Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 15065 

modification. In accordance with Notice 

2007–10, these regulations will be 

effective for any Bulgarian aktsionerno 

druzhestvo formed on or after January 1, 

2007. 

Notice 2007–10 also stated that the 

regulations would be effective for any 

Bulgarian aktsionerno druzhestvo 

formed before January 1, 2007, upon a 

50 percent or greater change of 

ownership in such entity subsequent to 

that date. See section 7805(b)(1)(C) and 

§ 601.601(d)(2)(ii)(b). The temporary 

regulations therefore provide that a 

Bulgarian aktsionerno druzhestvo 

formed before January 1, 2007, will 

become a per se corporation on the date 

that, in the aggregate, a 50 percent or 

more interest in the entity is owned by 

a person or persons who were not 

owners of the entity as of January 1, 

2007. In the case of a partnership, an 

interest means a capital or profits 

interest. In the case of a corporation, an 

interest means an equity interest in the 

entity measured by vote or value. 

The standard provided by these 

temporary regulations for determining 

the application of the regulations to a 

Bulgarian aktsionerno druzhestvo 

formed before January 1, 2007, clarifies 

the standard described in Notice 2007–

10 and the standard to be applied with 

respect to entities listed in § 301.7701–

2(b)(8), including those entities listed in 

TD 8697, TD 9197, and TD 9235. 

Comments are requested with respect to 

this clarification. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866. Therefore, a 

regulatory assessment is not required. It 

has been determined that section 553(b) 

of the Administrative Procedure Act (5 

U.S.C. Chapter 5) does not apply to this 

regulation. For the applicability of the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6), refer to the Special Analyses 

section of the preamble to the notice of 

proposed rulemaking published in this 

issue of the Federal Register. Pursuant 

to section 7805(f) of the Internal 

Revenue Code, these regulations have 

been submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on their 

impact. 

Drafting Information 

The principal author of these 

regulations is S. James Hawes of the 

Office of Associate Chief Counsel 

(International); however, other 

personnel from the IRS and the Treasury 

Department participated in their 

development. 

List of Subjects in 26 CFR Part 301 

Employment taxes, Estate taxes, 

Excise taxes, Gift taxes, Income taxes, 

Penalties, Reporting and recordkeeping 

requirements. 

Amendments to the Regulations 

■ Accordingly, 26 CFR part 301 is 

amended as follows: 

PART 301—PROCEDURE AND 

ADMINISTRATION 

■ Paragraph 1. The authority citation 

for part 301 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 2. Section 301.7701–2(b)(8)(vi) 

and (e)(7) are added and the paragraph 

heading for paragraph (e) is revised to 

read as follows: 

§ 301.7701–2 Business entities; 

definitions. 

* * * * * 

(b) * * * 

(8) * * * 

(vi) [Reserved]. For further guidance, 

see § 301.7701–2T(b)(8)(vi). 

* * * * * 

(e) Effective/applicability date.* * * 

(7) [Reserved]. For further guidance, 

see § 301.7701–2T(e)(7). 

■ Par. 3. Section 301.7701–2T is added 

to read as follows: 

§ 301.7701–2T Business entities; 

definitions (temporary). 

(a) through (b)(8)(v) [Reserved]. For 

further guidance, see § 301.7701–2(a) 

through (b)(8)(v). 

(b)(8)(vi) Certain European entities. 

The following business entity formed in 

the following jurisdiction: 

Bulgaria, Aktsionerno Druzhestvo. 

(c) through (e)(6) [Reserved]. For 

further guidance, see § 301.7701–2(c) 

through (e)(6). 

(7) The reference to the Bulgarian 

entity in paragraph (b)(8)(vi) of this 

section applies to such entities formed 

on or after January 1, 2007, and to any 

such entity formed before such date 

from the date that, in the aggregate, a 50 

percent or more interest in such entity 

is owned by any person or persons who 

were not owners of the entity as of 

January 1, 2007. For purposes of the 

preceding sentence, the term interest 

means—

(i) In the case of a partnership, a 

capital or profits interest; and 

(ii) In the case of a corporation, an 

equity interest measured by vote or 

value. 

(8) Expiration date. The applicability 

of this section expires on or before 

March 18, 2011. 

Linda E. Stiff, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: March 12, 2008. 

Eric Solomon, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. E8–5686 Filed 3–20–08; 8:45 am] 

BILLING CODE 4830–01–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4006 and 4007 

RIN 1212–AB11 

Premium Rates; Payment of 

Premiums; Variable-Rate Premium; 

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. The 

amendments implement provisions of 

the Pension Protection Act of 2006 (Pub. 

L. 109–280) that change the variable-rate 

premium for plan years beginning on or 

after January 1, 2008, and make other 

changes to the regulations. (Other 

provisions of the Pension Protection Act 

of 2006 that deal with PBGC premiums 

are the subject of separate rulemaking 

proceedings.) 

DATES: Effective April 21, 2008. (For 

information about applicability of the 

amendments made by this rule, see 

Applicability in the SUPPLEMENTARY

INFORMATION.) 

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). 


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15066 Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 

Pension plans covered by Title IV must 

pay premiums to PBGC. The flat-rate 

premium applies to all covered plans; 

the variable-rate premium applies only 

to single-employer plans. Section 4006 

of ERISA deals with premium rates, 

including the computation of premiums. 

Section 4007 of ERISA deals with the 

payment of premiums, including 

premium due dates and interest and 

penalties on premiums not timely paid, 

and with recordkeeping and audits. 

On August 17, 2006, the President 

signed into law the Pension Protection 

Act of 2006, Pub. L. 109–280 (PPA 

2006). PPA 2006 makes changes to the 

funding rules in Title I of ERISA and in 

the Internal Revenue Code of 1986 

(Code) on which the variable-rate 

premium is based. Section 401(a) of 

PPA 2006 amends the variable-rate 

premium provisions of section 4006 of 

ERISA to conform to those changes in 

the funding rules and to eliminate the 

full-funding limit exemption from the 

variable-rate premium. 

On May 31, 2007 (at 72 FR 30308), 

PBGC published in the Federal Register 

a proposed rule to amend PBGC’s 

regulations on Premium Rates (29 CFR 

part 4006) and Payment of Premiums 

(29 CFR part 4007) to implement the 

amendment to ERISA section 4006 

made by PPA 2006. (PPA 2006 also 

includes other provisions affecting 

PBGC premiums that were not 

addressed in the proposed rule, 

including provisions that cap the 

variable-rate premium for certain plans 

of small employers, make permanent the 

new ‘‘termination premium’’ (created by 

the Deficit Reduction Act of 2005) that 

is payable in connection with certain 

distress and involuntary plan 

terminations, and authorize PBGC’s 

payment of interest on refunds of 

overpaid premiums. Those provisions 

are or will be the subject of other 

rulemaking actions. See, for example, 

PBGC’s final rule published December 

17, 2007 (at 72 FR 71222).) PBGC 

received comments on the proposed 

rule from two commenters—an actuary 

and an organization representing plan 

sponsors and service providers. The 

comments are discussed below with the 

topics they relate to. 

The final rule is nearly the same as 

the proposed rule. In addition to 

changes prompted by public comments, 

PBGC has added two definitional crossreferences, clarified the definition of 

‘‘new plan,’’ eliminated unnecessary 

verbiage from one of the due date rules, 

clarified the relationship between the 

funding interest rate transition rule and 

the premium funding target, extended 

the small-plan deadline for making 

certain elections, clarified how 

participants are counted for purposes of 

determining plan size, provided 

illustrations of the provision on vesting, 

and clarified the provision dealing with 

plans to which special funding rules 

apply. These changes are discussed 

below. There are also a few merely 

editorial refinements in the proposed 

rule’s regulatory language. 

Overview of Regulatory Amendments 

For purposes of determining a plan’s 

variable-rate premium (VRP) for a 

premium payment year beginning after 

2007, the rule requires unfunded vested 

benefits (UVBs) to be measured as of the 

funding valuation date for the premium 

payment year. The asset measure 

underlying the UVB calculation is to be 

determined for premium purposes the 

same way it is determined for funding 

purposes, except that any averaging 

method adopted for funding purposes is 

disregarded. The liability measure 

underlying the UVB calculation is to be 

determined for premium purposes the 

same way it is determined for funding 

purposes, except that only vested 

benefits are included and a special 

premium discount rate structure is used. 

Filers may make an election (irrevocable 

for five years) to use funding discount 

rates for premium purposes instead of 

the special premium discount rates. 

The rule revises the premium due 

date and penalty structure of the 

existing regulation to give some plans 

more time to file and others the ability 

to make VRP filings based on estimated 

liabilities and then follow up with 

amended filings to adjust the VRP 

without penalty. Three special relief 

rules for VRP filers are eliminated as no 

longer appropriate or necessary, and 

two new relief rules are added. 

The rule also explains when certain 

benefits are considered ‘‘vested’’ and 

makes some other changes unrelated to 

PPA 2006. For example, the rule 

provides explicitly that (in the absence 

of an exemption) a premium filing made 

on paper or in any other manner other 

than the prescribed electronic filing 

method (applicable to all plans for plan 

years beginning after 2006) does not 

satisfy the requirement to file. It also 

clarifies and strengthens recordkeeping 

and audit provisions. 

A more detailed discussion follows. 

Variable-Rate Premium Determination 

Dates 

Under ERISA section 4006(a)(3)(E)(i) 

and (ii), a plan’s per-participant VRP for 

a plan year is generally—

$9.00 for each $1,000 (or fraction thereof) of 

unfunded vested benefits [’’UVBs’’] under the 

plan as of the close of the preceding plan 

year. 

divided by the plan’s participant count 

as of the close of the preceding plan 

year. (Under ERISA section 

4006(a)(3)(H), added by section 405 of 

PPA 2006, the per-participant VRP is 

capped at $5 times the participant count 

as of the close of the prior plan year for 

certain plans of small employers. The 

cap provision is the subject of another 

rulemaking.) Under ERISA section 

4006(a)(3)(A)(i), the per-participant VRP 

is multiplied by the number of 

participants ‘‘in [the] plan during the 

plan year’’ to yield the total VRP. The 

existing premium rates regulation treats 

all of these provisions as referring to a 

single determination date. In most cases, 

this is the last day of the prior plan year; 

it is the first day of the premium 

payment year (the plan year for which 

the premium is being paid) for two 

categories of plans: new and newly 

covered plans (which are not in 

existence as covered plans on the last 

day of the prior plan year) and certain 

plans involved in plan spinoffs and 

mergers as of the beginning of the 

premium payment year (which 

otherwise would double-count or not 

count certain participants and UVBs for 

premium purposes). 

The term ‘‘unfunded vested benefits’’

(‘‘UVBs’’) is defined in ERISA section 

4006(a)(3)(E)(iii). In section 

4006(a)(3)(E)(iii) before amendment by 

PPA 2006, ‘‘UVBs’’ is defined as 

unfunded current liability (a term found 

in the funding provisions of the Code 

and Title I of ERISA) determined by 

counting only vested benefits and using 

a special interest rate and (under certain 

circumstances) a special measure of 

plan assets. PPA 2006 changes the 

funding rules for single-employer plans, 

eliminating the concept of current 

liability for plan years beginning after 

2007. (As discussed below, certain plans 

will not use the new funding rules until 

a later date.) To conform to this change, 

PPA 2006 changes the definition of 

UVBs in ERISA section 

4006(a)(3)(E)(iii). As amended by PPA 

2006, for plan years beginning after 

2007, section 4006(a)(3)(E)(iii) provides 

that ‘‘UVBs’’—

means, for a plan year, the excess (if any) of 

* * * the funding target of the plan as 

determined under [ERISA] section 303(d) 

[corresponding to Code section 430(d)] for 

the plan year by only taking into account 

vested benefits and by using the interest rate 

described in [ERISA section 

4006(a)(3)(E)(iv)], over * * * the fair market 

value of plan assets for the plan year which 

are held by the plan on the valuation date. 

New ERISA section 303(g) says that 

with certain exceptions not relevant 

here, ‘‘all determinations under this 

section [which includes the definition 


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Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 15067 

of ‘‘funding target’’ in section 303(d)(1)] 

for a plan year shall be made as of the 

valuation date of the plan for such plan 

year.’’ Thus PBGC concludes that the 

‘‘valuation date’’ for plan assets referred 

to in new section 4006(a)(3)(E)(iii) is the 

valuation date determined under section 

303(g)(2). In general (under section 

303(g)(2)(A)), the valuation date for a 

plan year is the first day of the plan 

year, but certain small plans may 

designate a different valuation date 

(under section 303(g)(2)(B)), which may 

be any day in the plan year. 

The change in the definition of UVBs 

thus creates ambiguity about the date as 

of which UVBs are to be measured. 

Section 4006(a)(3)(E)(ii), which was not 

changed by PPA 2006, refers to two plan 

years—the ‘‘plan year’’ for which the 

VRP is being paid (the premium 

payment year) and the ‘‘preceding plan 

year,’’ at the close of which UVBs are to 

be measured. New section 

4006(a)(3)(E)(iii) refers only to the ‘‘plan 

year’’ in defining UVBs. And a plan’s 

funding target and assets—the elements 

of UVBs—are to be measured as of the 

valuation date, which need not be the 

close of the plan year and which for 

many plans (those not small enough to 

elect otherwise) must be the beginning 

of the plan year. 

To resolve the statutory ambiguity, 

PBGC is adopting a rule regarding the 

date as of which UVBs are to be 

measured. In view of the following 

considerations, PBGC is requiring that 

UVBs be measured as of the valuation 

date in the premium payment year 

rather than a date in the prior plan year. 

Historical data indicate that most 

premium filers use beginning-of-theplan-year valuation dates for funding 

purposes; under PPA 2006 many of 

them will be required to do so. 

Although funding valuations don’t 

themselves produce UVB numbers that 

can be used for VRP purposes, they 

involve the gathering of the same basic 

data for analysis, and the valuations are 

done in the same way, simply using 

different assumptions. It would be 

burdensome and impractical to require 

plans that must do funding valuations 

as of the first day of a plan year to do 

separate valuations as of the last day for 

VRP purposes. 

Requiring a funding valuation done as 

of the first day of the prior plan year to 

be ‘‘rolled forward’’ to the last day of the 

prior plan year is likewise burdensome 

and impractical. Instructions for ‘‘rollforwards’’ would necessarily be 

complex, especially in light of the new 

‘‘segment rate’’ interest assumption 

under ERISA sections 303(h)(2)(C) and 

4006(a)(3)(E)(iv) as amended by PPA 

2006. And ‘‘rolled-forward’’ valuations 

would tend to be inaccurate because 

correcting for the many changes in 

circumstances that can occur during the 

course of a year involves a significant 

element of estimation. 

Furthermore, basing the VRP on a 

valuation done in the premium payment 

year reflects a plan’s current funding 

status much better than basing it on a 

valuation done in the prior year, 

especially a valuation done as of the 

first day of the prior year. And with 

some changes (discussed below) in 

PBGC’s premium due date and penalty 

rules, there will be adequate time for 

plans to compute premiums based on a 

premium payment year valuation. 

Accordingly, this rule requires that 

UVBs be measured as of the valuation 

date for the premium payment year 

(referred to as the ‘‘UVB valuation 

date’’) and adjusts premium due dates 

and penalty rules to accommodate the 

fact that this UVB valuation date is later 

(by at least a day and in some cases 

perhaps as much as a year) than ‘‘the 

close of the preceding plan year,’’ the 

date used under section 4006(a)(3)(E) 

before amendment by PPA 2006. (No 

change is made in the date as of which 

participants are counted, which the 

regulations as amended by this final 

rule refer to as the ‘‘participant count 

date.’’) 

Variable-Rate Premium Computation 

As noted above, UVBs under PPA 

2006 are based on a plan’s funding 

target and the market value of its assets. 

Under new ERISA section 303(d)(1), as 

set forth in section 102 of PPA 2006, 

‘‘the funding target of a plan for a plan 

year is the present value of all benefits 

accrued or earned under the plan as of 

the beginning of the plan year.’’ But new 

ERISA section 303(g) makes clear that 

the funding target is to be determined as 

of the valuation date, which for small 

plans may not be the beginning of the 

plan year. PBGC thus believes that what 

ERISA section 303(d)(1) requires is that 

the benefits to be valued as of the 

valuation date are those accrued as of 

the beginning of the plan year. If the 

valuation date is later than the first day 

of the plan year, accruals after the 

beginning of the plan year are to be 

ignored. 

The situation regarding assets is 

similar. New ERISA section 

4006(a)(3)(E)(iii)(II) refers to ‘‘the fair 

market value of plan assets for the plan 

year which are held by the plan on the 

valuation date.’’ Under new ERISA 

section 303(g)(4)(B), however, plan 

assets as of a valuation date later than 

the first day of the plan year do not 

include contributions for the plan year 

made during the plan year but before 

the valuation date or interest thereon. 

PBGC interprets section 

4006(a)(3)(E)(iii)(II) as incorporating this 

rule, as well as the corresponding rule 

for prior-year contributions in section 

303(g)(4)(A). Thus for a valuation date 

later than the first day of the plan year, 

UVBs are to reflect neither accruals nor 

contributions for the plan year. 

In general, a plan’s funding target and 

the value of its assets are to be 

determined for premium purposes the 

same way they are for funding purposes 

except as new ERISA section 

4006(a)(3)(E)(iii) and (iv) provides 

otherwise. In order to distinguish the 

funding target used for premium 

purposes from that used for funding 

purposes, the rule introduces the term 

‘‘premium funding target.’’ In general, 

this means the funding target 

determined by taking only vested 

benefits into account and by using the 

special segment rates described in new 

ERISA section 4006(a)(3)(E)(iv) (the 

‘‘standard premium funding target’’). 

Those special segment rates are ‘‘spot 

rates’’ (based on bond yields for a single 

recent month), as opposed to the 24- 

month average segment rates used for 

funding purposes. 

But in certain circumstances 

(described below), PBGC is permitting 

filers to use an ‘‘alternative premium 

funding target’’ that may be less 

burdensome to use than the standard 

premium funding target. A plan’s 

alternative premium funding target is 

the vested portion of the plan’s funding 

target under ERISA section 303(d)(1) 

that is used to determine the plan’s 

minimum contribution under ERISA 

section 303 for the premium payment 

year—that is, an amount calculated 

using the same assumptions as are used 

to calculate the plan’s funding target 

under ERISA section 303(d)(1), but 

based only on vested benefits, rather 

than all benefits. 

Although instructions for annual 

reports on Form 5500 series for plan 

years beginning after 2007 are not final, 

PBGC expects plans to be required to 

compute the vested portion of the 

funding target (broken down by 

participant category) for Form 5500 

filings. PBGC also expects that the final 

instructions will permit or require 

benefits to be categorized as vested or 

non-vested in a manner consistent with 

the provisions of this rule (discussed 

below) that explain when certain 

benefits are considered vested for 

premium purposes. The advantage to a 

filer of using the alternative premium 

funding target will be that, if the plan 

determines the vested portion of its 

funding target for purposes of the 

annual report (Form 5500 series) in a 


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15068 Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 

manner consistent with PBGC’s rules, it 

can use the same number for premium 

purposes and thus avoid having to do a 

second calculation for premium 

purposes alone. 

Under the rule, the alternative 

premium funding target may be used 

where the plan makes an election to do 

so that is irrevocable for a period of five 

years. As financial markets fluctuate, 

the averaged rates used for the 

alternative premium funding target will 

fluctuate above and below the spot rates 

used for the standard premium funding 

target. Locking in the election for five 

years will keep plans from calculating 

the premium funding target both ways 

each year and using the smaller number; 

the reason for permitting use of the 

alternative premium funding target is to 

reduce not premiums but the burden of 

computing premiums. PBGC expects 

that normal interest rate fluctuations 

will make premiums computed with the 

alternative premium funding target—on 

average, over time—approximately 

equal to premiums calculated with the 

standard premium funding target. 

Requiring a five-year commitment to the 

use of the alternative premium funding 

target will give this averaging process 

time to work. If a plan administrator 

concludes that the averaging process has 

not had enough time to work by the end 

of the minimum five-year election 

period, the election may be left in place 

to give the averaging process more time 

to work. 

The proposed rule required that an 

election (or revocation of an election) to 

use the alternative premium funding 

target be made by the end of the first 

plan year to which it would apply. The 

final rule changes the election/ 

revocation deadline to the VRP due date 

for the first plan year to which the 

election or revocation would apply. 

This will allow an election or revocation 

to be made at the same time as a plan’s 

VRP filing for the first plan year to 

which it applies, even if the plan year 

ends before the due date (such as for a 

small plan (as discussed below) or a 

short plan year). And since the VRP 

depends on whether an available 

election or revocation is made, there is 

no need for the election/revocation 

deadline to be later than the VRP due 

date if the VRP due date occurs before 

the end of the plan year. PBGC plans to 

provide for such elections and 

revocations in its electronic premium 

filing application. 

The proposed rule did not explicitly 

address the applicability of the 

transition rule in ERISA section 

303(h)(2)(G) to the calculation of the 

premium funding target. Section 

303(h)(2)(G) calls for a two-year 

transition from the current liability 

interest rate to the new segment rates for 

purposes of determining the funding 

target. However, in describing the 

interest rate to be used in determining 

the standard premium funding target, 

ERISA section 4006(a)(3)(E)(iv) (as 

added by PPA 2006) refers only to 

subparagraphs (C) and (D) of ERISA 

section 303(h)(2), not to the funding 

interest assumption as a whole. Thus, 

the fact that there is a transition rule for 

funding purposes does not mean that 

there is a transition rule for premium 

purposes. 

Furthermore, since the current 

liability interest rate is not the interest 

assumption that has heretofore been 

used to determine UVBs, a literal 

application of the section 303(h)(2)(G) 

transition rule would lead to illogical 

results. The only reasonable way the 

transition rule could be applied to the 

calculation of the standard premium 

funding target would be by reading into 

section 303(h)(2)(G) (for premium 

purposes) a reference to the required 

interest rate heretofore used to 

determine UVBs, rather than the current 

liability interest rate that section 

303(h)(2)(G) actually refers to. 

Accordingly, the proposed rule did not 

provide for the applicability of the 

transition rule to the determination of 

the standard premium funding target, 

and the premium filing instructions that 

PBGC submitted for approval by the 

Office of Management and Budget when 

the proposed rule was published 

reflected this. Section 4006.4(b)(2)(ii) of 

the premium rates regulation, as 

amended by the final rule, makes this 

point explicit. 

The alternative premium funding 

target, on the other hand, is based 

directly on the funding target under 

ERISA section 303(d)(1), which will be 

calculated using the transition rule 

(unless elected out of under ERISA 

section 303(h)(2)(G)(iv)). Thus the 

alternative premium funding target will 

clearly reflect the provisions of section 

303(h)(2)(G), just as it will reflect the 

provisions of section 303(h)(2)(D)(ii) 

(election to use the full yield curve 

instead of segment rates) or section 

303(h)(2)(E) (election of ‘‘applicable 

month’’ for determining the yield 

curve). PBGC believes that this point is 

clearly implicit in the language of the 

proposed rule, and has not changed that 

language for the final rule. 

Since new ERISA section 

4006(a)(3)(E)(iii)(II) speaks explicitly of 

the ‘‘fair market value’’ of assets, PBGC 

concludes that it would be inconsistent 

with the statute to permit or require the 

use of the averaging process described 

in new ERISA section 303(g)(3)(B) or the 

reduction of assets by the prefunding 

and funding standard carryover 

balances described in new ERISA 

section 303(f)(4). (The existing premium 

rates regulation also provides that credit 

balances do not reduce assets for 

premium purposes.) 

As noted above, however, PBGC 

believes that adjustments must be made 

for contributions as described in new 

ERISA section 303(g)(4). Similar 

adjustments are required under the 

current premium rates regulation. For 

simplicity, PBGC is providing that the 

adjustments are to be made using the 

effective interest rates determined for 

funding purposes, rather than effective 

interest rates computed on the basis of 

the premium segment rates. This will 

mean that the adjustments do not have 

to be calculated twice (once for funding 

purposes and again for premium 

purposes), and plans can use for 

premium purposes a figure for the value 

of assets that they are expected to be 

entering in the annual report (Form 

5500 series). PBGC anticipates that the 

differences between funding and 

premium rates and the periods of time 

over which these rates are applied for 

this purpose will be small enough to 

justify this simplification. And as 

funding rates fluctuate above and below 

premium rates, the differences in each 

direction should cancel out over time. 

This rule does not include an 

‘‘alternative calculation method’’ for 

rolling forward prior year values to the 

current year. The alternative calculation 

method (ACM) in § 4006.4(c) of the 

current premium rates regulation was 

instituted when much actuarial 

valuation work was done using hand 

calculators and tables of factors. Highspeed, high-memory computers are now 

the norm for handling both data and 

mathematical computations. Actuarial 

valuations are thus much faster now. 

Furthermore, the segment rate 

methodology for valuing benefits does 

not lend itself to the kind of formulaic 

transformation process exemplified by 

the existing ACM. PBGC accordingly 

believes that an alternative calculation 

method is both unnecessary and 

impracticable under PPA 2006. 

Noting that the proposed rule ignored 

premium payment year accruals in 

determining the premium funding target 

for plans with UVB valuation dates after 

the beginning of the year, one 

commenter urged that benefit increase 

amendments adopted after the UVB 

valuation date but implemented 

retroactively to the beginning of the 

premium payment year be ignored for 

premium purposes. PBGC is not 

adopting any express provision on this 

subject. The premium funding target is 


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Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 15069 

based on the funding target under 

ERISA section 303(d); whether a benefit 

increase (even if retroactive) is taken 

into account for premium purposes 

depends on whether it is taken into 

account for funding purposes, an issue 

not addressed in this rule. 

Due Dates and Penalty Rules 

PBGC expects that most plans that are 

required (or choose) to do funding 

valuations as of the beginning of the 

plan year (and whose UVB valuation 

date is thus the first day of the premium 

payment year) will be able to determine 

their UVBs by the VRP due date 

currently provided for in PBGC’s 

premium payment regulation (generally, 

the middle of the tenth full calendar 

month after the beginning of the plan 

year). But there are some circumstances 

that can make timely determination of 

the VRP difficult or impossible: for 

example, use of a valuation date after 

the beginning of the plan year 

(applicable to small plans only) or 

difficulty in collecting data (e.g., 

because of the occurrence of unusual 

events during the preceding year). To 

deal with such circumstances, PBGC is 

revising its premium due date and 

penalty structure to give smaller plans 

more time to file and larger plans the 

ability to make VRP filings based on 

estimated liabilities and then correct 

them without penalty. The following 

detailed discussion of the due date and 

penalty structure is followed by a 

summary table. 

PBGC’s current due date structure for 

flat- and variable-rate premiums is 

based on two categories of plans: those 

that owed premiums for 500 or more 

participants for the plan year preceding 

the premium payment year (‘‘large’’

plans) and those that did not. The new 

structure is based on three categories. 

The large-plan category remains the 

same. A new ‘‘mid-size’’ category 

consists of plans that owed premiums 

for 100 or more, but fewer than 500, 

participants for the plan year preceding 

the premium payment year. A category 

of ‘‘small’’ plans includes all other 

plans. The participant count for this 

purpose will continue to be the prior 

year’s count; the rule provides uniform 

language for determining both singleand multiemployer plans’ participant 

counts for determining due dates, 

eliminating a slight language difference 

in the existing regulation. 

The final rule makes clear that the 

number of participants used for 

determining plan size is the participant 

count used for purposes of the flat-rate 

premium (not the number of 

participants whose benefits are taken 

into account in computing the VRP). 

Since both flat-rate and variable-rate 

premium due dates are based on plan 

size, plan size must be determinable for 

plans (such as multiemployer plans) 

that do not compute the VRP. 

Furthermore, the VRP does not reflect 

the number of participants directly 

except for certain plans of small 

employers that are subject to a VRP cap 

based on the number of participants (in 

which case it is the flat-rate participant 

count that is used). Tying plan size to 

the flat-rate premium participant count 

is consistent with the existing 

regulation. 

The 100-participant break-point 

between the small and mid-size 

categories approximates the break-point 

in the PPA 2006 funding rules between 

plans that are required to use beginningof-the-year valuation dates under ERISA 

section 303(g)(2)(A) and those permitted 

to use another date under ERISA section 

303(g)(2)(B). The correspondence with 

the valuation date provision is only 

approximate. Under the valuation date 

provision, PPA 2006 counts participants 

on each day of a plan year and 

aggregates plans within controlled 

groups; under the premium due date 

rules, participants are counted in one 

plan on one day. Furthermore, PPA 

2006 funding rules look back to the plan 

year preceding the valuation year; the 

PBGC participant count for the plan 

year preceding the premium payment 

year is typically as of the last day of the 

plan year before that. Accordingly, there 

may be plans that are eligible to elect 

valuation dates other than the first day 

of the plan year but that do not fall into 

PBGC’s new small-plan category. But 

most plans that use valuation dates 

other than the first day of the plan year 

are expected to be ‘‘small’’ under the 

new due date structure, and there is 

enough flexibility in the due date rules 

for large and mid-size plans to make 

premium filing manageable in most 

cases even for plans with valuation 

dates after the beginning of the plan 

year. In unusual cases, where a plan 

with a valuation date late in the year 

finds itself in the large or mid-size 

category, PBGC has authority to waive 

late premium penalties. 

Small Plans 

For plans in the ‘‘small’’ category, all 

premiums will be due on the last day of 

the sixteenth full calendar month that 

begins on or after the first day of the 

premium payment year (for calendaryear plans, April 30 of the year 

following the premium payment year). 

This will give any small plan at least 

four months to determine UVBs. 

The same due date will apply to both 

variable- and flat-rate premiums. While 

there is no reason these small plans 

cannot determine the flat-rate premium 

by the current due date (the 15th day of 

the tenth full calendar month that 

begins on or after the first day of the 

premium payment year), PBGC wants to 

avoid requiring them to make two 

filings per year. And for simplicity, 

PBGC is making no distinction for due 

date purposes between single-employer 

plans that pay the VRP and singleemployer (and multiemployer) plans 

that do not. Small single-employer plans 

that qualify for an exemption from the 

VRP and small multiemployer plans 

(which are not subject to the VRP) will 

have the same deferred due date as 

small single-employer plans that owe a 

VRP. 

Mid-Size Plans 

For mid-size plans, the rule retains 

the current premium due date—the 15th 

day of the tenth full calendar month that 

begins on or after the first day of the 

premium payment year (October 15th 

for calendar-year plans)—for both flatand variable-rate premiums. With rare 

exceptions, these plans will perform 

valuations as of the first day of the 

premium payment year, and in most 

cases should be able to calculate UVBs 

by the current due date. However, in 

recognition of the possibility that 

circumstances might make a final UVB 

determination by the due date difficult 

or impossible, the rule permits VRP 

filings to be made based on estimated 

liabilities and provides a penalty-free 

‘‘true-up’’ period to correct a VRP based 

on an erroneous estimate. 

Under this provision, the VRP penalty 

is waived for a period of time after the 

VRP due date if, by the VRP due date, 

the plan administrator submits an 

estimate of the VRP that meets certain 

requirements and pays the estimated 

amount. The waiver of the penalty 

covers the period from the VRP due date 

until the small-plan due date or, if 

earlier, the filing of the final VRP. 

Interest is not suspended; if the VRP 

estimate falls short of the correct 

amount, interest will accrue on the 

amount of the underpayment from the 

date when the payment was due to the 

date the shortfall was paid, just as with 

the existing ‘‘safe harbor’’ rule for large 

plans’ flat-rate premium payments. 

The requirements for the VRP 

estimate are that it be based on (1) a 

final determination of the market value 

of the plan’s assets and (2) a reasonable 

estimate of the plan’s premium funding 

target for the premium payment year 

that takes into account the most current 

data available to the plan’s enrolled 

actuary and is determined in accordance 

with generally accepted actuarial 


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15070 Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 

principles and practices. The estimate of 

the premium funding target must be 

certified by the enrolled actuary and, 

like other premium information filed 

with PBGC, is subject to audit. PBGC 

needs a good estimate of its VRP income 

for inclusion in its annual report, which 

is prepared during October (because its 

fiscal year ends September 30), when 

most plans (those with calendar plan 

years) submit VRP filings. Thus, it is 

important to have assurance that the 

estimate of the premium funding target 

has been prepared in good faith. 

Since this penalty relief is based on 

the plan’s reporting a final figure for the 

value of assets by the VRP due date, the 

relief is lost if there is a mistake in the 

assets figure so reported, whether the 

mistaken figure is lower or higher than 

the true figure. PBGC will consider a 

request for an appropriate penalty 

waiver in such a situation and in acting 

on the request will consider such facts 

and circumstances as the reason for the 

mistake, whether assets were over- or 

understated, and, if assets were 

overstated, the extent of the 

overstatement. 

Since the provision of a period for 

‘‘truing up’’ the VRP without penalty, 

after a filing based on an estimate, is not 

an extension of the VRP due date, it 

does not provide additional time to 

make an alternative premium funding 

target election. 

Large Plans 

The due date and penalty structure for 

‘‘large’’ plans is the same as for ‘‘midsize’’ plans except that the early due 

date for the flat-rate premium under the 

existing regulation is retained, along 

with the related ‘‘safe harbor’’ penalty 

rules. However, there is a change in the 

‘‘safe harbor’’ rules to accommodate the 

unlikely event that a plan might be in 

the small-plan category for one year but 

in the large-plan category for the next 

year. Under §§ 4007.8(f) and (g)(2)(ii) of 

the existing premium payment 

regulation, a plan may be entitled to safe 

harbor relief if its flat-rate filing is 

consistent with its reported participant 

count for the prior plan year, even if the 

reported count is later determined to be 

wrong. But under the new rules, a plan 

that is small for one year and large for 

the next year will not have to report its 

participant count for the first year until 

after the flat-rate due date for the second 

year. Thus, to get the benefit of these 

special safe-harbor rules, a plan in such 

circumstances would have to make its 

final filing for the first year two months 

before it was due. To alleviate this 

problem, the rule provides safe-harbor 

relief for any plan whose flat-rate due 

date for the plan year preceding the 

premium payment year is later than the 

large-plan flat-rate due date for the 

premium payment year. 

Due Date Table 

The following table shows the 

relevant premium due dates for small, 

mid-size, and large calendar year plans 

(as described above) for the 2008 

premium payment year: 

Small plans 

(under 100 participants) 

Mid-size plans 

(100–499 participants) 

Large plans 

(500 or more participants) 

Flat-rate premium due ............................. April 30, 2009 ... October 15, 2008 ................................... February 29, 2008. See flat-rate premium safe harbor rules. 

Flat-rate premium reconciliation due ....... N/A ................... N/A ......................................................... October 15, 2008. 

Variable-rate premium due ...................... April 30, 2009 ... October 15, 2008. Estimate may be 

filed and paid. See rules on correcting VRP without penalty.

October 15, 2008. Estimate may be 

filed and paid. See rules on correcting VRP without penalty. 

Latest VRP penalty starting date. If certain conditions are met, penalty is 

waived until this date or, if earlier, the 

date the final VRP is filed.

N/A ................... April 30, 2009 ......................................... April 30, 2009. 

Special Variable-Rate Premium Rules 

The existing premium rates regulation 

includes a number of special 

‘‘exemption’’ or ‘‘relief’’ rules for VRP 

filers. One of these—the full-funding 

limit exemption, which was created by 

statute—has been eliminated by PPA 

2006. Three others—created by PBGC 

regulation in 1988—have lost their 

justification, as explained below, and 

PBGC is eliminating them as well. PBGC 

is also introducing two new ‘‘relief’’

rules. 

The three regulatory special rules that 

are eliminated are (1) the rule that a 

plan with fewer than 500 participants 

for the premium payment year is 

exempt from reporting its VRP 

information if the plan has no UVBs (the 

‘‘small well-funded plan rule’’), (2) the 

rule that a plan with 500 or more 

participants may report (and compute 

its VRP on the basis of) accrued rather 

than vested benefits (the ‘‘large plan 

accrued benefit rule’’), and (3) the rule 

that a plan may value benefits using the 

funding interest rate rather than the 

variable-rate premium interest rate if the 

funding rate is less than the premium 

rate (the ‘‘funding interest rate rule’’). 

All three represent compromises 

between the need for accuracy in the 

determination of the VRP and the 

reporting of VRP data on the one hand 

and the need to reduce the burden of 

compliance on the other. 

PBGC needs accurate data about UVBs 

and assets—now as in 1988—to verify 

the correctness of the reported VRP and 

for financial projections. But whereas 

the cost of determining this information 

20 years ago could be very significant, 

because much actuarial valuation work 

was done using hand calculators and 

tables of factors, valuations are now 

computerized and thus cost less. PBGC’s 

need for accurate data now outweighs 

the burden of determining and reporting 

the data. The elimination of these three 

special rules reflects that change in the 

balance between need and burden. 

Furthermore, both the ‘‘large plan 

accrued benefit rule’’ and the ‘‘funding 

interest rate rule’’ overstate UVBs and 

are used by very few plans—fewer than 

three dozen plans used each of these 

two special rules for the 2004 filing year 

(the last year for which data are 

available). 

In addition, one of the two new 

‘‘relief’’ rules that PBGC is 

introducing—the new alternative 

premium funding target provision 

discussed above—provides relief for 

filers that might otherwise have used 

any of these three special rules. The 

alternative premium funding target 

provision permits the use of funding 

rates for premium purposes (like the 

‘‘funding interest rate rule’’) without the 

need for a comparison of rates (albeit 

with a requirement for a five-year 

commitment). And by using the 

alternative premium funding target 

provision, plans that might have used 

the ‘‘large plan accrued benefit rule’’ or 

the ‘‘small well-funded plan rule’’ may 

be able to base premium reporting on 


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figures that are computed for and 

included in the annual report (Form 

5500 series). 

PBGC’s second new ‘‘relief’’ rule—in 

addition to the alternative premium 

funding target provision—is a reporting 

relief provision for certain smallemployer plans. Section 405 of PPA 

2006 caps the VRP for certain plans of 

small employers, a provision that is the 

subject of another PBGC rulemaking 

proceeding. This rule exempts plans 

that qualify for the VRP cap and pay the 

full amount of the cap from determining 

or reporting UVBs. 

Meaning of ‘‘Vested’’

As discussed above, the 

determination of UVBs—both before 

and after the PPA 2006 amendments—

requires that only vested benefits be 

taken into account. PBGC believes that 

there is some uncertainty among 

pension practitioners as to the meaning 

of the term ‘‘vested’’ as used in ERISA 

section 4006(a)(3)(E). With a view to 

reducing uncertainty and promoting 

consistency in the VRP determination 

process, § 4006.4(d) of the premium 

rates regulation, as amended by this 

final rule, explains—for premium 

purposes only—when certain benefits 

are considered vested. 

The proposed rule specified two 

circumstances that would not prevent a 

participant’s benefit from being vested 

for premium purposes. One 

circumstance is that the benefit is not 

protected under Code section 411(d)(6) 

and thus may be eliminated or reduced 

by the adoption of a plan amendment or 

by the occurrence of a condition or 

event (such as a change in marital 

status). PBGC considers such a benefit 

to be vested (if the other conditions of 

entitlement have been met) so long as 

the benefit has not actually been 

eliminated or reduced. The other 

circumstance—applicable to certain 

benefits payable upon a participant’s 

death—is that the participant is living. 

The benefits to which this would apply 

are (1) a qualified pre-retirement 

survivor annuity, (2) a post-retirement 

survivor annuity such as the annuity 

paid after a participant’s death under a 

joint and survivor or certain and 

continuous option, and (3) a benefit that 

returns a participant’s accumulated 

mandatory employee contributions. 

PBGC considers such benefits to be 

vested (if the other conditions of 

entitlement have been met) 

notwithstanding that the participant is 

alive. The final rule includes two 

illustrative examples. 

There was a public comment that the 

vesting provision in the proposed rule 

did not address two types of benefits as 

to which guidance was needed: Preretirement lump sum death benefits and 

disability benefits. PBGC does not 

intend new § 4006.4(d) (the vesting 

provision) to be an exhaustive treatment 

of the subject; the provision is meant 

merely to provide clarification for the 

specific cases it mentions. In response 

to this comment, however, PBGC is 

expanding § 4006.4(d) to provide that a 

pre-retirement lump sum death benefit 

(other than one that returns mandatory 

employee contributions) is not 

considered vested for premium 

purposes where the participant is living 

and that a disability benefit is not 

considered vested for premium 

purposes where the participant is not 

disabled. 

Another commenter stated that many 

practitioners have not been treating as 

vested the benefits that PBGC would 

consider vested under the proposed rule 

and that PBGC’s vesting provision is at 

odds with the standards (currently 

under revision) of the American 

Academy of Actuaries. The commenter 

expressed a preference that PBGC not 

adopt the proposed vesting provision 

and urged that the provision be applied 

prospectively only. PBGC acknowledges 

that some actuaries may not be using the 

interpretation of vesting prescribed by 

this rule but believes that many are 

doing so; it is precisely to promote 

consistency in this regard that the 

vesting provision—applicable for 

premium purposes only—is included in 

the rule. 

For plans that have been computing 

UVBs without counting benefits that are 

considered vested under PBGC’s rule, 

adoption of the rule may increase UVBs. 

As stated in Applicability below, the 

rule is effective for plan years beginning 

after 2007. Although PBGC has made no 

determination as to the position it may 

take regarding the interpretive issue for 

prior periods, PBGC currently has no 

plans to focus on this issue in audits of 

premium filings for plan years 

beginning before 2008. 

Recordkeeping and Audits 

The rule clarifies and strengthens the 

provisions of the premium payment 

regulation dealing with recordkeeping 

and audits. Most of the changes simply 

reflect existing recordkeeping and audit 

practices. 

In describing the premium records to 

be kept, the current premium payment 

regulation mentions explicitly only 

those prepared by enrolled actuaries 

and insurance carriers. The rule 

broadens this to include plan sponsors 

and employers required to contribute to 

a plan for their employees and clarifies, 

with a list of examples of relevant 

records, that PBGC interprets the term 

‘‘records’’ broadly. Similarly, the rule 

refers explicitly to records supporting 

the amount of premiums that were 

required to be paid and the premiumrelated information that was required to 

be reported (rather than just what was 

actually paid or reported). Where a 

premium or premium-related 

information is determined through the 

use of a manual or automated system or 

process, the rule allows PBGC to require 

that the operation of the system or 

process be demonstrated so that its 

effectiveness, and the reliability of the 

results produced, can be assessed. In 

addition, in situations where plan 

records are deficient, the rule broadens 

the categories of data on which PBGC 

may rely to establish the amount of 

premiums due to include not just 

participant count data but UVB data. 

The rule also makes clear that the 45 

days permitted for producing records 

under § 4007.10(c) applies to records 

sent to PBGC, not to records audited onsite (which PBGC expects to be 

produced much more promptly). And 

the rule broadens the circumstances in 

which PBGC can require faster 

submission of records. The existing 

regulation limits such circumstances to 

those where collection of money may be 

jeopardized. This is changed to 

authorize shorter response times where 

the interests of PBGC may be prejudiced 

by delay—such as where PBGC has 

reason to suspect that records might be 

destroyed or manipulated. 

Miscellaneous Provisions 

Plans Subject to Special Funding Rules 

Sections 104, 105, and 106 of PPA 

2006 defer the effective date of the 

funding amendments for certain plans 

described in those sections, which in 

general deal with plans of cooperatives, 

plans affected by settlement agreements 

with PBGC, and plans of government 

contractors. Section 402 of PPA 2006 

(amended by section 6615 of the U.S. 

Troop Readiness, Veterans’ Care, 

Katrina Recovery, and Iraq 

Accountability Appropriations Act, 

2007, Pub. L. 110–28) applies special 

funding rules to certain plans of 

commercial passenger airlines and 

airline caterers. None of these 

provisions affects the applicability of 

the amendments to ERISA section 4006 

regarding the determination of the VRP. 

The rule provides explicitly that plans 

in this small group must determine 

UVBs in the same manner as all other 

plans. The language of this provision 

has been revised in the final rule to 

make this point clearer (in light, 

particularly, of the amendment to 


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15072 Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 

section 402 of PPA 2006, which was 

made after the proposed rule was 

cleared for publication in the Federal 

Register). 

New and Newly Covered Plans 

The rule eliminates confusing 

language in the existing regulations that 

raised questions about the 

determination of due dates, participant 

count dates, and premium proration for 

new and newly covered plans in certain 

circumstances. The new language makes 

clear that the first day of a new plan’s 

first plan year for premium purposes is 

the effective date of the plan. The final 

rule goes beyond the proposed rule in 

this regard by revising the definition of 

‘‘new plan’’ to eliminate wording that 

might suggest that a new plan could 

become effective after the beginning of 

its first premium payment year. These 

changes will obviate the need for plan 

administrators to choose between the 

effective date and the adoption date as 

the first day of the plan year for 

premium filing. 

In addition, the final rule eliminates 

one of the alternative due date 

computation rules for new and newly 

covered plans (in new § 4007.11(c)). The 

proposed rule included an alternative 

under which the due date would be not 

earlier than 90 days after the plan’s 

coverage date. This alternative is not 

necessary. The coverage date must fall 

within the premium payment year in 

order for premiums to be due at all, and 

the due date cannot be earlier than 

sixteen months after the beginning of 

that year. Thus, the due date will be at 

least four months (i.e. more than 90 

days) after the date on which the plan 

became covered. Accordingly, an 

alternative due date that is 90 days after 

the coverage date would never come 

into play and can be eliminated from 

the regulation. 

Electronic Filing Requirement 

Effective July 1, 2006, PBGC amended 

its regulations to require that annual 

premium filings be made electronically 

(71 FR 31077, June 1, 2006). 

(Exemptions from the e-filing 

requirement may be granted for good 

cause in appropriate circumstances.) For 

PBGC’s premium processing systems to 

work effectively and efficiently, 

information must be received in an 

electronic format compatible with those 

systems; the burden of reformatting 

information received on paper or in 

other incompatible formats is 

significant, and the reformatting process 

gives rise to data errors. The premium 

payment regulation as amended by this 

rule therefore provides explicitly that, 

in the absence of an exemption, 

premium filing on paper or in any other 

manner other than the prescribed 

electronic filing method does not satisfy 

the requirement to file. Thus, a penalty 

under ERISA section 4071 may be 

assessed for the period from the due 

date of the premium filing until it is 

made electronically, even if a timely 

paper filing is made. 

Billing ‘‘Grace Period’’ for Interest 

The rule consolidates paragraphs (b) 

and (c) of § 4007.7, both of which deal 

with the ‘‘grace period’’ for interest on 

premium underpayments where a bill is 

paid within 30 days. No substantive 

change is intended. 

VRP Rate 

ERISA section 4006(a)(3)(E)(ii) sets 

the variable-rate premium at $9 for each 

$1,000 (or fraction thereof) of UVBs. 

Section 4006.3(b) of the existing 

premium rates regulation omits the 

phrase ‘‘(or fraction thereof).’’ The 

requirement is made clear in PBGC’s 

premium instructions; the rule adds this 

phrase to the regulatory text. 

Pre-1996 Penalty Accrual Rules 

The rule eliminates the pre-1996 

penalty accrual rules as anachronistic. 

Definitional Cross-Reference 

The definition of ‘‘participant’’ in 

§ 4006.6 uses the term ‘‘benefit 

liabilities,’’ which is defined in § 4001.2 

of PBGC’s regulation on Terminology. 

Existing § 4006.2 (dealing with defined 

terms used in the premium rates 

regulation) does not include a crossreference to the definition of ‘‘benefit 

liabilities’’ in § 4001.2. This final rule 

corrects that omission (which was not 

corrected in the proposed rule). 

Other Changes 

The rule includes a number of 

clarifying and editorial changes. 

Applicability 

The regulatory changes made by this 

rule, like the statutory changes to the 

VRP, apply to plan years beginning after 

2007. 

Compliance With Rulemaking 

Guidelines 

E.O. 12866 

PBGC has determined, in consultation 

with the Office of Management and 

Budget, that this rule is a ‘‘significant 

regulatory action’’ under Executive 

Order 12866. The Office of Management 

and Budget has therefore reviewed the 

rule under E.O. 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: 

• There is ambiguity in ERISA section 

4006(a)(3)(E) regarding the date as of 

which UVBs are to be measured. This 

problem is significant because, unless 

the statutory ambiguity is resolved, it 

will be unclear what date UVBs are to 

be measured as of. 

• The statute lacks clarity and 

specificity in describing how UVBs are 

calculated. This problem is significant 

because, unless clarity and specificity 

are provided, it will be unclear how to 

compute UVBs. 

• The statute does not expressly 

provide for an alternative premium 

funding target as described above. This 

problem is significant because the 

standard premium funding target 

provided for in the statute is more 

burdensome to use than the alternative 

premium funding target described above 

without generating significantly 

different premium revenue than the less 

burdensome alternative premium 

funding target. 

• PBGC’s existing premium due date 

and penalty rules do not accord well 

with the new rules for the date as of 

which and manner in which UVBs are 

to be determined. This problem is 

significant because, without changes in 

the due date and penalty rules, some 

plans may experience difficulties in 

paying premiums timely and without 

late payment penalties. 

• Some existing PBGC VRP relief 

rules are anachronistic and some new 

relief provisions are warranted by 

statutory changes. This problem is 

significant because the outmoded relief 

rules detract from accuracy in 

determining the VRP and deprive PBGC 

of VRP data without significantly 

reducing burden, while statutory 

changes have made it possible to grant 

new relief without significant adverse 

consequences for the PBGC insurance 

program. 

• There is uncertainty as to the 

meaning of the term ‘‘vested’’ that is 

used in the statute to describe benefits 

taken into account in determining the 

VRP. This problem is significant 

because, without improved clarity in the 

meaning of ‘‘vested’’ as applied to VRP 

determinations, those determinations 

may be inconsistent. 

• PBGC’s current recordkeeping and 

audit rules do not match current 

recordkeeping and audit practices in 

scope and specificity, and provide 

relatively narrow circumstances in 

which PBGC may require expedited 

submission of records. This problem is 

significant because inadequate 

recordkeeping and audit rules could 

compromise PBGC’s ability to enforce 


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Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 15073 

the premium rules in the statute and 

PBGC’s regulations thereunder. 

• PBGC’s existing premium payment 

regulation does not provide explicitly 

that, in the absence of an exemption, 

premium filing on paper or in any other 

manner other than the prescribed 

electronic filing method does not satisfy 

the requirement to file. This problem is 

significant because, in the absence of an 

explicit statement, filers might believe 

they had a basis for taking the position 

that penalties for late filing would not 

apply if they timely filed on paper or in 

some other non-approved manner. 

Regulatory Flexibility Act 

PBGC certifies under section 605(b) of 

the Regulatory Flexibility Act (5 U.S.C. 

601 et seq.) that the amendments in this 

final rule will not have a significant 

economic impact on a substantial 

number of small entities. 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. 

Most of the amendments implement 

statutory changes made by Congress. 

They provide procedures for 

calculating, substantiating, and paying 

the premiums prescribed by statute and 

impose no significant burden beyond 

the burden imposed by statute. To the 

extent that this rule makes changes that 

are outside the explicit scope of the 

statute, they affect primarily the 

requirement to perform and manner of 

performing VRP calculations. When the 

VRP provisions were added to PBGC’s 

regulations nearly 20 years ago, these 

calculations were mostly done using 

actuarial tables and hand calculators. 

Today they are almost universally done 

using high-memory, high-speed 

computers. The VRP calculations 

parallel funding calculations that must 

be done independently of PBGC 

premium requirements. Thus, the VRP 

calculations can be done for the most 

part by plugging in different parameters 

(such as interest rates) to computer 

programs that are used for funding 

purposes. The incremental cost of such 

calculations for entities of any size is 

insignificant. Not including a 

computation option like the existing 

alternative computation method (ACM) 

in the new rules does not significantly 

affect compliance costs because such an 

option would itself be complex and thus 

burdensome to use and because a 

simplified computation method is no 

longer needed in the current 

environment of computerized actuarial 

computations. 

Changes that would tend to increase 

compliance costs (e.g., elimination of 

the VRP exemption for well-funded 

small plans) are offset by changes 

tending to reduce compliance costs (e.g., 

the introduction of the reporting 

exemption for plans of small employers 

paying the maximum capped VRP). 

The shift from prior-year to currentyear data and the deferral of the due 

date for small plans (those with fewer 

than 100 participants) should not affect 

the cost of compliance. Under existing 

rules, UVBs are determined as of the 

end of the prior year (or in some cases 

the beginning of the current year) and 

the VRP is due 91⁄2 months later. Under 

the new rules, UVBs will be determined 

as of the UVB valuation date, which for 

most small plans may be any day in the 

current year. For plans that choose a 

valuation date at the beginning of the 

year, the VRP is now due 16 months 

later. For those that choose a valuation 

date at the end of the year, the VRP is 

now due 4 months later. For a plan that 

chooses a mid-year valuation date, the 

VRP is due 10 months later, providing 

about the same time for data-gathering 

and computations as under the existing 

rules. But even a 4-month period 

between the valuation date and the due 

date should be adequate for the datagathering and UVB computations of 

small plans, and the change in timing 

should not affect the cost of compliance. 

PBGC believes that the changes to the 

recordkeeping requirements in general 

simply codify existing practices. The 

changes to the audit rules will not affect 

a significant number of plans of any 

size. 

Paperwork Reduction Act 

The information collection 

requirements under this rule have been 

approved by the Office of Management 

and Budget under the Paperwork 

Reduction Act (OMB control number 

1212–0009; expires 02/28/2011). 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 premium-related 

information to identify the plan for 

which premiums are paid to PBGC, to 

verify the determination of the 

premium, and to help the PBGC 

determine the magnitude of its exposure 

in the event of plan termination. 

The information collection 

requirements under the premium rates 

and premium payment regulations that 

OMB approved included the following 

changes from those previously 

approved: 

• Filers will be required to include in 

the addresses of the plan sponsor and 

plan administrator the countries where 

the addresses are located (if other than 

the United States). 

• Filers will no longer be required to 

report coverage status. 

• Filers will be required to provide 

the plan contact’s e-mail address (if 

any). 

• Filers will no longer be required to 

provide information on participant 

notices under ERISA section 4011 (that 

requirement having been eliminated by 

PPA 2006). 

• Filers will be required to report if 

they qualify for premium proration (for 

a short plan year) and if so, to report the 

number of months in the proration 

period. Proration will be reported 

separately from credits. (This change 

will not apply to 2008 estimated flatrate premium filings.) 

• Filers will be required to report 

plan size (small, mid-size, or large) 

based on the prior year’s participant 

count (or report that the plan is filing for 

the first time). 

• Filers will have an opportunity to 

make alternative premium funding 

target elections as part of the premium 

filing. 

• Filers will be required to report the 

participant count date. 

• Most existing VRP information 

items will be eliminated in connection 

with the implementation of the new 

VRP rules. Items retained will be the 

identification of any applicable VRP 

exemption and the amount of UVBs. 

• New VRP data required will be 

qualification for the VRP cap for certain 

plans of small employers, the UVB 

valuation date, the premium funding 

target as of the UVB valuation date, the 

premium funding target method 

(standard or alternative), whether the 

reported premium funding target is an 

estimate, the segment rates used to 

compute the premium funding target (or 

indication that the full yield curve was 

used), the market value of assets as of 

the UVB valuation date, the 

(unprorated) VRP cap (for plans eligible 

for the cap), and the (unprorated) 

uncapped VRP (for plans not eligible for 

the cap). 

• For a final filing, filers will be 

required to report the date and type of 

event that results in the cessation of the 

filing obligation. 

• The existing item on transfers from 

disappearing plans will be replaced by 

two new items: information about 

transfers from other plans (whether 

disappearing or not) and information 

about transfers to other plans. (This 

change will not apply to 2008 estimated 

flat-rate premium filings.) 

• For frozen plans, filers will be 

required to identify the type of freeze 

and its effective date. 


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15074 Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 

• For amended filings, filers will be 

required to report any change in the 

beginning and ending dates of the plan 

year being reported and any change in 

the plan identifying numbers being 

reported from those in the original 

filing. 

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, 29 CFR 

parts 4006 and 4007 are amended 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 § 4006.2: 

■ a. The introductory text is amended 

by removing the words ‘‘chapter: Code’’

and adding in their place the words 

‘‘chapter: benefit liabilities, Code’’; and 

by removing the words ‘‘irrevocable 

commitment, multiemployer plan’’ and 

adding in their place the words 

‘‘irrevocable commitment, mandatory 

employee contributions, multiemployer 

plan’’. 

■ b. The definition of ‘‘new plan’’ is 

amended by removing the words 

‘‘became effective within’’ and adding 

in their place the words ‘‘did not exist 

before’’. 

■ c. The definition of ‘‘short plan year’’

is revised, and four new definitions are 

added, to read as follows: 

§ 4006.2 Definitions. 

* * * * * 

Participant count of a plan for a plan 

year means the number of participants 

in the plan on the participant count date 

of the plan for the plan year. 

Participant count date of a plan for a 

plan year means the date provided for 

in § 4006.5(c), (d), or (e) as applicable. 

Premium funding target has the 

meaning described in § 4006.4(b)(1). 

* * * * * 

Short plan year means a plan year of 

coverage that is shorter than a normal 

plan year. 

UVB valuation date of a plan for a 

plan year means the plan’s funding 

valuation date for the plan year 

determined in accordance with ERISA 

section 303(g)(2). 

■ 3. In § 4006.3: 

■ a. Paragraph (a) is amended by 

removing the words ‘‘last day of the 

plan year preceding the premium 

payment year,’’ and adding in their 

place the words ‘‘participant count 

date’’. 

■ b. Paragraph (b)(1) is amended by 

removing the words ‘‘$1,000 of a singleemployer plan’s unfunded vested 

benefits’’ and adding in their place the 

words ‘‘$1,000 (or fraction thereof) of a 

single-employer plan’s unfunded vested 

benefits for the premium payment 

year’’. 

■ 4. Section 4006.4 is revised to read as 

follows: 

§ 4006.4 Determination of unfunded vested 

benefits. 

(a) In general. Except as provided in 

the exemptions and special rules under 

§ 4006.5, the amount of a plan’s 

unfunded vested benefits for the 

premium payment year is the excess (if 

any) of the plan’s premium funding 

target for the premium payment year 

(determined under paragraph (b) of this 

section) over the fair market value of the 

plan’s assets for the premium payment 

year (determined under paragraph (c) of 

this section). Unfunded vested benefits 

for the premium payment year must be 

determined as of the plan’s UVB 

valuation date for the premium payment 

year, based on the plan provisions and 

the plan’s population as of that date. 

The determination must be made in a 

manner consistent with generally 

accepted actuarial principles and 

practices. 

(b) Premium funding target— (1) In 

general. A plan’s premium funding 

target is its standard premium funding 

target under paragraph (b)(2) of this 

section or, if an election to use the 

alternative premium funding target 

under § 4006.5(g) is in effect, its 

alternative premium funding target 

under § 4006.5(g). 

(2) Standard premium funding target. 

A plan’s standard premium funding 

target under this section is the plan’s 

funding target as determined under 

ERISA section 303(d) (or 303(i), if 

applicable) for the premium payment 

year using the same assumptions that 

are used for funding purposes, except 

that—

(i) Only vested benefits are taken into 

account, and 

(ii) The interest rates to be used are 

the segment rates for the month 

preceding the month in which the 

premium payment year begins that are 

determined in accordance with ERISA 

section 4006(a)(3)(E)(iv). These are the 

rates that would be determined under 

ERISA section 303(h)(2)(C) if ERISA 

section 303(h)(2)(D) were applied by 

using the monthly yields for the month 

preceding the month in which the 

premium payment year begins on 

investment grade corporate bonds with 

varying maturities and in the top 3 

quality levels rather than the average of 

such yields for a 24-month period. For 

this purpose, the transition rule in 

ERISA section 303(h)(2)(G) is 

inapplicable. 

(c) Value of assets. The fair market 

value of a plan’s assets under this 

section is determined in the same 

manner as for funding purposes under 

ERISA section 303(g)(3) and (4), except 

that averaging as described in ERISA 

section 303(g)(3)(B) must not be used 

and prior year contributions are 

included only to the extent received by 

the plan by the date the premium is 

filed. Contribution receipts must be 

accounted for as described in ERISA 

section 303(g)(4), using effective interest 

rates determined under ERISA section 

303(h)(2)(A) (not rates that could be 

determined based on the segment rates 

described in paragraph (b)(2) of this 

section). 

(d) ‘‘Vested.’’ For purposes of ERISA 

section 4006(a)(3)(E), this part, and part 

4007 of this chapter: 

(1) A participant’s benefit that is 

otherwise vested does not fail to be 

vested merely because of the 

circumstance that the participant is 

living, in the case of the following death 

benefits: 

(i) A qualified pre-retirement survivor 

annuity (as described in ERISA section 

205(e)), (ii) A post-retirement survivor 

annuity that pays some or all of the 

participant’s benefit amount for a fixed 

or contingent period (such as a joint and 

survivor annuity or a certain and 

continuous annuity), and 

(iii) A benefit that returns the 

participant’s accumulated mandatory 

employee contributions (as described in 

ERISA section 204(c)(2)(C)). 

(2) A benefit otherwise vested does 

not fail to be vested merely because of 

the circumstance that the benefit may be 

eliminated or reduced by the adoption 

of a plan amendment or by the 

occurrence of a condition or event (such 

as a change in marital status). 

(3) A participant’s pre-retirement 

lump-sum death benefit (other than a 

benefit described in paragraph (d)(1)(iii) 

of this section) is not vested if the 

participant is living. 

(4) A participant’s disability benefit is 

not vested if the participant is not 

disabled. 

(e) Illustration of vesting principles. 

The vesting principles set forth in 

paragraph (d) of this section are 

illustrated by the following examples: 

(1) Example 1. Under Plan A, if a 

participant retires at or after age 55 but before 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 15075 

age 62, the participant receives a temporary 

supplement from retirement until age 62. The 

supplement is not a QSUPP (qualified social 

security supplement), as defined in Treasury 

Reg. § 1.401(a)(4)–12, and is not protected 

under Code section 411(d)(6). The temporary 

supplement is considered vested, and its 

value is included in the premium funding 

target, for each participant who, on the UVB 

valuation date, is at least 55 but less than 62, 

and thus eligible for the supplement. The 

calculation is unaffected by the fact that the 

plan could be amended to remove the 

supplement after the UVB valuation date. 

(2) Example 2. Plan B provides a qualified 

pre-retirement survivor annuity (QPSA) upon 

the death of a participant who has five years 

of service, at no charge to the participant. 

The QPSA is considered vested, and its value 

is included in the premium funding target, 

for each participant who, on the UVB 

valuation date, has five years of service and 

is thus eligible for the QPSA. The calculation 

is unaffected by the fact that the participant 

is alive on that date. 

(f) Plans to which special funding 

rules apply. Unfunded vested benefits 

must be determined (whether the 

standard premium funding target or the 

alternative premium funding target is 

used) without regard to the following 

provisions of the Pension Protection Act 

of 2006 (Pub. L. 109–280): 

(1) Section 104, dealing generally 

with plans of cooperatives. 

(2) Section 105, dealing generally 

with plans affected by settlement 

agreements with PBGC. 

(3) Section 106, dealing generally 

with plans of government contractors. 

(4) Section 402, dealing generally 

with plans of commercial passenger 

airlines and airline caterers. 

■ 5. In § 4006.5: 

■ a. Paragraph (a) introductory text is 

amended by removing the words 

‘‘paragraphs (a)(1)–(a)(5)’’ and adding in 

their place the words ‘‘paragraphs 

(a)(1)–(a)(3)’’; and by removing the 

words ‘‘determine its unfunded vested 

benefits’’ and adding in their place the 

words ‘‘determine or report its 

unfunded vested benefits’’. 

■ b. Paragraphs (a)(1) and (a)(5) are 

removed. 

■ c. Paragraphs (a)(2), (a)(3), and (a)(4) 

are redesignated as paragraphs (a)(1), 

(a)(2), and (a)(3) respectively. 

■ d. Redesignated paragraph (a)(1) is 

amended by removing the words 

‘‘benefit liabilities’’ from the heading 

and adding in their place the word 

‘‘participants’’; by removing the word 

‘‘did’’ and adding in its place the word 

‘‘does’’; and by removing the words 

‘‘last day of the plan year preceding the 

premium payment year’’ and adding in 

their place the words ‘‘UVB valuation 

date’’. 

■ e. Redesignated paragraph (a)(2) is 

amended by removing the figures 

‘‘412(i)’’ where they appear once in the 

heading and once in the body of the 

paragraph and adding in their place the 

figures ‘‘412(e)(3)’’; by removing the 

word ‘‘was’’ and adding in its place the 

word ‘‘is’’; and by removing the words 

‘‘last day of the plan year preceding the 

premium payment year’’ and adding in 

their place the words ‘‘UVB valuation 

date’’. 

■ f. Redesignated paragraph (a)(3)(ii) is 

amended by removing the words ‘‘last 

day of the plan year preceding the 

premium payment year’’ and adding in 

their place the words ‘‘UVB valuation 

date’’. 

■ g. The heading of paragraph (e) is 

amended by removing the words 

‘‘Special determination date rule for’’

and adding in their place the words 

‘‘Participant count date;’’. 

■ h. Paragraph (e)(2) introductory text is 

amended by removing the words 

‘‘paragraph (e)(2) if’’ and adding in their 

place the words ‘‘paragraph (e)(2) for a 

plan year if’’. 

■ i. Paragraph (e)(2)(ii) is amended by 

removing the words ‘‘on the first day of 

the plan’s premium payment year’’ and 

adding in their place the words ‘‘at the 

beginning of the plan year’’. 

■ j. Paragraph (f) introductory text is 

amended by removing the words ‘‘year 

as described’’ and adding in their place 

the words ‘‘year described’’. 

■ k. Paragraphs (b), (c), (d), (e)(1), and 

(f)(1) are revised, and paragraph (g) is 

added, to read as follows: 

§ 4006.5 Exemptions and special rules. 

* * * * * 

(b) Reporting exemption for plans 

paying capped variable-rate premium. A 

plan that qualifies for the variable-rate 

premium cap described in ERISA 

section 4006(a)(3)(H) is not required to 

determine or report its unfunded vested 

benefits under § 4006.4 if it reports that 

it qualifies for the cap and pays a 

variable-rate premium equal to the 

amount of the cap. 

(c) Participant count date; in general. 

Except as provided in paragraphs (d) 

and (e) of this section, the participant 

count date of a plan for a plan year is 

the last day of the prior plan year. 

(d) Participant count date; new and 

newly-covered plans. The participant 

count date of a new plan or a newlycovered plan for a plan year is the first 

day of the plan year. For this purpose, 

a new plan’s first plan year begins on 

the plan’s effective date. 

(e) Participant count date; certain 

mergers and spinoffs. 

(1) The participant count date of a 

plan described in paragraph (e)(2) of 

this section for a plan year is the first 

day of the plan year. 

* * * * * 

(f) Proration for certain short plan 

years. * * * 

(1) New or newly covered plan. A new 

plan becomes effective less than one full 

year before the beginning of its second 

plan year, or a newly-covered plan 

becomes covered on a date other than 

the first day of its plan year. (Cessation 

of coverage before the end of a plan year 

does not give rise to proration under 

this section.) 

* * * * * 

(g) Alternative premium funding 

target. A plan’s alternative premium 

funding target is the vested portion of 

the plan’s funding target under ERISA 

section 303(d)(1) that is used to 

determine the plan’s minimum 

contribution under ERISA section 303 

for the premium payment year, that is, 

the amount that would be determined 

under ERISA section 303(d)(1) if only 

vested benefits were taken into account. 

A plan may elect to compute unfunded 

vested benefits using the alternative 

premium funding target instead of the 

standard premium funding target 

described in § 4006.4(b)(2), and may 

revoke such an election, in accordance 

with the provisions of this paragraph 

(g). A plan must compute its unfunded 

vested benefits using the alternative 

premium funding target instead of the 

standard premium funding target 

described in § 4006.4(b)(2) if an election 

under this paragraph (g) to use the 

alternative premium funding target is in 

effect for the premium payment year. 

(1) An election under this paragraph 

(g) to use the alternative premium 

funding target for a plan must specify 

the first plan year to which it applies 

and must be filed by the plan’s variablerate premium due date for that plan 

year. The first plan year to which the 

election applies must begin at least five 

years after the first plan year to which 

a revocation of a prior election applied. 

The election will be effective—

(i) For the plan year for which made 

and for all plan years that begin less 

than five years thereafter, and 

(ii) For all succeeding plan years until 

the first plan year to which a revocation 

of the election applies. 

(2) A revocation of an election under 

this paragraph (g) to use the alternative 

premium funding target for a plan must 

specify the first plan year to which it 

applies and must be filed by the plan’s 

variable-rate premium due date for that 

plan year. The first plan year to which 

the revocation applies must begin at 

least five years after the first plan year 

to which the election applied. 


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15076 Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 

■ 6. In paragraph (c) of § 4006.6: 

■ a. Example 1 is amended by removing 

the words ‘‘July 1, 2000’’ and adding in 

their place the words ‘‘July 1, 2008’’; by 

removing the words ‘‘December 31, 

2000’’ where they appear twice and 

adding in their place the words 

‘‘December 31, 2008’’; by removing the 

words ‘‘snapshot date’’ and adding in 

their place the words ‘‘participant count 

date’’; and by removing the words ‘‘2001 

premium’’ where they appear twice and 

adding in their place the words ‘‘2009 

premium’’. 

■ b. Example 2 is amended by removing 

the words ‘‘February 1, 2002’’ where 

they appear twice and adding in their 

place the words ‘‘February 1, 2010’’; by 

removing the words ‘‘July 1, 2000’’ and 

adding in their place the words ‘‘July 1, 

2008’’; by removing the words ‘‘July 1, 

2001’’ and adding in their place the 

words ‘‘July 1, 2009’’; by removing the 

words ‘‘December 31, 2002’’ and adding 

in their place the words ‘‘December 31, 

2010’’; by removing the words 

‘‘snapshot date’’ and adding in their 

place the words ‘‘participant count 

date’’; and by removing the words ‘‘2003 

premium’’ where they appear twice and 

adding in their place the words ‘‘2011 

premium’’. 

■ c. Example 3 is amended by removing 

the words ‘‘January 1, 2004’’ and adding 

in their place the words ‘‘January 1, 

2012’’; by removing the words 

‘‘December 30, 2005’’ where they appear 

twice and adding in their place the 

words ‘‘December 30, 2013’’; by 

removing the words ‘‘January 9, 2006’’

and adding in their place the words 

‘‘January 9, 2014’’; by removing the 

words ‘‘December 31, 2005’’ and adding 

in their place the words ‘‘December 31, 

2013’’; by removing the words 

‘‘snapshot date’’ and adding in their 

place the words ‘‘participant count 

date’’; and by removing the words ‘‘2006 

premium’’ where they appear twice and 

adding in their place the words ‘‘2014 

premium’’. 

■ d. Example 4 is amended by removing 

the words ‘‘January 1, 2006’’ and adding 

in their place the words ‘‘January 1, 

2014’’; by removing the words 

‘‘December 31, 2005’’ and adding in 

their place the words ‘‘December 31, 

2013’’; and by removing the words 

‘‘2006 premium’’ and adding in their 

place the words ‘‘2014 premium’’. 

PART 4007—PAYMENT OF PREMIUMS 

■ 7. The authority citation for part 4007 

continues to read as follows: 

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

1306, 1307. 

■ 8. In § 4007.2: 

■ a. Paragraph (a) is amended by 

removing the word ‘‘insurer,’’; and by 

removing the words ‘‘multiemployer 

plan,’’. 

■ b. Paragraph (b) is amended by 

removing the words ‘‘participant, 

premium payment year’’ and adding in 

their place the words ‘‘participant, 

participant count, premium funding 

target, premium payment year’’. 

■ 9. In § 4007.3: 

■ a. The first three sentences (ending 

with the words ‘‘prescribed in the 

instructions.’’) of the text of § 4007.3 are 

designated as paragraph (a), and the 

remainder of the text (beginning with 

the words ‘‘Information must be filed 

electronically’’) is designated as 

paragraph (b). 

■ b. Newly designated paragraph (a) is 

amended by adding the heading ‘‘In 

general.’’; and by removing the words 

‘‘estimation, declaration, reconciliation, 

and payment’’ and adding in their place 

the words ‘‘estimation, determination, 

declaration, and payment’’. 

■ c. Newly designated paragraph (b) is 

amended by adding the heading 

‘‘Electronic filing.’’; by removing the 

words ‘‘requirement to file 

electronically does not apply’’ and 

adding in their place the words 

‘‘requirement to file electronically 

applies to all estimated and final flatrate and variable-rate premium filings 

(including amended filings) but does 

not apply’’; and by adding two new 

sentences to the end of the paragraph to 

read as follows: 

§ 4007.3 Filing requirement; method of 

filing. 

* * * * * 

(b) Electronic filing. * * * Unless an 

exemption applies, filing on paper or in 

any other manner other than by a 

prescribed electronic filing method does 

not satisfy the requirement to file. 

Failure to file electronically as required 

is subject to penalty under ERISA 

section 4071. 

■ 10. In § 4007.7, paragraph (c) is 

removed, and paragraph (b) is revised to 

read as follows: 

§ 4007.7 Late payment interest charges. 

* * * * * 

(b) With respect to any PBGC bill for 

a premium underpayment and/or 

interest thereon, interest will accrue 

only until the date of the bill if the 

premium underpayment and interest 

billed are paid within 30 days after the 

date of the bill. 

■ 11. In § 4007.8: 

■ a. Paragraph (a) introductory text is 

amended by adding at the end of the 

paragraph the words ‘‘The penalty rate 

is—’’. 

■ b. Paragraph (a)(1) introductory text 

and paragraph (a)(2) are removed, and 

paragraphs (a)(1)(i) and (a)(1)(ii) are 

redesignated as paragraphs (a)(1) and 

(a)(2) respectively. 

■ c. Paragraph (f) is amended by 

removing the figures 

‘‘§ 4007.11(a)(2)(iii)’’ and adding in their 

place the figures ‘‘§ 4007.11(a)(3)(iii)’’; 

by removing the words ‘‘filing is due if 

fewer’’ and adding in their place the 

words ‘‘filing is due if either—Fewer’’; 

by removing the period at the end of 

paragraph (f) and adding in its place ‘‘, 

or’’; and by designating as paragraph 

(f)(1) the portion of the text of paragraph 

(f) that begins with the words ‘‘Fewer 

than 500’’. 

■ d. Paragraph (i) is amended by 

removing the figures 

‘‘§ 4007.11(a)(2)(iii)’’ and adding in their 

place the figures ‘‘§ 4007.11(a)(3)(iii)’’. 

■ e. New paragraphs (f)(2) and (j) are 

added to read as follows: 

§ 4007.8 Late payment penalty charges. 

* * * * * 

(f) Safe-harbor relief for certain large 

plans. * * * 

* * * * * 

(2) The due date for paying the flatrate premium for the plan year 

preceding the premium payment year is 

later than the due date for paying the 

flat-rate premium for the premium 

payment year. 

* * * * * 

(j) Variable-rate premium penalty 

relief. This waiver applies in the case of 

a plan for which a reconciliation filing 

is required under § 4007.11(a)(2)(ii) or 

(a)(3)(iv). PBGC will waive the penalty 

on any underpayment of the variablerate premium for the period that ends 

on the earlier of the date the 

reconciliation filing is due or the date 

the reconciliation filing is made if, by 

the date the variable-rate premium for 

the premium payment year is due under 

§ 4007.11(a)(2)(i) or (a)(3)(ii)—

(1) The plan administrator reports—

(i) The fair market value of the plan’s 

assets for the premium payment year, 

and 

(ii) An estimate of the plan’s premium 

funding target for the premium payment 

year that is certified by an enrolled 

actuary to be a reasonable estimate that 

takes into account the most current data 

available to the enrolled actuary and 

that has been determined in accordance 

with generally accepted actuarial 

principles and practices; and 

(2) The plan administrator pays at 

least the amount of variable-rate 

premium determined from the value of 

assets and estimated premium funding 

target so reported. 


jlentini on PROD1PC65 with RULES
Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 15077 

■ 12. In § 4007.10: 

■ a. Paragraph (c)(3) is amended by 

removing the words ‘‘that collection of 

unpaid premiums (or any associated 

interest or penalties) would otherwise 

be jeopardized’’ and adding in their 

place the words ‘‘that the interests of 

PBGC may be prejudiced by a delay in 

the receipt of the information (e.g., 

where collection of unpaid premiums 

(or any associated interest or penalties) 

would otherwise be jeopardized)’’. 

■ b. Paragraphs (a)(1), (b), and (c)(1) are 

revised, and paragraph (a)(4) is added, 

to read as follows: 

§ 4007.10 Recordkeeping; audits; 

disclosure of information. 

(a) Retention of records to support 

premium payments—(1) In general. The 

designated recordkeeper under 

paragraph (a)(3) of this section must 

retain, for a period of six years after the 

premium due date, all plan records that 

are necessary to establish, support, and 

validate the amount of any premium 

required to be paid and any information 

required to be reported (‘‘premiumrelated information’’) under this part 

and part 4006 of this chapter and under 

PBGC’s premium filing instructions. 

Records that must be retained pursuant 

to this paragraph include, but are not 

limited to, records that establish the 

number of plan participants and that 

support and demonstrate the calculation 

of unfunded vested benefits. 

* * * * * 

(4) Records. (i) Records that must be 

retained pursuant to paragraph (a)(1) of 

this section include, but are not limited 

to, records prepared by the plan 

administrator, a plan sponsor, an 

employer required to contribute to the 

plan with respect to its employees, an 

enrolled actuary performing services for 

the plan, or an insurance carrier issuing 

any contract to pay benefits under the 

plan. 

(ii) For purposes of this section, 

‘‘records’’ include, but are not limited 

to, plan documents; participant data 

records; personnel and payroll records; 

actuarial tables, worksheets, and 

reports; records of computations, 

projections, and estimates; benefit 

statements, disclosures, and 

applications; financial and tax records; 

insurance contracts; records of plan 

procedures and practices; and any other 

records, whether in written, electronic, 

or other format, that are relevant to the 

determination of the amount of any 

premium required to be paid or any 

premium-related information required 

to be reported. 

(iii) When a record to be produced for 

PBGC inspection and copying exists in 

more than one format, it must be 

produced in the format specified by 

PBGC. 

(b) PBGC audit—(1) In general. In 

order to determine the correctness of 

any premium paid or premium-related 

information reported or to determine the 

amount of any premium required to be 

paid or any premium-related 

information required to be reported, 

PBGC may—

(i) Audit any premium filing, 

(ii) Inspect and copy any records that 

are relevant to the determination of the 

amount of any premium required to be 

paid and any premium-related 

information required to be reported, 

including (without limitation) the 

records described in paragraph (a) of 

this section, and 

(iii) Require disclosure of any manual 

or automated system or process used to 

determine any premium paid or 

premium-related information reported, 

and demonstration of its operation in 

order to permit PBGC to determine the 

effectiveness of the system or process 

and the reliability of information 

produced by the system or process. 

(2) Deficiencies found on audit. If, 

upon audit, PBGC determines that a 

premium due under this part was 

underpaid, late payment interest and 

penalty charges will apply as provided 

for in this part. If, upon audit, PBGC 

determines that required information 

was not timely and accurately reported, 

a penalty may be assessed under ERISA 

section 4071. 

(3) Insufficient records. In 

determining the premium due, if, in the 

judgment of PBGC, a plan’s records fail 

to establish the participant count or (for 

a single-employer plan) the plan’s 

unfunded vested benefits for any 

premium payment year, PBGC may rely 

on data it obtains from other sources 

(including the IRS and the Department 

of Labor) for presumptively establishing 

the participant count and/or unfunded 

vested benefits for premium 

computation purposes. 

(c) Providing record information—(1) 

In general. A designated recordkeeper 

must make the records retained 

pursuant to paragraph (a) of this section 

available to PBGC promptly upon 

request for inspection and photocopying 

(or, for electronic records, inspection, 

electronic copying, and printout) at the 

location where they are kept (or another, 

mutually agreeable, location). If PBGC 

requests in writing that records retained 

pursuant to paragraph (a) of this section, 

or information in such records, be 

submitted to PBGC, the designated 

recordkeeper must submit the requested 

materials to PBGC either electronically 

or by hand, mail, or commercial 

delivery service within 45 days of the 

date of PBGC’s request therefor, or by a 

different time specified in the request. 

* * * * * 

■ 13. In § 4007.11, paragraphs (a), (b), 

and (c) are revised to read as follows: 

§ 4007.11 Due dates. 

(a) In general. For flat-rate and 

variable-rate premiums, the premium 

filing due date for small plans is 

prescribed in paragraph (a)(1) of this 

section, the premium filing due date for 

mid-size plans is prescribed in 

paragraph (a)(2) of this section, and the 

premium filing due dates for large plans 

are prescribed in paragraph (a)(3) of this 

section. 

(1) Small plans. If the plan had fewer 

than 100 participants for whom flat-rate 

premiums were payable for the plan 

year preceding the premium payment 

year, the due date is the last day of the 

sixteenth full calendar month following 

the end of the plan year preceding the 

premium payment year. 

(2) Mid-size plans. If the plan had 100 

or more but fewer than 500 participants 

for whom flat-rate premiums were 

payable for the plan year preceding the 

premium payment year: 

(i) The due date is the fifteenth day of 

the tenth full calendar month following 

the end of the plan year preceding the 

premium payment year. 

(ii) If the premium funding target is 

not known by the date specified in 

paragraph (a)(2)(i) of this section, a 

reconciliation filing and any required 

variable-rate premium payment must be 

made by the last day of the sixteenth 

full calendar month following the end of 

the plan year preceding the premium 

payment year. 

(3) Large plans. If the plan had 500 or 

more participants for whom flat-rate 

premiums were payable for the plan 

year preceding the premium payment 

year: 

(i) The due date for the flat-rate 

premium required by § 4006.3(a) of this 

chapter is the last day of the second full 

calendar month following the close of 

the plan year preceding the premium 

payment year. 

(ii) The due date for the variable-rate 

premium required by § 4006.3(b) of this 

chapter for single-employer plans is the 

fifteenth day of the tenth full calendar 

month following the end of the plan 

year preceding the premium payment 

year. 

(iii) If the participant count is not 

known by the date specified in 

paragraph (a)(3)(i) of this section, a 

reconciliation filing and any required 

flat-rate premium payment must be 

made by the date specified in paragraph 

(a)(3)(ii) of this section. 


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15078 Federal Register / Vol. 73, No. 56 / Friday, March 21, 2008 / Rules and Regulations 

(iv) If the premium funding target is 

not known by the date specified in 

paragraph (a)(3)(ii) of this section, a 

reconciliation filing and any required 

variable-rate premium payment must be 

made by the last day of the sixteenth 

full calendar month following the end of 

the plan year preceding the premium 

payment year. 

(b) Due dates for plans that change 

plan years. For any plan that changes its 

plan year, the due date or due dates for 

the flat-rate premium and any variablerate premium for the short plan year are 

as specified in paragraph (a)(1), (a)(2), 

(a)(3), or (c) of this section (whichever 

applies). For the plan year that follows 

a short plan year, each due date is the 

later of—

(i) The applicable due date specified 

in paragraph (a)(1), (a)(2), or (a)(3) of 

this section, or 

(ii) 30 days after the date on which 

the amendment changing the plan year 

was adopted. 

(c) Due dates for new and newly 

covered plans. Notwithstanding 

paragraph (a) of this section, 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 is the latest of—

(1) The last day of the sixteenth full 

calendar month that began on or after 

the first day of the premium payment 

year (the effective date, in the case of a 

new plan), or 

(2) 90 days after the date of the plan’s 

adoption. 

* * * * * 

Issued in Washington, DC, this 17th day of 

March 2008. 

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. E8–5712 Filed 3–20–08; 8:45 am] 

BILLING CODE 7709–01–P 

DEPARTMENT OF THE TREASURY 

Office of International Investment 

31 CFR Part 800 

Regulations Pertaining to Mergers, 

Acquisitions and Takeovers 

AGENCY: Department of the Treasury. 

ACTION: Final rule. 

SUMMARY: This final regulation amends 

regulations in part 800 of 31 CFR that 

implement section 721 of the Defense 

Production Act of 1950. The regulation 

amends a provision that pertains to the 

circumstances under which the 

Committee on Foreign Investment in the 

United States completes action 

following an investigation of a notified 

transaction, consistent with the 

amendments to section 721 made by the 

Foreign Investment and National 

Security Act of 2007 (‘‘FINSA’’). 

DATES: Effective date: March 21, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Nova Daly, Deputy Assistant Secretary, 

U.S. Department of the Treasury, 1500 

Pennsylvania Avenue, NW., 

Washington, DC 20220; telephone: (202) 

622–2752; or e-mail: 

Nova.Daly@do.treas.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

On July 26, 2007, President Bush 

signed into law the Foreign Investment 

and National Security Act of 2007 

(‘‘FINSA’’) (Pub. L. 110–49), which 

amends section 721 of the Defense 

Production Act of 1950 (50 U.S.C. App. 

2170 et seq.) (‘‘section 721’’), to codify 

the structure, role, process, and 

responsibilities of the Committee on 

Foreign Investment in the United States 

(‘‘CFIUS’’). Section 721 requires that, 

upon receipt by Treasury of written 

notification of a ‘‘covered transaction’’

(i.e., a merger, acquisition, or takeover 

by or with any foreign person that could 

result in foreign control of any person 

engaged in interstate commerce in the 

United States), the President, acting 

through CFIUS, shall review the 

transaction within 30 days to determine 

its effects on national security, based on 

any relevant factors, including several 

new factors FINSA added to an 

illustrative list contained in section 721. 

If, during its review, CFIUS determines 

that (1) the transaction threatens to 

impair U.S. national security and the 

threat has not yet been mitigated, (2) the 

lead agency recommends an 

investigation and CFIUS concurs, (3) the 

transaction would result in foreign 

government control, or (4) the 

transaction would result in the control 

of any U.S. critical infrastructure that 

could impair U.S. national security and 

the threat has not yet been mitigated, 

then CFIUS must conduct and complete 

within 45 days an investigation of the 

transaction. (The latter two grounds for 

an investigation do not mandate an 

investigation if the Secretary or Deputy 

Secretary of the Treasury and the 

equivalent lead agency counterparts 

jointly determine that the transaction 

will not impair U.S. national security.) 

FINSA does not require CFIUS, upon 

completion or termination of an 

investigation, to refer a transaction to 

the President for a final decision. On 

January 23, 2008, President Bush signed 

Executive Order 13456 (further 

amending Executive Order 11858) that 

sets forth the circumstances under 

which a transaction shall be referred to 

the President for a final decision. 

Specifically, Section 6(c) of Executive 

Order 11858, as amended, provides that 

CFIUS ‘‘shall send a report to the 

President requesting the President’s 

decision with respect to a review or 

investigation of a transaction in the 

following circumstances: 

(i) The Committee recommends that 

the President suspend or prohibit the 

transaction; 

(ii) The Committee is unable to reach 

a decision on whether to recommend 

that the President suspend or prohibit 

the transaction; or 

(iii) The Committee requests that the 

President make a determination with 

regard to the transaction.’’

The current regulations, by contrast, 

require CFIUS, upon completion or 

termination of any investigation, to 

report to the President and include a 

recommendation for action. This final 

regulation conforms the regulations to 

FINSA and Executive Order 11858, as 

amended, by removing the requirement 

to report to the President following 

completion or termination of an 

investigation, except in the 

circumstances set forth in Executive 

Order 11858. 

Procedural Matters: It has been 

determined that this rule is not a 

significant regulatory action as defined 

in Executive Order 12866; therefore, a 

regulatory assessment is not required. 

Because no notice of proposed 

rulemaking is required, the provisions 

of the Regulatory Flexibility Act (5 

U.S.C. chapter 6) do not apply. Pursuant 

to 5 U.S.C. 553(a)(1), this final rule 

relates to a foreign affairs function of the 

United States, and therefore is not 

subject to the delayed effective date 

provisions of the Administrative 

Procedures Act. 

Section 709 of the Defense Production 

Act (DPA) (50 U.S.C. App. 2159) states 

that any regulation issued under the 

DPA shall be published in the Federal 

Register and opportunity for public 

comment shall be provided for not less 

than 30 days. In addition, FINSA 

requires regulations that carry out 

section 721 to be promulgated subject to 

notice and comment. However, this 

regulation is not being issued pursuant 

to the DPA or FINSA. Consequently, the 


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