gebhardt, Lead Regulatory 

Specialist, Minerals Management 

Service, Minerals Revenue Management, 

P.O. Box 25165, MS 302B2, Denver, 

Colorado 80225, telephone (303) 231–

3211, fax (303) 231–3781, or e-mail 

Sharron.Gebhardt@mms.gov. The 

principal authors of this final rule are 

John Barder of Minerals Revenue 

Management, MMS, Department of the 

Interior, and Geoffrey Heath of the 

Office of the Solicitor, Department of 

the Interior, Washington, DC. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The MMS published a proposed rule 

in the Federal Register on February 13, 

2006 (71 FR 7453), referred to in this 

rule as the 2006 Indian Oil Proposed 

Rule or, simply, the proposed rule, that 

would amend the regulations governing 

the valuation for royalty purposes of 

crude oil produced from Indian leases. 

Before developing the proposed rule, 

MMS held a series of eight public 

meetings in March and June 2005 to 

consult with Indian tribes and 

individual Indian mineral owners and 

to obtain information from interested 

parties. The intent of the proposed 

rulemaking was to add more certainty to 

the valuation of oil produced from 

Indian lands, eliminate reliance on oil 

posted prices, and address the unique 

terms of Indian tribal and allotted 

leases—in particular, the major portion 

provision. Because of the response from 

Indian tribes and industry to the 

proposed rule, MMS plans to convene a 

negotiated rulemaking committee that 

will make recommendations regarding 

the major portion provision in Indian 

tribal and allotted leases. 

For clarification, relevant rulemaking 

activity is listed below. 

Publication date 

Federal 

Register 

reference 

Publication title Referred to in this final rule as 

July 7, 2006 ............................. 71 FR 38545 .... Reporting Amendments Proposed Rule ........ 2006 Reporting Amendments Proposed 

Rule. 

February 13, 2006 ................... 71 FR 7453 ...... Indian Oil Valuation Proposed Rule ............... 2006 Indian Oil Proposed Rule. 

March 10, 2005 ....................... 70 FR 11869 .... Federal Gas Valuation Final Rule ..................

Public Workshop on Proposed Rule—Establishing Oil Value for Royalty Due on Indian 

Leases.

2005 Federal Gas Final Rule. 

February 22, 2005 ................... 70 FR 8556 ...... (Proposed Rule of February 12, 1998 (63 FR 

7089) and Supplementary Proposed Rule 

of January 5, 2000 (65 FR 403 are withdrawn).

2005 Establishing Oil Value for Royalty Due 

on Indian Leases—Workshop. 

May 24, 2004 Effective August 

1, 2004.

69 FR 29432 .... Federal Oil Valuation .....................................

Final Rule Technical Amendment ..................

2004 Federal Oil Final Rule Technical 

Amendment. 

May 5, 2004 Effective August 

1, 2004.

69 FR 24959 .... Federal Oil Valuation .....................................

Final Rule .......................................................

2004 Federal Oil Final Rule. 

September 28, 2000 ............... 65 FR 58237 .... Establishing Oil Value for Royalty Due on Indian Leases: Proposed Rule.2000 Indian Oil Proposed Rule. 

March 15, 2000 Effective June 

1, 2000—Amended 2004.

65 FR 14022 .... Establishing Oil Value for Royalty Due on 

Federal Leases: Final Rule.

2000 Federal Oil Final Rule. 

February 28, 2000 ................... 65 FR 10436 .... Establishing Oil Value for Royalty Due on Indian Leases.

Supplementary Proposed Rule and Notice of 

Extension of Comment Period.

2000 Indian Oil Revised Supplementary Proposed Rule. 

January 5, 2000 ...................... 65 FR 403 ........ Establishing Oil Value for Royalty Due on Indian Leases.

Supplementary Proposed Rule ......................

2000 Indian Oil Supplementary Proposed 

Rule. 

August 10, 1999: Effective 

January 1, 2000.

64 FR 43506 .... Amendments to Gas Valuation Regulations 

for Indian Leases.

Final Rule .......................................................

1999 Indian Gas Final Rule. 

April 9, 1998 ............................ 63 FR 17349 .... Establishing Oil Value for Royalty Due on Indian Leases: Proposed Rule.

Extension of Public Comment Period ............

1998 Indian Oil Proposed Rule Comment 

Period Extension. 

February 12, 1998 ................... 63 FR 7089 ...... Establishing Oil Value for Royalty Due on Indian Leases.

Proposed Rule ...............................................

1998 Indian Oil Proposed Rule. 

January 15, 1988 .................... 53 FR 1184 ...... Part 3—Revision of Oil Product Valuation 

Regulations and Related Topics.

Final Rule .......................................................

1988 Oil Valuation Final Rule. 


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