federal register

36967

Monday

July 15, 1996

Part II

Pension Benefit

Guaranty

Corporation

29 CFR Part 4044

Allocation of Assets in Single-Employer

Plans; Interest Rates and Assumptions

Used in Making Benefits Valuations; Final

Rule and Notice
36968 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

PENSION BENEFIT GUARANTY

CORPORATION

29 CFR Part 4044

Allocation of Assets in SingleEmployer Plans; Interest Rate for

Valuing Benefits

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Final rule.

SUMMARY: This final rule amends the

Pension Benefit Guaranty Corporation’s

regulation on Allocation of Assets in

Single-Employer Plans. The regulation

prescribes interest assumptions for

valuing benefits under terminating

single-employer plans. This rule adopts

interest assumptions for plans with

valuation dates in August 1996 and

advises the public of the new

assumptions. These interest

assumptions are also used under the

PBGC’s regulation on Duties of Plan

Sponsor Following Mass Withdrawal.

EFFECTIVE DATE: August 1, 1996.

FOR FURTHER INFORMATION CONTACT:

Harold J. Ashner, Assistant General

Counsel, Office of the General Counsel,

Pension Benefit Guaranty Corporation,

1200 K Street, NW., Washington, DC

20005, 202–326–4024 (202–326–4179

for TTY and TDD).

SUPPLEMENTARY INFORMATION: This rule

adopts the August 1996 interest

assumptions to be used in benefit

valuations for terminating singleemployer plans. Before July 1996, the

interest assumptions used for such

benefit valuations were contained in

PBGC regulations codified at 29 CFR

part 2619. In a final rule effective July

1, 1996 (61 FR 34001), the PBGC

reorganized and renumbered its

regulations. The single-employer benefit

valuation provisions are now codified in

the PBGC’s regulation on Allocation of

Assets in Single-Employer Plans at 29

CFR part 4044, and this rule amends

that regulation. As discussed in a notice

published elsewhere in today’s Federal

Register, these interest assumptions are

also used in valuations of

multiemployer plans following mass

withdrawal.

Part 4044 prescribes actuarial

assumptions for valuing plan benefits of

terminating single-employer plans

covered by title IV of the Employee

Retirement Income Security Act of 1974.

Under ERISA section 4041(c), a singleemployer plan administrator wishing to

terminate the plan in a distress

termination must value guaranteed

benefits and ‘‘benefit liabilities’’ (i.e., all

benefits provided under the plan as of

the plan termination date) in accordance

with part 4044. (Benefit liabilities may

also be valued in accordance with part

4044 for purposes of the Standard

Termination Notice filed with the PBGC

by a plan terminating in a standard

termination, although this is not

required.) In addition, when the PBGC

terminates an underfunded plan

involuntarily pursuant to ERISA section

4042(a), it values benefits in accordance

with part 4044 to determine the amount

of the plan’s underfunding.

Among the actuarial assumptions

prescribed in part 4044 are interest rates

and factors, which are set forth in

appendix B to part 4044. Because these

interest rates and factors are intended to

reflect current conditions in the

financial and annuity markets, it is

necessary to update the rates and factors

periodically.

Two sets of interest rates and factors

are prescribed, one set for the valuation

of benefits to be paid as annuities and

one set for the valuation of benefits to

be paid as lump sums. This amendment

adds to appendix B to part 4044 the two

sets of interest rates and factors for

valuing benefits in plans with valuation

dates during August 1996.

For annuity benefits, the interest rates

will be 6.30 percent for the first 20 years

following the valuation date and 4.75

percent thereafter. For benefits to be

paid as lump sums, the interest

assumptions to be used by the PBGC

will be 5.25 percent for the period

during which benefits are in pay status,

4.50 percent during the seven-year

period directly preceding the benefit’s

placement in pay status, and 4.00

percent during any other years

preceding the benefit’s placement in pay

status. The annuity interest assumptions

represent an increase (from those in

effect for July 1996) of 0.10 percent for

the first 20 years following the valuation

date and are otherwise unchanged. The

lump sum interest assumptions

represent an increase (from those in

effect for July 1996) of 0.25 percent for

the period during which benefits are in

pay status and the seven years directly

preceding that period and are otherwise

unchanged.

Generally, the interest rates and

factors under part 4044 are in effect for

at least one month. However, the PBGC

publishes its interest assumptions each

month regardless of whether they

represent a change from the previous

month’s assumptions. The assumptions

are normally published in the Federal

Register on or about the 15th of the

preceding month.

The PBGC has determined that notice

and public comment on this amendment

are impracticable and contrary to the

public interest. This finding is based on

the need to determine and issue new

interest rates and factors promptly so

that the rates and factors can reflect, as

accurately as possible, current market

conditions.

Because of the need to provide

immediate guidance for the valuation of

benefits in plans with valuation dates

during August 1996, the PBGC finds

that good cause exists for making the

rates and factors set forth in this

amendment effective less than 30 days

after publication.

The PBGC has determined that this

action is not a ‘‘significant regulatory

action’’ under the criteria set forth in

Executive Order 12866.

Because no general notice of proposed

rulemaking is required for this

amendment, the Regulatory Flexibility

Act of 1980 does not apply. See 5 U.S.C.

601(2).

List of Subjects in 29 CFR Part 4044

Pension insurance, Pensions.

In consideration of the foregoing, part

4044 of chapter XL, title 29, Code of

Federal Regulations, is hereby amended

as follows:

PART 4044—[AMENDED]

1. The authority citation for part 4044

continues to read as follows:

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

1341, 1344, 1362.

Appendix B to Part 4044—[Amended]

2. In appendix B, a new entry is

added to Table I, and Rate Set 34 is

added to Table II, as set forth below.

The introductory text of each table is

republished for the convenience of the

reader and remains unchanged.

Appendix B to Part 4044—Interest Rates

Used to Value Annuities and Lump Sums
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations 36969

TABLE I.—ANNUITY VALUATIONS

[This table sets forth, for each indicated calendar month, the interest rates (denoted by i1, i2, * * *, and referred to generally as it) assumed to be

in effect between specified anniversaries of a valuation date that occurs within that calendar month; those anniversaries are specified in the

columns adjacent to the rates. The last listed rate is assumed to be in effect after the last listed anniversary date]

For valuation dates occurring in the month—

The values of it are:

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

* * * * * * *

August 1996 ....................................................................... .0630 1–20 .0475 >20 N/A N/A

TABLE II.—LUMP SUM VALUATIONS

[In using this table: (1) For benefits for which the participant or beneficiary is entitled to be in pay status on the valuation date, the immediate annuity rate shall apply; (2) For benefits for which the deferral period is y years (where y is an integer and 0 < y ≤ n1), interest rate i1 shall

apply from the valuation date for a period of y years, and thereafter the immediate annuity rate shall apply; (3) For benefits for which the deferral period is y years (where y is an integer and n1 < y ≤ n1 + n2), interest rate i2 shall apply from the valuation date for a period of y ¥ n1

years, interest rate i1 shall apply for the following n1 years, and thereafter the immediate annuity rate shall apply; (4) For benefits for which

the deferral period is y years (where y is an integer and y > n1 + n2), interest rate i3 shall apply from the valuation date for a period of y ¥

n1 ¥ n2 years, interest rate i2 shall apply for the following n2 years, interest rate i1 shall apply for the following n1 years, and thereafter the

immediate annuity rate shall apply]

Rate set

For plans with a valuation

date Immediate

annuity rate

(percent)

Deferred annuities (percent)

On or after Before i1 i2 i3 n1 n2

* * * * * * *

34 08–1–96 09–1–96 5.25 4.50 4.00 4.00 7 8

Issued in Washington, DC, on this 5th day

of July 1996.

Martin Slate,

Executive Director, Pension Benefit Guaranty

Corporation.

[FR Doc. 96–17792 Filed 7–12–96; 8:45 am]

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