Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules 23693

PENSION BENEFIT GUARANTY

CORPORATION

29 CFR Parts 4011, 4022, 4041A, 4044,

4050, 4281

RIN 1212–AA88

Valuation and Payment of Lump Sum

Benefits

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Proposed rule.

SUMMARY: The Pension Benefit Guaranty

Corporation proposes to amend its

regulations to increase the maximum

value of benefits that the PBGC may pay

in lump sum form, and certain other

lump sum thresholds, from $3,500 to

$5,000. The proposed amendments do

not affect lump sum benefits paid by

ongoing plans.

DATES: Comments must be received on

or before June 1, 1998.

ADDRESSES: Comments may be mailed to

the Office of the General Counsel,

Pension Benefit Guaranty Corporation,

1200 K Street, NW., Washington, DC

20005–4026, or delivered to Suite 340 at

the above address. Comments also may

be sent by Internet e-mail to

reg.comments@pbgc.gov. Comments

will be available for inspection at the

PBGC’s Communications and Public

Affairs Department in Suite 240 at the

above address during normal business

hours.

FOR FURTHER INFORMATION CONTACT:

Harold J. Ashner, Assistant General

Counsel, or Marc L. Jordan, Attorney,

Pension Benefit Guaranty Corporation,

Office of the General Counsel, Suite 340,

1200 K Street, NW., Washington, DC

20005–4026, 202–326–4024. (For TTY/

TTD users, call the Federal relay service

toll-free at 1–800–877–8339 and ask to

be connected to 202–326–4024.)

SUPPLEMENTARY INFORMATION: Section

203(e) of ERISA specifies the maximum

value that a plan may provide it will

pay in a lump sum (i.e., single

installment) to a participant or surviving

spouse without consent. The Taxpayer

Relief Act of 1997 increased the section

203(e) maximum from $3,500 to $5,000

effective for plan years beginning after

August 5, 1997.

The PBGC proposes to amend its

regulations to increase various $3,500

thresholds to $5,000 and to make other

changes relating to lump sum payments:

• Under the amendment, the PBGC

may make a lump sum payment of a

benefit that has a value of $5,000 or less

as of the plan’s termination date. The

amendment provides rules for applying

the lump sum threshold where the

PBGC issues a determination on title IV

benefits before it issues a determination

on benefits payable under ERISA

section 4022(c). Consistent with its

current practice, the PBGC will give the

participant the option to receive the

benefit in the form of an annuity if the

monthly benefit (at normal retirement

age in the normal form for an unmarried

participant) is equal to or greater than

$25.

Applicability: The amendment will

apply to any initial determination

issued on or after the amendment’s

effective date. For any initial

determination issued before the

amendment’s effective date, the PBGC

may make a lump sum payment of a

benefit with a value of $5,000 or less,

provided (1) the benefit is not yet in pay

status, and (2) the participant (with

spousal consent) or beneficiary elects

the lump sum payment.

• Under the amendment, the lump

sum threshold under § 4044.52(b),

which is used for determining whether

lump sum or annuity assumptions are

used to value benefits for purposes of

allocating assets to benefits under

ERISA section 4044, is $5,000.

Applicability: The amendment will

apply to any plan with a termination

date on or after the amendment’s

effective date.

• The reference to the lump sum

threshold in the PBGC’s Model

Participant Notice (29 CFR part 4011) is

changed from $3,500 to $5,000.

Applicability: This amendment will

apply to any Participant Notice issued

on or after the amendment’s effective

date. However, for a reasonable time

period, the PBGC will not treat a

Participant Notice as failing to satisfy

the Participant Notice requirements

merely because it refers to the $3,500

threshold.

• The dollar thresholds in the

Missing Participants regulation are

increased from $3,500 to $5,000. See

§§ 4050.2 (definition of missing

participant annuity assumptions) and

4050.5(a)(2) (de minimis lump sum).

Applicability: This amendment will

apply to missing participants for whom

the deemed distribution date is on or

after the amendment’s effective date.

• The dollar threshold up to which

the plan sponsor of a terminated

multiemployer plan that is closing out

may make a lump sum payment of

nonforfeitable benefits is increased from

$3,500 to $5,000.

Applicability: This amendment will

apply to any distribution made on or

after the amendment’s effective date.

• In the case of participant deaths

after the termination date, the

amendment allows the PBGC to make a

lump sum payment of a qualified

preretirement survivor annuity with a

value of $5,000 or less if the surviving

spouse elects a lump sum.

Applicability: This amendment will

apply to any lump sum payment made

on or after the amendment’s effective

date.

• The amendment allows the PBGC to

make a lump sum payment, without

regard to amount, of any benefits due to

an estate (e.g., under a certain and

continuous benefit where the designated

beneficiary predeceases the participant)

if the estate elects a lump sum.

Applicability: This amendment will

apply to any payment made on or after

the amendment’s effective date.

Finally, the amendment (1)

eliminates, as unnecessary, two

provisions in its multiemployer

valuation regulation that refer to the

$3,500 limit, and (2) makes clear that

the lump sum value of a benefit is

calculated by valuing the monthly

annuity benefit (which excludes the

value of certain preretirement death

benefits, such as a qualified

preretirement survivor annuity).

E.O. 12866 and the Regulatory

Flexibility Act

The PBGC has determined that this

proposed rule is not a ‘‘significant

regulatory action’’ under the criteria set

forth in Executive Order 12866. The

PBGC certifies that, if adopted, the

amendment will not have a significant

economic effect on a substantial number

of small entities. The amendments will

affect only de minimis benefits and will

have an immaterial effect on liabilities

associated with plan termination.

Accordingly, as provided in section

605(b) of the Regulatory Flexibility Act,

sections 603 and 604 do not apply.

List of Subjects

29 CFR Part 4022, 4041A

Pension insurance, Pensions,

Reporting and recordkeeping

requirements.

29 CFR Part 4044

Pension insurance, Pensions.

29 CFR Part 4011, 4050, 4281

Pensions, Reporting and

recordkeeping requirements.

For the reasons set forth above, the

PBGC proposes to amend parts 4011,

4022, 4041A, 4044, 4050, and 4281 of 29

CFR chapter XL as follows:

PART 4011—DISCLOSURE TO

PARTICIPANTS

1. The authority citation for part 4011

continues to read as follows:
23694 Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules

Authority: 29 U.S.C. 1302(b)(3) and 1311.

Appendix A to Part 4011 [Amended]

2. Appendix A to Part 4011 is

amended by removing the sentence

‘‘The PBGC does not pay lump sums

exceeding $3,500.’’ which immediately

precedes the heading ‘‘WHERE TO GET

MORE INFORMATION’’, and adding in

its place the sentence ‘‘The PBGC

generally does not pay lump sums

exceeding $5,000.’’

PART 4022—BENEFITS PAYABLE IN

TERMINATED SINGLE-EMPLOYER

PLANS

3. The authority citation for part 4022

continues to read as follows:

Authority: 29 U.S.C. 1302 and 1322.

4. In § 4022.7, paragraph (b)(1) is

revised, and new paragraph (d) is

added, to read as follows:

§ 4022.7 Benefits payable in a single

installment.

* * * * *

(b)(1) Payment in lump sum.

Notwithstanding paragraph (a) of this

section:

(i) In general. If the lump sum value

of a benefit payable by the PBGC is

$5,000 or less and the benefit is not yet

in pay status, the benefit may be paid in

a lump sum. In determining whether the

lump sum value of a benefit is $5,000

or less, the value of any amounts

returned under paragraph (b)(2) of this

section is disregarded. If the PBGC

determines a title IV benefit before it

determines the benefit payable under

section 4022(c) of ERISA, the $5,000

threshold shall apply separately to the

title IV benefit. The section 4022(c)

benefit shall be paid in annuity form if

the title IV benefit is paid in annuity

form, and otherwise shall be separately

subject to the $5,000 threshold.

(ii) Annuity option. If the PBGC

would otherwise make a lump sum

payment in accordance with paragraph

(b)(1)(i) of this section and the monthly

benefit is equal to or greater than $25 (at

normal retirement age and in the normal

form for an unmarried participant), the

PBGC shall provide the participant (or

the beneficiary of a participant who is

deceased as of the termination date) the

option to receive the benefit in the form

of an annuity.

(iii) Election of QPSA lump sum. If

the lump sum value of a qualified

preretirement survivor annuity is $5,000

or less, the benefit is not yet in pay

status, and the participant dies after the

termination date, the benefit may be

paid in a lump sum if so elected by the

surviving spouse.

(iv) Certain and continuous payments

to estates. The PBGC may pay any

benefits payable to an estate (e.g., in the

case of benefits under a certain and

continuous annuity where the

designated beneficiary predeceases the

participant) in a lump sum without

regard to the threshold in paragraph

(b)(1)(i) of this section if so elected by

the estate. The payments shall be

discounted using the immediate interest

rate that would be applicable to the plan

under § 4044.52(b) if the termination

date had been the date of death (or, if

later, [effective date of final rule]).

* * * * *

(d) Determination of lump sum

amount. The lump sum value of a

benefit shall be determined in

accordance with § 4044.52(b).

PART 4041A—TERMINATION OF

MULTIEMPLOYER PLANS

5. The authority citation for part

4041A continues to read as follows:

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

1441.

§ 4041A.43 [Amended]

6. In § 4041A.43, paragraph (b)(1) is

amended by removing ‘‘$3,500’’ and

adding, in its place, ‘‘$5,000’’.

PART 4044—ALLOCATION OF

ASSETS IN SINGLE-EMPLOYER

PLANS

7. The authority citation for part 4044

continues to read as follows:

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

1341, 1344, 1362.

§ 4044.52 [Amended]

8. In section 4044.52, the introductory

text to paragraph (b) is revised to read

as follows:

§ 4044.52 Valuation of benefits.

* * * * *

(b) Benefits payable as lump sums.

For valuing benefits payable as lump

sums (including the return of

accumulated employee contributions

upon death), and for determining

whether the lump sum value of a benefit

exceeds $5,000, the plan administrator

shall determine the lump sum value of

a benefit by valuing, in accordance with

paragraph (a) of this section, the

monthly annuity benefits payable in the

form determined under § 4044.51(a) and

commencing at the time determined

under § 4044.51(b), except that—

* * * * *

§ 4044.54 [Amended]

9. Section 4044.54 is amended by

removing ‘‘$3,500’’ and adding, in its

place, ‘‘$5,000’’.

PART 4050—MISSING PARTICIPANTS

10. The authority citation for part

4050 continues to read as follows:

Authority: 29 U.S.C. 1302(b)(3), 1350.

§ 4050.2 [Amended]

11. In § 4050.2, paragraph (5) of the

definition of Missing participant

annuity assumptions is amended by

removing ‘‘$3,500’’ and adding, in its

place, ‘‘$5,000’’.

§ 4050.5 [Amended]

12. In § 4050.5, paragraph (a)(2) is

amended by removing ‘‘$3,500’’ and

adding, in its place, ‘‘$5,000’’.

Appendix A to Part 4050 [Amended]

13. In Appendix A, the heading is

amended by adding at the end, the

words ‘‘in Plans With Deemed

Distribution Dates on and After

[effective date of final rule]’’; the

introductory text to Example 1 is

amended by removing ‘‘$1,750’’ and

adding, in its place, ‘‘$3,500’’; paragraph

(1) to Example 1 is amended by

removing ‘‘$1,700’’ each time it appears

and adding, in each place, ‘‘$3,000’’;

paragraph (2) to Example 1 is amended

by removing ‘‘$3,700’’ and adding, in its

place, ‘‘$5,200’’ and removing ‘‘$3,200’’

each time it appears and adding, in each

place, ‘‘$4,700’’; paragraph (3) to

Example 1 is amended by removing

‘‘$3,400’’ and adding, in its place,

‘‘$4,900’’ and removing ‘‘$3,450’’ each

time it appears and adding, in each

place, ‘‘$4,950’’; and paragraph (1) of

Example 2 is amended by removing

‘‘$3,500’’ and adding, in its place,

‘‘$5,000’’.

PART 4281—DUTIES OF PLAN

SPONSOR FOLLOWING MASS

WITHDRAWAL

14. The authority citation for part

4281 continues to read as follows:

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

1399(c)(1)(D), and 1441.

§ 4281.13 [Amended]

15. In section 4281.13, paragraph (b)

is removed, the introductory text to

paragraph (a) is amended by removing

the paragraph designation, the heading,

and the words ‘‘paragraph (b) of this

section (regarding the valuations of

benefits payable as lump sums under

trusteed plans) and’’, and paragraphs

(a)(1) through (a)(5) are redesignated as

paragraphs (a) through (e).

§ 4281.14 [Amended]

16. In section 4281.14, the section

heading is amended by removing the

phrase ‘‘—in general’’, and paragraph (a)

is amended by removing the words
Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules 23695

‘‘Except as otherwise provided in

§ 4281.15 (regarding the valuation of

benefits payable as lump sums under

trusteed plans), and subject’’ and

adding, in their place, the word

‘‘Subject’’.

§ 4281.15 [Removed and Reserved]

17. Section 4281.15 is removed and

reserved.

Issued in Washington, D.C. this 24th day

of April, 1998.

David M. Strauss,

Executive Director, Pension Benefit Guaranty

Corporation.

[FR Doc. 98–11519 Filed 4–29–98; 8:45 am]

BILLING CODE 7708–01–P

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 317, 351, 353, and 370

Regulations Governing Agencies for

the Issue and Offering of United States

Savings Bonds, Including Sales by

Electronic Means

AGENCY: Bureau of the Public Debt,

Fiscal Service, Treasury.

ACTION: Proposed rule.

SUMMARY: The Department of the

Treasury hereby publishes a proposed

rule governing the issue and offering of

United States Savings Bonds. This

document proposes changes to create

new categories of savings bond issuing

agents and to clarify and expand the

means by which bonds may be sold,

including electronic means.

DATES: Submit comments on or before

June 1, 1998.

ADDRESSES: Comments should be sent to

the attention of Wallace L. Earnest,

Director, Division of Staff Services,

Room 507, Bureau of the Public Debt,

200 3rd St., Parkersburg, WV 26106–

1328. Additionally, comments may be

sent by e-mail to the following address:

<Savbonds@bpd.treas.gov>. When

sending comments by e-mail, please

provide your full name and mailing

address, and send the comments in

ASCII format. Comments received will

be available for public inspection and

copying at the Treasury Department

Library, Freedom of Information Act

(FOIA) Collection, Room 5030, Main

Treasury Building, 1500 Pennsylvania

Ave. NW, Washington, D.C. 20220.

Individuals wishing to visit the library

should call (202) 622–0990 for an

appointment. Copies of this proposed

rule can be downloaded from the

Bureau of the Public Debt at the

following World Wide Web address:

<http://www.savingsbonds.gov>.

FOR FURTHER INFORMATION CONTACT:

Wallace L. Earnest, Director, Division of

Staff Services, at (304) 480–6319 or by

e-mail at <wearnest@bpd.treas.gov>;

Troy D. Martin, Senior Program Analyst,

Division of Staff Services, at (304) 480–

6545 or by e-mail at

<tmartin@bpd.treas.gov>; Edward C.

Gronseth, Deputy Chief Counsel, at

(304) 480–5192 or by e-mail at

<egronset@bpd.treas.gov>; or Gregory J.

Till, Attorney-Adviser, Office of the

Chief Counsel, at (202) 219–3320 or by

e-mail at <gtill@bpd.treas.gov>.

SUPPLEMENTARY INFORMATION:

I. Background

The growth of electronic commerce

and the World Wide Web have led to a

flourishing of financial service

providers and new payment methods.

However, the Bureau of the Public Debt

has been unable to take full advantage

of these developments in the sale of

United States Savings Bonds because of

apparent restrictions in existing

regulations. This document proposes

changes to create new categories of

savings bond issuing agents and to

clarify and expand the means by which

bonds may be sold, including electronic

means.

The most important proposed changes

are directed at four areas in title 31 of

the Code of Federal Regulations. First,

changes in §§ 317.2 and 317.3 would

amend the rules used to determine

which organizations may serve as

issuing agents and the procedures used

to qualify these organizations as issuing

agents. Second, changes to § 351.5

would expand the means by which

issuing agents may sell savings bonds.

Third, a new subpart in part 370 would

address the use of Automated Clearing

House debit entries for the sale of bonds

issued through the Bureau of the Public

Debt. Fourth, another new subpart in

part 370 would address the electronic

submission of purchase applications

and remittances for the sale of bonds

issued through the Bureau of the Public

Debt. This second new subpart in part

370 would facilitate Treasury’s

intention to sell savings bonds through

remittances by credit cards at the World

Wide Web site of the Bureau of the

Public Debt.

II. Summary of Amendments

A. Regulations Governing Agencies for

Issue of Savings Bonds (31 CFR Part

317)

(1) Definitions (§ 317.1)

The revised definition of ‘‘issuing

agent’’ would note the authority of the

Commissioner of the Public Debt or the

Commissioner’s designee to qualify

issuing agents, as explained in § 317.2.

The definition also would clarify that an

issuing agent acts as an agent of the

purchaser in handling the remittance.

The proposed language addressing the

handling of the remittance is consistent

with current practice. The Secretary of

the Treasury collects purchase funds

from issuing agents, not the public. If an

issuing agent discovers that the

remittance is uncollectible or must be

returned after the issuance of a bond,

the Secretary is nonetheless entitled to

payment from the issuing agent. The

issuing agent bears the risk of loss for

non-collection or return of the

remittance.

(2) Organizations Eligible to Serve as

Issuing Agents (§ 317.2)

Currently, issuing agent eligibility is

limited to financial institutions (such as

banks and credit unions), agencies of

the United States and state and local

governments, and employers operating

payroll savings plans. This document

proposes to expand the types of

organizations that are eligible to serve as

issuing agents.

One proposed change, in § 317.2(c),

would allow organizations that operate

payroll savings plans on behalf of

employers to serve as issuing agents.

The proposed change is designed to

bolster payroll savings plan sales from

small businesses, which often do not

have the resources to maintain such

plans themselves. As is the case with

employer organizations, an organization

operating a payroll service plan on

behalf of an employer organization

would be eligible for issuing agent fees

under the proposed rule only if it

inscribes savings bonds.

Another proposed addition, set out in

§ 317.2(d), would give the

Commissioner of the Bureau of the

Public Debt or the Commissioner’s

designee the authority to qualify issuing

agents when to do so would be in the

public interest. The Commissioner or

the Commissioner’s designee could use

such process as deemed to be

appropriate in selecting the issuing

agent. The selected issuing agent would

also be subject to such conditions as

deemed to be appropriate.

The new § 317.2(d) would be used for

the selection of entities to sell bonds in

unique ways as new methods of sales

emerge. In particular, this provision

would facilitate the qualification of

issuing agents to sell savings bonds

through electronic methods, such as

those offered by financial services

providers through World Wide Web

access.