18996 Federal Register / Vol. 60, No. 72 / Friday, April 14, 1995 / Rules and Regulations

29 CFR Parts 2619 and 2676

Valuation of Plan Benefits in SingleEmployer Plans; Valuation of Plan

Benefits and Plan Assets Following

Mass Withdrawal; Amendments

Adopting Additional PBGC Rates

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Final rule.

SUMMARY: This final rule amends the

Pension Benefit Guaranty Corporation’s

regulations on Valuation of Plan

Benefits in Single-Employer Plans and

Valuation of Plan Benefits and Plan

Assets Following Mass Withdrawal. The

former regulation contains the interest

assumptions that the PBGC uses to

value benefits under terminating singleemployer plans. The latter regulation

contains the interest assumptions for

valuations of multiemployer plans that

have undergone mass withdrawal. The

amendments set out in this final rule

adopt the interest assumptions

applicable to single-employer plans

with termination dates in May 1995,

and to multiemployer plans with

valuation dates in May 1995. The effect

of these amendments is to advise the

public of the adoption of these

assumptions.

EFFECTIVE DATE: May 1, 1995.

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 May 1995 interest

assumptions to be used under the

Pension Benefit Guaranty Corporation’s

regulations on Valuation of Plan

Benefits in Single-Employer Plans (29

CFR part 2619, the ‘‘single-employer

regulation’’) and Valuation of Plan

Benefits and Plan Assets Following

Mass Withdrawal (29 CFR part 2676, the

‘‘multiemployer regulation’’).

Part 2619 sets forth the methods for

valuing plan benefits of terminating

single-employer plans covered under

title IV of the Employee Retirement

Income Security Act of 1974, as

amended. Under ERISA section 4041(c),

all single-employer plans wishing to

terminate 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, using the formulas set

forth in part 2619, subpart C. (Plans

terminating in a standard termination

may, for purposes of the Standard

Termination Notice filed with PBGC,

use these formulas to value benefit

liabilities, although this is not required.)

In addition, when the PBGC terminates

an underfunded plan involuntarily

pursuant to ERISA section 4042(a), it

uses the subpart C formulas to

determine the amount of the plan’s

underfunding. Part 2676 prescribes

rules for valuing benefits and certain

assets of multiemployer plans under

sections 4219(c)(1)(D) and 4281(b) of

ERISA.

Appendix B to part 2619 sets forth the

interest rates and factors under the

single-employer regulation. Appendix B

to part 2676 sets forth the interest rates

and factors under the multiemployer

regulation. Because these 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.

The PBGC issues two sets of interest

rates and factors, one set to be used for

the valuation of benefits to be paid as

annuities and one set for the valuation

of benefits to be paid as lump sums. The

same assumptions apply to terminating

single-employer plans and to

multiemployer plans that have

undergone a mass withdrawal. This

amendment adds to appendix B to parts

2619 and 2676 sets of interest rates and

factors for valuing benefits in singleemployer plans that have termination

dates during May 1995 and

multiemployer plans that have

undergone mass withdrawal and have

valuation dates during May 1995.

For annuity benefits, the interest rates

will be 6.90% for the first 20 years

following the valuation date and 5.75%

thereafter. For benefits to be paid as

lump sums, the interest assumptions to

be used by the PBGC will be 5.50% for

the period during which benefits are in

pay status, 4.75% during the seven-year

period directly preceding the benefit’s

placement in pay status, and 4.0%

during any other years preceding the

benefit’s placement in pay status. The

above annuity interest assumptions

represent a decrease (from those in

effect for April 1995) of .20 percent for

the first 20 years following the valuation

date and are otherwise unchanged. The

lump sum interest assumptions

represent a decrease (from those in

effect for April 1995) of .25 percent for

the period during which benefits are in

pay status and the seven years directly

preceding that period; they are

otherwise unchanged.

Generally, the interest rates and

factors under these regulations 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 normally will be published

in the Federal Register by the 15th of

the preceding month or as close to that

date as circumstances permit.

The PBGC has determined that notice

and public comment on these

amendments 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 single-employer plans whose

termination dates fall during May 1995,

and in multiemployer plans that have

undergone mass withdrawal and have

valuation dates during May 1995, 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 it will

not have an annual effect on the

economy of $100 million or more or

adversely affect in a material way the

economy, a sector of the economy,

productivity, competition, jobs, the

environment, public health or safety, or

State, local, or tribal governments or

communities; create a serious

inconsistency or otherwise interfere

with an action taken or planned by

another agency; materially alter the

budgetary impact of entitlements,

grants, user fees, or loan programs or the

rights and obligations of recipients

thereof; or raise novel legal or policy

issues arising out of legal mandates, the

President’s priorities, or the principles

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

29 CFR Part 2619

Employee benefit plans, Pension

insurance, and Pensions.

29 CFR Part 2676

Employee benefit plans and Pensions.

In consideration of the foregoing,

parts 2619 and 2676 of chapter XXVI,

title 29, Code of Federal Regulations, are

hereby amended as follows:

PART 2619—[AMENDED]

1. The authority citation for part 2619

continues to read as follows:
Federal Register / Vol. 60, No. 72 / Friday, April 14, 1995 / Rules and Regulations 18997

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

1341, 1344, 1362.

2. In appendix B, Rate Set 19 is added

to Table I, and a new entry is added to

Table II, as set forth below. The

introductory text of both tables is

republished for the convenience of the

reader and remains unchanged.

Appendix B to Part 2618—Interest

Rates Used to Value Lump Sums and

Annuities

Lump Sum Valuations

In determining the value of interest

factors of the form v0:n (as defined in

§ 2619.49(b)(1)) for purposes of applying

the formulas set forth in § 2619.49(b)

through (i) and in determining the value

of any interest factor used in valuing

benefits under this subpart to be paid as

lump sums (including the return of

accumulated employee contributions

upon death), the PBGC shall employ the

values of it set out in Table I hereof as

follows:

(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 (y is an integer and 0

< y ≤ n1), interest rate i1 shall apply from

the valuation date for a period of y

years; thereafter the immediate annuity

rate shall apply.

(3) For benefits for which the deferral

period is y years (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; thereafter the

immediate annuity rate shall apply.

(4) For benefits for which the deferral

period is y years (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; thereafter the immediate annuity

rate shall apply.

TABLE I

[Lump Sum Valuations]

Rate set

For plans with a valuation

date Immediate

annuity rate

(percent)

Deferred annuities (percent)

On or after Before i1 i2 i3 n1 n2

* * * * * * *

19 5–1–95 6–1–95 5.50 4.75 4.00 4.00 7 8

Annuity Valuations

In determining the value of interest

factors of the form vO:n (as defined in

§ 2619.49(b)(1)) for purposes of applying

the formulas set forth in § 2619.49 (b)

through (i) and in determining the value

of any interest factor used in valuing

annuity benefits under the subpart, the

plan administrator shall use the values

of it prescribed in the Table II hereof.

The following table tabulates, for each

calendar month of valuation ending

after the effective date of this part, 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.

TABLE II

[Annuity Valuations]

For valuation dates occurring in the month—

The values of it are:

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

* * * * * * *

May 1995 .......................................................................... .0690 1–20 .0575 >20 N/A N/A

PART 2676—[AMENDED]

3. The authority citation for part 2676

continues to read as follows:

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

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

4. In appendix B, Rate Set 19 is added

to Table I, and a new entry is added to

Table II, as set forth below. The

introductory text of both tables is

republished for the convenience of the

reader and remains unchanged.

Appendix B to Part 2676—Interest

Rates Used To Value Lump Sums and

Annuities

Lump Sum Valuations

In determining the value of interests

factors of the form vO:n (as defined in

§ 2676.13(b)(1)) for purposes of applying

the formulas set forth in § 2676.13 (b)

through (i) and in determining the value

of any interest factor used in valuing

benefits under this supbart to be paid as

pump sums, the PBGC shall use the

values of it prescribed in Table I hereof.

The interest rates set forth in Table I

shall be used by the PBGC to calculate

benefits payable as lump sums benefits

as follows:

(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 (y is an integer and 0

< y ≤ n1), interest rate i1 shall apply from

the valuation date for a period of y

years; thereafter the immediate annuity

rate shall apply.

(3) For benefits for which the deferral

period is y years (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; thereafter the

immediate annuity rate shall apply.
18998 Federal Register / Vol. 60, No. 72 / Friday, April 14, 1995 / Rules and Regulations

(4) For benefits for which the deferral

period is y years (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; thereafter the immediate annuity

rate shall apply.

TABLE I

[Lump Sum Valuations]

Rate set

For plans with a valuation

date Immediate

annuity rate

(percent)

Deferred annuities (percent)

On or after Before i1 i2 i3 n1 n2

* * * * * * *

19 5–1–95 6–1–95 5.50 4.75 4.00 4.00 7 8

Annuity Valuations

In determining the value of interest

factors of the form v0:n (as defined in

§ 2676.13(b)(1)) for purposes of applying

the formulas set forth in § 2676.13 (b)

through (i) and in determining the value

of any interest factor used in valuing

annuity benefits under this subpart, the

plan administrator shall use the values

of it prescribed in the table below.

The following table tabulates, for each

calendar month of valuation ending

after the effective date of this part, 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.

TABLE II

[Annuity Valuations]

For valuation dates occurring in the month—

The values of it are:

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

* * * * * * *

May 1995 .......................................................................... .0690 1–20 .0575 >20 N/A N/A

Issued in Washington, DC, on this 11th day

of April 1995.

Martin Slate,

Executive Director, Pension Benefit Guaranty

Corporation.

[FR Doc. 95–9238 Filed 4–13–95; 8:45 am]

BILLING CODE 7708–01–M

29 CFR Part 2644

Notice and Collection of Withdrawal

Liability; Adoption of New Interest Rate

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Final rule.

SUMMARY: This is an amendment to the

Pension Benefit Guaranty Corporation’s

regulation on Notice and Collection of

Withdrawal Liability. That regulation

incorporates certain interest rates

published by another Federal agency.

This amendment adds to the appendix

of that regulation a new interest rate to

be effective from April 1, 1995, to June

30, 1995. The effect of the amendment

is to advise the public of the new rate.

EFFECTIVE DATE: April 1, 1995.

FOR FURTHER INFORMATION CONTACT:

Harold J. Ashner, Assistant General

Counsel, Office of the General Counel,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026; telephone 202–326–4024

(202–326–4179 for TTY and TDD).

These are not toll-free numbers.

SUPPLEMENTARY INFORMATION: Under

section 4219(c) of the Employee

Retirement Income Security Act of 1974,

as amended (‘‘ERISA’’), the Pension

Benefit Guaranty Corporation (‘‘the

PBGC’’) promulgated a final regulation

on Notice and Collection of Withdrawal

Liability. That regulation, codified at 29

CFR part 2644, deals with the rate of

interest to be charged by multiemployer

pension plans on withdrawal liability

payments that are overdue or in default,

or to be credited by plans on

overpayments of withdrawal liability.

The regulation allows plans to set rates,

subject to certain restrictions. Where a

plan does not set the interest rate,

§ 2644.3(b) of the regulation provides

that the rate to be charged or credited

for any calendar quarter is the average

quoted prime rate on short-term

commercial loans for the fifteenth day

(or the next business day if the fifteenth

day is not a business day) of the month

preceding the beginning of the quarter,

as reported by the Board of Governors

of the Federal Reserve System in

Statistical Release H.15 (‘‘Selected

Interest Rates’’).

Because the regulation incorporates

interest rates published in Statistical

Release H.15, that release is the

authoritative source for the rates that are

to be applied under the regulation. As

a convenience to persons using the

regulation, however, the PBGC collects

the applicable rates and republishes

them in an appendix to part 2644. This

amendment adds to this appendix the

interest rate of 9.00 percent, which will

be effective from April 1, 1995, through

June 30, 1995. This rate represents an

increase of .50 percent from the rate in

effect for the first quarter of 1995. This

rate is based on the prime rate in effect

on March 15, 1995.

The appendix to 29 CFR part 2644

does not prescribe interest rates under

the regulation; the rates prescribed in

the regulation are those published in

Statistical Release H.15. The appendix

merely collects and republishes the

rates in a convenient place. Thus, the

interest rates in the appendix are

informational only. Accordingly, the

PBGC finds that notice of and public

comment on this amendment would be

unnecessary and contrary to the public

interest. For the above reasons, the

PBGC also believes that good cause

exists for making this amendment

effective immediately.