34002 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

PENSION BENEFIT GUARANTY

CORPORATION

29 CFR Chs. XXVI and XL

RIN 1212–AA75

Reorganization, Renumbering, and

Reinvention of Regulations

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Final rule.

SUMMARY: In accordance with the

President’s Regulatory Reinvention

Initiative, the Pension Benefit Guaranty

Corporation is reorganizing,

renumbering, and reinventing its

regulations. The amendments will

clarify and simplify the PBGC’s

regulations and make them easier to use.

EFFECTIVE DATE: July 1, 1996.

FOR FURTHER INFORMATION CONTACT:

Harold J. Ashner, Assistant General

Counsel, or Marc L. Jordan, Attorney,

Office of the General Counsel, Pension

Benefit Guaranty Corporation, 1200 K

Street, NW., Washington, DC 20005–

4026, 202–326–4024 (202–326–4179 for

TTY and TDD).

SUPPLEMENTARY INFORMATION: The PBGC

is renumbering and reorganizing its

regulations to make it easier for

practitioners and the public to research

and use the rules under Title IV of the

Employee Retirement Income Security

Act of 1974. Under the new approach,

the regulations will be numbered to

track the statutory sections they

implement.

On July 8, 1994 (at 59 FR 35067), the

PBGC published a notice in the Federal

Register inviting public comment on a

proposal to reorganize and renumber its

regulations to track Title IV. No

comments were received.

On March 4, 1995, the President

issued his Regulatory Reinvention

Initiative, directing Federal agencies to

eliminate or revise those regulations

that are outdated or otherwise in need

of reform. The PBGC is reorganizing,

renumbering, and reinventing its

regulations. The reinvention is limited

to nonsubstantive corrections and

clarifications and deletion of material

that is unnecessary or that has been

substantially superseded (or is no longer

applicable).

For example, the reinvented

regulations omit existing provisions

dealing with the allocation of residual

assets (part 2618, subpart C) because

these provisions were largely

superseded by changes in section

4044(d) of ERISA made by the Pension

Protection Act of 1987. Similarly, the

provision regarding interest rate

assumptions for paying lump sums

(existing § 2619.26(b)(2)) has been

eliminated because of changes in

section 417(e)(3) of the Internal Revenue

Code and section 205(g)(3) of ERISA

made by the Retirement Equity Act of

1984, the Tax Reform Act of 1986, and

the Retirement Protection Act of 1994.

To clarify the rules on missing

participants in terminating plans,

nonsubstantive language changes have

been made in the missing participants

regulation (existing part 2629, new part

4050), related sections in the

termination regulations (existing parts

2616 and 2617, new part 4041), and in

the definition of ‘‘distribution date’’ in

new § 4001.2.

The new regulation on premium rates

(part 4006, which contains portions of

existing part 2610) omits the variablerate premium cap reduction rules

(which have expired) and the cap rules

themselves (repealed by the Retirement

Protection Act of 1994). The rule reflects

new provisions in the Retirement

Protection Act of 1994 dealing with

regulated public utility plans.

In some cases, provisions that may

have been partially superseded by

statutory changes have been retained

pending revision—for example, the

regulation on allocation of assets in

terminating single-employer plans

(renumbered part 4044). A note at the

beginning of part 4044 and reminders

within the part alert readers that some

regulatory material republished in part

4044 must be read in the light of these

other changes in the law.

The PBGC welcomes public comment

on this rule to correct any editorial

errors—e.g., in cross-references—that

may have been overlooked due to the

magnitude of the revision project.

Under this final rule, the PBGC’s

regulations will be moved from chapter

XXVI to chapter XL of title 29 of the

CFR. Sections will be numbered in the

4000’s. Part 4000 consists of finding

aids—tables correlating provisions of

old chapter XXVI and new chapter XL.

Part 4001 contains definitions of terms

used throughout the PBGC’s regulations.

A table of contents showing the rest of

the new structure, along with the full

text of the revised regulations, is set

forth below.

Rulemaking Requirements and E.O.

12866

The PBGC has determined that this

action is not a ‘‘significant regulatory

action’’ under the criteria set forth in

Executive Order 12866.

The PBGC has determined that the

notice and comment requirements of the

Administrative Procedure Act (5 U.S.C.

553(b)) do not apply to this final rule.

The PBGC previously notified the

public of the primary changes made by

this rule and provided an opportunity

for public comment. None of the

amendments in this rule (including

those that clarify the regulations or

remove or replace provisions made

obsolete by the passage of time or by

subsequent statutory or regulatory

changes) affects applicable substantive

legal requirements. Therefore, the PBGC

has, for good cause, found that further

notice and public procedure thereon are

unnecessary.

For the same reasons, the PBGC finds

pursuant to section 553(d)(3) of the

Administrative Procedure Act (5 U.S.C.

553(d)(3)) that there is good cause to

make this rule effective less than 30

days from the date of its publication.

The PBGC also certifies that the

amendments in this regulation will not

have a significant economic impact on

a substantial number of small entities.

Accordingly, as provided in section

605(b) of the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.), sections 603 and

604 of the Regulatory Flexibility Act do

not apply. None of the amendments in

this rule affects applicable substantive

legal requirements.

Issued in Washington, DC, on the 24th day

of June 1996.

Robert B. Reich,

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.

James J. Keightley,

Secretary, Board of Directors Pension Benefit

Guaranty Corporation.

List of Subjects in 29 CFR Chapters

XXVI and XL

Parts 2601 and 4002

Authority delegations (Government

agencies), Organization and functions

(Government agencies).

Part 2602

Conflict of interests, Government

employees, Penalties, Political activities

(Government employees), Production

and disclosure of information,

Testimony.

Parts 2603 and 4901

Freedom of Information.

Parts 2604 and 4906

Administrative practice and

procedure, Conflict of interests,

Penalties.

Parts 2606 and 4003

Administrative practice and

procedure, Organization and functions
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34003

(Government agencies), Pension

insurance, Pensions.

Parts 2607 and 4902

Privacy.

Parts 2608 and 4907

Blind, Civil rights, Deaf, Disabled,

Discrimination against handicapped,

Equal employment opportunity, Federal

buildings and facilities, Handicapped,

Nondiscrimination, Physically

handicapped.

Parts 2609 and 4903

Administrative practice and

procedure, Claims, Organization and

functions (Government agencies).

Part 2610 and 4007

Penalties, Pension insurance,

Pensions, Reporting and recordkeeping

requirements.

Parts 2611, 2615, 2616, 2617, 2623,

2642, 2674, 4022, 4041, 4041A, 4065,

4211, and 4245

Pension insurance, Pensions,

Reporting and recordkeeping

requirements.

Parts 2612 and 4068

Business and industry, Pension

insurance, Pensions, Small businesses.

Parts 2613, 2618, 2619, 2620, 2621,

2640, 2670, 4006, 4022, 4022B, 4044,

and 4061

Pension insurance, Pensions.

Parts 2622, 2643, 4062, 4063, 4064, and

4204

Business and industry, Pension

insurance, Pensions, Reporting and

recordkeeping requirements, Small

businesses.

Parts 2641 and 4221

Business and industry, Pensions,

Small businesses.

Parts 2644, 2645, 2647, 2649, 2676,

2677, 4203, 4206, 4207, and 4220

Pensions.

Parts 2627, 2628, 2629, 2646, 2648,

2672, 2675, 4001, 4010, 4050, 4208,

4219, 4231, 4261, and 4281

Pensions, Reporting and

recordkeeping requirements.

Part 2673

Pension insurance.

Part 4000

Administrative practice and

procedure, Authority delegations

(Government agencies), Blind, Business

and industry, Civil rights, Claims,

Conflict of interests, Deaf, Disabled,

Discrimination against handicapped,

Equal employment opportunity, Federal

buildings and facilities, Freedom of

Information, Government employees,

Handicapped, Nondiscrimination,

Organization and functions

(Government agencies), Penalties,

Pension insurance, Pensions, Physically

handicapped, Political activities

(Government employees), Privacy,

Production and disclosure of

information, Reporting and

recordkeeping requirements, Small

businesses, Testimony.

Part 4001

Business and industry, Organization

and functions (Government agencies),

Pension insurance, Pensions, Small

businesses.

Part 4903

Conflict of interests, Government

employees, Penalties, Political activities

(Government employees).

Part 4904

Government employees, Penalties,

Production and disclosure of

information, Testimony.

For the reasons set forth above, the

PBGC is amending subtitle B of title 29

of the Code of Federal Regulations as

follows:

CHAPTER XXVI—[REMOVED]

1. Chapter XXVI is removed.

2. Chapter XL is added to read as

follows:

CHAPTER XL—PENSION BENEFIT

GUARANTY CORPORATION

SUBCHAPTER A—GENERAL

Part 4000—Finding Aids

Sec.

4000.1 Distribution table.

4000.2 Derivation table.

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

Part 4001—Terminology

Sec.

4001.1 Purpose and scope.

4001.2 Definitions.

4001.3 Trades or businesses under common

control; controlled groups.

Authority: 29 U.S.C. 1301(a), 1301(b)(1),

1302(b)(3).

Part 4002—Bylaws of the Pension Benefit

Guaranty Corporation

Sec.

4002.1 Name.

4002.2 Offices.

4002.3 Board of Directors.

4002.4 Chairman.

4002.5 Quorum.

4002.6 Meetings.

4002.7 Place of meetings; use of conference

call communications equipment.

4002.8 Alternate voting procedure.

4002.9 Amendments.

Authority: 29 U.S.C. 1302(f).

Part 4003—Rules for Administrative Review

of Agency Decisions

Subpart A—General Provisions

Sec.

4003.1 Purpose and scope.

4003.2 Definitions.

4003.3 PBGC assistance in obtaining

information.

4003.4 Extension of time.

4003.5 Non-timely request for review.

4003.6 Representation.

4003.7 Exhaustion of administrative

remedies.

4003.8 Request for confidential treatment.

4003.9 Filing of documents.

4003.10 Computation of time.

Subpart B—Initial Determinations

4003.21 Form and contents of initial

determinations.

4003.22 Effective date of determinations.

Subpart C—Reconsideration of Initial

Determinations

4003.31 Who may request reconsideration.

4003.32 When to request reconsideration.

4003.33 Where to submit request for

reconsideration.

4003.34 Form and contents of request for

reconsideration.

4003.35 Final decision on request for

reconsideration.

Subpart D—Administrative Appeals

4003.51 Who may appeal or participate in

appeals.

4003.52 When to file.

4003.53 Where to file.

4003.54 Contents of appeal.

4003.55 Opportunity to appear and to

present witnesses.

4003.56 Consolidation of appeals.

4003.57 Appeals affecting third parties.

4003.58 Powers of the Appeals Board.

4003.59 Decision by the Appeals Board.

4003.60 Referral of appeal to the Executive

Director.

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

SUBCHAPTER B—PREMIUMS

Part 4006—Premium Rates

Sec.

4006.1 Purpose and scope.

4006.2 Definitions.

4006.3 Premium rate.

4006.4 Determination of unfunded vested

benefits.

4006.5 Exemptions and special rules.

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

1307.

Part 4007—Payment of Premiums

Sec.

4007.1 Purpose and scope.

4007.2 Definitions.

4007.3 Filing requirement and forms.

4007.4 Filing address.

4007.5 Date of filing.

4007.6 Computation of time.

4007.7 Late payment interest charges.

4007.8 Late payment penalty charges.

4007.9 Coverage for guaranteed basic

benefits.

4007.10 Recordkeeping requirements; PBGC

audits.
34004 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

4007.11 Due dates.

4007.12 Liability for single-employer

premiums.

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

1307.

SUBCHAPTER C—CERTAIN REPORTING

AND DISCLOSURE REQUIREMENTS

Part 4010—Annual Financial and Actuarial

Information Reporting

Sec.

4010.1 Purpose and scope.

4010.2 Definitions.

4010.3 Filing requirement.

4010.4 Filers.

4010.5 Information year.

4010.6 Information to be filed.

4010.7 Identifying information.

4010.8 Plan actuarial information.

4010.9 Financial information.

4010.10 Due date and filing with the PBGC.

4010.11 Waivers and extensions.

4010.12 Confidentiality of information

submitted.

4010.13 Penalties.

4010.14 OMB control number.

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

1310.

Part 4011—Disclosure to Participants

Sec.

4011.1 Purpose and scope.

4011.2 Definitions.

4011.3 Notice requirement.

4011.4 Small plan rules.

4011.5 Exemption for new and newlycovered plans.

4011.6 Mergers, consolidations, and

spinoffs.

4011.7 Persons entitled to receive notice.

4011.8 Time of notice.

4011.9 Manner of issuance of notice.

4011.10 Form of notice.

4011.11 OMB control number.

Appendix A to part 4011—Model participant

notice.

Appendix B to part 4011—Table of maximum

guaranteed benefits.

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

SUBCHAPTER D—COVERAGE AND

BENEFITS

Part 4022—Benefits Payable in Terminated

Single-Employer Plans

Subpart A—General Provisions; Guaranteed

Benefits

Sec.

4022.1 Purpose and scope.

4022.2 Definitions.

4022.3 Guaranteed benefits.

4022.4 Entitlement to a benefit.

4022.5 Determination of nonforfeitable

benefits.

4022.6 Annuity payable for total disability.

4022.7 Benefits payable in a single

installment.

Subpart B—Limitations on Guaranteed

Benefits

4022.21 Limitations; in general.

4022.22 Maximum guaranteeable benefit.

4022.23 Computation of maximum

guaranteeable benefit.

4022.24 Benefit increases.

4022.25 Five-year phase-in of benefit

guarantee for participants other than

substantial owners.

4022.26 Phase-in of benefit guarantee for

participants who are substantial owners.

4022.27 Effect of tax disqualification.

Subpart C—Calculation and Payment of

Unfunded Nonguaranteed Benefits

[Reserved]

Subpart D—Benefit Reductions in

Terminating Plans

4022.61 Limitations on benefit payments by

plan administrator.

4022.62 Estimated guaranteed benefit.

4022.63 Estimated title IV benefit.

Subpart E—PBGC Recoupment and

Reimbursement of Benefit Overpayments

and Underpayments

4022.81 General rules.

4022.82 Method of recoupment.

4022.83 PBGC reimbursement of benefit

underpayments.

Appendix to Part 4022—Maximum

Guaranteeable Monthly Benefit

Authority: 29 U.S.C. 1302(b)(3), 1322,

1322b, 1341(c)(3)(D), 1344.

Part 4022B—Aggregate Limits on

Guaranteed Benefits

Sec.

4022B.1 Aggregate payments limitation.

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

SUBCHAPTER E—PLAN TERMINATIONS

Part 4041—Termination of Single-Employer

Plans

Subpart A—General Provisions

Sec.

4041.1 Purpose and scope.

4041.2 Definitions.

4041.3 Requirements for a standard or a

distress termination.

4041.4 Administration of plan during

pendency of termination proceedings.

4041.5 Challenges to plan termination

under collective bargaining agreement.

4041.6 Annuity requirements.

4041.7 Facilitating plan sufficiency in a

standard termination.

4041.8 Disaster relief—distress termination.

4041.9 Filing with the PBGC.

4041.10 Computation of time.

4041.11 Maintenance of plan records.

4041.12 Information collection.

Subpart B—Standard Terminations

4041.21 Notice of intent to terminate.

4041.22 Issuance of notices of plan benefits.

4041.23 Form and contents of notices of

plan benefits.

4041.24 Standard termination notice.

4041.25 PBGC action upon filing of

standard termination notice.

4041.26 Notice of noncompliance.

4041.27 Closeout of plan.

Subpart C—Distress Terminations

4041.41 Notice of intent to terminate.

4041.42 PBGC review of notice of intent to

terminate.

4041.43 Distress termination notice.

4041.44 PBGC determination of compliance

with requirements for distress

termination.

4041.45 PBGC determination of plan

sufficiency/insufficiency.

4041.46 Notices of benefit distribution.

4041.47 Verification of plan sufficiency

prior to closeout.

4041.48 Closeout of plan.

Appendix to Part 4041—Agreement for

Commitment to Make Plan Sufficient for

Benefit Liabilities

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

1344.

Part 4041A—Termination of Multiemployer

Plans

Subpart A—General Provisions

Sec.

4041A.1 Purpose and scope.

4041A.2 Definitions.

4041A.3 Submission of documents.

Subpart B—Notice of Termination

4041A.11 Requirement of notice.

4041A.12 Contents of notice.

Subpart C—Plan Sponsor Duties

4041A.21 General rule.

4041A.22 Payment of benefits.

4041A.23 Imposition and collection of

withdrawal liability.

4041A.24 Annual plan valuations and

monitoring.

4041A.25 Periodic determinations of plan

solvency.

4041A.26 Financial assistance.

4041A.27 PBGC approval to pay benefits

not otherwise permitted.

Subpart D—Closeout of Sufficient Plans

4041A.41 General rule.

4041A.42 Method of distribution.

4041A.43 Benefit forms.

4041A.44 Cessation of withdrawal liability.

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

1441.

Part 4043—Reportable Events and Certain

Other Notification Requirements

Subpart A—Reportable Events; In General

Sec.

4043.1 Purpose and scope.

4043.2 Definitions.

4043.3 Requirement of notice.

4043.4 Reporting of reportable events on

annual report.

4043.5 Obligation of contributing sponsor.

4043.6 Date of filing.

4043.7 Computation of time.

4043.11 Tax disqualification.

4043.12 Title I non-compliance.

4043.13 Amendment decreasing benefits

payable.

4043.14 Active participant reduction.

4043.15 Termination or partial termination.

4043.16 Failure to meet minimum funding

standards and granting of funding

waiver.

4043.17 Inability to pay benefits when due.

4043.18 Distribution to a substantial owner.

4043.19 Plan merger, consolidation or

transfer.

4043.20 Alternative compliance with

reporting and disclosure requirements of

Title I.

4043.21 Bankruptcy, insolvency, or similar

settlements.

4043.22 Liquidation or dissolution.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34005

4043.23 Transactions involving a change in

contributing sponsor or controlled group.

Subpart B—Section 302(f); Notice of Failure

to Make Required Contributions

4043.31 PBGC Form 200, notice of failure to

make required contributions.

Authority: 29 U.S.C. 1302(b)(3), 1343,

1365.

Part 4044—Allocation of Assets in SingleEmployer Plans

Subpart A—Allocation of Assets

General Provisions

Sec.

4044.1 Purpose and scope of subpart A.

4044.2 Definitions.

4044.3 General rule.

4044.4 Violations.

Allocation of Assets to Benefit Categories

4044.10 Manner of allocation.

4044.11 Priority category 1 benefits.

4044.12 Priority category 2 benefits.

4044.13 Priority category 3 benefits.

4044.14 Priority category 4 benefits.

4044.15 Priority category 5 benefits.

4044.16 Priority category 6 benefits.

4044.17 Subclasses.

Allocation of Residual Assets

4044.30 [Reserved.]

Subpart B—Valuation of Benefits and Assets

4044.41 General valuation rules.

Trusteed Plans

4044.51 Benefits to be valued.

4044.52 Valuation of benefits.

4044.53 Mortality assumptions—in general.

4044.54 Mortality assumptions—lump

sums.

Expected Retirement Age

4044.55 XRA when a participant must retire

to receive a benefit.

4044.56 XRA when a participant need not

retire to receive a benefit.

4044.57 Special rule for facility closing.

Non-Trusteed Plans

4044.71 Valuation of annuity benefits.

4044.72 Form of annuity to be valued.

4044.73 Lump sums and other alternative

forms of distribution in lieu of annuities.

4044.74 Withdrawal of employee

contributions.

4044.75 Other lump sum benefits.

Appendix A to Part 4044—Mortality Rate

Tables

Appendix B to Part 4044—Interest Rates

Used to Value Annuities and Lump

Sums

Appendix C to Part 4044—Loading

Assumptions

Appendix D to Part 4044—Tables Used To

Determine Expected Retirement Age

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

1341, 1344, 1362.

Part 4047—Restoration of Terminating and

Terminated Plans

Sec.

4047.1 Purpose and scope.

4047.2 Definitions.

4047.3 Funding of restored plan.

4047.4 Payment of premiums.

4047.5 Repayment of PBGC payments of

guaranteed benefits.

Authority: 29 U.S.C. 1302(b)(3), 1347.

Part 4050—Missing Participants

Sec.

4050.1 Purpose and scope.

4050.2 Definitions.

4050.3 Method of distribution for missing

participants.

4050.4 Diligent search.

4050.5 Designated benefit.

4050.6 Payment and required

documentation.

4050.7 Benefits of missing participants—in

general.

4050.8 Automatic lump sum.

4050.9 Annuity or elective lump sum—

living missing participant.

4050.10 Annuity or elective lump sum—

beneficiary of deceased missing

participant.

4050.11 Limitations.

4050.12 Special rules.

4050.13 OMB control number.

SUBCHAPTER F—LIABILITY

Part 4061—Amounts Payable by the

Pension Benefit Guaranty Corporation

Sec.

4061.1 Cross-references.

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

Part 4062—Liability for Termination of

Single-Employer Plans

Sec.

4062.1 Purpose and scope.

4062.2 Definitions.

4062.3 Amount and payment of section

4062(b) liability.

4062.4 Determinations of net worth and

collective net worth.

4062.5 Net worth record date.

4062.6 Net worth notification and

information.

4062.7 Calculating interest on liability and

refunds of overpayments.

4062.8 Arrangements for satisfying liability.

4062.9 Notification of and demand for

liability.

4062.10 Filing of documents.

4062.11 Computation of time.

Part 4063—Withdrawal Liability; Plans

Under Multiple Controlled Groups

Sec.

4063.1 Cross-references.

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

Part 4064—Liability on Termination of

Single-Employer Plans Under Multiple

Controlled Groups

Sec.

4064.1 Cross-references.

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

SUBCHAPTER G—ANNUAL REPORTING

REQUIREMENTS

Part 4065—Annual Report

Sec.

4065.1 Purpose and scope.

4065.2 Definitions.

4065.3 Filing requirement.

Authority: 29 U.S.C. 1302, 1365.

SUBCHAPTER H—ENFORCEMENT

PROVISIONS

Part 4067—Recovery of Liability for Plan

Terminations

Sec.

4067.1 Cross-reference.

Authority: 29 U.S.C. 1302, 1367.

Part 4068—Lien for Liability

Sec.

4068.1 Purpose; cross-references.

4068.2 Definitions.

4068.3 Notification of and demand for

liability.

4068.4 Lien.

Authority: 29 U.S.C. 1302(b)(3), 1368.

SUBCHAPTER I—WITHDRAWAL

LIABILITY FOR MULTIEMPLOYER PLANS

Part 4203—Extension of Special Withdrawal

Liability Rules

Sec.

4203.1 Purpose and scope.

4203.2 Plan adoption of special withdrawal

rules.

4203.3 Requests for PBGC approval of plan

amendments.

4203.4 PBGC action on requests.

4203.5 OMB control number.

Authority: 29 U.S.C. 1302(b)(3), 1383(f),

1388(e)(3).

Part 4204—Variances for Sale of Assets

Subpart A—General

Sec.

4204.1 Purpose and scope.

4204.2 Definitions.

Subpart B—Variance of the Statutory

Requirements

4204.11 Variance of the bond/escrow and

sale-contract requirements.

4204.12 De minimis transactions.

4204.13 Net income and net tangible assets

tests.

Subpart C—Procedures for Individual and

Class Variances or Exemptions

4204.21 Requests to PBGC for variances and

exemptions.

4204.22 PBGC action on requests.

Authority: 29 U.S.C. 1302(b)(3), 1384(c).

Part 4206—Adjustment of Liability for a

Withdrawal Subsequent to a Partial

Withdrawal

Sec.

4206.1 Purpose and scope.

4206.2 Definitions.

4206.3 Credit against liability for a

subsequent withdrawal.

4206.4 Amount of credit in plans using the

presumptive method.

4206.5 Amount of credit in plans using the

modified presumptive method.

4206.6 Amount of credit in plans using the

rolling-5 method.

4206.7 Amount of credit in plans using the

direct attribution method.

4206.8 Reduction of credit for abatement or

other reduction of prior partial

withdrawal liability.

4206.9 Amount of credit in plans using

alternative allocation methods.
34006 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

4206.10 Special rule for 70-percent decline

partial withdrawals.

Authority: 29 U.S.C. 1302(b)(3), 1386(b).

Part 4207—Reduction or Waiver of

Complete Withdrawal Liability

Sec.

4207.1 Purpose and scope.

4207.2 Definitions.

4207.3 Abatement.

4207.4 Withdrawal liability payments

during pendency of abatement

determination.

4207.5 Requirements for abatement.

4207.6 Partial withdrawals after reentry.

4207.7 Liability for subsequent complete

withdrawals and related adjustments for

allocating unfunded vested benefits.

4207.8 Liability for subsequent partial

withdrawals.

4207.9 Special rules.

4207.10 Plan rules for abatement.

Authority: 29 U.S.C. 1302(b)(3), 1387.

Part 4208—Reduction or Waiver of Partial

Withdrawal Liability

Sec.

4208.1 Purpose and scope.

4208.2 Definitions.

4208.3 Abatement.

4208.4 Conditions for abatement.

4208.5 Withdrawal liability payments

during pendency of abatement

determination.

4208.6 Computation of reduced annual

partial withdrawal liability payment.

4208.7 Adjustment of withdrawal liability

for subsequent withdrawals.

4208.8 Multiple partial withdrawals in one

plan year.

4208.9 Plan adoption of additional

abatement conditions.

Authority: 29 U.S.C. 1302(b)(3), 1388 (c)

and (e).

Part 4211—Allocating Unfunded Vested

Benefits

Subpart A—General

Sec.

4211.1 Purpose and scope.

4211.2 Definitions.

4211.3 Special rules for construction

industry and IRC section 404(c) plans.

Subpart B—Changes Not Subject to PBGC

Approval

4211.11 Changes not subject to PBGC

approval.

4211.12 Modifications to the presumptive,

modified presumptive and rolling-5

methods.

4211.13 Modifications to the direct

attribution method.

Subpart C—Changes Subject to PBGC

Approval

4211.21 Changes subject to PBGC approval.

4211.22 Requests for PBGC approval.

4211.23 Approval of alternative method.

4211.24 Special rule for certain alternative

methods previously approved.

Subpart D—Allocation Methods for Merged

Multiemployer Plans

4211.31 Allocation of unfunded vested

benefits following the merger of plans.

4211.32 Presumptive method for

withdrawals after the initial plan year.

4211.33 Modified presumptive method for

withdrawals after the initial plan year.

4211.34 Rolling-5 method for withdrawals

after the initial plan year.

4211.35 Direct attribution method for

withdrawals after the initial plan year.

4211.36 Modifications to the determination

of initial liabilities, the amortization of

initial liabilities, and the allocation

fraction.

4211.37 Allocating unfunded vested

benefits for withdrawals before the end

of the initial plan year.

Authority: 29 U.S.C. 1302(b)(3), 1391

(c)(1), (c)(2)(D), (c)(5)(A), (c)(5)(B), (c)(5) (D),

and (f).

Part 4219—Notice, Collection, and

Redetermination of Withdrawal Liability

Subpart A—General

Sec.

4219.1 Purpose and scope.

4219.2 Definitions.

Subpart B—Redetermination of Withdrawal

Liability Upon Mass Withdrawal

4219.11 Withdrawal liability upon mass

withdrawal.

4219.12 Employers liable upon mass

withdrawal.

4219.13 Amount of liability for de minimis

amounts.

4219.14 Amount of liability for 20-yearlimitation amounts.

4219.15 Determination of reallocation

liability.

4219.16 Imposition of liability.

4219.17 Filings with PBGC.

4219.18 Withdrawal in a plan year in which

substantially all employers withdraw.

4219.19 Information collection.

Subpart C—Overdue, Defaulted, and

Overpaid Withdrawal Liability

Sec.

4219.31 Overdue and defaulted withdrawal

liability; overpayment.

4219.32 Interest on overdue, defaulted and

overpaid withdrawal liability.

4219.34 Plan rules concerning overdue and

defaulted withdrawal liability.

Authority: 29 U.S.C. 1302(b)(3), 1389 (c)

and (d), 1399 (c)(1)(D) and (c)(6).

Part 4220—Procedures for PBGC Approval

of Plan Amendments

Sec.

4220.1 Purpose and scope.

4220.2 Requests for PBGC approval.

4220.3 PBGC action on requests.

Authority: 29 U.S.C. 1302(b)(3), 1400.

Part 4221—Arbitration of Disputes in

Multiemployer Plans

Sec.

4221.1 Purpose and scope.

4221.2 Definitions.

4221.3 Initiation of arbitration.

4221.4 Appointment of the arbitrator.

4221.5 Powers and duties of the arbitrator.

4221.6 Hearing.

4221.7 Reopening of proceedings.

4221.8 Award.

4221.9 Reconsideration of award.

4221.10 Costs.

4221.11 Waiver of rules.

4221.12 Calculation of periods of time.

4221.13 Filing or service of documents.

4221.14 PBGC-approved arbitration

procedures.

Authority: 29 U.S.C. 1302(b)(3), 1401.

SUBCHAPTER J—INSOLVENCY,

REORGANIZATION, TERMINATION, AND

OTHER RULES APPLICABLE TO

MULTIEMPLOYER PLANS

Part 4231—Mergers and Transfers Between

Multiemployer Plans

Sec.

4231.1 Purpose and scope.

4231.2 Definitions.

4231.3 Requirements for mergers and

transfers.

4231.4 Preservation of accrued benefits.

4231.5 Valuation requirement.

4231.6 Plan solvency tests.

4231.7 De minimis mergers and transfers.

4231.8 Notice of merger or transfer.

4231.9 Request for compliance

determination.

4231.10 Actuarial calculations and

assumptions.

Authority: 29 U.S.C. 1302(b)(3), 1411.

Part 4245—Notice of Insolvency

Sec.

4245.1 Purpose and scope.

4245.2 Definitions.

4245.3 Notice of insolvency.

4245.4 Contents of notice of insolvency.

4245.5 Notice of insolvency benefit level.

4245.6 Contents of notice of insolvency

benefit level.

4245.7 PBGC address.

Authority: 29 U.S.C. 1302(b)(3), 1426(e).

Part 4261—Financial Assistance to

Multiemployer Plans

Sec.

4261.1 Cross-reference.

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

Part 4281—Duties of Plan Sponsor

Following Mass Withdrawal

Subpart A—General

Sec.

4281.1 Purpose and scope.

4281.2 Definitions.

4281.3 Submission of documents.

4281.4 Collection of information.

Subpart B—Valuation of Plan Benefits and

Plan Assets

4281.11 Valuation dates.

4281.12 Benefits to be valued.

4281.13 Benefit valuation methods—in

general.

4281.14 Mortality assumptions—in general.

4281.15 Mortality assumptions—lump

sums under trusteed plans.

4281.16 Benefit valuation methods—plans

closing out.

4281.17 Asset valuation methods—in

general.

4281.18 Outstanding claims for withdrawal

liability.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34007

Subpart C—Benefit Reductions

4281.31 Plan amendment.

4281.32 Notices of benefit reductions.

4281.33 Restoration of benefits.

Subpart D—Benefit Suspensions

4281.41 Benefit suspensions.

4281.42 Retroactive payments.

4281.43 Notices of insolvency and annual

updates.

4281.44 Contents of notices of insolvency

and annual updates.

4281.45 Notices of insolvency benefit level.

4281.46 Contents of notices of insolvency

benefit level.

4281.47 Application for financial

assistance.

Appendix A to Part 4281—Interest Rates

Used to Value Lump Sums and

Annuities

Appendix B to Part 4281—Loading

Assumptions

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

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

SUBCHAPTER K—INTERNAL AND

ADMINISTRATIVE RULES AND

PROCEDURES

Part 4901—Examination and Copying of

Pension Benefit Guaranty Corporation

Records

Subpart A—General

Sec.

4901.1 Purpose and scope.

4901.2 Definitions.

4901.3 Disclosure facilities.

4901.4 Information maintained in public

reference room.

4901.5 Disclosure of other information.

Subpart B—Procedure for Formal Requests

4901.11 Submittal of requests for access to

records.

4901.12 Description of information

requested.

4901.13 Receipt by agency of request.

4901.14 Action on request.

4901.15 Appeals from denial of requests.

4901.16 Extensions of time.

4901.17 Exhaustion of administrative

remedies.

Subpart C—Restrictions on Disclosure

4901.21 Restrictions in general.

4901.22 Partial disclosure.

4901.23 Records of concern to more than

one agency.

4901.24 Special rules for trade secrets and

confidential commercial or financial

information submitted to the PBGC.

Subpart D—Fees

4901.31 Charges for services.

4901.32 Fee schedule.

4901.33 Payment of fees.

4901.34 Waiver or reduction of charges.

Authority: 5 U.S.C. 552; 29 U.S.C.

1302(b)(3); E.O. 12600, 52 FR 23781.

Part 4902—Disclosure and Amendment of

Records Under the Privacy Act

Sec.

4902.1 Purpose and scope.

4902.2 Definitions.

4902.3 Procedures for determining

existence of and requesting access to

records.

4902.4 Disclosure of record to an

individual.

4902.5 Procedures for requesting

amendment of a record.

4902.6 Action on request for amendment of

a record.

4902.7 Appeal of a denial of a request for

amendment of a record.

4902.8 Fees.

4902.9 Specific exemptions.

Authority: 5 U.S.C. 552a; 29 U.S.C.

1302(b)(3).

Part 4903—Debt Collection

Subpart A—General

Sec.

4903.1 Purpose and scope.

4903.2 General.

4903.3 Definitions.

Subpart B—Administrative Offset

4903.21 Application of Federal Claims

Collection Standards.

4903.22 Administrative offset procedures.

4903.23 PBGC requests for offset to other

agencies.

4903.24 Requests for offset from other

agencies.

Subpart C—Tax Refund Offset

4903.31 Eligibility of debt for tax refund

offset.

4903.32 Tax refund offset procedures.

4903.33 Referral of debt for tax refund

offset.

Subpart D—Salary Offset [Reserved]

Authority: 29 U.S.C. 1302(b); 31 U.S.C.

3701, 3711(f), 3720A; 4 CFR part 102; 26 CFR

301.6402–6.

Part 4904—Ethical Conduct of Employees

Sec.

4904.1 Ethical conduct; standards and

requirements.

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

Part 4905—Appearances in Certain

Proceedings

Sec.

4905.1 Purpose and scope.

4905.2 Definitions.

4905.3 General.

4905.4 Appearances by PBGC employees.

4905.5 Requests for authenticated copies of

PBGC records.

4905.6 Penalty.

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

Part 4906—[Reserved]

Part 4907—Enforcement of

Nondiscrimination on the Basis of Handicap

in Programs or Activities Conducted by the

Pension Benefit Guaranty Corporation

Sec.

4907.101 Purpose.

4907.102 Application.

4907.103 Definitions.

4907.110 Self-evaluation.

4907.111 Notice.

4907.130 General prohibitions against

discrimination.

4907.140 Employment.

4907.149 Program accessibility:

Discrimination prohibited.

4907.150 Program accessibility: Existing

facilities.

4907.151 Program accessibility: New

construction and alterations.

4907.160 Communications.

4907.170 Compliance procedures.

Authority: 29 U.S.C. 794, 1302(b)(3).

PART 4000—FINDING AIDS

Sec.

4000.1 Distribution table.

4000.2 Derivation table.

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

§ 4000.1 Distribution table.

The following table shows where in

chapter XL of 29 CFR to find regulations

previously codified in chapter XXVI.

Ch. XXVI Part

Subpart(s)/Section(s)

Ch. XL Part(s)/Subpart(s)

Subpart(s)/Section(s)

Subchapter A—Internal and Administrative Rules

2601 .......................................................................................................... 4002

2602:

Subpart A ........................................................................................... 4904

Subpart B ........................................................................................... 4905

2603 .......................................................................................................... 4901

2604 .......................................................................................................... Repealed

2606 .......................................................................................................... 4003

2607 .......................................................................................................... 4902

2608 .......................................................................................................... 4907

2609 .......................................................................................................... 4903
34008 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Ch. XXVI Part

Subpart(s)/Section(s)

Ch. XL Part(s)/Subpart(s)

Subpart(s)/Section(s)

Subchapter B—Rules Applicable to Single-Employer and Multiemployer Plans

2610 .......................................................................................................... 4006 & 4007

§§ 2610.1, 2610.21, 2610.31 ............................................................. §§ 4006.1 & 4007.1

§§ 2610.2 ........................................................................................... §§ 4006.2 & 4007.2

§§ 2610.3–2610.9 & 2610.11 ............................................................ 4007

§ 2610.10 ........................................................................................... 4006.5(e)

§§ 2610.22–2610.24 & 2610.33 ........................................................ 4006

§§ 2610.25, 2610.26 & 2610.34 ........................................................ 4007

2611 .......................................................................................................... 4065

2612 .......................................................................................................... 4001, Subpart B

2613 .......................................................................................................... 4022, Subpart A

Subchapter C—Single-Employer Plans

2615 .......................................................................................................... 4043

2616 .......................................................................................................... 4041

Subpart A ........................................................................................... Subpart A

Subpart B ........................................................................................... Subpart C

2617 .......................................................................................................... 4041

Subpart A ........................................................................................... Subpart A

Subpart B ........................................................................................... Subpart B

2618 .......................................................................................................... 4044, Subpart A

2619 .......................................................................................................... 4044, Subpart B

2620 .......................................................................................................... 4044, Subpart B

2621 (except § 2621.23(b)) ....................................................................... 4022, Subpart B

2621.23(b) ................................................................................................. 4022B

2622 (except 2622.9) ................................................................................ 4062

§ 2622.9 ............................................................................................. 4068

2623 .......................................................................................................... 4022, Subparts D & E

2625 .......................................................................................................... 4047

2627 .......................................................................................................... 4011

2628 .......................................................................................................... 4010

2629 .......................................................................................................... 4050

Subchapter F—Withdrawal Liability in Multiemployer Plans

2640:

§ 2640.2 ............................................................................................. § 4001.2

§ 2640.3 ............................................................................................. § 4221.2

§ 2640.4 ............................................................................................. § 4211.2

§ 2640.5 ............................................................................................. § 4204.2

§ 2640.6 ............................................................................................. § 4207.2, 4208.2

§ 2640.7 ............................................................................................. § 4219.2

§ 2640.8 ............................................................................................. § 4206.2

2641 .......................................................................................................... 4221

2642 .......................................................................................................... 4211

2643 .......................................................................................................... 4204

2644 .......................................................................................................... 4219, Subpart C

2645 .......................................................................................................... 4203

2646 .......................................................................................................... 4208

2647 .......................................................................................................... 4207

2648 .......................................................................................................... 4219, Subpart B

2649 .......................................................................................................... 4206

Subchapter H—Other Rules Applicable to Multiemployer Plans

2670:

§ 2670.2 ............................................................................................. § 4001.2

§ 2670.3 ............................................................................................. § 4231.2

§ 2670.4 ............................................................................................. §§ 4041A.2, 4245.2, & 4281.2

2672 .......................................................................................................... 4231

2673 .......................................................................................................... 4041A, Subpart B, & 4041A.3(a)

2674 .......................................................................................................... 4245

2675 .......................................................................................................... 4041A, Subparts C & D, & 4281, Subparts C & D

2676 .......................................................................................................... 4281, Subpart B

2677 .......................................................................................................... 4220

§ 4000.2 Derivation table.

The following table shows where in previous chapter XXVI of 29 CFR to find regulations now codified in chapter

XL.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34009

Ch. XL Part

Subpart/Section(s)

Ch. XXVI Part(s)

Subpart/Section(s)

Subchapter A—General

4000 .......................................................................................................... [tables]

4001:

Subpart A ........................................................................................... [various statutory and regulatory definitions]

Subpart B ........................................................................................... 2612

4002 .......................................................................................................... 2601

4003 .......................................................................................................... 2606

Subchapter B—Premiums

4006 .......................................................................................................... 2610

4007 .......................................................................................................... 2610

Subchapter C—Certain Reporting and Disclosure Requirements

4010 .......................................................................................................... 2628

4011 .......................................................................................................... 2627

Subchapter D—Coverage and Benefits

4022:

Subpart A ........................................................................................... 2613

Subpart B ........................................................................................... 2621 (except § 2621.23(b))

Subparts D & E ................................................................................. 2623

4022B ........................................................................................................ § 2621.23(b)

Subchapter E—Plan Terminations

4041:

Subpart A ........................................................................................... §§ 2616 & 2617, Subparts A

Subpart B ........................................................................................... 2617, Subpart B

Subpart C .......................................................................................... 2616, Subpart B

4041A:

Subpart A ........................................................................................... §§ 2670.4, 2673.1, 2673.4, 2675.1 & 2675.2

Subpart B ........................................................................................... §§ 2673.2 & .3

Subparts C & D ................................................................................. 2675, Subparts B & E

4043 .......................................................................................................... 2615

4044 .......................................................................................................... 2618, 2619 & 2620

4047 .......................................................................................................... 2625

4050 .......................................................................................................... 2629

Subchapter F—Liability

4061 .......................................................................................................... [cross-references]

4062 .......................................................................................................... 2622 (except § 2622.9)

4063 .......................................................................................................... [cross-references]

4064 .......................................................................................................... [cross-references]

Subchapter G—Annual Reporting Requirements

4065 .......................................................................................................... 2611

Subchapter H—Enforcement Provisions

4067 .......................................................................................................... [cross-reference]

4068 .......................................................................................................... 2622.9

Subchapter I—Withdrawal Liability in Multiemployer Plans

4203 .......................................................................................................... 2645

4204 .......................................................................................................... 2643 & § 2640.5

4206 .......................................................................................................... 2649 & § 2640.8

4207 .......................................................................................................... 2647 & 2640.6

4208 .......................................................................................................... 2646 & 2640.6

4211 .......................................................................................................... 2642 & 2640.4

4219:

Subpart A ........................................................................................... § 2640.7

Subpart B ........................................................................................... 2648

Subpart C .......................................................................................... 2644

4220 .......................................................................................................... 2677

4221 .......................................................................................................... 2641 & § 2640.3

Subchapter J—Insolvency, Reorganization, Termination, and Other Rules Applicable to Multiemployer Plans

4231 .......................................................................................................... 2672 & § 2670.3
34010 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Ch. XL Part

Subpart/Section(s)

Ch. XXVI Part(s)

Subpart/Section(s)

4245 .......................................................................................................... 2674 & 2670.4

4261 .......................................................................................................... [cross-reference]

4281:

Subpart A ........................................................................................... 2675, Subpart A, & 2670.4

Subpart B ........................................................................................... 2676

Subpart C .......................................................................................... 2675, Subpart C

Subpart D .......................................................................................... 2675, Subpart D

Subchapter K—Internal Administrative Rules and Procedures

4901 .......................................................................................................... 2603

4902 .......................................................................................................... 2607

4903 .......................................................................................................... 2609

4904 .......................................................................................................... 2602, Subpart A

4905 .......................................................................................................... 2602, Subpart B

4907 .......................................................................................................... 2608

PART 4001—TERMINOLOGY

Sec.

4001.1 Purpose and scope.

4001.2 Definitions.

4001.3 Trades or businesses under common control; controlled groups.

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

§ 4001.1 Purpose and scope.

This part contains definitions of

certain terms used in this chapter and

the regulations under which the PBGC

makes various controlled group

determinations.

§ 4001.2 Definitions.

For purposes of this chapter (unless

otherwise indicated or required by the

context):

Affected party means, with respect to

a plan—

(1) Each participant in the plan;

(2) Each beneficiary of a deceased

participant;

(3) Each alternate payee under an

applicable qualified domestic relations

order, as defined in section 206(d)(3) of

ERISA;

(4) Each employee organization that

currently represents any group of

participants;

(5) For any group of participants not

currently represented by an employee

organization, the employee

organization, if any, that last

represented such group of participants

within the 5-year period preceding

issuance of the notice of intent to

terminate; and

(6) the PBGC. If an affected party has

designated, in writing, a person to

receive a notice on behalf of the affected

party, any reference to the affected party

(in connection with the notice) shall be

construed to refer to such person.

Annuity means a series of periodic

payments to a participant or surviving

beneficiary for a fixed or contingent

period.

Basic-type benefit means a benefit that

is guaranteed under the provisions of

part 4022, subpart A, of this chapter, or

would be guaranteed if the guarantee

limits in part 4022, subpart B, of this

chapter did not apply.

Benefit liabilities means the benefits

of participants and their beneficiaries

under the plan (within the meaning of

section 401(a)(2) of the Code).

Code means the Internal Revenue

Code of 1986, as amended.

Complete withdrawal means a

complete withdrawal as described in

section 4203 of ERISA.

Contributing sponsor means a person

who is a contributing sponsor as defined

in section 4001(a)(13) of ERISA.

Controlled group means, in

connection with any person, a group

consisting of such person and all other

persons under common control with

such person, determined under section

4001.3 of this part. For purposes of

determining the persons liable for

contributions under section

412(c)(11)(B) of the Code or section

302(c)(11)(B) of ERISA, or for premiums

under section 4007(e)(2) of ERISA, a

controlled group also includes any

group treated as a single employer

under section 414 (m) or (o) of the Code.

Corporation means the Pension

Benefit Guaranty Corporation, except

where the context demonstrates that a

different meaning is intended.

Defined benefit plan means a plan

described in section 3(35) of ERISA.

Distress termination means the

voluntary termination of a singleemployer plan in accordance with

section 4041(c) of ERISA and part 4041,

subpart C, of this chapter.

Distribution date means:

(1) Except as provided in paragraph

(2)—

(i) For benefits provided through the

purchase of irrevocable commitments,

the date on which the obligation to

provide the benefits passes from the

plan to the insurer; and

(ii) For benefits provided other than

through the purchase of irrevocable

commitments, the date on which the

benefits are delivered to the participant

or beneficiary (or to another plan or

benefit arrangement or other recipient

authorized by the participant or

beneficiary in accordance with

applicable law and regulations)

personally or by deposit with a mail or

courier service (as evidenced by a

postmark or written receipt); or

(2) Other than for purposes of

determining the interest rate to be used

in calculating the value of a benefit to

be paid as a lump sum to a latediscovered participant, the deemed

distribution date (as defined in § 4050.2)

in the case of a designated benefit paid

to the PBGC, a benefit provided after the

deemed distribution date to a latediscovered participant, or an irrevocable

commitment purchased from an insurer

after the deemed distribution date for a

recently-missing participant in

accordance with part 4050 of this

chapter (dealing with missing

participants).

Employer means all trades or

businesses (whether or not

incorporated) that are under common
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34011

control, within the meaning of § 4001.3

of this chapter.

ERISA means the Employee

Retirement Income Security Act of 1974,

as amended.

Fair market value means the price at

which property would change hands

between a willing buyer and a willing

seller, neither being under any

compulsion to buy or sell and both

having reasonable knowledge of

relevant facts.

FOIA means the Freedom of

Information Act, as amended (5 U.S.C.

552).

Funding standard account means an

account established and maintained

under section 302(b) of ERISA or section

412(b) of the Code.

Guaranteed benefit means a benefit

under a single-employer plan that is

guaranteed by the PBGC under section

4022(a) of ERISA and part 4022 of this

chapter, or a benefit under a

multiemployer plan that is guaranteed

by the PBGC under section 4022A of

ERISA.

Insurer means a company authorized

to do business as an insurance carrier

under the laws of a State or the District

of Columbia.

Irrevocable commitment means an

obligation by an insurer to pay benefits

to a named participant or surviving

beneficiary, if the obligation cannot be

cancelled under the terms of the

insurance contract (except for fraud or

mistake) without the consent of the

participant or beneficiary and is legally

enforceable by the participant or

beneficiary.

IRS means the Internal Revenue

Service.

Mandatory employee contributions

means amounts contributed to the plan

by a participant that are required as a

condition of employment, as a condition

of participation in such plan, or as a

condition of obtaining benefits under

the plan attributable to employer

contributions.

Mass withdrawal means the

withdrawal of every employer from the

plan, or the withdrawal of substantially

all employers pursuant to an agreement

or arrangement to withdraw.

Multiemployer Act means the

Multiemployer Pension Plan

Amendments Act of 1980.

Multiemployer plan means a plan that

is described in section 4001(a)(3) of

ERISA and that is covered by title IV of

ERISA.

Multiple employer plan means a

single-employer plan maintained by two

or more contributing sponsors that are

not members of the same controlled

group, under which all plan assets are

available to pay benefits to all plan

participants and beneficiaries.

Nonbasic-type benefit means any

benefit provided by a plan other than a

basic-type benefit.

Nonforfeitable benefit means a benefit

described in section 4001(a)(8) of

ERISA. Benefits that become

nonforfeitable solely as a result of the

termination of a plan will be considered

forfeitable.

Normal retirement age means the age

specified in the plan as the normal

retirement age. This age shall not exceed

the later of age 65 or the age attained

after 5 years of participation in the plan.

If no normal retirement age is specified

in the plan, it is age 65.

Notice of intent to terminate means

the notice of a proposed termination of

a single-employer plan, as required by

section 4041(a)(2) of ERISA and

§ 4041.21 (in a standard termination) or

§ 4041.41 (in a distress termination) of

this chapter.

PBGC means the Pension Benefit

Guaranty Corporation.

Person means a person defined in

section 3(9) of ERISA.

Plan means a defined benefit plan

within the meaning of section 3(35) of

ERISA that is covered by title IV of

ERISA.

Plan administrator means an

administrator, as defined in section

3(16)(A) of ERISA.

Plan sponsor means, with respect to a

multiemployer plan, the person

described in section 4001(a)(10) of

ERISA.

Plan year means the calendar, policy,

or fiscal year on which the records of

the plan are kept.

Proposed termination date means the

date specified as such by the plan

administrator of a single-employer plan

in a notice of intent to terminate or, if

later, in the standard or distress

termination notice, in accordance with

section 4041 of ERISA and part 4041 of

this chapter.

Single-employer plan means any

defined benefit plan (as defined in

section 3(35) of ERISA) that is not a

multiemployer plan (as defined in

section 4001(a)(3) of ERISA) and that is

covered by title IV of ERISA.

Standard termination means the

voluntary termination, in accordance

with section 4041(b) of ERISA and part

4041, subpart B, of this chapter, of a

single-employer plan that is able to

provide for all of its benefit liabilities

when plan assets are distributed.

Substantial owner means a substantial

owner as defined in section

4022(b)(5)(A) of ERISA.

Sufficient for benefit liabilities means

that there is no amount of unfunded

benefit liabilities, as defined in section

4001(a)(18) of ERISA.

Sufficient for guaranteed benefits

means that there is no amount of

unfunded guaranteed benefits, as

defined in section 4001(a)(17) of ERISA.

Termination date means the date

established pursuant to section 4048(a)

of ERISA.

Title IV benefit means the guaranteed

benefit plus any additional benefits to

which plan assets are allocated pursuant

to section 4044 of ERISA and part 4044

of this chapter.

Voluntary employee contributions

means amounts contributed by an

employee to a plan, pursuant to the

provisions of the plan, that are not

mandatory employee contributions.

§ 4001.3 Trades or businesses under

common control; controlled groups.

For purposes of title IV of ERISA:

(a)(1) The PBGC will determine that

trades and businesses (whether or not

incorporated) are under common

control if they are ‘‘two or more trades

or businesses under common control’’,

as defined in regulations prescribed

under section 414(c) of the Code.

(2) The PBGC will determine that all

employees of trades or businesses

(whether or not incorporated) which are

under common control shall be treated

as employed by a single employer, and

all such trades and businesses shall be

treated as a single employer.

(3) An individual who owns the entire

interest in an unincorporated trade or

business is treated as his own employer,

and a partnership is treated as the

employer of each partner who is an

employee within the meaning of section

401(c)(1) of the Code.

(b) In the case of a single-employer

plan:

(1) In connection with any person, a

controlled group consists of that person

and all other persons under common

control with such person.

(2) Persons are under common control

if they are members of a ‘‘controlled

group of corporations’’, as defined in

regulations prescribed under section

414(b) of the Code, or if they are ‘‘two

or more trades or businesses under

common control’’, as defined in

regulations prescribed under section

414(c) of the Code.

PART 4002—BYLAWS OF THE

PENSION BENEFIT GUARANTY

CORPORATION

Sec.

4002.1 Name.

4002.2 Offices.

4002.3 Board of Directors.

4002.4 Chairman.

4002.5 Quorum.
34012 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

4002.6 Meetings.

4002.7 Place of meetings; use of conference

call communications equipment.

4002.8 Alternate voting procedure.

4002.9 Amendments.

Authority: 29 U.S.C. 1302(f).

§ 4002.1 Name.

The name of the Corporation is the

Pension Benefit Guaranty Corporation.

§ 4002.2 Offices.

The principal office of the

Corporation shall be in the Metropolitan

area of the City of Washington, District

of Columbia. The Corporation may have

additional offices at such other places as

the Board of Directors may deem

necessary or desirable to the conduct of

its business.

§ 4002.3 Board of Directors.

(a) The Board of Directors shall

establish the policies of the Corporation

and shall perform the other functions

assigned to the Board of Directors in

title IV of the Employee Retirement

Income Security Act of 1974. The Board

of Directors of the Corporation shall be

composed of the Secretary of Labor, the

Secretary of the Treasury, and the

Secretary of Commerce. Members of the

Board shall serve without

compensation, but shall be reimbursed

by the Corporation for travel,

subsistence, and other necessary

expenses incurred in the performance of

their duties as members of the Board. A

person at the time of a meeting of the

Board of Directors who is serving as

Secretary of Labor, Secretary of the

Treasury or Secretary of Commerce in

an acting capacity, shall serve as a

member of the Board of Directors with

the same authority and effect as the

designated Secretary.

(b) The following powers are

expressly reserved to the Board of

Directors and shall not be delegated:

(1) Approval of all final substantive

regulations prior to publication in the

Federal Register, except for

amendments to the regulations on

Allocation of Assets in Single-employer

Plans and Duties of Plan Sponsor

Following Mass Withdrawal (parts 4044

and 4281 of this chapter) establishing

new interest rates and factors, which

may be approved by the Executive

Director of the PBGC.

(2) Approval of all reports or

recommendations to the Congress that

are required by statute;

(3) Establishment from time to time of

the Corporation’s budget and debt

ceiling up to the statutory limit;

(4) Determination from time to time of

limits on advances to the revolving

funds administered by the Corporation

pursuant to section 4005(a) of ERISA;

(5) Final decision on any policy

matter that would materially affect the

rights of a substantial number of

employers or covered participants and

beneficiaries.

(c) Final non-substantive regulations

and all proposed regulations shall be

approved by the Executive Director

prior to publication in the Federal

Register; provided that all proposed

substantive regulations shall first be

circulated for review to the Board of

Directors or their designees, and may

thereafter be issued by the Executive

Director after responding to any

comments made within 21 days after

circulation of the proposed regulation,

or, if no comments are received, after

expiration of the 21-day period.

§ 4002.4 Chairman.

The Secretary of Labor shall be the

Chairman of the Board of Directors and

he shall be the administrator of the

Corporation with responsibility for its

management, including overall

supervision of the Corporation’s

personnel, organization, and budget

practices, and shall exercise such

incidental powers as may be necessary

to carry out his administrative

responsibilities. The Chairman may

delegate his administrative

responsibilities.

§ 4002.5 Quorum.

A majority of the Directors shall

constitute a quorum for the transaction

of business. Any act of a majority of the

Directors present at any meeting at

which there is a quorum shall be the act

of the Board, except as may otherwise

be provided in these bylaws.

§ 4002.6 Meetings.

Regular meetings of the Board of

Directors shall be held at such times as

the Chairman shall select. Special

meetings of the Board of Directors shall

be called by the Chairman on the

request of any other Director.

Reasonable notice of any meetings shall

be given to each Director. The General

Counsel of the Corporation shall serve

as Secretary to the Board of Directors

and keep its minutes. As soon as

practicable after each meeting, a draft of

the minutes of such meeting shall be

distributed to each member of the Board

for correction or approval.

§ 4002.7 Place of meetings; use of

conference call communications

equipment.

Meetings of the Board of Directors

shall be held at the principal office of

the Corporation unless otherwise

determined by the Board of Directors or

the Chairman. Any Director may

participate in a meeting of the Board of

Directors through the use of conference

call telephone or similar

communications equipment, by means

of which all persons participating in the

meeting can simultaneously speak to

and hear each other. Any Director so

participating in a meeting shall be

deemed present for all purposes.

Actions taken by the Board of Directors

at meetings conducted through the use

of such equipment, including the votes

of each member, shall be recorded in the

usual manner in the minutes of the

meetings of the Board of Directors. A

resolution of the Board of Directors

signed by each of its three members

shall have the same force and effect as

if agreed at a duly called meeting and

shall be recorded in the minutes of the

Board of Directors.

§ 4002.8 Alternate voting procedure.

(a) A Director shall be deemed to have

participated in a meeting of the Board

of Directors for all purposes if,

(1) That Director was represented at

that meeting by an individual who was

designated to act on his behalf, and

(2) That Director ratified in writing

the actions taken by his designee at that

meeting within a reasonable period of

time after such meeting.

(b) For purposes of this section, a

Director, including an individual

serving as Acting Secretary, shall

designate a representative at a level not

below that of Assistant Secretary within

his Department. Such designation shall

be in writing and shall be effective until

withdrawn or until a date specified

therein.

(c) For purposes of this section, a

Director’s approval of the minutes of a

meeting of the Board of Directors shall

constitute ratification of the actions of

his designee at such meeting.

§ 4002.9 Amendments.

These bylaws may be amended or

new bylaws adopted by unanimous vote

of the Board.

PART 4003—RULES FOR

ADMINISTRATIVE REVIEW OF

AGENCY DECISIONS

Subpart A—General Provisions

Sec.

4003.1 Purpose and scope.

4003.2 Definitions.

4003.3 PBGC assistance in obtaining

information.

4003.4 Extension of time.

4003.5 Non-timely request for review.

4003.6 Representation.

4003.7 Exhaustion of administrative

remedies.

4003.8 Request for confidential treatment.

4003.9 Filing of documents.

4003.10 Computation of time.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34013

Subpart B—Initial Determinations

4003.21 Form and contents of initial

determinations.

4003.22 Effective date of determinations.

Subpart C—Reconsideration of Initial

Determinations

4003.31 Who may request reconsideration.

4003.32 When to request reconsideration.

4003.33 Where to submit request for

reconsideration.

4003.34 Form and contents of request for

reconsideration.

4003.35 Final decision on request for

reconsideration.

Subpart D—Administrative Appeals

4003.51 Who may appeal or participate in

appeals.

4003.52 When to file.

4003.53 Where to file.

4003.54 Contents of appeal.

4003.55 Opportunity to appear and to

present witnesses.

4003.56 Consolidation of appeals.

4003.57 Appeals affecting third parties.

4003.58 Powers of the Appeals Board.

4003.59 Decision by the Appeals Board.

4003.60 Referral of appeal to the Executive

Director.

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

Subpart A—General Provisions

§ 4003.1 Purpose and scope.

(a) Purpose. This part sets forth the

rules governing the issuance of all

initial determinations by the PBGC on

cases pending before it involving the

matters set forth in paragraph (b) of this

section and the procedures for

requesting and obtaining administrative

review by the PBGC of those

determinations. Subpart A contains

general provisions. Subpart B sets forth

rules governing the issuance of all

initial determinations of the PBGC on

matters covered by this part. Subpart C

establishes procedures governing the

reconsideration by the PBGC of initial

determinations relating to the matters

set forth in paragraphs (b)(1) through

(b)(4). Subpart D establishes procedures

governing administrative appeals from

initial determinations relating to the

matters set forth in paragraphs (b)(5)

through (b)(10).

(b) Scope. This part applies to the

following determinations made by the

PBGC in cases pending before it and to

the review of those determinations:

(1) Determinations that a plan is

covered under section 4021 of ERISA;

(2) Determinations with respect to

premiums, interest and late payment

penalties pursuant to section 4007 of

ERISA;

(3) Determinations with respect to

voluntary terminations under section

4041 of ERISA, including—

(i) A determination that a notice

requirement or a certification

requirement under section 4041 of

ERISA has not been met,

(ii) A determination that the

requirements for demonstrating distress

under section 4041(c)(2)(B) of ERISA

have not been met, and

(iii) A determination with respect to

the sufficiency of plan assets for benefit

liabilities or for guaranteed benefits;

(4) Determinations with respect to

allocation of assets under section 4044

of ERISA, including distribution of

excess assets under section 4044(d);

(5) Determinations that a plan is not

covered under section 4021 of ERISA;

(6) Determinations under section 4022

(a) or (c) or section 4022A(a) of ERISA

with respect to benefit entitlement of

participants and beneficiaries under

covered plans and determinations that a

domestic relations order is or is not a

qualified domestic relations order under

section 206(d)(3) of ERISA and section

414(p) of the Code;

(7) Determinations under section 4022

(b) or (c), section 4022A (b) through (e),

or section 4022B of ERISA of the

amount of benefits payable to

participants and beneficiaries under

covered plans;

(8) Determinations of the amount of

money subject to recapture pursuant to

section 4045 of ERISA;

(9) Determinations of the amount of

liability under section 4062(b)(1),

section 4063, or section 4064 of ERISA;

(10) Determinations—

(i) That the amount of a participant’s

or beneficiary’s benefit under section

4050(a)(3) of ERISA has been correctly

computed based on the designated

benefit paid to the PBGC under section

4050(b)(2) of ERISA, or

(ii) That the designated benefit is

correct, but only to the extent that the

benefit to be paid does not exceed the

participant’s or beneficiary’s guaranteed

benefit.

(c) Matters not covered by this part.

Nothing in this part limits—

(1) The authority of the PBGC to

review, either upon request or on its

own initiative, a determination to which

this part does not apply when, in its

discretion, the PBGC determines that it

would be appropriate to do so, or

(2) The procedure that the PBGC may

utilize in reviewing any determination

to which this part does not apply.

§ 4003.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: Code,

contributing sponsor, controlled group,

ERISA, multiemployer plan, PBGC,

person, plan administrator, and singleemployer plan.

In addition, for purposes of this part:

Aggrieved person means any

participant, beneficiary, plan

administrator, contributing sponsor of a

single-employer plan or member of such

a contributing sponsor’s controlled

group, plan sponsor of a multiemployer

plan, or employer that is adversely

affected by an initial determination of

the PBGC with respect to a pension plan

in which such person has an interest.

The term ‘‘beneficiary’’ includes an

alternate payee (within the meaning of

section 206(d)(3)(K) of ERISA) under a

qualified domestic relations order

(within the meaning of section

206(d)(3)(B) of ERISA).

Appeals Board means a board

consisting of three PBGC officials. The

Executive Director shall appoint a

senior PBGC official to serve as

Chairperson and three or more other

PBGC officials to serve as regular

Appeals Board members. The

Chairperson shall designate the three

officials who will constitute the Appeals

Board with respect to a case, provided

that a person may not serve on the

Appeals Board with respect to a case in

which he or she made a decision

regarding the merits of the

determination being appealed. The

Chairperson need not serve on the

Appeals Board with respect to all cases.

Appellant means any person filing an

appeal under subpart D of this part.

Director means the Director of any

department of the PBGC and includes

the Executive Director of the PBGC,

Deputy Executive Directors, and the

General Counsel.

§ 4003.3 PBGC assistance in obtaining

information.

A person who lacks information or

documents necessary to file a request for

review pursuant to subpart C or D of

this part, or necessary to a decision

whether to seek review, or necessary to

participate in an appeal pursuant to

§ 4003.57 of this part or necessary to a

decision whether to participate, may

request the PBGC’s assistance in

obtaining information or documents in

the possession of a party other than the

PBGC. The request shall state or

describe the missing information or

documents, the reason why the person

needs the information or documents,

and the reason why the person needs

the assistance of the PBGC in obtaining

the information or documents. The

request may also include a request for

an extension of time to file pursuant to

§ 4003.4 of this part.

§ 4003.4 Extension of time.

(a) General rule. When a document is

required under this part to be filed

within a prescribed period of time, an

extension of time to file will be granted

only upon good cause shown and only
34014 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

when the request for an extension is

made before the expiration of the time

prescribed. The request for an extension

shall be in writing and state why

additional time is needed and the

amount of additional time requested.

The filing of a request for an extension

shall stop the running of the prescribed

period of time. When a request for an

extension is granted, the PBGC shall

notify the person requesting the

extension, in writing, of the amount of

additional time granted. When a request

for an extension is denied, the PBGC

shall so notify the requestor in writing,

and the prescribed period of time shall

resume running from the date of denial.

(b) Disaster relief. When the President

of the United States declares that, under

the Disaster Relief Act of 1974, as

amended (42 U.S.C. 5121, 5122(2),

5141(b)), a major disaster exists, the

Executive Director of the PBGC (or his

or her designee) may, by issuing one or

more notices of disaster relief, extend

the due date for filing a request for

reconsideration under § 4003.32 or an

appeal under § 4003.52 by up to 180

days.

(1) The due date extension or

extensions shall be available only to an

aggrieved person who is residing in, or

whose principal place of business is

within, a designated disaster area, or

with respect to whom the office of the

service provider, bank, insurance

company, or other person maintaining

the information necessary to file the

request for reconsideration or appeal is

within a designated disaster area; and

(2) The request for reconsideration or

appeal shall identify the filing as one for

which the due date extension is

available.

§ 4003.5 Non-timely request for review.

The PBGC will process a request for

review of an initial determination that

was not filed within the prescribed

period of time for requesting review (see

§§ 4003.32 and 4003.52) if—

(a) The person requesting review

demonstrates in his or her request that

he or she did not file a timely request

for review because he or she neither

knew nor, with due diligence, could

have known of the initial determination;

and

(b) The request for review is filed

within 30 days after the date the

aggrieved person, exercising due

diligence at all relevant times, first

learned of the initial determination

where the requested review is

reconsideration, or within 45 days after

the date the aggrieved person, exercising

due diligence at all relevant times, first

learned of the initial determination

where the request for review is an

appeal.

§ 4003.6 Representation.

A person may file any document or

make any appearance that is required or

permitted by this part on his or her own

behalf or he or she may designate a

representative. When the representative

is not an attorney-at-law, a notarized

power of attorney, signed by the person

making the designation, which

authorizes the representation and

specifies the scope of representation

shall be filed with the PBGC in

accordance with § 4003.9(b) of this part.

§ 4003.7 Exhaustion of administrative

remedies.

Except as provided in § 4003.22(b), a

person aggrieved by an initial

determination of the PBGC covered by

this part, other than a determination

subject to reconsideration that is issued

by a Department Director, has not

exhausted his or her administrative

remedies until he or she has filed a

request for reconsideration under

subpart C of this part or an appeal under

subpart D of this part, whichever is

applicable, and a decision granting or

denying the relief requested has been

issued.

§ 4003.8 Request for confidential

treatment.

If any person filing a document with

the PBGC believes that some or all of the

information contained in the document

is exempt from the mandatory public

disclosure requirements of the Freedom

of Information Act, 5 U.S.C. 552, he or

she shall specify the information with

respect to which confidentiality is

claimed and the grounds therefor.

§ 4003.9 Filing of documents.

(a) Date of filing. Any document

required or permitted to be filed under

this part is considered filed on the date

of the United States postmark stamped

on the cover in which the document is

mailed, provided that—

(1) The postmark was made by the

United States Postal Service; and

(2) The document was mailed postage

prepaid, properly packaged and

addressed to the PBGC.

If the conditions stated in both

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

section are not met, the document is

considered filed on the date it is

received by the PBGC. Documents

received after regular business hours are

considered filed on the next regular

business day.

(b) Where to file. Any document

required or permitted to be filed under

this part in connection with a request

for reconsideration shall be submitted to

the Director of the department within

the PBGC that issued the initial

determination. Any document required

or permitted to be filed under this part

in connection with an appeal shall be

submitted to the Appeals Board,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026.

§ 4003.10 Computation of time.

In computing any period of time

prescribed or allowed by this part, the

day of the act, event, or default from

which the designated period of time

begins to run is not counted. The last

day of the period so computed shall be

included, unless it is a Saturday,

Sunday, or Federal holiday, in which

event the period runs until the end of

the next day which is not a Saturday,

Sunday, or a Federal holiday.

Subpart B—Initial Determinations

§ 4003.21 Form and contents of initial

determinations.

All determinations to which this

subpart applies shall be in writing, shall

state the reason for the determination,

and, except when effective on the date

of issuance as provided in § 4003.22(b),

shall contain notice of the right to

request review of the determination

pursuant to subpart C or subpart D of

this part, as applicable, and a brief

description of the procedures for

requesting review.

§ 4003.22 Effective date of determinations.

(a) General Rule. Except as provided

in paragraph (b) of this section, an

initial determination covered by this

subpart will not become effective until

the prescribed period of time for filing

a request for reconsideration under

subpart C of this part or an appeal under

subpart D of this part, whichever is

applicable, has elapsed. The filing of a

request for review under subpart C or D

of this part shall automatically stay the

effectiveness of a determination until a

decision on the request for review has

been issued by the PBGC.

(b) Exception. The PBGC may, in its

discretion, order that the initial

determination in a case is effective on

the date it is issued. When the PBGC

makes such an order, the initial

determination shall state that the

determination is effective on the date of

issuance and that there is no obligation

to exhaust administrative remedies with

respect to that determination by seeking

review of it by the PBGC.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34015

Subpart C—Reconsideration of Initial

Determinations

§ 4003.31 Who may request

reconsideration.

Any person aggrieved by an initial

determination of the PBGC to which this

subpart applies may request

reconsideration of the determination.

§ 4003.32 When to request

reconsideration.

Except as provided in §§ 4003.4 and

4003.5, a request for reconsideration

must be filed within 30 days after the

date of the initial determination of

which reconsideration is sought or,

when administrative review includes a

procedure in § 4903.33 of this chapter,

by a date 60 days (or more) thereafter

that is specified in the PBGC’s notice of

the right to request review.

§ 4003.33 Where to submit request for

reconsideration.

A request for reconsideration shall be

submitted to the Director of the

department within the PBGC that issued

the initial determination, except that a

request for reconsideration of a

determination described in

§ 4003.1(b)(3)(ii) shall be submitted to

the Executive Director.

§ 4003.34 Form and contents of request

for reconsideration.

A request for reconsideration shall—

(a) Be in writing;

(b) Be clearly designated as a request

for reconsideration;

(c) Contain a statement of the grounds

for reconsideration and the relief

sought; and

(d) Reference all pertinent

information already in the possession of

the PBGC and include any additional

information believed to be relevant.

§ 4003.35 Final decision on request for

reconsideration.

(a) Except as provided in paragraphs

(a)(1) or (a)(2), final decisions on

requests for reconsideration will be

issued by the same department of the

PBGC that issued the initial

determination, by an official whose

level of authority in that department is

higher than that of the person who

issued the initial determination.

(1) When an initial determination is

issued by a Department Director, the

Department Director (or an official

designated by the Department Director)

will issue the final decision on request

for reconsideration of a determination

other than one described in

§ 4003.1(b)(3)(ii).

(2) The Executive Director (or an

official designated by the Executive

Director) will issue the final decision on

a request for reconsideration of a

determination described in

§ 4003.1(b)(3)(ii).

(b) The final decision on a request for

reconsideration shall be in writing,

specify the relief granted, if any, state

the reason(s) for the decision, and state

that the person has exhausted his or her

administrative remedies.

Subpart D—Administrative Appeals

§ 4003.51 Who may appeal or participate in

appeals.

Any person aggrieved by an initial

determination to which this subpart

applies may file an appeal. Any person

who may be aggrieved by a decision

under this subpart granting the relief

requested in whole or in part may

participate in the appeal in the manner

provided in § 4003.57.

§ 4003.52 When to file.

Except as provided in §§ 4003.4 and

4003.5, an appeal under this subpart

must be filed within 45 days after the

date of the initial determination being

appealed or, when administrative

review includes a procedure in

§ 4903.33 of this chapter, by a date 60

days (or more) thereafter that is

specified in the PBGC’s notice of the

right to request review.

§ 4003.53 Where to file.

An appeal or a request for an

extension of time to appeal shall be

submitted to the Appeals Board,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026.

§ 4003.54 Contents of appeal.

(a) An appeal shall—

(1) Be in writing;

(2) Be clearly designated as an appeal;

(3) Contain a statement of the grounds

upon which it is brought and the relief

sought;

(4) Reference all pertinent information

already in the possession of the PBGC

and include any additional information

believed to be relevant;

(5) State whether the appellant desires

to appear in person or through a

representative before the Appeals Board;

and

(6) State whether the appellant desires

to present witnesses to testify before the

Appeals Board, and if so, state why the

presence of witnesses will further the

decision-making process.

(b) In any case where the appellant

believes that another person may be

aggrieved if the PBGC grants the relief

sought, the appeal shall also include the

name(s) and address(es) (if known) of

such other person(s).

§ 4003.55 Opportunity to appear and to

present witnesses.

(a) At the discretion of the Appeals

Board, any appearance permitted under

this subpart may be before a hearing

officer designated by the Appeals Board.

(b) An opportunity to appear before

the Appeals Board (or a hearing officer)

and an opportunity to present witnesses

will be permitted at the discretion of the

Appeals Board. In general, an

opportunity to appear will be permitted

if the Appeals Board determines that

there is a dispute as to a material fact;

an opportunity to present witnesses will

be permitted when the Appeals Board

determines that witnesses will

contribute to the resolution of a factual

dispute.

(c) Appearances permitted under this

section will take place at the main

offices of the PBGC, 1200 K Street NW.,

Washington, DC 20005–4026, unless the

Appeals Board, in its discretion,

designates a different location, either on

its own initiative or at the request of the

appellant or a third party participating

in the appeal.

§ 4003.56 Consolidation of appeals.

(a) When consolidation may be

required. Whenever multiple appeals

are filed that arise out of the same or

similar facts and seek the same or

similar relief, the Appeals Board may, in

its discretion, order the consolidation of

all or some of the appeals.

(b) Representation of parties.

Whenever the Appeals Board orders the

consolidation of appeals, the appellants

may designate one (or more) of their

number to represent all of them for all

purposes relating to their appeals.

(c) Decision by Appeals Board. The

decision of the Appeals Board in a

consolidated appeal shall be binding on

all appellants whose appeals were

subject to the consolidation.

§ 4003.57 Appeals affecting third parties.

(a) Before the Appeals Board issues a

decision granting, in whole or in part,

the relief requested in an appeal, it shall

make a reasonable effort to notify third

persons who will be aggrieved by the

decision of the following:

(1) The pendency of the appeal;

(2) The grounds upon which the

appeal is based;

(3) The grounds upon which the

Appeals Board is considering reversing

the initial determination;

(4) The right to submit written

comments on the appeal;

(5) The right to request an opportunity

to appear in person or through a

representative before the Appeals Board

and to present witnesses; and

(6) That no further opportunity to

present information to the PBGC with
34016 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

respect to the determination under

appeal will be provided.

(b) Written comments and a request to

appear before the Appeals Board must

be filed within 45 days after the date of

the notice from the Appeals Board.

(c) If more than one third party is

involved, their participation in the

appeal may be consolidated pursuant to

the provisions of § 4003.56.

§ 4003.58 Powers of the Appeals Board.

In addition to the powers specifically

described in this part, the Appeals

Board may request the submission of

any information or the appearance of

any person it considers necessary to

resolve a matter before it and to enter

any order it considers necessary for or

appropriate to the disposition of any

matter before it.

§ 4003.59 Decision by the Appeals Board.

(a) In reaching its decision, the

Appeals Board shall consider those

portions of the file relating to the initial

determination, all material submitted by

the appellant and any third parties in

connection with the appeal, and any

additional information submitted by

PBGC staff.

(b) The decision of the Appeals Board

constitutes the final agency action by

the PBGC with respect to the

determination which was the subject of

the appeal and is binding on all parties

who participated in the appeal and who

were notified pursuant to § 4003.57 of

their right to participate in the appeal.

(c) The decision of the Appeals Board

shall be in writing, specify the relief

granted, if any, state the bases for the

decision, including a brief statement of

the facts or legal conclusions supporting

the decision, and state that the appellant

has exhausted his or her administrative

remedies.

§ 4003.60 Referral of appeal to the

Executive Director.

The Appeals Board may, in its

discretion, refer any appeal to the

Executive Director of the PBGC for

decision. In such a case, the Executive

Director shall have all the powers vested

in the Appeals Board by this subpart

and the decision of the Executive

Director shall meet the requirements of

and have the effect of a decision issued

under § 4003.59 of this part.

PART 4006—PREMIUM RATES

Sec.

4006.1 Purpose and scope.

4006.2 Definitions.

4006.3 Premium rate.

4006.4 Determination of unfunded vested

benefits.

4006.5 Exemptions and special rules.

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

1307.

§ 4006.1 Purpose and scope.

This part, which applies to all plans

covered by title IV of ERISA, provides

rules for computing the premiums

imposed by sections 4006 and 4007 of

ERISA. (See part 4007 of this chapter for

rules for the payment of premiums,

including due dates and late payment

charges.)

§ 4006.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: Code,

contributing sponsor, ERISA, fair market

value, insurer, irrevocable commitment,

multiemployer plan, notice of intent to

terminate, PBGC, plan administrator,

plan, plan year, and single-employer

plan.

In addition, for purposes of this part:

New plan means a plan that became

effective within the premium payment

year and includes a plan resulting from

a consolidation or spinoff. A plan that

meets this definition is considered to be

a new plan even if the plan constitutes

a successor plan within the meaning of

section 4021(a) of ERISA.

Newly-covered plan means a plan that

is not a new plan and that was not

covered by title IV of ERISA

immediately prior to the premium

payment year.

Participant means any individual who

is included in one of the categories

below:

(a) Active. (1) Any individual who is

currently in employment covered by the

plan and who is earning or retaining

credited service under the plan. This

category includes any individual who is

considered covered under the plan for

purposes of meeting the minimum

coverage requirements, but because of

offset or other provisions (including

integration with Social Security

benefits), the individual does not have

any accrued benefits.

(2) Any non-vested individual who is

not currently in employment covered by

the plan but who is earning or retaining

credited service under the plan. This

category does not include a non-vested

former employee who has incurred a

break in service the greater of one year

or the break in service period specified

in the plan.

(b) Inactive—(1) Inactive receiving

benefits. Any individual who is retired

or separated from employment covered

by the plan and who is receiving

benefits under the plan. This category

does not include an individual to whom

an insurer has made an irrevocable

commitment to pay all the benefits to

which the individual is entitled under

the plan.

(2) Inactive entitled to future benefits.

Any individual who is retired or

separated from employment covered by

the plan and who is entitled to begin

receiving benefits under the plan in the

future. This category does not include

an individual to whom an insurer has

made an irrevocable commitment to pay

all the benefits to which the individual

is entitled under the plan.

(c) Deceased. Any deceased

individual who has one or more

beneficiaries who are receiving or

entitled to receive benefits under the

plan. This category does not include an

individual if an insurer has made an

irrevocable commitment to pay all the

benefits to which the beneficiaries of

that individual are entitled under the

plan.

Premium payment year means the

plan year for which the premium is

being paid.

Short plan year means a plan year

that is less than twelve full months.

§ 4006.3 Premium rate.

Subject to the provisions of § 4006.5

(dealing with exemptions and special

rules), the premium paid for basic

benefits guaranteed under section

4022(a) of ERISA shall equal the flat-rate

premium under paragraph (a) of this

section plus, in the case of a singleemployer plan, the variable-rate

premium under paragraph (b) of this

section.

(a) Flat-rate premium. The flat-rate

premium is equal to the number of

participants in the plan on the last day

of the plan year preceding the premium

payment year, multiplied by—

(1) $19 for a single-employer plan, or

(2) $2.60 for a multiemployer plan.

(b) Variable-rate premium. The

variable-rate premium is $9 for each

$1,000 of a single-employer plan’s

unfunded vested benefits, as determined

under § 4006.4.

§ 4006.4 Determination of unfunded vested

benefits.

(a) General rule. Except as permitted

by paragraph (c) of this section or as

provided in the exemptions and special

rules under § 4006.5, the amount of a

plan’s unfunded vested benefits (as

defined in paragraph (b) of this section)

shall be determined as of the last day of

the plan year preceding the premium

payment year, based on the plan

provisions and the plan’s population as

of that date. The determination shall be

made in accordance with paragraph

(a)(1) or (a)(2), and shall be certified to

in accordance with paragraph (a)(4).

(1) The unfunded vested benefits shall

be determined using the actuarial

assumptions and methods described in
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34017

paragraph (a)(3) for the plan year

preceding the premium payment year

(or, in the case of a new or newlycovered plan, for the premium payment

year), except to the extent that other

actuarial assumptions or methods are

specifically prescribed by this section or

are necessary to reflect the occurrence of

a significant event described in

paragraph (d) of this section between

the date of the funding valuation and

the last day of the plan year preceding

the premium payment year. (If the plan

does a valuation as of the last day of the

plan year preceding the premium

payment year, no separate adjustment

for significant events is needed.)

(2) Under this rule, the determination

of the unfunded vested benefits may be

based on a plan valuation done as of the

first day of the premium payment year,

provided that—

(i) The actuarial assumptions and

methods used are those described in

paragraph (a)(3) for the premium

payment year, except to the extent that

other actuarial assumptions or methods

are specifically prescribed by this

section or are required to make the

adjustment described in paragraph

(a)(2)(ii) of this section; and

(ii) If an enrolled actuary determines

that there is a material difference

between the values determined under

the valuation and the values that would

have been determined as of the last day

of the preceding plan year, the valuation

results are adjusted to reflect

appropriately the values as of the last

day of the preceding plan year. (This

adjustment need not be made if the

unadjusted valuation would result in

greater unfunded vested benefits.)

(3) For purposes of paragraphs (a)(1)

and (a)(2), the actuarial assumptions

and methods for a plan year are those

used by the plan for purposes of

determining the additional funding

requirement under section 302(d) of

ERISA and section 412(1) of the Code

(or, in the case of a plan that is not

required to determine such additional

funding requirement, any assumptions

and methods that would be permitted

for such purpose if the plan were so

required).

(4) In the case of any plan that

determines the amount of its unfunded

vested benefits under the general rule

described in this paragraph, an enrolled

actuary must certify, in accordance with

the PBGC annual Premium Payment

Package provided for in § 4007.3 of this

part, that the determination was made

in a manner consistent with generally

accepted actuarial principles and

practices.

(b) Unfunded vested benefits. The

amount of a plan’s unfunded vested

benefits under this section shall be the

excess of the plan’s vested benefits

amount (determined under paragraph

(b)(1) of this section) over the value of

the plan’s assets (determined under

paragraph (b)(2) of this section).

(1) Vested benefits amount. A plan’s

vested benefits amount under this

section shall be the plan’s current

liability (within the meaning of section

302(d)(7) of ERISA and section 412(1)(7)

of the Code) determined by taking into

account only vested benefits and by

using an interest rate equal to the

applicable percentage of the annual

yield for 30-year Treasury constant

maturities, as reported in Federal

Reserve Statistical Release G.13 and

H.15, for the calendar month preceding

the calendar month in which the

premium payment year begins. If the

interest rate (or rates) used by the plan

to determine current liability was (or

were all) not greater than the required

interest rate, the vested benefits need

not be revalued if an enrolled actuary

certifies that the interest rate (or interest

rates) used was (or were all) not greater

than the required interest rate. For

purposes of this paragraph (b)(1)

(subject to the provisions of § 4006.5(g),

dealing with plans of regulated public

utilities), the applicable percentage is—

(i) For a premium payment year that

begins before July 1997, 80 percent;

(ii) For a premium payment year that

begins after June 1997 and before the

first premium payment year to which

the first tables prescribed under section

302(d)(7)(C)(ii)(II) of ERISA and section

412(1)(7)(C)(ii)(II) of the Code apply, 85

percent; and

(iii) For the first premium payment

year to which the first tables prescribed

under section 302(d)(7)(C)(ii)(II) of

ERISA and section 412(1)(7)(C)(ii)(II) of

the Code apply and any subsequent plan

year, 100 percent.

(2) Value of assets. (i) Actuarial value.

For a premium payment year that is

described in paragraph (b)(1)(i) or

(b)(1)(ii) of this section, the value of the

plan’s assets shall be their actuarial

value determined in accordance with

section 302(c)(2) of ERISA and section

412(c)(2) of the Code.

(ii) Fair market value. For a premium

payment year that is described in

paragraph (b)(1)(iii) of this section, the

value of the plan’s assets shall be their

fair market value.

(iii) Use of credit balance. The value

of the plan’s assets shall not be reduced

by a credit balance in the funding

standard account.

(iv) Contributions. Contributions

owed for any plan year preceding the

premium payment year shall be

included for plans with 500 or more

participants and may be included for

any other plan. Contributions may be

included only to the extent such

contributions have been paid into the

plan on or before the earlier of the due

date for payment of the variable-rate

portion of the premium under § 4007.11

or the date that portion is paid.

Contributions included that are paid

after the last day of the plan year

preceding the premium payment year

shall be discounted at the plan asset

valuation rate (on a simple or

compound basis in accordance with the

plan’s discounting rules) to such last

day to reflect the date(s) of payment.

Contributions for the premium payment

year may not be included for any plan.

(c) Alternative method for calculating

unfunded vested benefits. In lieu of

determining the amount of the plan’s

unfunded vested benefits pursuant to

paragraph (a) of this section, a plan

administrator may calculate the amount

of a plan’s unfunded vested benefits

under this paragraph (c) using the plan’s

Form 5500, Schedule B, for the plan

year preceding the premium payment

year. Pursuant to this paragraph (c),

unfunded vested benefits shall be

determined, in accordance with the

Premium Payment Package, from values

for the plan’s vested benefits and assets

that are required to be reported on the

plan’s Schedule B. The value of the

vested benefits shall be adjusted in

accordance with paragraph (c)(1) of this

section to reflect accruals during the

plan year preceding the premium

payment year and with paragraph (c)(2)

of this section to reflect the interest rate

prescribed in paragraph (b)(1) of this

section, and the value of the assets shall

be adjusted in accordance with

paragraph (c)(4) of this section. (If the

plan administrator certifies that the

interest rate (or rates) used to determine

the vested benefit values taken from the

Schedule B was (or were all) not greater

than the interest rate prescribed in

paragraph (b)(1) of this section, the

interest rate adjustment prescribed in

paragraph (c)(2) of this section is not

required.) The resulting unfunded

vested benefits amount shall be adjusted

in accordance with paragraph (c)(5) of

this section to reflect the passage of time

from the date of the Schedule B data to

the last day of the plan year preceding

the premium payment year.

(1) Vested benefits adjustment for

accruals. The total value of the plan’s

current liability as of the first day of the

plan year preceding the premium

payment year for vested benefits of

active and terminated vested

participants not in pay status, computed

in accordance with section 302(d)(7) of

ERISA and section 412(l)(7) of the Code,
34018 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

shall be adjusted to reflect the increase

in vested benefits attributable to

accruals during the plan year preceding

the premium payment year by

multiplying that value by 1.07.

(2) Vested benefits interest rate

adjustment. The value of vested benefits

as entered on the Schedule B shall be

adjusted in accordance with the

following formula (except as provided

in paragraph (c)(3) of this section) to

reflect the interest rate prescribed in

paragraph (b)(1) of this section:

VBadj=VBPAY×.94(RIR-BIR)

+VBNON-PAY

×.94(RIR-BIR)×((100+BIA)/

(100+RIR))(ARA–50)

;

where—

(i) VBadj is the adjusted vested benefits

amount (as of the first day of the plan

year preceding the premium payment

year) under the alternative calculation

method;

(ii) VBPAY is the plan’s current

liability as of the first day of the plan

year preceding the premium payment

year for vested benefits of participants

and beneficiaries in pay status,

computed in accordance with section

302(d)(7) of ERISA and section 412(l)(7)

of the Code;

(iii) VBNON-PAY is the total of the

plan’s current liability as of the first day

of the plan year preceding the premium

payment year for vested benefits of

active and terminated vested

participants not in pay status, computed

in accordance with section 302(d)(7) of

ERISA and section 412(l)(7) of the Code,

multiplied by 1.07 in accordance with

paragraph (c)(1) of this section;

(iv) RIR is the required interest rate

prescribed in paragraph (b)(1) of this

section;

(v) BIR is the post-retirement current

liability interest rate used to determine

the pay-status current liability figure

referred to in paragraph (c)(2)(ii) of this

section;

(vi) BIA is the pre-retirement current

liability interest rate used to determine

the pre-pay-status current liability

figures referred to in paragraph (c)(2)(iii)

of this section; and

(vii) ARA is the plan’s assumed

weighted average retirement age.

(3) Optional use of substitution

factors in interest rate adjustment

formula. In lieu of the term, .94 (RIR-BIR)

,

in the formula prescribed by paragraph

(c)(2) of this section, a plan

administrator may use the optional

substitution factor provided in the

Premium Payment Package.

(4) Adjusted value of plan assets. The

value of plan assets shall be the

actuarial value of plan assets as of the

first day of the plan year preceding the

premium payment year, determined in

accordance with section 302(c)(2) of

ERISA and section 412(c)(2) of the Code

without reduction for any credit balance

in the plan’s funding standard account,

unless that amount was determined as

of a date other than the first day of the

plan year preceding the premium

payment year or the premium payment

year is described in § 4006.4(b)(1)(iii). In

either of those events, the value of plan

assets shall be the current value of

assets (as reported on Form 5500) as of

that first day or (if Form 5500–EZ is

filed) as of the last day of the plan year

preceding the Schedule B year. The

value of assets from the Schedule B

shall be adjusted in accordance with

paragraph (b)(2) of this section, except

that the amount of all contributions that

are included in the value of assets and

that were made after the first day of the

plan year preceding the premium

payment year shall be discounted to

such first day at the interest rate

prescribed in paragraph (b)(1) of this

section for the premium payment year,

compounded annually except that

simple interest may be used for any

partial years.

(5) Adjustment for passage of time.

The amount of the plan’s unfunded

vested benefits shall be adjusted to

reflect the passage of time between the

date of the Schedule B data (the first day

of the plan year preceding the premium

payment year) and the last day of the

plan year preceding the premium

payment year in accordance with the

following formula:

UVBadj=(VBadj¥Aadj)×(1+RIR/100)Y;

where—

(i) UVBadj is the amount of the plan’s

adjusted unfunded vested benefits;

(ii) VBadj is the value of the adjusted

vested benefits calculated in accordance

with paragraphs (c)(1) and (c)(2) of this

section;

(iii) Aadj is the adjusted asset amount

calculated in accordance with paragraph

(c)(3) of this section; (iv) RIR is the

required interest rate prescribed in

paragraph (b)(1) of this section; and

(v) Y is deemed to be equal to 1

(unless the plan year preceding the

premium payment year is a short plan

year, in which case Y is the number of

years between the first day and the last

day of the short plan year, expressed as

a decimal fraction of 1.0 with two digits

to the right of the decimal point).

(d) Restrictions on alternative

calculation method for large plans.

(1) The alternative calculation method

described in paragraph (c) of this

section may be used for a plan with 500

or more participants as of the last day

of the plan year preceding the premium

payment year only if—

(i) No significant event, as described

in paragraph (d)(2) of this section, has

occurred between the first day and the

last day of the plan year preceding the

premium payment year, and an enrolled

actuary so certifies in accordance with

the Premium Payment Package; or

(ii) An enrolled actuary makes an

appropriate adjustment to the value of

unfunded vested benefits to reflect the

occurrence of significant events that

have occurred between those dates and

certifies to that fact in accordance with

the Premium Payment Package.

(2) The significant events described in

this paragraph are—

(i) An increase in the plan’s actuarial

costs (consisting of the plan’s normal

cost under section 302(b)(2)(A) of ERISA

and section 412(b)(2)(A) of the Code,

amortization charges under section

302(b)(2)(B) of ERISA and section

412(b)(2)(B) of the Code, and

amortization credits under section

302(b)(3)(B) of ERISA and section

412(b)(3)(B) of the Code) attributable to

a plan amendment, unless the cost

increase attributable to the amendment

is less than 5 percent of the actuarial

costs determined without regard to the

amendment;

(ii) The extension of coverage under

the plan to a new group of employees

resulting in an increase of 5 percent or

more in the plan’s liability for accrued

benefits;

(iii) A plan merger, consolidation or

spinoff that is not de minimis pursuant

to the regulations under section 414(l) of

the Code;

(iv) The shutdown of any facility,

plant, store, etc., that creates immediate

eligibility for benefits that would not

otherwise be immediately payable for

participants separating from service;

(v) The offer by the plan for a

temporary period to permit participants

to retire at benefit levels greater than

that to which they would otherwise be

entitled;

(vi) A cost-of-living increase for

retirees resulting in an increase of 5

percent or more in the plan’s liability

for accrued benefits; and

(vii) Any other event or trend that

results in a material increase in the

value of unfunded vested benefits.

§ 4006.5 Exemptions and special rules.

(a) Variable-rate premium

exemptions. A plan described in any of

paragraphs (a)(1)–(a)(5) of this section is

not required to determine its unfunded

vested benefits under § 4006.4 and does

not owe a variable-rate premium under

§ 4006.3(b).

(1) Certain fully funded plans. A plan

is described in this paragraph if the plan

had fewer than 500 participants on the
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34019

last day of the plan year preceding the

premium payment year, and an enrolled

actuary certifies in accordance with the

Premium Payment Package that, as of

that date, the plan had no unfunded

vested benefits (valued at the interest

rate prescribed in § 4006.4(b)(1)).

(2) Plans without vested benefit

liabilities. A plan is described in this

paragraph if it did not have any

participants with vested benefits as of

the last day of the plan year preceding

the premium payment year, and the

plan administrator so certifies in

accordance with the Premium Payment

Package.

(3) Section 412(i) plans. A plan is

described in this paragraph if the plan

was a plan described in section 412(i) of

the Code and the regulations thereunder

at all times during the plan year

preceding the premium payment year

and the plan administrator so certifies,

in accordance with the Premium

Payment Package. If the plan is a new

plan or a newly-covered plan, the

certification under this paragraph shall

be made as of the due date for the

premium under § 4007.11(c) and shall

certify to the plan’s status at all times

during the premium payment year

through such due date.

(4) Plans terminating in standard

terminations. The exemption for a plan

described in this paragraph is

conditioned upon the plan’s making a

final distribution of assets in a standard

termination. If a plan is ultimately

unable to do so, the exemption is

revoked and all variable-rate amounts

not paid pursuant to this exemption are

due retroactive to the applicable due

date(s). A plan is described in this

paragraph if—

(i) The plan administrator has issued

notices of intent to terminate the plan in

a standard termination in accordance

with section 4041(a)(2) of ERISA; and

(ii) The proposed termination date set

forth in the notice of intent to terminate

is on or before the last day of the plan

year preceding the premium payment

year.

(5) Plans at full funding limit. A plan

is described in this paragraph if, on or

before the earlier of the due date for

payment of the variable-rate portion of

the premium under § 4007.11 or the

date that portion is paid, the plan’s

contributing sponsor or contributing

sponsors made contributions to the plan

for the plan year preceding the premium

payment year in an amount not less

than the full funding limitation for such

preceding plan year under section

302(c)(7) of ERISA and section 412(c)(7)

of the Code (determined in accordance

with paragraphs (a)(5)(i) and (a)(5)(ii) of

this section). In order for a plan to

qualify for this exemption, an enrolled

actuary must certify that the plan has

met the requirements of this paragraph.

(i) Determination of full funding

limitation. The determination of

whether contributions for the preceding

plan year were in an amount not less

than the full funding limitation under

section 302(c)(7) of ERISA and section

412(c)(7) of the Code for such preceding

plan year shall be based on the methods

of computing the full funding

limitation, including actuarial

assumptions and funding methods, used

by the plan (provided such assumptions

and methods met all requirements,

including the requirements for

reasonableness, under section 302 of

ERISA and section 412 of the Code)

with respect to such preceding plan

year. Plan assets shall not be reduced by

the amount of any credit balance in the

plan’s funding standard account.

(ii) Rounding of de minimis amounts.

Any contribution that is rounded down

to no less than the next lower multiple

of one hundred dollars (in the case of

full funding limitations up to one

hundred thousand dollars) or to no less

than the next lower multiple of one

thousand dollars (in the case of full

funding limitations above one hundred

thousand dollars) shall be deemed for

purposes of this paragraph to be in an

amount equal to the full funding

limitation.

(b) Special rule for determining vested

benefits for certain large plans. With

respect to a plan that had 500 or more

participants on the last day of the plan

year preceding the premium payment

year, if an enrolled actuary determines

pursuant to § 4006.4(a) that the actuarial

value of plan assets equals or exceeds

the value of all benefits accrued under

the plan (valued at the interest rate

prescribed in § 4006.4(b)(1)), the

enrolled actuary need not determine the

value of the plan’s vested benefits, and

may instead report in the Premium

Payment Package the value of the

accrued benefits.

(c) Special rule for determining

unfunded vested benefits for plans

terminating in distress or involuntary

terminations. A plan described in this

paragraph may determine its unfunded

vested benefits by using the special

alternative calculation method set forth

in this paragraph. A plan is described in

this paragraph if it has issued notices of

intent to terminate in a distress

termination in accordance with section

4041(a)(2) of ERISA with a proposed

termination date on or before the last

day of the plan year preceding the

premium payment year, or if the PBGC

has instituted proceedings to terminate

the plan in accordance with section

4042 of ERISA and has sought a

termination date on or before the last

day of the plan year preceding the

premium payment year. Pursuant to this

paragraph, a plan shall determine its

unfunded vested benefits in accordance

with the alternative calculation method

in § 4006.4(c), except that—

(1) The calculation shall be based on

the Form 5500, Schedule B, for the plan

year which includes (in the case of a

distress termination) the proposed

termination date or (in the case of an

involuntary termination) the

termination date sought by the PBGC,

or, if no Schedule B is filed for that plan

year, on the Schedule B for the

immediately preceding plan year;

(2) All references in § 4006.4(c) and

§ 4006.4(d) to the first day of the plan

year preceding the premium payment

year shall be deemed to refer to the first

day of the plan year for which the

Schedule B was filed;

(3) The value of the sum of the plan’s

current liability as of the first day of the

plan year preceding the premium

payment year for vested benefits of

active and terminated vested

participants not in pay status, computed

in accordance with section 302(d)(7) of

ERISA and section 412(l)(7) of the Code,

shall be adjusted (in lieu of the

adjustment required by § 4006.4(c)(1))

by multiplying that value by the sum of

1 plus the product of .07 and the

number of years (rounded to the nearest

hundredth of a year) between the date

of the Schedule B data and (in the case

of a distress termination) the proposed

termination date or (in the case of an

involuntary termination) the

termination date sought by the PBGC;

and

(4) The exponent, ‘‘Y,’’ in the time

adjustment formula of § 4006.4(c)(5)

shall be deemed to equal the number of

years (rounded to the nearest hundredth

of a year) between the date of the

Schedule B data and the last day of the

plan year preceding the premium

payment year.

(d) Special determination date rule for

new and newly-covered plans. In the

case of a new plan or a newly-covered

plan, all references in §§ 4006.3, 4006.4,

and paragraphs (a) and (b) of this

section to the last day of the plan year

preceding the premium payment year

shall be deemed to refer to the first day

of the premium payment year or, if later,

the date on which the plan became

effective for benefit accruals for future

service, and for purposes of determining

the plan’s premium, the number of plan

participants, and (for a single-employer

plan) the amount of the plan’s unfunded

vested benefits and the applicability of

any exemption or special rule under
34020 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

paragraph (a) or (b) of this section, shall

be determined as of such first day or

later date.

(e) Special determination date rule for

certain mergers and spinoffs. (1) With

respect to a plan described in paragraph

(e)(2) of this section, all references in

§§ 4006.3, 4006.4, and this section, as

applicable, to the last day of the plan

year preceding the premium payment

year shall be deemed to refer to the first

day of the premium payment year.

(2) A plan is described in this

paragraph (e)(2) if—

(i) The plan engages in a merger or

spinoff that is not de minimis pursuant

to the regulations under section 414(l) of

the Code (in the case of single-employer

plans) or pursuant to part 4231 of this

chapter (in the case of multiemployer

plans), as applicable;

(ii) The merger or spinoff is effective

on the first day of the plan’s premium

payment year; and

(iii) The plan is the transferee plan in

the case of a merger or the transferor

plan in the case of a spinoff.

(f) Special refund rule for certain

short plan years. A plan described in

this paragraph (f) is entitled to a refund

for a short plan year. The amount of the

refund will be determined by prorating

the premium for the short plan year by

the number of months (treating a part of

a month as a month) in the short plan

year. A plan is described in this

paragraph if—

(1) The plan is a new or newlycovered plan that becomes effective for

premium purposes on a date other than

the first day of its first plan year;

(2) The plan adopts an amendment

changing its plan year, resulting in a

short plan year;

(3) The plan’s assets are distributed

pursuant to the plan’s termination, in

which case the short plan year for

purposes of computing the amount of

the refund under this paragraph shall be

deemed to end on the asset distribution

date or, if later (in the case of a singleemployer plan), the date 30 days prior

to the date the PBGC receives the plan’s

post-distribution certification; or

(4) The plan is a single-employer plan

and a trustee of the plan is appointed

pursuant to section 4042 of ERISA, in

which case the short plan year for

purposes of computing the amount of

the refund under this paragraph shall be

deemed to end on the date of

appointment.

(g) Special rules for plans of regulated

public utilities. (1) This paragraph (g)

applies to a premium payment year

beginning before 1998 of a plan

maintained by one or more contributing

sponsors at least one of which is a

regulated public utility. For this

purpose, a regulated public utility is one

that, as of the beginning of the premium

payment year, is described in section

7701(a)(33)(A)(i) of the Code and has

not begun to collect from utility

customers rates that reflect the costs

incurred or projected to be incurred for

additional premiums under section

4006(a)(3)(E) of ERISA pursuant to final

and nonappealable determinations by

all public utility commissions (or other

authorities having jurisdiction over the

rates and terms of service by the

regulated public utility) that the costs

are just and reasonable and recoverable

from customers of the regulated public

utility.

(2) Limitation on variable-rate

premium and required interest rate. If

every contributing sponsor of a plan

described in paragraph (a) of this

section is a regulated public utility,

then, notwithstanding the provisions of

§§ 4006.3(b) and 4006.4(b)(1),—

(i) The variable-rate premium shall

not be greater than $53 multiplied by

the number of participants in the plan

on the last day of the plan year

preceding the premium payment year;

and

(ii) If the premium payment year

begins after June 1997, § 4006.4(b)(1)

shall be applied as if the applicable

percentage referred to therein were 80

percent.

(3) Proportional application of

limitation rules. If a plan is described in

paragraph (g)(1) of this section but also

has a contributing sponsor that is not a

regulated public utility and participants

who are not regulated public utility

participants (determined under any

reasonable method consistently applied

among participants and from year to

year), the limitations in paragraph (g)(2)

of this section shall be applied in

proportion to the number of regulated

public utility participants in accordance

with the Premium Payment Package.

(4) Special variable-rate premium rule

for certain small regulated public utility

plans paying maximum variable-rate

premium. A plan whose variable-rate

premium is subject to the limitation

described in paragraph (g)(2)(i) of this

section is not required to determine its

unfunded vested benefits under § 4006.4

if—

(i) The number of participants

required to be taken into account in

computing the plan’s premium for the

premium payment year is fewer than

500; and

(ii) The plan pays a variable-rate

premium equal to $53 multiplied by the

number of participants in the plan on

the last day of the plan year preceding

the premium payment year.

(5) Effect of omitted or inadequate

information. The variable-rate premium

of a plan described in paragraph (g)(2)

of this section may be deemed to be $53

multiplied by the number of

participants in the plan on the last day

of the plan year preceding the premium

payment year if—

(i) Any item or items necessary to

establish the correct variable-rate

premium for the plan are omitted from

the plan’s premium filing; or

(ii) In connection with an audit, the

plan’s records fail, in the PBGC’s

judgment, to establish that the plan’s

unfunded vested benefits were of the

amount reported by the plan for the

premium payment year.

PART 4007—PAYMENT OF PREMIUMS

Sec.

4007.1 Purpose and scope.

4007.2 Definitions.

4007.3 Filing requirement and forms.

4007.4 Filing address.

4007.5 Date of filing.

4007.6 Computation of time.

4007.7 Late payment interest charges.

4007.8 Late payment penalty charges.

4007.9 Coverage for guaranteed basic

benefits.

4007.10 Recordkeeping requirements; PBGC

audits.

4007.11 Due dates.

4007.12 Liability for single-employer

premiums.

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

1307.

§ 4007.1 Purpose and scope.

This part, which applies to all plans

that are covered by title IV of ERISA,

provides procedures for paying the

premiums imposed by sections 4006

and 4007 of ERISA. (See part 4006 of

this chapter for premium rates and

computational rules.)

§ 4007.2 Definitions.

(a) The following terms are defined in

§ 4001.2 of this chapter: Code,

contributing sponsor, ERISA, insurer,

IRS, multiemployer plan, notice of

intent to terminate, PBGC, plan, plan

administrator, plan year, and singleemployer plan.

(b) For purposes of this part, the

following terms are defined in § 4006.2

of this chapter: new plan, newly

covered plan, participant, premium

payment year, and short plan year.

§ 4007.3 Filing requirement and forms.

The estimation, declaration,

reconciliation and payment of

premiums shall be made using the forms

prescribed by and in accordance with

the instructions in the PBGC annual

Premium Payment Package. The plan

administrator of each covered plan shall
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34021

file the prescribed form or forms, and

any premium payments due, no later

than the applicable due date specified

in § 4007.11.

§ 4007.4 Filing address.

Plan administrators shall file all forms

required to be filed under this part and

all payments for premiums, interest, and

penalties required to be made under this

part at the address specified in the

Premium Payment Package.

§ 4007.5 Date of filing.

(a) Any form required to be filed

under this part and any payment

required to be made under this part

shall be deemed to have been filed or

made on the date on which it is mailed.

(b) A form or payment shall be

presumed to have been mailed on the

date on which it is postmarked by the

United States Postal Service, or three

days prior to the date on which it is

received by the PBGC if it does not

contain a legible United States Postal

Service postmark.

§ 4007.6 Computation of time.

In computing any period of time

prescribed by this part, the day of the

act, event, or default from which the

designated period of time begins to run

is not counted. The last day of the

period so computed shall be included,

unless it is a Saturday, Sunday, or

federal holiday, in which event the

period runs until the end of the next day

that is not a Saturday, Sunday, or

federal holiday. For purposes of

computing late payment interest charges

under § 4007.7 and late payment

penalty charges under § 4007.8, a

Saturday, Sunday or federal holiday

referred to in the previous sentence

shall be included.

§ 4007.7 Late payment interest charges.

(a) If any premium payment due

under this part is not paid by the due

date prescribed for such payment by

§ 4007.11, an interest charge will accrue

on the unpaid amount at the rate

imposed under section 6601(a) of the

Code for the period from the date

payment is due to the date payment is

made. Late payment interest charges are

compounded daily.

(b) When PBGC issues a bill for

premium payments necessary to

reconcile the premiums paid with the

actual premium due, interest will be

accrued on the unpaid premium until

the date of the bill if paid no later than

30 days after the date of such bill. If the

bill is not paid within the 30-day period

following the date of such bill, interest

will continue to accrue throughout such

30-day period and thereafter, until the

date paid.

(c) PBGC bills for interest assessed

under this section will be deemed paid

when due if paid no later than 30 days

after the date of such bills. Otherwise,

interest will accrue in accordance with

paragraph (a) of this section on the

amount of the bill from the date of the

bill until the date of payment.

§ 4007.8 Late payment penalty charges.

(a) Penalty charge. If any premium

payment due under this part is not paid

by the due date prescribed for such

payment by § 4007.11, the PBGC will,

unless a waiver is granted pursuant to

paragraph (b) of this section, assess a

late payment charge (not to exceed

100% of the unpaid premium) equal to

the greater of—

(i) 5% per month (or fraction thereof)

of the unpaid premiums; or

(ii) $25.

(b) Waiver of penalty charge. The late

payment penalty charge will be waived,

in whole or in part—

(1) With respect to any premium

payment made within 60 days after the

due date prescribed for such payment in

§ 4007.11, if, before such due date, the

PBGC grants a waiver upon a showing

of substantial hardship arising from the

timely payment of the premium and a

showing that the premium will be paid

within such 60-day period;

(2) If the PBGC grants a waiver based

on any other demonstration of good

cause;

(3) If the PBGC, on its own motion,

waives the application of paragraph (a)

of this section;

(4) With respect to any premium

payment (excluding any variable-rate

premium under § 4006.3(b)), if a plan

that is required to make a reconciliation

filing described in § 4007.11(b)(2)(iii)—

(i) Paid at least 90 percent of the flatrate premium due for the premium

payment year by the due date specified

in § 4007.11(b)(2)(i); or

(ii) Paid by the due date specified in

§ 4007.11(b)(2)(i) an amount equal to the

premium that would be due for the

premium payment year, computed using

the flat per capita premium rate for the

premium payment year and the

participant count upon which the prior

year’s premium was based; and

(iii) Pays 100 percent of the flat-rate

premium due for the premium payment

year under § 4006.3 on or before the due

date for the reconciliation filing under

§ 4007.11(b)(2)(iii); or

(5) With respect to any PBGC bills for

the premium payment necessary to

reconcile the premium paid with the

actual premium due, if such bills are

paid no later than 30 days after the date

of such bills.

§ 4007.9 Coverage for guaranteed basic

benefits.

(a) The failure by a plan administrator

to pay the premiums due under this part

will not result in that plan’s loss of

coverage for basic benefits guaranteed

under sections 4022(a) or 4022A(a) of

ERISA.

(b) The payment of the premiums

imposed by this part will not result in

coverage for basic benefits guaranteed

under sections 4022(a) or 4022A(a) of

ERISA for plans not covered under title

IV of ERISA.

§ 4007.10 Recordkeeping requirements;

PBGC audits.

(a) Retention of records to support

premium payments. All plan records,

including calculations and other data

prepared by an enrolled actuary or, for

a plan described in section 412(i) of the

Code, by the insurer from which the

insurance contracts are purchased, that

are necessary to support or to validate

premium payments under this part shall

be retained by the plan administrator for

a period of six years after the premium

due date. 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

reconcile the calculation of the plan’s

unfunded vested benefits with the

actuarial valuation upon which the

calculation was based. Records retained

pursuant to this paragraph shall be

made available to the PBGC upon

request for inspection and

photocopying.

(b) PBGC audit. Premium payments

under this part are subject to audit by

the PBGC. If, upon audit, the PBGC

determines that a premium due under

this part was underpaid, the late

payment interest charges under § 4007.7

and the late payment penalty charges

under § 4007.8 shall apply to the unpaid

balance from the premium due date to

the date of payment. In determining the

premium due, if, in the judgment of the

PBGC, the plan’s records fail to establish

the number of plan participants with

respect to whom premiums were

required for any premium payment year,

the PBGC may rely on data it obtains

from other sources (including the IRS

and the Department of Labor) for

presumptively establishing the number

of plan participants for premium

computation purposes.

§ 4007.11 Due dates.

(a) In general. The premium filing due

date for small plans is prescribed in

paragraph (a)(1) of this section and the

premium filing due dates for large plans

are prescribed in paragraph (a)(2) of this

section.
34022 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(1) Plans with fewer than 500

participants. If the plan has fewer than

500 participants, as determined under

paragraph (b) of this section, the due

date is the fifteenth day of the eighth

full calendar month following the

month in which the plan year began.

(2) Plans with 500 or more

participants. If the plan has 500 or more

participants, as determined under

paragraph (b) of this section—

(i) The due date for the flat-rate

premium required by § 4006.3(a) is the

last day of the second full calendar

month following the close of the plan

year preceding the premium payment

year; and

(ii) The due date for the variable-rate

premium required by § 4006.3(b) for

single-employer plans is the fifteenth

day of the eighth full calendar month

following the month in which the

premium payment year begins.

(iii) If the number of plan participants

on the last day of the plan year

preceding the premium payment year is

not known by the date specified in

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

reconciliation filing (on the form

prescribed by this part) and any

required premium payment or request

for refund shall be made by the date

specified in paragraph (a)(2)(ii) of this

section.

(3) Plans that change plan years. For

any plan that changes its plan year, the

premium form or forms and payment or

payments for the short plan year shall

be filed by the applicable due date or

dates specified in paragraphs (a)(1),

(a)(2), or (c) of this section. For the plan

year that follows a short plan year, the

due date or dates for the premium forms

and payments shall be, with respect to

each such due date, the later of—

(i) The applicable due date or dates

specified in paragraph (a)(1) or (a)(2) of

this section; or

(ii) 30 days after the date on which

the amendment changing the plan year

was adopted.

(b) Participant count rule for purposes

of determining filing due dates. For

purposes of determining under

paragraph (a) of this section whether a

plan has fewer than 500 participants, or

500 or more participants, the plan

administrator shall use—

(1) For a single-employer plan, the

number of participants for whom

premiums were payable for the plan

year preceding the premium payment

year, or

(2) For a multiemployer plan,—

(i) If the premium payment year is the

plan’s second plan year, the first day of

the first plan year; or

(ii) If the premium payment year is

the plan’s third or a subsequent plan

year, the last day of the second

preceding plan year.

(c) Due dates for new and newly

covered plans. Notwithstanding

paragraph (a) of this section, the

premium form and all premium

payments due for the first plan year of

coverage of any new plan or newly

covered plan shall be filed on or before

the latest of—

(1) The fifteenth day of the eighth full

calendar month following the month in

which the plan year began or, if later, in

which the plan became effective for

benefit accruals for future service;

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

adoption; or

(3) 90 days after the date on which the

plan became covered by title IV of

ERISA.

(d) Continuing obligation to file. The

obligation to file the form or forms

prescribed by this part and to pay any

premiums due continues through the

plan year in which all plan assets are

distributed pursuant to a plan’s

termination or in which a trustee is

appointed under section 4042 of ERISA,

whichever occurs earlier. The entire

premium computed under this part is

due, irrespective of whether the plan is

entitled to a refund for a short plan year

pursuant to § 4006.5(f).

(e) Improper filings. Any form not

filed in accordance with this part, not

filed in accordance with the instructions

in the Premium Payment Package, not

accompanied by the required premium

payment, or otherwise incomplete, may,

in the discretion of the PBGC, be

returned with any payment

accompanying the form to the plan

administrator, and such payment shall

be treated as not having been made.

§ 4007.12 Liability for single-employer

premiums.

(a) The designation under this part of

the plan administrator as the person

required to file the applicable forms and

to submit the premium payment for a

single-employer plan is a procedural

requirement only and does not alter the

liability for premium payments imposed

by section 4007 of ERISA. Pursuant to

section 4007(e) of ERISA, both the plan

administrator and the contributing

sponsor of a single-employer plan are

liable for premium payments, and, if the

contributing sponsor is a member of a

controlled group, each member of the

controlled group is jointly and severally

liable for the required premiums. Any

entity that is liable for required

premiums is also liable for any interest

and penalties assessed with respect to

such premiums.

(b) For any plan year in which a plan

administrator issues (pursuant to

section 4041(a)(2) of ERISA) notices of

intent to terminate in a distress

termination under section 4041(c) of

ERISA or the PBGC initiates a

termination proceeding under section

4042 of ERISA, and for each plan year

thereafter, the obligation to pay the

premiums (and any interest or penalties

thereon) imposed by ERISA and this

part for a single-employer plan shall be

an obligation solely of the contributing

sponsor and the members of its

controlled group, if any.

(Approved by the Office of Management and

Budget under control number 1212–0009)

PART 4010—ANNUAL FINANCIAL AND

ACTUARIAL INFORMATION

REPORTING

Sec.

4010.1 Purpose and scope.

4010.2 Definitions.

4010.3 Filing requirement.

4010.4 Filers.

4010.5 Information year.

4010.6 Information to be filed.

4010.7 Identifying information.

4010.8 Plan actuarial information.

4010.9 Financial information.

4010.10 Due date and filing with the PBGC.

4010.11 Waivers and extensions.

4010.12 Confidentiality of information

submitted.

4010.13 Penalties.

4010.14 OMB control number.

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

1310.

§ 4010.1 Purpose and scope.

This part prescribes the requirements

for annual filings with the PBGC under

section 4010 of ERISA. This part applies

to filers for any information year ending

on or after December 31, 1995.

§ 4010.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: benefit

liabilities, Code, contributing sponsor,

controlled group, ERISA, fair market

value, IRS, PBGC, person, plan, and

plan year.

In addition, for purposes of this part:

Exempt entity means a person who

does not have to file information and

about whom information does not have

to be filed, as described in § 4010.4(d)

of this part.

Exempt plan means a plan about

which actuarial information does not

have to be filed, as described in

§ 4010.8(c) of this part.

Fair market value of the plan’s assets

means the fair market value of the plan’s

assets at the end of the plan year ending

within the filer’s information year

(determined without regard to any

contributions receivable).
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34023

Filer means a person who is required

to file reports, as described in § 4010.4

of this part.

Fiscal year means, with respect to a

person, the person’s annual accounting

period or, if the person has not adopted

a closing date, the calendar year.

Information year means the year

determined under § 4010.5 of this part.

§ 4010.3 Filing requirement.

(a) In general. Except as provided in

§ 4010.8(c) (relating to exempt plans)

and except where waivers have been

granted under § 4010.11 of this part,

each filer shall submit to the PBGC

annually, on or before the due date

specified in § 4010.10, all information

specified in § 4010.6(a) with respect to

all members of a controlled group and

all plans maintained by members of a

controlled group.

(b) Single controlled group

submission. Any filer or other person

may submit the information specified in

§ 4010.6(a) on behalf of one or more

members of a filer’s controlled group. If

a person other than a filer submits the

information, the submission must also

include a written power of attorney

signed by a filer authorizing the person

to act on behalf of one or more filers.

§ 4010.4 Filers.

(a) General. A contributing sponsor of

a plan and each member of the

contributing sponsor’s controlled group

is a filer with respect to an information

year (unless exempted under paragraph

(d) of this section) if—

(1) the aggregate unfunded vested

benefits of all plans (including any

exempt plans) maintained by the

members of the contributing sponsor’s

controlled group exceed $50 million

(disregarding those plans with no

unfunded vested benefits);

(2) any member of a controlled group

fails to make a required installment or

other required payment to a plan and,

as a result, the conditions for imposition

of a lien described in section 302(f)(1)

(A) and (B) of ERISA or section

412(n)(1) (A) and (B) of the Code have

been met during the information year,

and the required installment or other

required payment is not made within

ten days after its due date; or

(3) any plan maintained by a member

of a controlled group has been granted

one or more minimum funding waivers

under section 303 of ERISA or section

412(d) of the Code totaling in excess of

$1 million that, as of the end of the plan

year ending within the information year,

are still outstanding (determined in

accordance with paragraph (c) of this

section).

(b) Unfunded vested benefits—(1)

General. Except as provided in

paragraph (b)(2) of this section, for

purposes of the $50 million test in

paragraph (a)(1) of this section, the

value of a plan’s unfunded vested

benefits is determined at the end of the

plan year ending within the filer’s

information year in accordance with

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

§ 4006.4 of this chapter (without

reference to the exemptions and special

rules under § 4006.5).

(2) Optional assumptions. Prior to the

first information year in which the

mortality assumptions prescribed under

section 302(d)(7)(C)(ii)(II) of ERISA

apply to all of the plans maintained by

a controlled group, the value of

unfunded vested benefits for a plan may

be determined by substituting for the

respective assumptions used under

paragraph (b)(1) of this section (but not

using the alternative calculation method

under § 4006.4(c) of this chapter) all of

the following assumptions:

(i) an interest rate equal to 100% of

the annual yield for 30-year Treasury

constant maturities (as reported in

Federal Reserve Statistical Release G.13

and H.15) for the last full calendar

month in the plan year;

(ii) the fair market value of the plan’s

assets; and

(iii) the mortality tables described in

section 302(d)(7)(C)(ii)(I) of ERISA or

section 412(l)(7)(C)(ii)(I) of the Code;

provided that for any plan year ending

on or after the effective date of an

amendment changing the mortality

assumptions used to value benefits to be

paid as annuities in trusteed plans

under part 4044 of this chapter, those

amended mortality assumptions shall be

used.

(c) Outstanding waiver. Before the end

of the statutory amortization period, a

minimum funding waiver for a plan is

considered outstanding unless—

(1) a credit balance exists in the

funding standard account (described in

section 302(b) of ERISA and section

412(b) of the Code) that is no less than

the outstanding balance of all waivers

for the plan;

(2) a waiver condition or contractual

obligation requires that a credit balance

as described in paragraph (c)(1)

continue to be maintained as of the end

of each plan year during the remainder

of the statutory amortization period for

the waiver; and

(3) no portion of any credit balance

described in paragraph (c)(1) is used to

make any required installment under

section 302(e) of ERISA or section

412(m) of the Code for any plan year

during the remainder of the statutory

amortization period.

(d) Exempt entities. A person is an

exempt entity if the person—

(1) is not a contributing sponsor of a

plan (other than an exempt plan);

(2) has revenue for its fiscal year

ending within the controlled group’s

nformation year that is five percent or

less of the controlled group’s revenue

for the fiscal year(s) ending within the

information year;

(3) has annual operating income for

the fiscal year ending within the

controlled group’s information year that

is no more than the greater of—

(i) five percent of the controlled

group’s annual operating income for the

fiscal year(s) ending within the

information year, or

(ii) $5 million; and

(4) has net assets at the end of the

fiscal year ending within the controlled

group’s information year that is no more

than the greater of—

(i) five percent of the controlled

group’s net assets at the end of the fiscal

year(s) ending within the information

year, or

(ii) $5 million.

§ 4010.5 Information year.

(a) Determinations based on

information year. An information year is

used under this part to determine which

persons are filers (§ 4010.4), what

information a filer must submit

(§§ 4010.6–4010.9), whether a plan is an

exempt plan (§ 4010.8(c)), and the due

date for submitting the information

(§ 4010.10(a)).

(b) General. Except as provided in

paragraph (c) of this section, a person’s

information year shall be the fiscal year

of the person. A filer is not required to

change its fiscal year or the plan year of

a plan, to report financial information

for any accounting period other than an

existing fiscal year, or to report actuarial

information for any plan year other than

an existing plan year.

(c) Controlled group members with

different fiscal years— (1) Use of

calendar year. If members of a

controlled group (disregarding any

exempt entity) report financial

information on the basis of different

fiscal years, the information year shall

be the calendar year.

(2) Example. Filers A and B are

members of the same controlled group.

Filer A has a July 1 fiscal year, and filer

B has an October 1 fiscal year. The

information year is the calendar year.

Filer A’s financial information with

respect to its fiscal year ending June 30,

1996, and filer B’s financial information

with respect to its fiscal year ending

September 30, 1996, must be submitted

to the PBGC following the end of the

1996 calendar year (the calendar year in
34024 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

which those fiscal years end). If filer B

were an exempt entity, the information

year would be filer A’s July 1 fiscal year.

§ 4010.6 Information to be filed.

(a) General. A filer must submit the

information specified in § 4010.7

(identifying information), § 4010.8 (plan

actuarial information) and § 4010.9

(financial information) of this part with

respect to each member of the filer’s

controlled group and each plan

maintained by any member of the

controlled group.

(b) Additional information. By written

notification, the PBGC may require any

filer to submit additional actuarial or

financial information that is necessary

to determine plan assets and liabilities

for any period through the end of the

filer’s information year, or the financial

status of a filer for any period through

the end of the filer’s information year.

The information must be submitted

within ten days after the date of the

written notification or by a different

time specified therein.

(c) Previous submissions. If any

required information has been

previously submitted to the PBGC, a

filer may incorporate this information

into the required submission by

referring to the previous submission.

§ 4010.7 Identifying information.

(a) Filers. Each filer is required to

provide the following identifying

information with respect to each

member of the controlled group

(excluding exempt entities)—

(1) the name, address, and telephone

number of each member of the

controlled group and the legal

relationships of each (for example,

parent, subsidiary); and

(2) the nine-digit Employer

Identification Number (EIN) assigned by

the IRS to each member (or if there is

no EIN for a member, an explanation).

(b) Plans. Each filer is required to

provide the following identifying

information with respect to each plan

(including exempt plans) maintained by

any member of the controlled group

(including exempt entities)—

(1) the name of each plan;

(2) the EIN and the three-digit Plan

Number (PN) assigned by the

contributing sponsor to each plan (or if

there is no EIN or PN for a plan, an

explanation); and

(3) if the EIN or PN of a plan has

changed since the beginning of the

filer’s information year, the previous

EIN or PN and an explanation.

§ 4010.8 Plan actuarial information.

(a) Required information. For each

plan (other than an exempt plan)

maintained by any member of the filer’s

controlled group, each filer is required

to provide the following actuarial

information—

(1) the fair market value of the plan’s

assets;

(2) the value of the plan’s benefit

liabilities (determined in accordance

with paragraph (d) of this section) at the

end of the plan year ending within the

filer’s information year;

(3) a copy of the actuarial valuation

report for the plan year ending within

the filer’s information year that contains

or is supplemented by the following

information—

(i) each amortization base and related

amortization charge or credit to the

funding standard account (as defined in

section 302 (b) of ERISA or section 412

(b) of the Code) for that plan year

(excluding the amount considered

contributed to the plan as described in

section 302(b)(3)(A) of ERISA or section

412(b)(3)(A) of the Code),

(ii) the itemized development of the

additional funding charge payable for

that plan year pursuant to section 412(l)

of the Code,

(iii) the minimum funding

contribution and the maximum

deductible contribution for that plan

year,

(iv) the actuarial assumptions and

methods used for that plan year for

purposes of section 302(b) and (d) of

ERISA or section 412(b) and (l) of the

Code (and any change in those

assumptions and methods since the

previous valuation and justifications for

any change), and

(v) a summary of the principal

eligibility and benefit provisions on

which the valuation of the plan was

based (and any changes to those

provisions since the previous

valuation), along with descriptions of

any benefits not included in the

valuation, any significant events that

occurred during that plan year, and the

plan’s early retirement factors; and

(4) a written certification by an

enrolled actuary that, to the best of his

or her knowledge and belief, the

actuarial information submitted is true,

correct, and complete and conforms to

all applicable laws and regulations,

provided that this certification may be

qualified in writing, but only to the

extent the qualification(s) are permitted

under 26 CFR § 301.6059–1(d).

(b) Alternative compliance for plan

actuarial information. If any of the

information specified in paragraph (a)(3)

of this section is not available by the

date specified in § 4010.10(a), a filer

may satisfy the requirement to provide

such information by—

(1) including a statement, with the

material that is submitted to the PBGC,

that the filer will file the unavailable

information by the alternative due date

specified in § 4010.10(b) of this part,

and

(2) filing such information (along with

a certification by an enrolled actuary

under paragraph (a)(4) of this section)

with the PBGC by that alternative due

date.

(c) Exempt plan. The actuarial

information specified in this section is

not required with respect to a plan that,

as of the end of the plan year ending

within the filer’s information year, has

fewer than 500 participants or has

benefit liabilities (determined in

accordance with paragraph (d) of this

section) equal to or less than the fair

market value of the plan’s assets,

provided that the plan—

(1) has received, on or within ten days

after their due dates, all required

installments or other payments required

to be made during the information year

under section 302 of ERISA or section

412 of the Code; and

(2) has no minimum funding waivers

outstanding (as described in § 4010.4(c)

of this part) as of the end of the plan

year ending within the information year.

(d) Value of benefit liabilities. The

value of a plan’s benefit liabilities at the

end of a plan year shall be determined

using the plan census data described in

paragraph (d)(1) of this section and the

actuarial assumptions and methods

described in paragraph (d)(2) or, where

applicable, (d)(3) of this section.

(1) Census data.

(i) Census data period. Plan census

data shall be determined (for all plans

for any information year) either as of the

end of the plan year or as of the

beginning of the next plan year.

(ii) Projected census data. If actual

plan census data is not available, a plan

may use a projection of plan census data

from a date within the plan year. The

projection must be consistent with

projections used to measure pension

obligations of the plan for financial

statement purposes and must give a

result appropriate for the end of the

plan year for these obligations. For

example, adjustments to the projection

process will be required where there has

been a significant event (such as a plan

amendment or a plant shutdown) that

has not been reflected in the projection

data.

(2) Actuarial assumptions and

methods. The value of benefit liabilities

shall be determined using the

assumptions and methods applicable to

the valuation of benefits to be paid as

annuities in trusteed plans terminating

at the end of the plan year (as prescribed
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34025

in §§ 4044.51 through 4044.57 of this

chapter).

(3) Special actuarial assumptions for

exempt plan determination. Solely for

purposes of determining whether a plan

is an exempt plan, the value of benefit

liabilities may be determined by

substituting for the retirement age

assumptions in paragraph (d)(2) the

retirement age assumptions used by the

plan for that plan year for purposes of

section 302(d) of ERISA or section 412(l)

of the Code.

§ 4010.9 Financial information.

(a) General. Except as provided in this

section, each filer is required to provide

the following financial information for

each controlled group member (other

than an exempt entity)—

(1) audited financial statements for

the fiscal year ending within the

information year (including balance

sheets, income statements, cash flow

statements, and notes to the financial

statements);

(2) if audited financial statements are

not available by the date specified in

§ 4010.10(a), unaudited financial

statements for the fiscal year ending

within the information year; or

(3) if neither audited nor unaudited

financial statements are available by the

date specified in § 4010.10(a), copies of

federal tax returns for the tax year

ending within the information year.

(b) Consolidated financial statements.

If the financial information of a

controlled group member is combined

with the information of other group

members in consolidated financial

statements, a filer may provide the

following financial information in lieu

of the information required in paragraph

(a) of this section—

(1) the audited consolidated financial

statements for the filer’s information

year or, if the audited consolidated

financial statements are not available by

the date specified in § 4010.10(a),

unaudited consolidated financial

statements for the fiscal year ending

within the information year; and

(2) for each controlled group member

included in the consolidated financial

statements that is a contributing sponsor

of a plan (other than an exempt plan),

the contributing sponsor’s revenues and

operating income for the information

year, and net assets at the end of the

information year.

(c) Subsequent submissions. If

unaudited financial statements are

submitted as provided in paragraph

(a)(2) or (b)(1) of this section, audited

financial statements must thereafter be

filed within 15 days after they are

prepared. If federal tax returns are

submitted as provided in paragraph

(a)(3) of this section, audited and

unaudited financial statements must

thereafter be filed within 15 days after

they are prepared.

(d) Submission of public information.

If any of the financial information

required by paragraphs (a) through (c) of

this section is publicly available, the

filer, in lieu of submitting such

information to the PBGC, may include a

statement with the other information

that is submitted to the PBGC indicating

when such financial information was

made available to the public and where

the PBGC may obtain it. For example, if

the controlled group member has filed

audited financial statements with the

Securities and Exchange Commission, it

need not file the financial statements

with PBGC but instead can identify the

SEC filing as part of its submission

under this part.

(e) Inclusion of information about

non-filers and exempt entities.

Consolidated financial statements

provided pursuant to paragraph (b)(1) of

this section may include financial

information of persons who are not

controlled group members (e.g., joint

ventures) or are exempt entities.

§ 4010.10 Due date and filing with the

PBGC.

(a) Due date. Except as permitted

under paragraph (b) of this section, a

filer shall file the information required

under this part with the PBGC on or

before the 105th day after the close of

the filer’s information year.

(b) Alternative due date. A filer that

includes the statement specified in

§ 4010.8(b)(1) with its submission to the

PBGC by the date specified in paragraph

(a) of this section must submit the

actuarial information specified in

§ 4010.8(b)(2) within 15 days after the

deadline for filing the plan’s annual

report (Form 5500 series) for the plan

year ending within the filer’s

information year (see § 2520.104a–

5(a)(2) of this title).

(c) How to file. Requests and

information may be delivered by mail,

by delivery service, by hand, or by any

other method acceptable to the PBGC,

to: Corporate Finance and Negotiations

Department, Pension Benefit Guaranty

Corporation, 1200 K Street, N.W.,

Washington, DC 20005–4026.

(d) Date when information filed.

Information filed under this part is

considered filed—

(1) on the date of the United States

postmark stamped on the cover in

which the information is mailed, if—

(i) the postmark was made by the

United States Postal Service; and

(ii) the document was mailed postage

prepaid, properly addressed to the

PBGC; or

(2) if the conditions stated in

paragraph (d)(1) of this section are not

met, on the date it is received by the

PBGC. Information received on a

weekend or Federal holiday or after 5:00

p.m. on a weekday is considered filed

on the next regular business day.

(e) Computation of time. In computing

any period of time under this part, the

day of the act or event from which the

designated period of time begins to run

shall not be included. The last day of

the period so computed shall be

included, unless it is a weekend or

Federal holiday, in which event the

period runs until the end of the next day

that is not a weekend or Federal

holiday.

§ 4010.11 Waivers and extensions.

The PBGC may waive the requirement

to submit information with respect to

one or more filers or plans or may

extend the applicable due date or dates

specified in § 4010.10 of this part. The

PBGC will exercise this discretion in

appropriate cases where it finds

convincing evidence supporting a

waiver or extension; any waiver or

extension may be subject to conditions.

A request for a waiver or extension must

be filed in writing with the PBGC at the

address provided in § 4010.10(c) no

later than 15 days before the applicable

date specified in § 4010.10 of this part,

and must state the facts and

circumstances on which the request is

based.

§ 4010.12 Confidentiality of information

submitted.

In accordance with § 4901.21(a)(3) of

this chapter and section 4010(c) of

ERISA, any information or documentary

material that is not publicly available

and is submitted to the PBGC pursuant

to this part shall not be made public,

except as may be relevant to any

administrative or judicial action or

proceeding or for disclosures to either

body of Congress or to any duly

authorized committee or subcommittee

of the Congress.

§ 4010.13 Penalties.

If all of the information required

under this part is not provided within

the specified time limit, the PBGC may

assess a separate penalty under section

4071 of ERISA against the filer and each

member of the filer’s controlled group

(other than an exempt entity) of up to

$1,000 a day for each day that the

failure continues. The PBGC may also

pursue other equitable or legal remedies

available to it under the law.
34026 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

§ 4010.14 OMB control number.

The collection of information

requirements contained in this part have

been approved by the Office of

Management and Budget under OMB

Control Number 1212–0049.

PART 4011—DISCLOSURE TO

PARTICIPANTS

Sec.

4011.1 Purpose and scope.

4011.2 Definitions.

4011.3 Notice requirement.

4011.4 Small plan rules.

4011.5 Exemption for new and newlycovered plans.

4011.6 Mergers, consolidations, and

spinoffs.

4011.7 Persons entitled to receive notice.

4011.8 Time of notice.

4011.9 Manner of issuance of notice.

4011.10 Form of notice.

4011.11 OMB control number.

Appendix A to Part 4011—Model Participant

Notice. Appendix B to Part 4011—Table of

maximum Guaranteed Benefits.

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

§ 4011.1 Purpose and scope.

This part prescribes rules and

procedures for complying with the

requirements of section 4011 of ERISA.

This part applies for any plan year

beginning on or after January 1, 1995,

with respect to any single-employer

plan that is covered by section 4021 of

ERISA.

§ 4011.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: contributing

sponsor, employer, ERISA, normal

retirement age, PBGC, person, plan, plan

administrator, plan year, and singleemployer plan.

In addition, for purposes of this part:

Participant has the meaning in

§ 4041.2 of this chapter.

Participant Notice means the notice

required pursuant to section 4011 of

ERISA and this part.

§ 4011.3 Notice requirement.

(a) General. Except as otherwise

provided in this part, the plan

administrator of a plan must provide a

Participant Notice for a plan year if a

variable rate premium is payable for the

plan under section 4006(a)(3)(E) of

ERISA and part 4006 of this chapter for

that plan year, unless, for that plan year

or for the prior plan year, the plan meets

the Deficit Reduction Contribution

(‘‘DRC’’) Exception Test in paragraph (b)

of this section. The DRC Exception Test

may be applied using the Small Plan

DRC Exception Test rules in § 4011.4(b),

where applicable.

(b) DRC Exception Test—(1) Basic

rule. A plan meets the DRC Exception

Test for a plan year if it is exempt from

the requirements of section 302(d) of

ERISA for that plan year by reason of

section 302(d)(9), without regard to the

small plan exemption in section

302(d)(6)(A).

(2) 1994 plan year. A plan satisfies the

DRC Exception Test for the 1994 plan

year if, for any two of the plan years

beginning in 1992, 1993, and 1994

(whether or not consecutive), the plan

satisfies any requirement of section

302(d)(9)(D)(i) of ERISA.

(c) Penalties for non-compliance. If a

plan administrator fails to provide a

Participant Notice within the specified

time limit or omits material information

from a Participant Notice, the PBGC

may assess a penalty under section 4071

of ERISA of up to $1,000 a day for each

day that the failure continues.

§ 4011.4 Small plan rules.

(a) 1995 plan year exemption. A plan

that is exempt from the requirements of

section 302(d) of ERISA for the 1994 or

1995 plan year by reason of section

302(d)(6)(A) is exempt from the

Participant Notice requirement for the

1995 plan year.

(b) Small Plan DRC Exception Test. In

determining whether the Participant

Notice requirement applies for a plan

year beginning after 1995, the plan

administrator of a plan that is exempt

from the requirements of section 302(d)

of ERISA by reason of section

302(d)(6)(A) for the plan year being

tested may use any one or more of the

following rules in determining whether

the plan meets the DRC Exception Test

for that plan year:

(1) Use of Schedule B data. For any

plan year for which the plan is exempt

from the requirements of section 302(d)

of ERISA by reason of section

302(d)(6)(A), provided both of the

following adjustments are made—

(i) The market value of the plan’s

assets as of the beginning of the plan

year (as required to be reported on Form

5500, Schedule B) may be substituted

for the actuarial value of the plan’s

assets as of the valuation date; and

(ii) The plan’s current liability for all

participants’ total benefits as of the

beginning of the plan year (as required

to be reported on Form 5500, Schedule

B) may be substituted for the plan’s

current liability as of the valuation date.

(2) Pre-1995 plan year 90 percent test.

A plan that is exempt from the

requirements of section 302(d) of ERISA

for a pre-1995 plan year by reason of

section 302(d)(6)(A) satisfies the

requirements of section 302(d)(9)(D)(i)

for that pre-1995 plan year if the ratio

of its assets to its current liability for

that plan year is at least 90 percent. For

this purpose, the plan’s assets are

valued without subtracting any credit

balance under section 302(b) of ERISA,

and its current liability is determined

using the highest interest rate allowable

for the plan year under section

302(d)(7)(C).

(3) Interest rate adjustment. If the

interest rate used to calculate current

liability for a plan year is less than the

highest rate allowable for the plan year

under section 302(d)(7)(C) of ERISA, the

current liability may be reduced by one

percent for each tenth of a percentage

point by which the highest rate exceeds

the rate so used.

§ 4011.5 Exemption for new and newlycovered plans.

A plan (other than a plan resulting

from a consolidation or spinoff) is

exempt from the Participant Notice

requirement for the first plan year for

which the plan must pay premiums

under parts 4006 and 4007 of this

chapter.

§ 4011.6 Mergers, consolidations, and

spinoffs.

In the case of a plan involved in a

merger, consolidation, or spinoff

transaction that becomes effective

during a plan year, the plan

administrator shall apply the

requirements of section 4011 of ERISA

and of this part for that plan year in a

reasonable manner to ensure that the

Participant Notice serves its statutory

purpose.

§ 4011.7 Persons entitled to receive notice.

The plan administrator must provide

the Participant Notice to each person

who is a participant, a beneficiary of a

deceased participant, an alternate payee

under an applicable qualified domestic

relations order (as defined in section

206(d)(3) of ERISA), or an employee

organization that represents any group

of participants for purposes of collective

bargaining. To determine who is a

person that must receive the Participant

Notice for a plan year, the plan

administrator may select any date

during the period beginning with the

last day of the previous plan year and

ending with the day on which the

Participant Notice for the plan year is

due, provided that a change in the date

from one plan year to the next does not

exclude a substantial number of

participants and beneficiaries.

§ 4011.8 Time of notice.

The plan administrator must issue the

Participant Notice for a plan year no

later than two months after the deadline

(including extensions) for filing the

annual report for the previous plan year

(see § 2520.104a–5(a)(2) of this title).
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34027

The plan administrator may change the

date of issuance from one plan year to

the next, provided that the effect of any

change is not to avoid disclosing a

minimum funding waiver under

§ 4011.10(b)(5) or a missed contribution

under § 4011.10(b)(6). When the

President of the United States declares

that, under the Disaster Relief Act of

1974, as amended (42 U.S.C. 5121,

5122(2), 5141(b)), a major disaster

exists, the PBGC may extend the due

date for providing the Participant Notice

by up to 180 days.

§ 4011.9 Manner of issuance of notice.

The Participant Notice shall be issued

by using measures reasonably calculated

to ensure actual receipt by the persons

entitled to receive it. It may be issued

together with another document, such

as the summary annual report required

under section 104(b)(3) of ERISA for the

prior plan year, but must be in a

separate document.

§ 4011.10 Form of notice.

(a) General. The Participant Notice

(and any additional information under

paragraph (d) of this section) shall be

readable and written in a manner

calculated to be understood by the

average plan participant and not to

mislead recipients. The Model

Participant Notice in Appendix A to this

part (when properly completed) is an

example of a Participant Notice meeting

the requirements of this section.

(b) Content. The Participant Notice for

a plan year shall include—

(1) Identifying information (the name

of the plan and the contributing

sponsor, the employer identification

number of the contributing sponsor, the

plan number, the date (at least the

month and year) on which the

Participant Notice is issued, and the

name, title, address and telephone

number of the person(s) who can

provide information about the plan’s

funding);

(2) A statement to the effect that the

Participant Notice is required by law;

(3) The Notice Funding Percentage for

the plan year, determined in accordance

with paragraph (c) of this section, and

the date as of which the Notice Funding

Percentage is determined;

(4) A statement to the effect that—

(i) To pay pension benefits, the

employer is required to contribute

money to the plan over a period of

years;

(ii) A plan’s funding percentage does

not take into consideration the financial

strength of the employer; and

(iii) The employer, by law, must pay

for all pension benefits, but benefits

may be at risk if the employer faces a

severe financial crisis or is in

bankruptcy;

(5) If, for any of the five plan years

immediately preceding the plan year,

the plan has been granted a minimum

funding waiver under section 303 of

ERISA that has not (as of the end of the

prior plan year) been fully repaid, a

statement identifying each such plan

year and an explanation of a minimum

funding waiver;

(6) For any payment subject to the

requirements of this paragraph, a

statement identifying the due date for

the payment and noting that the

payment has or has not been made and

(if made) the date of the payment. Once

participants have been notified (under

this part or Title I of ERISA) of a missed

contribution that is subject to the

requirements of this paragraph, the

delinquency need not be reported in a

Participant Notice for a subsequent plan

year if the missed contribution has been

paid in full by the time the subsequent

Participant Notice is issued. The

payments subject to the requirements of

this paragraph are—

(i) Any minimum funding payment

necessary to satisfy the minimum

funding standard under section 302(a)

of ERISA for any plan year beginning on

or after January 1, 1994, if not paid by

the earlier of the due date for that

payment (the latest date allowed under

section 302(c)(10)) or the date of

issuance of the Participant Notice; and

(ii) An installment or other payment

required by section 302 of ERISA for a

plan year beginning on or after January

1, 1995, that was not paid by the 60th

day after the due date for that payment;

(7) A statement to the effect that if a

plan terminates before all pension

benefits are fully funded, the PBGC pays

most persons all pension benefits, but

some persons may lose certain benefits

that are not guaranteed;

(8) A summary of plan benefits

guaranteed by the PBGC, with an

explanation of the limitations on such

guarantee; and

(9) A statement that further

information about the PBGC’s guarantee

may be obtained by requesting a free

copy of the booklet ‘‘Your Guaranteed

Pension’’ from Consumer Information

Center, Dept. YGP, Pueblo, Colorado

81009. The Participant Notice may

include a statement that the booklet may

be obtained through electronic access

via the World Wide Web from the PBGC

Homepage at http://www.pbgc.gov/

ygp.htm.

(c) Notice Funding Percentage—

(1) General Rule. The Notice Funding

Percentage that must be included in the

Participant Notice for a plan year is the

‘‘funded current liability percentage’’ (as

that term is defined in section

302(d)(9)(C) of ERISA) for that plan year

or the prior plan year.

(2) Small plans. A plan that is exempt

from the requirements of section 302(d)

of ERISA for a plan year by reason of

section 302(d)(6)(A) may determine its

funded current liability percentage for

that plan year using the Small Plan DRC

Exception Test rules in § 4011.4(b).

(d) Additional information. The plan

administrator may include with the

Participant Notice any information not

described in paragraph (b) of this

section only if it is in a separate

document.

(e) Foreign languages. In the case of

a plan that (as of the date selected under

§ 4011.7) covers the numbers or

percentages specified in § 2520.104b–

10(e) of this title of participants literate

only in the same non-English language,

the plan administrator shall provide

those participants either—

(1) An English-language Participant

Notice that prominently displays a

legend, in their common non-English

language, offering them assistance in

that language, and clearly setting forth

any procedures participants must follow

to obtain such assistance, or

(2) A Participant Notice in that

language.

§ 4011.11 OMB control number.

The collections of information

contained in this part have been

approved by the Office of Management

and Budget under OMB control number

1212–0050.

Appendix A to Part 4011—Model

Participant Notice

The following is an example of a

Participant Notice that satisfies the

requirements of § 4011.10 when the required

information is filled in (subject to

§§ 4011.10(d)–(e), where applicable).

Notice to Participants of [Plan Name]

The law requires that you receive

information on the funding level of your

defined benefit pension plan and the benefits

guaranteed by the Pension Benefit Guaranty

Corporation (PBGC), a federal insurance

agency. YOUR PLAN’S FUNDING

As of [DATE], your plan had [INSERT

NOTICE FUNDING PERCENTAGE

(DETERMINED IN ACCORDANCE WITH

§ 4011.10(c))] percent of the money needed to

pay benefits promised to employees and

retirees.

To pay pension benefits, your employer is

required to contribute money to the pension

plan over a period of years. A plan’s funding

percentage does not take into consideration

the financial strength of the employer. Your

employer, by law, must pay for all pension

benefits, but your benefits may be at risk if

your employer faces a severe financial crisis

or is in bankruptcy.
34028 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

[INCLUDE THE FOLLOWING

PARAGRAPH ONLY IF, FOR ANY OF THE

PREVIOUS FIVE PLAN YEARS, THE PLAN

HAS BEEN GRANTED AND HAS NOT

FULLY REPAID A FUNDING WAIVER.]

Your plan received a funding waiver for

[LIST ANY OF THE FIVE PREVIOUS PLAN

YEARS FOR WHICH A FUNDING WAIVER

WAS GRANTED AND HAS NOT BEEN

FULLY REPAID]. If a company is

experiencing temporary financial hardship,

the Internal Revenue Service may grant a

funding waiver that permits the company to

delay contributions that fund the pension

plan.

[INCLUDE THE FOLLOWING WITH

RESPECT TO ANY UNPAID OR LATE

PAYMENT THAT MUST BE DISCLOSED

UNDER § 4011.10(b)(6):]

Your plan was required to receive a

payment from the employer on [LIST

APPLICABLE DUE DATE(S)]. That payment

[has not been made] [was made on [LIST

APPLICABLE PAYMENT DATE(S)]].

PBGC GUARANTEES

When a pension plan ends without enough

money to pay all benefits, the PBGC steps in

to pay pension benefits. The PBGC pays most

people all pension benefits, but some people

may lose certain benefits that are not

guaranteed.

The PBGC pays pension benefits up to

certain maximum limits.

• The maximum guaranteed benefit is

[INSERT FROM TABLE IN APPENDIX B] per

month or [INSERT FROM TABLE IN

APPENDIX B] per year for a 65-year-old

person in a plan that terminates in [INSERT

APPLICABLE YEAR].

• The maximum benefit may be reduced

for an individual who is younger than age 65.

For example, it is [INSERT FROM TABLE IN

APPENDIX B] per month or [INSERT FROM

TABLE IN APPENDIX B] per year for an

individual who starts receiving benefits at

age 55. [IN LIEU OF AGE 55, YOU MAY ADD

OR SUBSTITUTE ANY AGE(S) RELEVANT

UNDER THE PLAN. FOR EXAMPLE, YOU

MAY ADD OR SUBSTITUTE THE

MAXIMUM BENEFIT FOR AGES 62 OR 60

FROM THE TABLE IN APPENDIX B. IF THE

PLAN PROVIDES FOR NORMAL

RETIREMENT BEFORE AGE 65, YOU MUST

INCLUDE THE NORMAL RETIREMENT

AGE.]

[IF THE PLAN DOES NOT PROVIDE

FOR COMMENCEMENT OF BENEFITS

BEFORE AGE 65, YOU MAY OMIT

THIS PARAGRAPH.]

• The maximum benefit will also be

reduced when a benefit is provided for a

survivor.

The PBGC does not guarantee certain types

of benefits.

[INCLUDE THE FOLLOWING

GUARANTEE LIMITS THAT APPLY TO THE

BENEFITS AVAILABLE UNDER YOUR

PLAN.]

• The PBGC does not guarantee benefits

for which you do not have a vested right

when a plan ends, usually because you have

not worked enough years for the company.

• The PBGC does not guarantee benefits

for which you have not met all age, service,

or other requirements at the time the plan

ends.

• Benefit increases and new benefits that

have been in place for less than a year are

not guaranteed. Those that have been in

place for less than 5 years are only partly

guaranteed.

• Early retirement payments that are

greater than payments at normal retirement

age may not be guaranteed. For example, a

supplemental benefit that stops when you

become eligible for Social Security may not

be guaranteed.

• Benefits other than pension benefits,

such as health insurance, life insurance,

death benefits, vacation pay, or severance

pay, are not guaranteed.

• The PBGC does not pay lump sums

exceeding $3,500.

WHERE TO GET MORE INFORMATION

Your plan, [EIN–PN], is sponsored by

[CONTRIBUTING SPONSOR(S)]. If you

would like more information about the

funding of your plan, contact [INSERT

NAME, TITLE, BUSINESS ADDRESS AND

PHONE NUMBER OF INDIVIDUAL OR

ENTITY].

For more information about the PBGC and

the benefits it guarantees, you may request a

free copy of ‘‘Your Guaranteed Pension’’ by

writing to Consumer Information Center,

Dept. YGP, Pueblo, Colorado 81009.

[THE FOLLOWING SENTENCE MAY BE

INCLUDED:] ‘‘Your Guaranteed Pension’’ is

also available from the PBGC Homepage on

the World Wide Web at http://

www.pbgc.gov/ygp.htm.

Issued: [INSERT AT LEAST MONTH AND

YEAR]

Appendix B to Part 4011—Table of

Maximum Guaranteed Benefits

If a plan terminates in—

The maximum guaranteed benefit for an individual starting to receive benefits at the age listed below is the

amount (monthly or annual) listed below:

Age 65 Age 62 Age 60 Age 55

Monthly Annual Monthly Annual Monthly Annual Monthly Annual

1995 ................................... $2,573.86 $30,886.32 $2,033.35 $24,400.20 $1,673.01 $20,076.12 $1,158.24 $13,898.88

1996 ................................... $2,642.05 $31,704.60 $2,087.22 $25,046.64 $1,717.33 $20,607.96 $1,188.92 $14,267.04

The maximum guaranteed benefit for an

individual starting to receive benefits at ages

other than those listed above can be

determined by applying the PBGC’s

regulation on computation of maximum

guaranteeable benefits (29 CFR 4022.22).

PART 4022—BENEFITS PAYABLE IN

TERMINATED SINGLE-EMPLOYER

PLANS

Subpart A—General Provisions;

Guaranteed Benefits

Sec.

4022.1 Purpose and scope.

4022.2 Definitions.

4022.3 Guaranteed benefits.

4022.4 Entitlement to a benefit.

4022.5 Determination of nonforfeitable

benefits.

4022.6 Annuity payable for total disability.

4022.7 Benefits payable in a single

installment.

Subpart B—Limitations on Guaranteed

Benefits

4022.21 Limitations; in general.

4022.22 Maximum guaranteeable benefit.

4022.23 Computation of maximum

guaranteeable benefits.

4022.24 Benefit increases.

4022.25 Five-year phase-in of benefit

guarantee for participants other than

substantial owners.

4022.26 Phase-in of benefit guarantee for

participants who are substantial owners.

4022.27 Effect of tax disqualification.

Subpart C—Calculation and Payment of

Unfunded Nonguaranteed Benefits

[Reserved]

Subpart D—Benefit Reductions in

Terminating Plans

4022.61 Limitations on benefit payments by

plan administrator.

4022.62 Estimated guaranteed benefit.

4022.63 Estimated title IV benefit.

Subpart E—PBGC Recoupment and

Reimbursement of Benefit Overpayments

and Underpayments

4022.81 General rules.

4022.82 Method of recoupment.

4022.83 PBGC reimbursement of benefit

underpayments.

Appendix A to Part 4022—Maximum

Guaranteeable Monthly Benefit

Authority: 29 U.S.C. 1302, 1322, 1322b,

1341(c)(3)(D), and 1344.

Subpart A—General Provisions;

Guaranteed Benefits

§ 4022.1 Purpose and scope.

The purpose of this part is to

prescribe rules governing the

calculation and payment of benefits

payable in terminated single-employer

plans under section 4022 of ERISA.

Subpart A, which applies to each plan
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34029

providing benefits guaranteed under

title IV of ERISA, contains definitions

applicable to all subparts, and describes

basic-type benefits that are guaranteed

by the PBGC subject to the limitations

set forth in Subpart B. Subpart C is

reserved for rules relating to the

calculation and payment of unfunded

nonguaranteed benefits under section

4022(c) of ERISA. Subpart D prescribes

procedures that minimize the

overpayment of benefits by plan

administrators after initiating distress

terminations of single-employer plans

that are not expected to be sufficient for

guaranteed benefits. Subpart E sets forth

the method of recoupment of benefit

payments in excess of the amounts

permitted under sections 4022, 4022B,

and 4044 of ERISA from participants

and beneficiaries in PBGC-trusteed

plans, and provides for reimbursement

of benefit underpayments. (The

provisions of this part have not been

amended to take account of changes

made in section 4022 of ERISA by

sections 766 and 777 of the Retirement

Protection Act of 1994.)

§ 4022.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: annuity, Code,

employer, ERISA, guaranteed benefit,

mandatory employee contributions,

nonforfeitable benefit, normal

retirement age, notice of intent to

terminate, PBGC, person, plan, plan

administrator, plan year, proposed

termination date, substantial owner, and

title IV benefit.

In addition, for purposes of this part

(unless otherwise required by the

context):

Accumulated mandatory employee

contributions means mandatory

employee contributions plus interest

credited on those contributions under

the plan, or, if greater, interest required

by section 204(c) of ERISA.

Benefit in pay status means that one

or more benefit payments have been

made or would have been made except

for administrative delay.

Benefit increase means any benefit

arising from the adoption of a new plan

or an increase in the value of benefits

payable arising from an amendment to

an existing plan. Such increases

include, but are not limited to, a

scheduled increase in benefits under a

plan or plan amendment, such as a costof-living increase, and any change in

plan provisions which advances a

participant’s or beneficiary’s entitlement

to a benefit, such as liberalized

participation requirements or vesting

schedules, reductions in the normal or

early retirement age under a plan, and

changes in the form of benefit payments.

In the case of a plan under which the

amount of benefits depends on the

participant’s salary and the participant

receives a salary increase the resulting

increase in benefits to which the

participant becomes entitled will not,

for the purpose of this part, be treated

as a benefit increase. Similarly, in the

case of a plan under which the amount

of benefits depends on the participant’s

age or service, and the participant

becomes entitled to increased benefits

solely because of advancement in age or

service, the increased benefits to which

the participant becomes entitled will

not, for the purpose of this part, be

treated as a benefit increase.

Covered employment means

employment with respect to which

benefits accrue under a plan.

Pension benefit means a benefit

payable as an annuity, or one or more

payments related thereto, to a

participant who permanently leaves or

has permanently left covered

employment, or to a surviving

beneficiary, which payments by

themselves or in combination with

Social Security, Railroad Retirement, or

workmen’s compensation benefits

provide a substantially level income to

the recipient.

Straight life annuity means a series of

level periodic payments payable for the

life of the recipient, but does not

include any combined annuity form,

including an annuity payable for a term

certain and life.

§ 4022.3 Guaranteed benefits.

Except as otherwise provided in this

part, the PBGC will guarantee the

amount, as of the termination date, of a

benefit provided under a plan to the

extent that the benefit does not exceed

the limitations in ERISA and in subpart

B, if—

(a) The benefit is a nonforfeitable

benefit;

(b) The benefit qualifies as a pension

benefit as defined in § 4022.2; and

(c) The participant is entitled to the

benefit under § 4022.4.

§ 4022.4 Entitlement to a benefit.

(a) A participant or his surviving

beneficiary is entitled to a benefit if

under the provisions of a plan:

(1) The benefit was in pay status on

the date of the termination of the plan.

(2) A benefit payable at normal

retirement age is an optional form of

payment to the benefit otherwise

payable at such age and the participant

elected the benefit before the

termination date of the plan.

(3) Except for a benefit described in

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

the termination date the participant had

satisfied the conditions of the plan

necessary to establish the right to

receive the benefit prior to such date

other than application for the benefit,

satisfaction of a waiting period

described in the plan, or retirement; or

(4) Absent an election by the

participant, the benefit would be

payable upon retirement.

(5) In the case of a benefit that returns

all or a portion of a participant’s

accumulated mandatory employee

contributions upon death, the

participant (or beneficiary) had satisfied

the conditions of the plan necessary to

establish the right to the benefit other

than death or designation of a

beneficiary.

(b) If none of the conditions set forth

in paragraph (a) of this section is met,

the PBGC will determine whether the

participant is entitled to a benefit on the

basis of the provisions of the plan and

the circumstances of the case.

§ 4022.5 Determination of nonforfeitable

benefits.

(a) A guaranteed benefit payable to a

surviving beneficiary is not considered

to be forfeitable solely because the plan

provides that the benefit will cease

upon the remarriage of such beneficiary

or his attaining a specified age.

However, the PBGC will observe the

provisions of the plan relating to the

effect of such remarriage or attainment

of such specified age on the surviving

beneficiary’s eligibility to continue to

receive benefit payments.

(b) Any other provision in a plan that

the right to a benefit in pay status will

cease or be suspended upon the

occurrence of any specified condition

does not automatically make that benefit

forfeitable. In each such case the PBGC

will determine whether the benefit is

forfeitable.

(c) A benefit guaranteed under

§ 4022.6 shall not be considered

forfeitable solely because the plan

provides that upon recovery of the

participant the benefit will cease.

§ 4022.6 Annuity payable for total

disability.

(a) Except as provided in paragraph

(b) of this section, an annuity which is

payable (or would be payable after a

waiting period described in the plan,

whether or not the participant is in

receipt of other benefits during such

waiting period), under the terms of a

plan on account of the total and

permanent disability of a participant

which is expected to last for the life of

the participant and which began before

the termination date is considered to be

a pension benefit.

(b) In any case in which the PBGC

determines that the standards for
34030 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

determining such total and permanent

disability under a plan were

unreasonable, or were modified in

anticipation of termination of the plan,

the disability benefits payable to a

participant under such standard shall

not be guaranteed unless the participant

meets the standards of the Social

Security Act and the regulations

promulgated thereunder for determining

total disability.

(c) For the purpose of this section, a

participant may be required, upon the

request of the PBGC, to submit to an

examination or to submit proof of

continued total and permanent

disability. If the PBGC finds that a

participant is no longer so disabled, it

may suspend, modify, or discontinue

the payment of the disability benefit.

§ 4022.7 Benefits payable in a single

installment.

(a) Alternative benefit. If a benefit that

is guaranteed under this part is payable

in a single installment or substantially

so under the terms of the plan, or an

option elected under the plan by the

participant, the benefit will not be

guaranteed or paid as such, but the

PBGC will guarantee the alternative

benefit, if any, in the plan which

provides for the payment of equal

periodic installments for the life of the

recipient. If the plan provides more than

one such annuity, the recipient may

within 30 days after notification of the

proposed termination of the plan elect

to receive one of those annuities. If the

plan does not provide such an annuity,

the PBGC will guarantee an actuarially

equivalent life annuity.

(b)(1) Payment in single installments.

Notwithstanding paragraph (a) of this

section, in any case in which the value

of a guaranteed benefit payable by the

PBGC is $3,500 or less, the total value

of the guaranteed benefit may be paid in

a single payment. For purposes of

determining the value of the guaranteed

benefit, subtract from the value of the

guaranteed benefit, any amounts that are

returned under paragraph (b)(2) of this

section, but only to the extent such

amounts do not exceed the value of the

portion of an individual’s benefit

derived from mandatory employee

contributions that is guaranteed.

(2) Return of employee

contributions—

(i) General. Notwithstanding any

other provision of this part, the PBGC

may pay in a single installment (or a

series of installments) instead of as an

annuity, the value of the portion of an

individual’s basic-type benefit derived

from mandatory employee

contributions, if:

(A) The individual elects payment in

a single installment (or a series of

installments) before the sixty-first (61st)

day after the date he or she receives

notice that such an election is available;

and

(B) Payment in a single installment (or

a series of installments) is consistent

with the plan’s provisions. For purposes

of this part, the portion of an

individual’s basic-type benefit derived

from mandatory employee contributions

is determined under § 4044.12 (priority

category 2 benefits) of this chapter, and

the value of that portion is computed

under the applicable rules contained in

part 4044, subpart B, of this chapter.

(ii) Set-off for distributions after

termination. The amount to be returned

under paragraph (b)(2)(i) of this section

is reduced by the set-off amount. The

set-off amount is the amount by which

distributions made to the individual

after the termination date exceed the

amount that would have been

distributed, exclusive of mandatory

employee contributions, if the

individual had withdrawn the

mandatory employee contributions on

the termination date.

Example: Participant A is receiving a

benefit of $600 per month when the

plan terminates, $200 of which is

derived from mandatory employee

contributions. If the participant had

withdrawn his contributions on the

termination date, his benefit would have

been reduced to $400 per month. The

participant receives two monthly

payments after the termination date.

The set-off amount is $400. (The $600

actual payment minus the $400 the

participant would have received if he

had withdrawn his contributions

multiplied by the two months for which

he received the extra payment.)

(c) Death benefits—

(1) General. Notwithstanding

paragraph (a) of this section, a benefit

that would otherwise be guaranteed

under the provisions of this subpart,

except for the fact that it is payable

solely in a single installment (or

substantially so) upon the death of a

participant, shall be paid by the PBGC

as an annuity that has the same value as

the single installment. The PBGC will in

each case determine the amount and

duration of the annuity based on all the

facts and circumstances.

(2) Exception. Upon the death of a

participant the PBGC may pay in a

single installment (or a series of

installments) that portion of the

participant’s accumulated mandatory

employee contributions that is payable

under the plan in a single installment

(or a series of installments) upon the

participant’s death.

Subpart B—Limitations on Guaranteed

Benefits

§ 4022.21 Limitations; in general.

(a)(1) Subject to paragraphs (b), (c)

and (d) of this section, the PBGC will

not guarantee that part of an installment

payment that exceeds the dollar amount

payable as a straight life annuity

commencing at normal retirement age,

or thereafter, to which a participant

would have been entitled under the

provisions of the plan in effect on the

termination date, on the basis of his

credited service to such date. If the plan

does not provide a straight life annuity

either as its normal form of retirement

benefit or as an option to the normal

form, the PBGC will for purposes of this

paragraph convert the plan’s normal

form benefit to a straight life annuity of

equal actuarial value as determined by

the PBGC.

(2) The limitation of paragraph (a)(1)

of this section shall not apply to:

(i) A survivor’s benefit payable as an

annuity on account of the death of a

participant that occurred before the plan

terminates and before the participant

retired;

(ii) A disability pension described in

section 4022.6 of this part; or

(iii) A benefit payable in non-level

installments that in combination with

Social Security, Railroad Retirement, or

workman’s compensation benefits

yields a substantially level income if the

projected income from the plan benefit

over the expected life of the recipient

does not exceed the value of the straight

life annuity described in paragraph

(a)(1) of this section.

(b) The PBGC will not guarantee the

payment of that part of any benefit that

exceeds the limitations in section

4022(b) of ERISA and this subpart B.

(c)(1) Except as provided in paragraph

(c)(2) of this section, the PBGC does not

guarantee a benefit payable in a single

installment (or substantially so) upon

the death of a participant or his

surviving beneficiary unless that benefit

is substantially derived from a reduction

in the pension benefit payable to the

participant or surviving beneficiary.

(2) Paragraphs (a) and (c)(1) of this

section do not apply to that portion of

accumulated mandatory employee

contributions payable under a plan

upon the death of a participant, and

such a benefit is a pension benefit for

purposes of this part.

(d) The PBGC will not guarantee a

benefit payable to other than natural

persons, or a trust or estate for the

benefit of one or more natural persons.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34031

§ 4022.22 Maximum guaranteeable benefit.

Subject to section 4022B of ERISA

and part 4022B of this chapter, benefits

payable with respect to a participant

under a plan shall be guaranteed only to

the extent that such benefits do not

exceed the actuarial value of a benefit in

the form of a life annuity payable in

monthly installments, commencing at

age 65 equal to the lesser of the amounts

computed in paragraphs (a) and (b) of

this section.

(a) One-twelfth of the participant’s

average annual gross income from his

employer during either his highest-paid

five consecutive calendar years in

which he was an active participant

under the plan, or if he was not an

active participant throughout the entire

such period, the lesser number of

calendar years within that period in

which he was an active participant

under the plan.

(1) As used in this paragraph, ‘‘gross

income’’ means ‘‘earned income’’ as

defined in section 911(b) of the Code,

determined without regard to any

community property laws.

(2) For the purposes of this paragraph,

if the plan is one to which more than

one employer contributes, and during

any calendar year the participant

received gross income from more than

one such contributing employer, then

the amounts so received shall be

aggregated in determining the

participant’s gross income for the

calendar year.

(b) $750 multiplied by the fraction x/

$13,200 where ‘‘x’’ is the Social Security

contribution and benefit base

determined under section 230 of the

Social Security Act in effect at the

termination date of the plan.

§ 4022.23 Computation of maximum

guaranteeable benefits.

(a) General. Where a benefit is

payable in any manner other than as a

monthly benefit payable for life

commencing at age 65, the maximum

guaranteeable monthly amount of such

benefit shall be computed by applying

the applicable factor or factors set forth

in paragraphs (c)–(e) of this section to

the monthly amount computed under

§ 4022.22. In the case of a step-down life

annuity, the maximum guaranteeable

monthly amount of such benefit shall be

computed in accordance with paragraph

(f) of this section.

(b) Application of adjustment factors

to monthly amount computed under

§ 4022.22. (1) Each percentage increase

or decrease computed under paragraphs

(c), (d), and (e) of this section shall be

added to or subtracted from a base of

1.00, and the resulting amounts shall be

multiplied.

(2) The monthly amount computed

under § 4022.22 shall be multiplied by

the product computed pursuant to

paragraph (b)(1) of this section in order

to determine the participant’s and/or

beneficiary’s maximum benefit

guaranteeable.

(c) Annuitant’s age factor. If a

participant or the beneficiary of a

deceased participant is entitled to and

chooses to receive his benefit at an age

younger than 65, the monthly amount

computed under § 4022.22 shall be

reduced by the following amounts for

each month up to the number of whole

months below age 65 that corresponds

to the later of the participant’s age at the

termination date or his age at the time

he begins to receive the benefit: For

each of the 60 months immediately

preceding the 65th birthday, the

reduction shall be 7⁄12 of 1%; For each

of the 60 months immediately preceding

the 60th birthday, the reduction shall be

4⁄12 of 1%; For each of the 120 months

immediately preceding the 55th

birthday, the reduction shall be 2⁄12 of

1%; and For each succeeding 120

months period, the monthly percentage

reduction shall be 1⁄2 of that used for the

preceding 120 month period.

(d) Factor for benefit payable in a

form other than as a life annuity. When

a benefit is in a form other than a life

annuity payable in monthly

installments, the monthly amount

computed under § 4022.22 shall be

adjusted by the appropriate factors on a

case-by-case basis by PBGC. This

paragraph sets forth the adjustment

factors to be used for several common

benefit forms payable in monthly

installments.

(1) Period certain and continuous

annuity. A period certain and

continuous annuity means an annuity

which is payable in periodic

installments for the participant’s life,

but for not less than a specified period

of time whether or not the participant

dies during that period. The monthly

amount of a period certain and

continuous annuity computed under

§ 4022.22 shall be reduced by the

following amounts for each month of

the period certain subsequent to the

termination date:

For each month up to 60 months

deduct 1⁄24 of 1%;

For each month beyond 60 months

deduct 1⁄12 of 1%.

(i) A cash refund annuity means an

annuity under which if the participant

dies prior to the time when he has

received pension payments equal to a

fixed sum specified in the plan, then the

balance is paid as a lump-sum death

benefit. A cash refund annuity shall be

treated as a benefit payable for a period

certain and continuous. The period of

certainty shall be computed by dividing

the amount of the lump-sum refund by

the monthly amount to which the

participant is entitled under the terms of

the plan.

(ii) An installment refund annuity

means an annuity under which if the

participant dies prior to the time he has

received pension payments equal to a

fixed sum specified in the plan, then the

balance is paid as a death benefit in

periodic installments equal in amount

to the participant’s periodic benefit. An

installment refund annuity shall be

treated as a benefit payable for a period

certain and continuous. The period of

certainty shall be computed by dividing

the amount of the remaining refund by

the monthly amount to which the

participant is entitled under the terms of

the plan.

(2) Joint and survivor annuity

(contingent basis). A joint and survivor

annuity (contingent basis) means an

annuity which is payable in periodic

installments to a participant for his life

and upon his death is payable to his

beneficiary for the beneficiary’s life in

the same or in a reduced amount. The

monthly amount of a joint and survivor

annuity (contingent basis) computed

under § 4022.22 shall be reduced by an

amount equal to 10% plus 2⁄10 of 1% for

each percentage point in excess of 50%

of the participant’s benefit that will

continue to be paid to the beneficiary.

If the benefit payable to the beneficiary

is less than 50 percent of the

participant’s benefit, PBGC shall

provide the adjustment factors to be

used.

(3) Joint and survivor annuity (joint

basis). A joint and survivor annuity

(joint basis) means an annuity which is

payable in periodic installments to a

participant and upon his death or the

death of his beneficiary is payable to the

survivor for the survivor’s life in the

same or in a reduced amount. The

monthly amount of a joint and survivor

annuity (joint basis) computed under

§ 4022.22 shall be reduced by an

amount equal to 4⁄10 of 1% for each

percentage point in excess of 50% of the

participant’s original benefit that will

continue to be paid to the survivor. If

the benefit payable to the survivor is

less than 50 percent of the participant’s

original benefit, PBGC shall provide the

adjustment factors to be used.

(e) When a benefit is payable in a

form described in paragraph (d) (2) or

(3) of this section, and the beneficiary’s

age is different from the participant’s

age, by 15 years or less, the monthly

amount computed under § 4022.22 shall

be adjusted by the following amounts: If

the beneficiary is younger than the
34032 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

participant, deduct 1% for each year of

the age difference; If the beneficiary is

older than the participant, add 1⁄2 of 1%

for each year of the age difference. In

computing the difference in ages, years

over 65 years of age shall not be

counted. If the difference in age between

the beneficiary and the participant is

greater than 15 years, PBGC shall

provide the adjustment factors to be

used.

(f) Step-down life annuity. A stepdown life annuity means an annuity

payable in a certain amount for the life

of the participant plus a temporary

additional amount payable until the

participant attains an age specified in

the plan.

(1) The temporary additional amount

payable under a step-down life annuity

shall be converted to a life annuity

payable in monthly installments by

multiplying the appropriate factor based

on the participant’s age and the number

of remaining years of the temporary

additional benefit by the amount of the

temporary additional benefit. The

factors to be used are set forth in the

table below. The amount of the monthly

benefit so calculated shall be added to

the level amount of the monthly benefit

payable for life to determine the levellife annuity that is equivalent to the

step-down life annuity.

FACTORS FOR CONVERTING TEMPORARY ADDITIONAL BENEFIT UNDER STEP-DOWN LIFE ANNUITY

Age of participant 1 at the later of the date the temporary

additional benefit commences or the date of plan termination

Number of years temporary additional benefit is payable under the plan as of the

date of plan termination 2

1 2 3 4 5 6 7 8 9 10

45 ........................................................................................... 0.060 0.117 0.170 0.220 0.268 0.315 0.355 0.395 0.435 0.475

46 ........................................................................................... .061 .119 .173 .224 .273 .321 .362 .403 .444 .485

47 ........................................................................................... .062 .121 .176 .228 .278 .327 .369 .411 .453 .495

48 ........................................................................................... .063 .123 .179 .232 .283 .333 .376 .419 .462 .505

49 ........................................................................................... .064 .125 .182 .236 .288 .339 .383 .427 .471 .515

50 ........................................................................................... .065 .127 .185 .240 .293 .345 .390 .435 .480 .525

51 ........................................................................................... .066 .129 .188 .244 .298 .351 .397 .443 .489 .535

52 ........................................................................................... .068 .133 .194 .252 .308 .363 .411 .459 .507 .555

53 ........................................................................................... .067 .131 .191 .248 .303 .357 .404 .451 .498 .545

54 ........................................................................................... .069 .135 .197 .256 .313 .369 .418 .467 .516 .565

55 ........................................................................................... .070 .137 .200 .260 .318 .375 .425 .475 .525 .575

56 ........................................................................................... .072 .141 .206 .268 .328 .387 .439 .491 .543 ..........

57 ........................................................................................... .074 .145 .212 .276 .338 .399 .453 .507 .......... ..........

58 ........................................................................................... .076 .149 .218 .284 .348 .411 .467 .......... .......... ..........

59 ........................................................................................... .078 153 .224 .292 .358 .423 .......... .......... .......... ..........

60 ........................................................................................... .080 .157 .230 .300 .368 .......... .......... .......... .......... ..........

61 ........................................................................................... .082 .161 .236 .308 .......... .......... .......... .......... .......... ..........

62 ........................................................................................... .084 .165 .242 .......... .......... .......... .......... .......... .......... ..........

63 ........................................................................................... .086 .169 .......... .......... .......... .......... .......... .......... .......... ..........

64 ........................................................................................... .088 .......... .......... .......... .......... .......... .......... .......... .......... ..........

1Age of participant is his age at his last birthday.

2 If the benefit is payable for less than 1 yr, the appropriate factor is obtained by multiplying the factor for 1 yr by a fraction, the numerator of

which is the number of months the benefit is payable, and the denominator of which is 12. If the benefit is payable for 1 or more whole years,

plus an additional number of months less than 12, the appropriate factor is obtained by linear interpolation between the factor for the number of

whole years the benefit is payable and the factor for the next year.

(2) If a participant is entitled to and

chooses to receive a step-down life

annuity at an age younger than 65, the

monthly amount computed under

§ 4022.22 shall be adjusted by applying

the factors set forth in paragraph (c) of

this section in the manner described in

paragraph (b) of this section.

(3) If the level-life monthly benefit

calculated pursuant to paragraph (f)(1)

of this section exceeds the monthly

amount calculated pursuant to

paragraph (f)(2) of this section, then the

monthly maximum benefit

guaranteeable shall be a step-down life

annuity under which the monthly

amount of the temporary additional

benefit and the amount of the monthly

benefit payable for life, respectively,

shall bear the same ratio to the monthly

amount of the temporary additional

benefit and the monthly benefit payable

for life provided under the plan,

respectively, as the monthly benefit

calculated pursuant to paragraph (f)(2)

of this section bears to the monthly

benefit calculated pursuant to paragraph

(f)(1) of this section.

§ 4022.24 Benefit increases.

(a) Scope. This section applies:

(1) To all benefit increases, as defined

in § 4022.2, payable with respect to a

participant other than a substantial

owner, which have been in effect for

less than five years preceding the

termination date; and

(2) To all benefit increases payable

with respect to a substantial owner,

which have been in effect for less than

30 years preceding the termination date.

(b) General rule. Benefit increases

described in paragraph (a) of this

section shall be guaranteed only to the

extent provided in § 4022.25 with

respect to a participant other than a

substantial owner and in § 4022.26 with

respect to a participant who is a

substantial owner.

(c) Computation of guaranteeable

benefit increases. Except as provided in

paragraph (d) of this section pertaining

to multiple benefit increases, the

amount of a guaranteeable benefit

increase shall be the amount, if any, by

which the monthly benefit calculated

pursuant to paragraph (c)(1) of this

section (the monthly benefit provided

under the terms of the plan as of the

termination date, as limited by

§ 4022.22) exceeds the monthly benefit

calculated pursuant to paragraph (c)(4)

of this section (the monthly benefit

which would have been payable on the

termination date if the benefit provided

subsequent to the increase were

equivalent, as of the date of the increase,

to the benefit provided prior to the

increase).

(1) Determine the amount of the

monthly benefit payable on the

termination date (or, in the case of a

deferred benefit, the monthly benefit

which will become payable thereafter)
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34033

under the terms of the plan subsequent

to the increase, using service credited to

the participant as of the termination

date, that is guaranteeable pursuant to

§ 4022.22;

(2) Determine, as of the date of the

benefit increase, in accordance with the

provisions of § 4022.23, the factors

which would be used to calculate the

monthly maximum benefit

guaranteeable (i) under the terms of the

plan prior to the increase and (ii) under

the terms of the plan subsequent to the

increase. However, when the benefit

referred to in paragraph (c)(2)(ii) of this

section is a joint and survivor benefit

deferred as of the termination date and

there is no beneficiary on that date, the

factors computed in paragraph (c)(2)(ii)

of this section shall be determined as if

the benefit were payable only to the

participant. Each set of factors

determined under this paragraph shall

be stated in the manner set forth in

§ 4022.23(b)(1);

(3) Multiply the monthly benefit

which would have been payable (or, in

the case of a deferred benefit, would

have become payable) under the terms

of the plan prior to the increase based

on service credited to the participant as

of the termination date by a fraction, the

numerator of which is the product of the

factors computed pursuant to paragraph

(c)(2)(ii) of this section and the

denominator of which is the product of

the factors computed pursuant to

paragraph (c)(2)(i) of this section.

(4) Calculate the amount of the

monthly benefit which would be

payable on the termination date if the

monthly benefit computed in paragraph

(c)(3) of this section had been payable

commencing on the date of the benefit

increase (or, in the case of a deferred

benefit, would have become payable

thereafter.) In the case of a benefit

which does not become payable until

subsequent to the termination date, the

amount of the monthly benefit

determined pursuant to this paragraph

is the same as the amount of the

monthly benefit calculated pursuant to

paragraph (c)(3) of this section.

(d) Multiple benefit increases. (1)

Where there has been more than one

benefit increase described in paragraph

(a) of this section, the amounts of

guaranteeable benefit increases shall be

calculated beginning with the earliest

increase, and each such amount (except

for the amount resulting from the final

benefit increase) shall be multiplied by

a fraction, the numerator of which is the

product of the factors, stated in the

manner set forth in § 4022.23(b)(1), used

to calculate the monthly maximum

guaranteeable benefit under § 4022.22

and the denominator of which is the

product of the factors used in the

calculation under paragraph (c)(2)(i) of

this section.

(2) Each benefit increase shall be

treated separately for the purposes of

§ 4022.25, except as otherwise provided

in paragraph (d) of that section, and for

the purposes of § 4022.26, as

appropriate.

(e) For the purposes of this subpart, a

benefit increase is deemed to be in effect

commencing on the later of its adoption

date or its effective date.

§ 4022.25 Five-year phase-in of benefit

guarantee for participants other than

substantial owners.

(a) Scope. This section applies to the

guarantee of benefit increases which

have been in effect for less than five

years with respect to participants other

than substantial owners.

(b) Phase-in formula. The amount of

a benefit increase computed pursuant to

§ 4022.24 shall be guaranteed to the

extent provided in the following

formula: the number of years the benefit

increase has been in effect, not to

exceed five, multiplied by the greater of

(1) 20 percent of the amount computed

pursuant to § 4022.24; or (2) $20 per

month.

(c) Computation of years. In

computing the number of years a benefit

increase has been in effect, each

complete 12-month period prior to the

termination date during which such

benefit increase was in effect shall

constitute one year.

(d) Multiple benefit increases. In

applying the formula contained in

paragraph (b) of this section, multiple

benefit increases within any 12-month

period prior to the termination date and

calculated from that date shall be

aggregated and treated as one benefit

increase.

(e) Notwithstanding the provisions of

paragraph (b) of this section, a benefit

increase described in paragraph (a) of

this section shall be guaranteed only if

PBGC determines that the plan was

terminated for a reasonable business

purpose and not for the purpose of

obtaining the payment of benefits by

PBGC.

§ 4022.26 Phase-in of benefit guarantee for

participants who are substantial owners.

(a) Scope. This section shall apply to

the guarantee of all benefits described in

subpart A with respect to participants

who are substantial owners at the

termination date or who were

substantial owners at any time within

the 5-year period preceding that date.

(b) Phase-in formula when there have

been no benefit increases. Benefits

provided by a plan under which there

has been no benefit increase, other than

the adoption of the plan, shall be

guaranteed to the extent provided in the

following formula: The monthly amount

computed under § 4022.22 multiplied

by a fraction not to exceed 1, the

numerator of which is the number of

full years prior to the termination date

that the substantial owner was an active

participant under the plan, and the

denominator of which is 30. Active

participation under a plan commences

at the later of the date on which the plan

is adopted or becomes effective.

(c) Phase-in formula when there have

been benefit increases. If there has been

a benefit increase under the plan, other

than the adoption of the plan, benefits

provided by each such increase shall be

guaranteed to the extent provided in the

following formula: The amount of the

guaranteeable benefit increase

computed under § 4022.24 multiplied

by a fraction not to exceed 1, the

numerator of which is the number of

full years prior to the termination date

that the benefit increase was in effect

and during which the substantial owner

was an active participant under the

plan, and the denominator of which is

30. However, in no event shall the total

benefits guaranteed under all such

benefit increases exceed the benefits

which are guaranteed under paragraph

(b) of this section with respect to a plan

described therein.

(d) For the purpose of computing the

benefits guaranteed under this section,

in the case of a substantial owner who

becomes an active participant under a

plan after a benefit increase (other than

the adoption of the plan) has been put

into effect, the plan as it exists at the

time he commences his participation

shall be deemed to be the original plan

with respect to him.

§ 4022.27 Effect of tax disqualification.

(a) General rule. Except as provided in

paragraph (b) of this section, benefits

accrued under a plan after the date on

which the Secretary of the Treasury or

his delegate issues a notice that any

trust which is part of the plan no longer

meets the requirements of section 401(a)

of the Code or that the plan no longer

meets the requirements of section 404(a)

of the Code or after the date of adoption

of a plan amendment that causes the

issuance of such a notice shall not be

guaranteed under this part.

(b) Exceptions. The restriction on the

guarantee of benefits set forth in

paragraph (a) of this section shall not

apply if:

(1) The Secretary of the Treasury or

his delegate issues a notice stating that

the original notice referred to in
34034 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

paragraph (a) of this section was

erroneous;

(2) The Secretary of the Treasury or

his delegate finds that, subsequent to

the issuance of the notice referred to in

paragraph (a) of this section, appropriate

action has been taken with respect to

the trust or plan to cause it to meet the

requirements of sections 401(a) or

404(a)(2) of the Code, respectively, and

issues a subsequent notice stating that

the trust or plan meets such

requirements; or

(3) The plan amendment is revoked

retroactively to its original effective

date.

Subpart C—Calculation and Payment

of Unfunded Nonguaranteed Benefits

[Reserved]

Subpart D—Benefit Reductions in

Terminating Plans

§ 4022.61 Limitations on benefit payments

by plan administrator.

(a) General. When section 4041.4 of

this chapter requires a plan

administrator to reduce benefits, the

plan administrator shall limit benefit

payments in accordance with this

section.

(b) Accrued benefit at normal

retirement. Except to the extent

permitted by paragraph (d) of this

section, a plan administrator may not

pay that portion of a monthly benefit

payable with respect to any participant

that exceeds the participant’s accrued

benefit payable at normal retirement age

under the plan. For the purpose of

applying this limitation, post-retirement

benefit increases, such as cost-of-living

adjustments, are not considered to

increase a participant’s benefit beyond

his or her accrued benefit payable at

normal retirement age.

(c) Maximum guaranteeable benefit.

Except to the extent permitted by

paragraph (d) of this section, a plan

administrator may not pay that portion

of a monthly benefit payable with

respect to any participant, as limited by

paragraph (b) of this section, that

exceeds the maximum guaranteeable

benefit under section 4022(b)(3)(B) of

ERISA and § 4022.22(b) of this part,

adjusted for age and benefit form, for the

year of the proposed termination date.

(d) Estimated benefit payments. A

plan administrator shall pay the

monthly benefit payable with respect to

each participant as determined under

§ 4022.62 or § 4022.63, whichever

produces the higher benefit.

(e) PBGC authority to modify

procedures. In order to avoid abuse of

the plan termination insurance system,

inequitable treatment of participants

and beneficiaries, or the imposition of

unreasonable burdens on terminating

plans, the PBGC may authorize or direct

the use of alternative procedures for

determining benefit reductions.

(f) Examples. This section is

illustrated by the following examples:

Example 1—Facts. On October 10, 1992, a

plan administrator files with the PBGC a

notice of intent to terminate in a distress

termination that includes December 31, 1992,

as the proposed termination date. A

participant who is in pay status on December

31, 1992, has been receiving his accrued

benefit of $2,500 per month under the plan.

The benefit is in the form of a joint and

survivor annuity (contingent basis) that will

pay 50 percent of the participant’s benefit

amount (i.e., $1,250 per month) to his

surviving spouse following the death of the

participant. On December 31, 1992, the

participant is age 66, and his wife is age 56.

Benefit reductions. Paragraph (b) of this

section requires the plan administrator to

cease paying benefits in excess of the accrued

benefit payable at normal retirement age.

Because the participant is receiving only his

accrued benefit, no reduction is required

under paragraph (b).

Paragraph (c) of this section requires the

plan administrator to cease paying benefits in

excess of the maximum guaranteeable

benefit, adjusted for age and benefit form in

accordance with the provisions of subpart B.

The maximum guaranteeable benefit for

plans terminating in 1992, the year of the

proposed termination date, is $2,352.27 per

month, payable in the form of a single life

annuity at age 65. Because the participant is

older than age 65, no adjustment is required

under § 4022.23(c) based on the annuitant’s

age factor. The benefit form is a joint and

survivor annuity (contingent basis), as

defined in § 4022.23(d)(2). The required

benefit reduction for this benefit form under

§ 4022.23(d) is 10 percent. The corresponding

adjustment factor is 0.90 (1.00–0.10). The

benefit reduction factor to adjust for the age

difference between the participant and the

beneficiary is computed under § 4022.23(e).

In computing the difference in ages, years

over 65 years of age are not taken into

account. Therefore, the age difference is 9

years (65–56). The required percentage

reduction when the beneficiary is 9 years

younger than the participant is 9 percent.

The corresponding adjustment factor is 0.91

(1.00–0.09).

The maximum guaranteeable benefit

adjusted for age and benefit form is $1,926.51

($2,352.27×0.90×0.91) per month. Therefore,

the plan administrator must reduce the

participant’s benefit payment from $2,500 to

$1,926.51. If the participant dies after

December 31, 1992, the plan administrator

will pay his spouse $963.26 (0.50×$1,926.51)

per month.

Example 2—Facts. The benefit of a

participant who retired under a plan at age

60 is a reduced single life annuity of $400 per

month plus a temporary supplement of $400

per month payable until age 62 (i.e., a stepdown benefit). The participant’s accrued

benefit under the plan is $450 per month,

payable from the plan’s normal retirement

age. On the proposed termination date, June

30, 1992, the participant is 61 years old.

The maximum guaranteeable benefit

adjusted for age under § 4022.23(c) of this

chapter is $1,693.63 ($2,352.27 × 0.72) per

month. Since the benefit is payable as a

single life annuity, no adjustment is required

under § 4022.23(d) for benefit form.

Benefit reductions. The plan benefit of

$800 per month payable until age 62 exceeds

the participant’s accrued benefit at normal

requirement age of $450 per month.

Paragraph (b) of this section requires that,

except to the extent permitted by paragraph

(d), the plan benefit must be reduced to $450

per month. Since the levelized benefit of

$404.10 ((0.082 × 50) + $400) per month,

determined under § 4022.23(f), is less than

the adjusted maximum guaranteeable benefit

of $1,693.63 per month, no further reduction

in the $450 per month benefit payment is

required under paragraph (c) of this section.

The plan administrator next would

determine the amount of the participant’s

estimated benefit under paragraph (d).

Example 3—Facts. A retired participant is

receiving a reduced early retirement benefit

of $1,100 per month plus a temporary

supplement of $700 per month payable until

age 62. The benefit is in the form of a single

life annuity. On the proposed termination

date, November 30, 1992, the participant is

56 years old.

The participant’s accrued benefit at normal

retirement age under the plan is $1,200 per

month. The maximum guaranteeable benefit

adjusted for age is $1,152.61 ($2,352.27 ×

0.49) per month. A form adjustment is not

required.

Benefit reductions. The plan benefit of

$1,800 per month payable from age 56 to age

62 exceeds the participant’s accrued benefit

at normal retirement age of $1,200 per

month. Therefore, under paragraph (b) of this

section, the plan administrator must reduce

the temporary supplement to $100 per

month.

For the purpose of determining whether

the reduced benefit, i.e., a level-life annuity

of $1,100 per month and a temporary annuity

supplement of $100 per month to age 62,

exceeds the maximum guaranteeable benefit

adjusted for age, the temporary annuity

supplement of $100 per month is converted

to a level-life annuity equivalent in

accordance with § 4022.23(f) of this chapter.

The level-life annuity equivalent is $38.70

($100 × 0.387). This, added to the life annuity

of $1,100 per month, equals $1,138.70. Since

the maximum guaranteeable benefit of

$1,152.61 per month exceeds $1,138.70 per

month, no further reduction is required

under paragraph (c) of this section.

The plan administrator next would

determine the participant’s estimated benefit

under paragraph (d). Assume that the

estimated benefit under paragraph (d) is $780

per month until age 62 and $715 per month

thereafter. The plan administrator would pay

the participant $780 per month, reduced to

$715 per month at age 62, subject to the final

benefit determination made under title IV.

Example 4—Facts. A retired participant is

receiving a reduced early retirement benefit

of $2,650 per month plus a temporary

supplement of $800 per month payable until
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34035

age 62. The benefit is in the form of a joint

and survivor annuity (contingent basis) that

will pay 50 percent of the participant’s

benefit amount to his surviving spouse

following the death of the participant. On the

proposed termination date, December 20,

1992, the participant and his spouse are each

56 years old.

The participant’s accrued benefit at normal

retirement age under the plan is $3,000 per

month. The maximum guaranteeable benefit

adjusted for age and the joint and survivor

annuity (contingent basis) annuity form is

$1,037.35 per month. An adjustment for age

difference is not required because the

participant and his spouse are the same age.

Benefit reductions. The plan benefit of

$3,450 per month payable from age 56 to age

62 exceeds the participant’s accrued benefit

at normal retirement age, which is $3,000 per

month. Therefore, under paragraph (b) of this

section, the plan administrator must reduce

the participant’s benefit so that it does not

exceed $3,000 per month.

The level-life equivalent of the

participant’s reduced benefit, determined

using the § 4022.23(f) adjustment factor, is

$2,785.45 (($350 × 0.387) + $2,650) per

month. Since this benefit exceeds the

participant’s maximum guaranteeable benefit

of $1,037.35 per month, the plan

administrator must reduce the participant’s

benefit payment so that it does not exceed

the maximum guaranteeable benefit.

The ratio of (i) the participant’s maximum

guaranteeable benefit to (ii) the level-life

equivalent of the participant’s reduced

benefit (computed under the ‘‘accrued for

normal retirement age’’ limitation) is used in

converting the level-life maximum

guaranteeable benefit to the step-down

benefit form. The level-life equivalent of the

reduced benefit computed under the

‘‘accrued for normal retirement age’’

limitation is 37.24 percent ($1,037.35/

$2,785.45). Thus, the plan administrator

must reduce the participant’s level-life

benefit of $2,650 per month to $986.86

($2,650 × 0.3724) and must further reduce the

reduced temporary benefit of $350 per month

to $130.34 ($350 × 0.3724). Under paragraph

(c) of this section, therefore, the participant’s

maximum guaranteeable benefit is $1,117.20

($986.86 + $130.34) per month to age 62 and

$986.86 per month thereafter, subject to any

adjustment under paragraph (d) of this

section.

Assume that the estimated benefit under

paragraph (d) is $1,005.48 per month to age

62 and $888.17 per month thereafter. The

plan administrator would reduce the

participant’s benefit from $3,450 per month

to $1,005.48 per month and pay this amount

until age 62, at which time the benefit

payment would be reduced to $888.17 per

month, subject to the final benefit

determination made under title IV.

§ 4022.62 Estimated guaranteed benefit.

(a) General. The estimated guaranteed

benefit payable with respect to each

participant who is not a substantial

owner is computed under paragraph (c)

of this section. The estimated

guaranteed benefit payable with respect

to each participant who is a substantial

owner is computed under paragraph (d)

of this section.

(b) Rules for determining benefits. For

the purposes of determining entitlement

to a benefit and the amount of the

estimated benefit under this section, the

following rules apply:

(1) Participants in pay status on the

proposed termination date. For benefits

payable with respect to a participant

who is in pay status on or before the

proposed termination date, the plan

administrator shall use the participant’s

age and benefit payable under the plan

as of the proposed termination date.

(2) Participants who enter pay status

after the proposed termination date. For

benefits payable with respect to a

participant who enters pay status after

the proposed termination date, the plan

administrator shall use the participant’s

age as of the benefit commencement

date and his or her service and

compensation as of the proposed

termination date.

(3) Participants with new benefits or

benefit improvements. For the purpose

of determining the estimated guaranteed

benefit under paragraph (c) of this

section, only new benefits and benefit

improvements that affect the benefit of

the participant or beneficiary for whom

the determination is made are taken into

account.

(4) Limitations on estimated

guaranteed benefits. For the purpose of

determining the estimated guaranteed

benefit under paragraph (c) or (d) of this

section, the benefit determined under

paragraph (b)(1) or (b)(2) of this section

is subject to the limitations set forth in

§ 4022.61 (b) and (c).

(c) Estimated guaranteed benefit

payable with respect to a participant

who is not a substantial owner. For

benefits payable with respect to a

participant who is not a substantial

owner, the estimated guaranteed benefit

is determined under paragraph (c)(1) of

this section, if no portion of the benefit

is subject to the phase-in of plan

termination insurance guarantees set

forth in section 4022(b)(1) of ERISA. In

any other case, the estimated guaranteed

benefit is determined under paragraph

(c)(2). ‘‘Benefit subject to phase-in’’

means a benefit that is subject to the

phase-in of plan termination insurance

guarantees set forth in section 4022(b)(1)

of ERISA, determined without regard to

section 4022(b)(7) of ERISA.

(1) Participants with no benefits

subject to phase-in. In the case of a

participant or beneficiary with no

benefit improvement (as defined in

paragraph (c)(2)(ii)) or new benefit (as

defined in paragraph (c)(2)(i)) in the five

years preceding the proposed

termination date, the estimated

guaranteed benefit is the benefit to

which he or she is entitled under the

rules in paragraph (b) of this section.

(2) Participants with benefits subject

to phase-in. In the case of a participant

or beneficiary with a benefit

improvement or new benefit in the five

years preceding the proposed

termination date, the estimated

guaranteed benefit is the benefit to

which he or she is entitled under the

rules in paragraph (b) of this section,

multiplied by the multiplier determined

according to paragraphs (i), (ii), and (iii),

but not less than the benefit to which he

or she would have been entitled if the

benefit improvement or new benefit had

not been adopted.

(i) From column (a) of Table I, select

the line that applies according to the

number of full years before the proposed

termination date since the plan was last

amended to provide for a new benefit

(or the number of full years since the

plan was established, if it has never

been amended to provide for a new

benefit). ‘‘New benefit’’ means a change

in the terms of the plan that results in

(a) a participant’s or a beneficiary’s

eligibility for a benefit that was not

previously available or to which he or

she was not entitled (excluding a benefit

that is actuarially equivalent to the

normal retirement benefit to which the

participant was previously entitled) or

(b) an increase of more than twenty

percent in the benefit to which a

participant is entitled upon entering pay

status before his or her normal

retirement age under the plan. ‘‘New

benefits’’ result from liberalized

participation or vesting requirements,

reductions in the age or service

requirements for receiving unreduced

benefits, additions of actuarially

subsidized benefits, and increases in

actuarial subsidies. The establishment

of a plan creates a new benefit as of the

effective date of the plan. A change in

the amount of a benefit is not deemed

to be a ‘‘new benefit’’ if it results solely

from a benefit improvement. ‘‘New

benefit’’ and ‘‘benefit improvement’’ are

mutually exclusive terms.

(ii) If there was no benefit

improvement under the plan during the

one-year period ending on the proposed

termination date, use the multiplier set

forth in column (b) of Table I on the line

selected from column (a). ‘‘Benefit

improvement’’ means a change in the

terms of the plan that results in (a) an

increase in the benefit to which a

participant is entitled at his or her

normal retirement age under the plan or

(b) an increase in the benefit to which

a participant or beneficiary in pay status

is entitled.
34036 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(iii) If there was any benefit

improvement during the one-year

period ending on the proposed

termination date, use the multiplier set

forth in column (c) of Table I on the line

selected from column (a).

TABLE I.—APPLICABLE MULTIPLIER

IF—

Full years since

last new benefit

No benefit

improvement during

last year

Benefit improvement

during last

year

(a) (b) (c)

Five or more ...... .90 .80

Four ................... .80 .70

Three ................. .65 .55

Two ................... .50 .45

Fewer than two .35 .30

Note: The foregoing method of estimating

guaranteed benefits is based upon the

PBGC’s experience with a wide range of plans

and may not provide accurate estimates in

certain circumstances. In accordance with

§ 4022.61(e), a plan administrator may use a

different method of estimation if he or she

demonstrates to the PBGC that his proposed

method will be more equitable to participants

and beneficiaries. The PBGC may require the

use of a different method in certain cases.

(d) Estimated guaranteed benefit

payable with respect to a substantial

owner. For benefits payable with respect

to each participant who is a substantial

owner and who commenced

participation under the plan fewer than

five full years before the proposed

termination date, the estimated

guaranteed benefit is determined under

paragraph (d)(1). With respect to any

other substantial owner, the estimated

guaranteed benefit is determined under

paragraph (d)(2).

(1) Fewer than five years of

participation. The estimated guaranteed

benefit under this paragraph is the

benefit to which the substantial owner

is entitled, as determined under

paragraph (b) of this section, multiplied

by a fraction, not to exceed one, the

numerator of which is the number of

full years prior to the proposed

termination date that the substantial

owner was an active participant under

the plan and the denominator of which

is thirty.

(2) Five or more years of participation.

The estimated guaranteed benefit under

this paragraph is the lesser of—

(i) the estimated guaranteed benefit

calculated under paragraph (d)(1) of this

section; or

(ii) the benefit to which the

substantial owner would have been

entitled as of the proposed termination

date (or benefit commencement date in

the case of a substantial owner whose

benefit commences after the proposed

termination date) under the terms of the

plan in effect when he or she first began

participation, as limited by § 4022.61 (b)

and (c), multiplied by a fraction, not to

exceed one, the numerator of which is

two times the number of full years of his

or her active participation under the

plan prior to the proposed termination

date and the denominator of which is

thirty.

(e) Examples. This section is

illustrated by the following examples:

Example 1—Facts. A participant who is

not a substantial owner retired on December

31, 1991, at age 60 and began receiving a

benefit of $600 per month. On January 1,

1989, the plan had been amended to allow

participants to retire with unreduced benefits

at age 60. Previously, a participant who

retired before age 65 was subject to a

reduction of 1⁄15 for each year by which his

or her actual retirement age preceded age 65.

On January 1, 1992, the plan’s benefit

formula was amended to increase benefits for

participants who retired before January 1,

1992. As a result, the participant’s benefit

was increased to $750 per month. There have

been no other pertinent amendments. The

proposed termination date is December 15,

1992.

Estimated guaranteed benefit. No

reduction is required under § 4022.61 (b) or

(c) because the participant’s benefit does not

exceed either the participant’s accrued

benefit at normal retirement age or the

maximum guaranteeable benefit. (Postretirement benefit increases are not

considered as increasing accrued benefits

payable at normal retirement age.)

The amendment as of January 1, 1989,

resulted in a ‘‘new benefit’’ because the

reduction in the age at which the participant

could receive unreduced benefits increased

the participant’s benefit entitlement at actual

retirement age by 5⁄15, which is more than a

20 percent increase. The amendment of

January 1, 1992, which increased the

participant’s benefit to $750 per month, is a

‘‘benefit improvement’’ because it is an

increase in the amount of benefit for persons

in pay status. (No percentage test applies in

determining whether such an increase is a

benefit improvement.)

The multiplier for computing the amount

of the estimated guaranteed benefit is taken

from the third row of Table I (because the last

new benefit had been in effect for 3 full years

as of the proposed termination date) and

column (c) (because there was a benefit

improvement within the 1-year period

preceding the proposed termination date).

This multiplier is 0.55. Therefore, the

amount of the participant’s estimated

guaranteed benefit is $412.50 (0.55×$750) per

month.

Example 2—Facts. A participant who is

not a substantial owner terminated

employment on December 31, 1990. On

January 1, 1992, she reached age 65 and

began receiving a benefit or $250 per month.

She had completed 3 years of service at her

termination of employment and was fully

vested in her accrued benefit. The plan’s

vesting schedule had been amended on July

1, 1988. Under the schedule in effect before

the amendment, a participant with 5 years of

service was 100 percent vested. There have

been no other pertinent amendments. The

proposed termination date is December 31,

1992.

Estimated guaranteed benefit. No

reduction is required under § 4022.61 (b) or

(c) because the participant’s benefit does not

exceed either her accrued benefit at normal

retirement age or the maximum

guaranteeable benefit. The plan’s change of

vesting schedule created a new benefit for the

participant. Because the amendment was in

effect for 4 full years before the proposed

termination date, the second row of Table I

is used to determine the applicable

multiplier for estimating the amount of the

participant’s guaranteed benefit. Because the

participant did not receive any benefit

improvement during the 12-month period

ending on the proposed termination date,

column (b) of the table is used. Therefore, the

multiplier is 0.80, and the amount of the

participant’s estimated guaranteed benefit is

$200 (0.80×$250) per month.

Example 3—Facts. A participant who is a

substantial owner retired prior to the

proposed termination date after 51⁄2 years of

active participation in the plan. The benefit

under the terms of the plan when he first

began active participation was $800 per

month. On the proposed termination date of

April 30, 1992, he was entitled to receive a

benefit of $2000 per month. No reduction of

this benefit is required under § 4022.61 (b) or

(c).

Estimated guaranteed benefit. Paragraph

(d)(2) of this section is used to compute the

amount of the estimated guaranteed benefit

of substantial owners with 5 or more years

of active participation prior to the proposed

termination date. Consequently, the amount

of this participant’s estimated guaranteed

benefit is the lesser of—

(i) the amount calculated as if he had been

an active participant in the plan for fewer

than 5 full years on the proposed termination

date, or $333.33 ($2000×5⁄30) per month, or

(ii) the amount to which he would have

been entitled as of the proposed termination

date under the terms of the plan when he

first began participation, as limited by

§ 4022.61 (b) and (c), multiplied by 2 times

the number of years of active participation

and divided by 30, or $266.67 ($800×2 ×5⁄30)

per month. Therefore, the amount of the

participant’s estimated guaranteed benefit is

$266.67 per month.

§ 4022.63 Estimated title IV benefit.

(a) General. If the conditions specified

in paragraph (b) exist, the plan

administrator shall determine each

participant’s estimated title IV benefit.

The estimated title IV benefit payable

with respect to each participant who is

not a substantial owner is computed

under paragraph (c) of this section. The

estimated title IV benefit payable with

respect to each participant who is a

substantial owner is computed under

paragraph (d) of this section.

(b) Conditions for use of this section.

The conditions set forth in this
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34037

paragraph must be satisfied in order to

make use of the procedures set forth in

this section. If the specified conditions

exist, estimated title IV benefits must be

determined in accordance with these

procedures (or in accordance with

alternative procedures authorized by the

PBGC under § 4022.61(f)) for each

participant and beneficiary whose

benefit under the plan exceeds the

limitations contained in § 4022.61(b) or

(c) or who is a substantial owner or the

beneficiary of a substantial owner. If the

specified conditions do not exist, title

IV benefits may be estimated by the plan

administrator in accordance with

procedures authorized by the PBGC, but

no such estimate is required. The

conditions are as follows:

(1) An actuarial valuation of the plan

has been performed for a plan year

beginning not more than eighteen

months before the proposed termination

date. If the interest rate used to value

plan liabilities in this valuation

exceeded the applicable valuation

interest rates and factors under

appendix B to part 4044 of this chapter

in effect on the proposed termination

date, the value of benefits in pay status

and the value of vested benefits not in

pay status on the valuation date must be

converted to the PBGC’s valuation rates

and factors.

(2) The plan has been in effect for at

least five full years before the proposed

termination date, and the most recent

actuarial valuation demonstrates that

the value of plan assets, reduced by

employee contributions remaining in

the plan and interest credited thereon

under the terms of the plan, exceeds the

present value, adjusted as required

under paragraph (b)(1), of all plan

benefits in pay status on the valuation

date.

(c) Estimated title IV benefit payable

with respect to a participant who is not

a substantial owner. For benefits

payable with respect to a participant

who is not a substantial owner, the

estimated title IV benefit is the

estimated priority category 3 benefit

computed under this paragraph. Priority

category 3 benefits are payable with

respect to participants who were, or

could have been, in pay status three full

years prior to the proposed termination

date. The estimated priority category 3

benefit is computed by multiplying the

benefit payable with respect to the

participant under § 4022.62 (b)(1) and

(b)(2) by a fraction, not to exceed one—

(1) The numerator of which is the

benefit that would be payable with

respect to the participant at normal

retirement age under the provisions of

the plan in effect on the date five full

years before the proposed termination

date, based on the participant’s age,

service, and compensation as of the

earlier of the participant’s benefit

commencement date or the proposed

termination date, and

(2) The denominator of which is the

benefit that would be payable with

respect to the participant at normal

retirement age under the provisions of

the plan in effect on the proposed

termination date, based on the

participant’s age, service, and

compensation as of the earlier of the

participant’s benefit commencement

date or the proposed termination date.

(d) Estimated title IV benefit payable

with respect to a substantial owner. For

benefits payable with respect to a

participant who is a substantial owner,

the estimated title IV benefit is the

higher of the benefit computed under

paragraph (c) of this section or the

benefit computed under this paragraph.

(1) The plan administrator shall first

calculate the estimated guaranteed

benefit payable with respect to the

substantial owner as if he or she were

not a substantial owner, using the

method set forth in § 4022.62(c).

(2) The benefit computed under

paragraph (d)(1) shall be multiplied by

the priority category 4 funding ratio.

The category 4 funding ratio is the ratio

of x to y, not to exceed one, where—

(i) in a plan with priority category 3

benefits, x equals plan assets minus

employee contributions remaining in

the plan on the valuation date, with

interest credited thereon under the

terms of the plan, and the present value

of benefits in pay status, and y equals

the present value of all vested benefits

not in pay status minus such employee

contributions and interest; or

(ii) in a plan with no priority category

3 benefits, x equals plan assets minus

employee contributions remaining in

the plan on the valuation date, with

interest credited thereon under the

terms of the plan, and y equals the

present value of all vested benefits

minus such employee contributions and

interest.

(e) Examples. This section is

illustrated by the following examples:

Example 1—Facts. A participant who is

not a substantial owner was eligible to retire

31⁄2 years before the proposed termination

date. The participant retired 2 years before

the proposed termination date with 20 years

of service. Her final 5 years’ average salary

was $45,000, and she was entitled to an

unreduced early retirement benefit of $1,500

per month payable as a single life annuity.

This retirement benefit does not exceed the

limitation in § 4022.61 (b) or (c).

On the participant’s benefit

commencement date, the plan provided for a

normal retirement benefit of 2 percent of the

final 5 years’ salary times the number of

years of service. Five years before the

proposed termination date, the percentage

was 11⁄2 percent. The amendments improving

benefits were put into effect 31⁄2 years prior

to the proposed termination date. There were

no other amendments during the 5-year

period.

The participant’s estimated guaranteed

benefit computed under § 4022.62(c) is

$1,500 per month times 0.90 (the factor from

column (b) of Table I in § 4022.62(c)(2)), or

$1,350 per month. It is assumed that the plan

meets the conditions set forth in paragraph

(b) of this section, and the plan administrator

is therefore required to estimate the title IV

benefit.

Estimated title IV benefit. For a participant

who is not a substantial owner, the amount

of the estimated title IV benefit is the

estimated priority category 3 benefit

computed under paragraph (c) of this section.

This amount is computed by multiplying the

participant’s benefit under the plan as of the

later of the proposed termination date or the

benefit commencement date by the ratio of (i)

the normal retirement benefit under the

provisions of the plan in effect 5 years before

the proposed termination date and (ii) the

normal retirement benefit under the plan

provisions in effect on the proposed

termination date.

Thus, the numerator of the ratio is the

benefit that would be payable to the

participant under the normal retirement

provisions of the plan 5 years before the

proposed termination date, based on her age,

service, and compensation on her benefit

commencement date. The denominator of the

ratio is the benefit that would be payable to

the participant under the normal retirement

provisions of the plan in effect on the

proposed termination date, based on her age,

service, and compensation as of the earlier of

her benefit commencement date or the

proposed termination date. Since the only

different factor in the numerator and

denominator is the salary percentage, the

amount of the estimated title IV benefit is

$1,125 (0.015/0.020 × $1,500) per month.

This amount is less than the estimated

guaranteed benefit of $1,350 per month.

Therefore, in accordance with § 4022.61(d),

the benefit payable to the participant is

$1,350 per month.

Example 2—Facts. A participant who is a

substantial owner retires at the plan’s normal

retirement age, having completed 5 years of

active participation in the plan, on October

31, 1992, which is the proposed termination

date. Under provisions of the plan in effect

5 years prior to the proposed termination

date, the participant is entitled to a single life

annuity of $500 per month. Under the most

recent plan amendments, which were put

into effect 11⁄2 years prior to the proposed

termination date, the participant is entitled to

a single life annuity of $1,000 per month. The

participant’s estimated guaranteed benefit

computed under § 4022.62(d)(2) is $166.67

per month.

It is assumed that all of the conditions in

paragraph (b) of this section have been met.

Plan assets equal $2 million. The present

value of all benefits in pay status is $1.5

million based on applicable PBGC interest

rates. There are no employee contributions
34038 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

and the present value of all vested benefits

that are not in pay status is $0.75 million

based on applicable PBGC interest rates.

Estimated title IV benefit. Paragraph (d) of

this section provides that the amount of the

estimated title IV benefit payable with

respect to a participant who is a substantial

owner is the higher of the estimated priority

category 3 benefit computed under paragraph

(c) of this section or the estimated priority

category 4 benefit computed under paragraph

(d) of this section.

Under paragraph (c), the participant’s

estimated priority category 3 benefit is $500

($1,000 × $500/$1000) per month.

Under paragraph (d), the participant’s

estimated priority category 4 benefit is the

estimated guaranteed benefit computed

under § 4022.62(c) (i.e., as if the participant

were not a substantial owner) multiplied by

the priority category 4 funding ratio. Since

the plan has priority category 3 benefits, the

ratio is determined under paragraph (d)(2)(i).

The numerator of the ratio is plan assets

minus the present value of benefits in pay

status. The denominator of the ratio is the

present value of all vested benefits that are

not in pay status. The participant’s estimated

guaranteed benefit under § 4022.62(c) is

$1,000 per month times 0.90 (the factor from

column (b) of Table I in § 4022.62(c)(2)), or

$900 per month. Multiplying $900 by the

category 4 funding ratio of 2⁄3 (($2 million—

$1.5 million)/$0.75 million) produces an

estimated category 4 benefit of $600 per

month.

Because the estimated category 4 benefit so

computed is greater than the estimated

category 3 benefit so computed, the estimated

category 4 benefit is the estimated title IV

benefit. Because the estimated category 4

benefit so computed is greater than the

estimated guaranteed benefit of $166.67 per

month, in accordance with § 4022.61(d), the

benefit payable to the participant is the

estimated category 4 benefit of $600 per

month.

Subpart E—PBGC Recoupment and

Reimbursement of Benefit

Overpayments and Underpayments

§ 4022.81 General rules.

(a) Recoupment of benefit

overpayments. If at any time the PBGC

determines that net benefits paid with

respect to any participant in a PBGCtrusteed plan exceed the total amount to

which the participant or his or her

beneficiary is entitled up to that time

under title IV of ERISA, and the

participant or beneficiary is entitled to

receive future benefit payments, the

PBGC shall recoup the overpayment in

accordance with paragraph (c) of this

section and § 4022.82. Notwithstanding

the previous sentence, the PBGC may, in

its discretion, recover overpayments by

methods other than recouping in

accordance with the rules in this

subpart. The PBGC will not normally

exercise this right unless net benefits

paid after the termination date exceed

those to which a participant or

beneficiary is entitled under the terms

of the plan before any reductions under

subpart D.

(b) Reimbursement of benefit

underpayments. If at any time the PBGC

determines that net benefits paid with

respect to a participant in a PBGCtrusteed plan are less than the amount

to which the participant or his or her

beneficiary is entitled up to that time

under title IV of ERISA, the PBGC shall

reimburse the participant or beneficiary

for the net underpayment in accordance

with paragraphs (c) and (d) of this

section and § 4022.83.

(c) Payments subject to recoupment or

reimbursement. The PBGC shall recoup

net overpayments and reimburse net

underpayments made on or after the

latest of the proposed termination date,

the termination date, or, if no notice of

intent to terminate was issued, the date

on which proceedings to terminate the

plan are instituted pursuant to section

4042 of ERISA.

(d) Interest. The PBGC will compute

interest on overpayments and

underpayments using the interest rate

established for valuing immediate

annuities as set forth in part 4044,

appendix B, of this chapter according to

the following rules:

(1) Overpayments before recoupment

begins. Except as provided in paragraph

(d)(2), no interest is charged on

overpayments from the date of the

payment to the date on which

recoupment begins.

(2) Receipt of both overpayments and

underpayments. If both benefit

overpayments and benefit

underpayments are made with respect

to a participant, the PBGC will

determine the amount of the net

overpayment or underpayment by

charging or crediting interest on each

payment from the first day of the month

after the date of payment to the first day

of the month in which recoupment

begins. If the net overpayment thus

computed is greater than the sum of the

actual overpayments (unadjusted for

interest to the date on which

recoupment begins), computations

under § 4022.82 will be based upon the

sum of the actual overpayments.

§ 4022.82 Method of recoupment.

(a) Future benefit reductions. Unless a

participant or beneficiary elects

otherwise under paragraph (b) of this

section, the PBGC shall recoup

overpayments of benefits in accordance

with this paragraph. The benefit

reduction under this paragraph shall be

an amount equal to the fraction

determined under paragraphs (a)(1) and

(a)(2) of this section, multiplied by each

future benefit payment to which the

participant or beneficiary is entitled.

(1) Computation. The PBGC shall

determine the fractional multiplier by

dividing the amount of the benefit

overpayment by the present value of the

benefit payable with respect to the

participant under title IV of ERISA. The

PBGC shall determine the present value

of the benefit to which a participant or

beneficiary is entitled under title IV of

ERISA as of the termination date, using

the PBGC interest rates and factors in

effect on that date. The PBGC may,

however, utilize a different date of

determination if warranted by the facts

and circumstances of a particular case.

(2) Limitation on benefit reduction.

Except as provided in paragraph (a)(1)

of this section, the PBGC shall reduce

benefits with respect to a participant or

beneficiary by no more than the greater

of (i) ten percent per month or (ii) the

amount of benefit per month in excess

of the maximum guaranteeable benefit

payable under section 4022(b)(3)(B) of

ERISA, determined without adjustment

for age and benefit form.

(3) PBGC notice to participant or

beneficiary. Before effecting a benefit

reduction pursuant to this paragraph,

the PBGC shall notify the participant or

beneficiary in writing of the amount of

the benefit overpayment and of the

amount of the reduced benefit

computed under this section. The notice

will advise the participant or

beneficiary of the repayment option set

forth in paragraph (b) of this section and

inform him or her that the PBGC will

proceed to recover the benefit

overpayment in accordance with this

paragraph unless an election to repay in

a lump sum is made in accordance with

paragraph (b).

(b) Lump sum repayment. A

participant or beneficiary who has

received a net benefit overpayment may

elect to repay the excess in a single

payment on or before a date agreed to

by the participant or beneficiary and the

PBGC. If the full payment is not made

by the agreed upon date or a date is not

agreed upon, the PBGC may proceed to

recover the overpayment in accordance

with paragraph (a) of this section.

§ 4022.83 PBGC reimbursement of benefit

underpayments.

When the PBGC determines that there

has been a net benefit underpayment

made with respect to a participant, it

shall pay the participant or beneficiary

the amount of the net underpayment,

determined in accordance with

§ 4022.81(d), in a single payment.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34039

Appendix to Part 4022—Maximum

Guaranteeable Monthly Benefit

The following table lists by year the

maximum guaranteeable monthly benefit

payable in the form of a life annuity

commencing at age 65 as described by

§ 4022.22(b) to a participant in a plan that

terminated in that year:

Year

Maximum

guaranteeable

monthly

benefit

1974 ...................................... $750.00

1975 ...................................... 801.14

1976 ...................................... 869.32

1977 ...................................... 937.50

1978 ...................................... 1,005.68

1979 ...................................... 1,073.86

1980 ...................................... 1,159.09

1981 ...................................... 1,261.36

1982 ...................................... 1,380.68

1983 ...................................... 1,517.05

1984 ...................................... 1,602.27

1985 ...................................... 1,687.50

1986 ...................................... 1,789.77

1987 ...................................... 1,857.95

1988 ...................................... 1,909.09

1989 ...................................... 2,028.41

1990 ...................................... 2,164.77

1991 ...................................... 2,250.00

1992 ...................................... 2,352.27

1993 ...................................... 2,437.50

1994 ...................................... 2,556.82

1995 ...................................... 2,573.86

1996 ...................................... 2,642.05

PART 4022B—AGGREGATE LIMITS

ON GUARANTEED BENEFITS

§ 4022B.1 Aggregate payments limitation.

If a person is entitled to benefits

under two or more plans or with respect

to two or more participants, or if more

than one person is entitled to benefits

payable with respect to one participant,

the aggregate benefits payable by PBGC

from its funds shall be limited to the

extent set forth in § 4022.22 computed

without regard to the provisions of

§ 4022.22(a). The limitation contained

in § 4022.22 shall be applied separately

to each plan at the date of its

termination, and the amounts payable

by PBGC under each plan shall be

aggregated up to the limitation

contained in this section.

PART 4041—TERMINATION OF

SINGLE-EMPLOYER PLANS

Subpart A—General Provisions

Sec.

4041.1 Purpose and scope.

4041.2 Definitions.

4041.3 Requirements for a standard

termination or a distress termination.

4041.4 Administration of plan during

pendency of termination proceedings.

4041.5 Challenges to plan termination

under collective bargaining agreement.

4041.6 Annuity requirements.

4041.7 Facilitating plan sufficiency in a

standard termination.

4041.8 Disaster relief.

4041.9 Filing with the PBGC.

4041.10 Computation of time.

4041.11 Maintenance of plan records.

4041.12 Information collection.

Subpart B—Standard Termination Process

4041.21 Notice of intent to terminate.

4041.22 Issuance of notices of plan benefits.

4041.23 Form and contents of notices of

plan benefits.

4041.24 Standard termination notice.

4041.25 PBGC action upon filing of

standard termination notice.

4041.26 Notice of noncompliance.

4041.27 Closeout of plan.

Subpart C—Distress Termination Process

4041.41 Notice of intent to terminate.

4041.42 PBGC review of notice of intent to

terminate.

4041.43 Distress termination notice.

4041.44 PBGC determination of compliance

with requirements for distress

termination.

4041.45 PBGC determination of plan

sufficiency/insufficiency.

4041.46 Notices of benefit distribution.

4041.47 Verification of plan sufficiency

prior to closeout.

4041.48 Closeout of plan.

Appendix to Part 4041—Agreement for

Commitment to Make Plan Sufficient for

Benefit Liabilities

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

1344, 1350.

Subpart A—General Provisions

§ 4041.1 Purpose and scope.

This part sets forth the rules and

procedures for terminating a singleemployer pension plan in a standard

termination or in a distress termination

under ERISA. Subpart A contains

various general rules that apply to both

standard terminations and distress

terminations. Subpart B sets forth the

specific steps that a plan administrator

must follow in order to terminate a plan

in a standard termination. Subpart C

sets forth the specific steps that a plan

administrator must follow in order to

terminate a plan in a distress

termination. This part applies to the

termination of any single-employer plan

covered under section 4021(a) of ERISA

and not excluded by section 4021(b).

This part does not reflect the

amendments to sections 4041(b)(2)(C)(i)

(relating to the PBGC’s authority not to

nullify a termination if nullification

would be inconsistent with the interests

of participants and beneficiaries) or

4041(c)(2)(B)(i)(I) (relating to the

liquidation criteria for a distress

termination) that were contained in the

Retirement Protection Act of 1994 (Pub.

L. 103–465, section 778 (a) and (b)).

§ 4041.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: affected party,

annuity, benefit liabilities, Code,

contributing sponsor, controlled group,

distress termination, distribution date,

employer, ERISA, guaranteed benefit,

insurer, irrevocable commitment, IRS,

mandatory employee contributions,

normal retirement age, notice of intent

to terminate, PBGC, person, plan, plan

administrator, plan year, singleemployer plan, standard termination,

termination date, and title IV benefit.

In addition, for purposes of this part:

Distress termination notice means the

notice filed with the PBGC pursuant to

section 4041(c)(2)(A) of ERISA and

§ 4041.43. PBGC Form 601 (including

Schedule EA–D) is the distress

termination notice.

Distribution notice means the notice

issued to the plan administrator by the

PBGC pursuant to § 4041.45(c) of this

part upon the PBGC’s determination

that the plan has sufficient assets to pay

at least guaranteed benefits.

Existing collective bargaining

agreement means a collective bargaining

agreement that—

(1) By its terms, either has not expired

or is extended beyond its stated

expiration date because neither of the

collective bargaining parties took the

required action to terminate it, and

(2) Has not been made inoperative by

a judicial ruling. When a collective

bargaining agreement no longer meets

these conditions, it ceases to be an

‘‘existing collective bargaining

agreement,’’ whether or not any or all of

its terms may continue to apply by

operation of law.

Majority owner means, with respect to

a contributing sponsor of a singleemployer plan, an individual who

owns, directly or indirectly, 50 percent

or more of—

(1) An unincorporated trade or

business,

(2) The capital interest or the profits

interest in a partnership, or

(3) Either the voting stock of a

corporation or the value of all of the

stock of a corporation. For this purpose,

the constructive ownership rules of

section 414 (b) and (c) of the Code shall

apply.

Notice of benefit distribution means

the notice to each participant and

beneficiary required by § 4041.46 of this

part describing the benefit to be

distributed to him or her.

Notice of noncompliance means a

notice issued to a plan administrator by

the PBGC pursuant to section

4041(b)(2)(C) of ERISA and § 4041.26 of

this part advising the plan administrator

that the requirements for a standard
34040 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

termination have not been satisfied and

that the plan is an ongoing plan.

Notice of plan benefits means the

notice to each participant and

beneficiary required by section

4041(b)(2)(B) of ERISA and §§ 4041.22

and 4041.23 of this part describing his

or her plan benefits.

Participant means—

(1) Any individual who is currently in

employment covered by the plan and

who is earning or retaining credited

service under the plan, including any

individual who is considered covered

under the plan for purposes of meeting

the minimum participation

requirements but who, because of offset

or similar provisions, does not have any

accrued benefits;

(2) Any nonvested individual who is

not currently in employment covered by

the plan but who is earning or retaining

credited service under the plan; and

(3) Any individual who is retired or

separated from employment covered by

the plan and who is receiving benefits

under the plan or is entitled to begin

receiving benefits under the plan in the

future, excluding any such individual to

whom an insurer has made an

irrevocable commitment to pay all the

benefits to which the individual is

entitled under the plan.

Plan benefits means the benefits to

which a participant is, or may become,

entitled under the plan’s provisions in

effect as of the termination date, based

on the participant’s accrued benefit

under the plan as of that date. Each

participant’s ‘‘plan benefits’’ equals that

participant’s ‘‘benefit liabilities,’’ and

the sum of all ‘‘plan benefits’’ equals the

plan’s ‘‘benefit liabilities.’’

Proposed distribution date means the

date chosen by the plan administrator as

the tentative date for the distribution of

plan assets pursuant to a standard

termination. A proposed distribution

date may not be earlier than the 61st

day, nor later than the 240th day,

following the day on which the plan

administrator files a standard

termination notice with the PBGC.

Proposed termination date means the

date specified as such by the plan

administrator in the notice of intent to

terminate or, if later, in the standard

termination notice or the distress

termination notice. A proposed

termination date specified in the notice

of intent to terminate may not be earlier

than the 60th day, nor later than the

90th day, after the issuance of the notice

of intent to terminate. A proposed

termination date becomes the

’termination date’ if a plan terminates in

a standard termination. A proposed

termination date specified in the

distress termination notice may not be

earlier than the proposed termination

date specified in the notice of intent to

terminate, or (except with PBGC

approval) later than the 90th day after

the issuance of the notice of intent to

terminate.

Residual assets means the plan assets

remaining after all benefit liabilities and

other liabilities of the plan have been

satisfied.

Standard termination notice means

the notice filed with the PBGC pursuant

to section 4041(b)(2)(A) of ERISA and

§ 4041.24 of this part advising the PBGC

of a proposed standard termination.

PBGC Form 500 (including Schedule

EA–S) is the standard termination

notice.

§ 4041.3 Requirements for a standard

termination or a distress termination.

(a) Exclusive means of voluntary plan

termination. A plan may be voluntarily

terminated by the plan administrator

only if all of the requirements for a

standard termination set forth in

paragraph (b) of this section are satisfied

or all of the requirements for a distress

termination set forth in paragraph (c) of

this section are satisfied.

(b) Requirements for a standard

termination. A plan may be terminated

in a standard termination only if—

(1) The plan administrator issues a

notice of intent to terminate to each

affected party in accordance with

§ 4041.21 at least 60 days and not more

than 90 days before the proposed

termination date;

(2) The plan administrator files a

standard termination notice with the

PBGC in accordance with § 4041.24 no

later than 120 days after the proposed

termination date or, if applicable, no

later than the due date established in an

extension notice issued under § 4041.8;

(3) The plan administrator issues

notices of plan benefits to plan

participants and beneficiaries in

accordance with §§ 4041.22 and 4041.23

no later than the date that the standard

termination notice is filed with the

PBGC;

(4) The PBGC does not issue a notice

of noncompliance to the plan

administrator pursuant to § 4041.26; and

(5) The plan administrator distributes

plan assets in accordance with

§ 4041.27(c) within the 180-day (or

extended) distribution period under

§ 4041.27(a), (e), and (f) (or, where

applicable, within the time prescribed

in part 4050 of this chapter), in

satisfaction of all benefit liabilities

under the plan.

(c) Requirements for a distress

termination. A plan may be terminated

in a distress termination only if—

(1) The plan administrator issues a

notice of intent to terminate to each

affected party in accordance with

§ 4041.41 at least 60 days and not more

than 90 days before the proposed

termination date;

(2) The plan administrator files a

distress termination notice with the

PBGC in accordance with § 4041.43 no

later than 120 days after the proposed

termination date or, if applicable, no

later than the due date established in an

extension notice issued under § 4041.8;

and

(3) The PBGC determines that each

contributing sponsor and each member

of its controlled group satisfy one of the

distress criteria set forth in paragraph (e)

of this section.

(d) Effect of failure to satisfy

requirements. (1) If the plan

administrator does not satisfy all of the

requirements of paragraph (b) of this

section for a standard termination or,

except as provided in paragraph (d)(2)(i)

of this section, all of the requirements

of paragraph (c) of this section for a

distress termination, any action taken to

effect the plan termination shall be null

and void, and the plan shall be an

ongoing plan. A plan administrator who

still desires to terminate the plan shall

initiate the termination process again,

starting with the issuance of a new

notice of intent to terminate.

(2)(i) The PBGC may, upon its own

motion, waive any requirement with

respect to notices to be filed with the

PBGC under paragraph (c)(1) or (c)(2) of

this section if the PBGC believes that it

will be less costly or administratively

burdensome to the PBGC to do so. The

PBGC will not entertain requests for

waivers under this paragraph.

(ii) Notwithstanding any other

provision of this part, the PBGC retains

the authority in any case to initiate a

plan termination in accordance with the

provisions of section 4042 of ERISA.

(e) Distress criteria. In a distress

termination, each contributing sponsor

and each member of its controlled group

shall satisfy at least one (but not

necessarily the same one) of the

following criteria in order for a distress

termination to occur:

(1) Liquidation. This criterion is met

if, as of the proposed termination date—

(i) A person has filed or had filed

against it a petition seeking liquidation

in a case under title 11, United States

Code, or under a similar federal law or

law of a State or political subdivision of

a State, or a case described in paragraph

(e)(2) of this section has been converted

to such a case; and

(ii) The case has not been dismissed.

(2) Reorganization. This criterion is

met if—
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34041

(i) As of the proposed termination

date, a person has filed or had filed

against it a petition seeking

reorganization in a case under title 11,

United States Code, or under a similar

law of a state or a political subdivision

of a state, or a case described in

paragraph (e)(1) of this section has been

converted to such a case;

(ii) As of the proposed termination

date, the case has not been dismissed;

(iii) The person notifies the PBGC of

any request to the bankruptcy court (or

other appropriate court in a case under

such similar law of a state or a political

subdivision of a state) for approval of

the plan termination by concurrently

filing with the PBGC a copy of the

motion requesting court approval,

including any documents submitted in

support of the request; and

(iv) The bankruptcy court or other

appropriate court determines that,

unless the plan is terminated, such

person will be unable to pay all its debts

pursuant to a plan of reorganization and

will be unable to continue in business

outside the reorganization process and

approves the plan termination.

(3) Inability to continue in business.

This criterion is met if a person

demonstrates to the satisfaction of the

PBGC that, unless a distress termination

occurs, the person will be unable to pay

its debts when due and to continue in

business.

(4) Unreasonably burdensome

pension costs. This criterion is met if a

person demonstrates to the satisfaction

of the PBGC that the person’s costs of

providing pension coverage have

become unreasonably burdensome

solely as a result of declining covered

employment under all single-employer

plans for which that person is a

contributing sponsor.

(f) Non-duplicative efforts. (1) If a

person requests approval of the plan

termination by a court, as described in

paragraph (e)(2) of this section, the

PBGC—

(i) Will normally enter an appearance

to request that the court make specific

findings as to whether the contributing

sponsor or controlled group member

meets the distress test in paragraph

(e)(3) of this section, or state that it is

unable to make such findings;

(ii) Will provide the court with any

information it has that may be germane

to the court’s ruling;

(iii) Will, if the person has requested,

or later requests, a determination by the

PBGC under paragraph (e)(3) of this

section, defer action on the request until

the court makes its determination; and

(iv) Will be bound by a final and nonappealable order of the court.

(2) If a person requests a

determination by the PBGC under

paragraph (e)(3) of this section, the

PBGC determines that the distress

criterion is not met, and the person

thereafter requests approval of the plan

termination by a court, as described in

paragraph (e)(2) of this section, the

PBGC will advise the court of its

determination and make its

administrative record available to the

court.

(g) Non-recognition of certain actions.

If the PBGC finds that a person

undertook any action or failed to act for

the principal purpose of satisfying any

of the distress criteria contained in

paragraph (e) of this section, rather than

for a reasonable business purpose, the

PBGC shall disregard such act or failure

to act in determining whether the

person has satisfied any of those

criteria.

§ 4041.4 Administration of plan during

pendency of termination proceedings.

(a) General rule. Except to the extent

specifically prohibited by this section,

during the pendency of termination

proceedings the plan administrator shall

continue to carry out the normal

operations of the plan, such as putting

participants into pay status, collecting

contributions due the plan, investing

plan assets, and, during the pendency of

a standard termination, making loans to

participants, in accordance with plan

provisions and applicable law and

regulations.

(b) Prohibitions after issuance of

notice of intent to terminate in a

standard termination. Except as

provided in paragraph (d) of this

section, during the period beginning on

the first day the plan administrator

issues a notice of intent to terminate and

ending on the last day of the PBGC’s 60-

day (or extended) review period, as

described in § 4041.25(a), the plan

administrator shall not—

(1) Distribute plan assets pursuant to

or in furtherance of the termination of

the plan;

(2) Pay benefits attributable to

employer contributions, other than

death benefits, in any form other than as

an annuity; or

(3) Purchase irrevocable commitments

to provide benefits from an insurer.

(c) Prohibitions after issuing notice of

intent to terminate in a distress

termination. The plan administrator

shall not make loans to plan

participants beginning on the first day

he or she issues a notice of intent to

terminate, and from that date until a

distribution is permitted pursuant to

§ 4041.48, the plan administrator shall

not—

(1) Distribute plan assets pursuant to,

or (except as required by this part) take

any other actions to implement, the

termination of the plan;

(2) Pay benefits attributable to

employer contributions, other than

death benefits, in any form other than as

an annuity; or

(3) Purchase irrevocable commitments

to provide benefits from an insurer.

(d) Exceptions in a standard

termination. During the period set forth

in paragraph (b) of this section, the plan

administrator may pay benefits

attributable to employer contributions

either through the purchase of

irrevocable commitments from an

insurer or in a form other than an

annuity if—

(1) The participant has separated from

active employment;

(2) The distribution is consistent with

prior plan practice; and

(3) The distribution is not reasonably

expected to jeopardize the plan’s

sufficiency for benefit liabilities.

(e) Effect of notice of noncompliance

in a standard termination. If the PBGC

issues a notice of noncompliance

pursuant to § 4041.26, the prohibitions

described in paragraphs (b)(2) and (b)(3)

of this section shall cease to apply—

(1) Upon expiration of the period

during which reconsideration may be

requested under § 4041.26(c) or, if

earlier, at the time the plan

administrator decides not to request

reconsideration; or

(2) If reconsideration is requested,

upon PBGC issuance of its decision on

reconsideration.

(f) Limitation on benefit payments on

or after proposed termination date in a

distress termination. Beginning on the

proposed termination date, the plan

administrator shall reduce benefits to

the level determined under part 4022,

subpart D, of this chapter.

(g) Failure to qualify for distress

termination. In any case where the

PBGC determines, pursuant to

§ 4041.42(c) or § 4041.44(c)(1), that the

requirements for a distress termination

are not satisfied—

(1) The prohibitions in paragraph (c)

of this section, other than those in

paragraph (c)(1), shall cease to apply—

(i) Upon expiration of the period

during which reconsideration may be

requested under §§ 4041.42(e) and

4041.44(d) or, if earlier, at the time the

plan administrator decides not to

request reconsideration; or

(ii) If reconsideration is requested,

upon PBGC issuance of its decision on

reconsideration.

(2) Any benefits that were not paid

pursuant to paragraph (f) of this section

shall be due and payable as of the
34042 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

effective date of the PBGC’s

determination, together with interest

from the date (or dates) on which the

unpaid amounts were originally due

until the date on which they are paid in

full at the rate or rates prescribed under

§ 4022.81(d) of this chapter.

(h) Effect of subsequent insufficiency.

If the plan administrator makes a

finding of subsequent insufficiency for

guaranteed benefits pursuant to

§ 4041.47(b), or the PBGC notifies the

plan administrator that it has made a

finding of subsequent insufficiency for

guaranteed benefits pursuant to

§ 4041.47(d), the prohibitions in

paragraph (c) of this section shall apply

in accordance with § 4041.47(e).

§ 4041.5 Challenges to plan termination

under collective bargaining agreement.

(a) Suspension upon formal challenge

to termination. (1)(i) If the PBGC is

advised, before the 60-day (or extended)

period specified in § 4041.25 ends (in a

standard termination) or before issuance

of a notice of inability to determine

sufficiency or a distribution notice

pursuant to § 4041.45(b) or (c) (in a

distress termination), that a formal

challenge to the termination (as

described in paragraph (b) of this

section) has been initiated, the PBGC

shall suspend the termination

proceeding and shall so advise the plan

administrator in writing.

(ii) If the PBGC is advised of a

challenge described in paragraph

(a)(1)(i) of this section after the 60-day

(or extended) period specified in

§ 4041.25 ends (in a standard

termination) or after issuance of a notice

of inability to determine sufficiency or

a distribution notice pursuant to

§ 4041.45(b) or (c) (in a distress

termination) but before the termination

procedure is concluded pursuant to this

part, the PBGC may suspend the

termination proceeding and, if it does,

shall so advise the plan administrator in

writing.

(2) The rules in paragraphs (a)(3) or

(a)(4) (as appropriate) shall apply during

a period of suspension beginning on the

date of the PBGC’s written notification

to the plan administrator and ending

with the final resolution of the

challenge to the termination:

(3) In a standard termination—

(i) The running of all time periods

specified in ERISA or this part relevant

to the termination shall be suspended;

and

(ii) The plan administrator shall

comply with the prohibitions in

§ 4041.4.

(4) In a distress termination—

(i) The suspension shall stay the

issuance by the PBGC of any notice of

inability to determine sufficiency or

distribution notice or, if any such notice

was previously issued, shall stay its

effectiveness;

(ii) The plan administrator shall

comply with the prohibitions in

§ 4041.4; and

(iii) The plan administrator shall file

a distress termination notice with the

PBGC in the manner and within the

time specified in § 4041.43.

(b) Formal challenge to termination.

For purposes of this section, a formal

challenge to a plan termination is

initiated when any of the following

actions is taken, asserting that the

termination would violate the terms and

conditions of an existing collective

bargaining agreement:

(1) The commencement of any

procedure specified in the collective

bargaining agreement for resolving

disputes under the agreement; or

(2) The commencement of any action

before an arbitrator, administrative

agency or board, or court under

applicable labor-management relations

law.

(c) Resolution of challenge.

Immediately upon the final resolution

(as described in paragraph (d) of this

section) of the formal challenge to the

termination, the plan administrator

shall notify the PBGC in writing of the

outcome of the challenge, and shall

provide the PBGC with a copy of the

award or order, if any. If the validity of

the proposed termination has been

upheld, the plan administrator also

shall advise the PBGC whether the plan

administrator wishes to continue the

proposed termination.

(1) Challenge sustained. If the

arbitrator, agency, board, or court has

determined (or the parties have agreed)

that the proposed termination violates

an existing collective bargaining

agreement, the PBGC shall dismiss the

termination proceeding, all actions

taken to effect the plan termination shall

be null and void, and the plan shall be

an ongoing plan. In this event, in a

distress termination, § 4041.4(g) shall

apply as of the date of the dismissal by

the PBGC.

(2) Termination sustained. If the

arbitrator, agency, board, or court has

determined (or the parties have agreed)

that the proposed termination does not

violate an existing collective bargaining

agreement and the plan administrator

wishes to proceed with the termination,

the PBGC shall reactivate the

termination proceeding by sending a

written notice thereof to the plan

administrator, and the following rules

shall apply:

(i) The termination proceeding shall

continue from the point where it was

suspended;

(ii) All actions taken to effect the

termination before the suspension shall

be effective;

(iii) Any time periods that were

suspended shall resume running from

the date of the PBGC’s notice of the

reactivation of the proceeding;

(iv) Any time periods that had fewer

than 15 days remaining shall be

extended to the 15th day after the date

of the PBGC’s notice, or such later date

as the PBGC may specify, and

(v) In a distress termination, the PBGC

shall proceed to issue a notice of

inability to determine sufficiency or a

distribution notice (or reactivate any

such notice stayed under paragraph

(a)(3) of this section), either with or

without first requesting updated

information from the plan administrator

pursuant to § 4041.43(c).

(d) Final resolution of challenge. For

purposes of this section, a formal

challenge to a proposed termination is

finally resolved when—

(1) The parties involved in the

challenge enter into a settlement that

resolves the challenge;

(2) A final award, administrative

decision, or court order is issued that is

not subject to review or appeal; or

(3) A final award, administrative

decision, or court order is issued that is

not appealed, or review or enforcement

of which is not sought, within the time

for filing an appeal or requesting review

or enforcement.

(e) Involuntary termination by the

PBGC. Notwithstanding any other

provision of this section, the PBGC

retains the authority in any case to

initiate a plan termination in

accordance with the provisions of

section 4042 of ERISA.

§ 4041.6 Annuity requirements.

(a) General rule. Except as provided in

paragraphs (b) and (d) of this section (or,

where applicable, in part 4050 of this

chapter), when a plan is closed out

under § 4041.27 (in a standard

termination) or § 4041.48 (in a distress

termination), any benefit that is payable

as an annuity under the provisions of

the plan must be provided in annuity

form through the purchase from an

insurer of a single premium,

nonparticipating, nonsurrenderable

annuity contract that constitutes an

irrevocable commitment by the insurer

to provide the benefits purchased.

(b) Exceptions to annuity requirement.

A benefit that is payable as an annuity

under the provisions of a plan need not

be provided in annuity form if the plan

provides for an alternative form of
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34043

distribution and either paragraph (b)(1)

or (b)(2) of this section applies:

(1) The participant is not in pay status

as of the distribution date, and the

present value of the participant’s total

benefit under the plan, including

amounts previously distributed to the

participant, is $3,500 or less,

determined in accordance with sections

411(a)(11) and 417(e)(3) of the Code and

the regulations thereunder. The present

value of such benefits shall be

determined using the interest rate or

rates as of—

(i) The date set forth in the plan for

such purpose, provided that the plan

provision is in accord with section

417(e)(3) of the Code and the regulations

thereunder (substituting ‘‘distribution

date’’ for ‘‘annuity starting date’’

wherever used in the plan); or

(ii) If the plan does not provide for

such a date, the distribution date.

(2) The participant elected the

alternative form of distribution in

writing, with the written consent of his

or her spouse, in accordance with the

requirements of sections 401(a)(11),

411(a)(11), and 417 of the Code and the

regulations thereunder.

(c) Optional benefit forms. Except as

permitted by sections 401(a)(11),

411(d)(6), and 417 of the Code and the

regulations thereunder, an annuity

contract purchased to satisfy the

annuity requirement shall preserve all

applicable benefit options provided

under the plan as of the termination

date.

(d) Participating annuities. (1)

General rule. Notwithstanding the

requirement of paragraph (a) of this

section that an annuity contract be

nonparticipating, a participating

annuity contract may be purchased to

satisfy the annuity requirement if the

plan can provide for all benefit

liabilities and—

(i) All benefit liabilities will be

guaranteed under the annuity contract

as the unconditional, irrevocable, and

noncancellable obligation of the insurer;

(ii) In no event, including unfavorable

investment or actuarial experience, can

the amounts payable to participants

under the annuity contract decrease

except to correct mistakes; and

(iii) As provided in paragraph (d)(2) of

this section, no amount of residual

assets to which participants are entitled

will be used to pay for the participation

feature.

(2) Plans with residual assets. If all or

a portion of the residual assets of a plan

will be distributed to participants—

(i) The additional premium for the

participation feature must be paid from

the contributing sponsor’s share, if any,

of the residual assets or from assets of

the contributing sponsor; and

(ii) If the plan provided for mandatory

employee contributions, the amount of

residual assets must be determined

using the price of the annuities for all

benefit liabilities without the

participation feature.

§ 4041.7 Facilitating plan sufficiency in a

standard termination.

(a) Commitment to make plan

sufficient—(1) General rule. At any time

before a standard termination notice is

filed with the PBGC, in order to enable

the plan to terminate in that standard

termination, a contributing sponsor or a

member of a controlled group of a

contributing sponsor may make a

commitment to contribute any

additional sums necessary to make the

plan sufficient for all benefit liabilities.

Any such commitment shall be treated

as a plan asset for all purposes under

this part. A sample commitment is

included in the appendix to this part.

(2) Requirements for valid

commitment. A commitment to make a

plan sufficient for all benefit liabilities

shall be valid for purposes of this part

only if the commitment—

(i) Is made to the plan;

(ii) Is in writing, signed by the

contributing sponsor and/or controlled

group member(s); and

(iii) If the contributing sponsor or

controlled group member is the subject

of a bankruptcy liquidation or

reorganization proceeding, as described

in § 4041.3(e)(1) or (e)(2) of this part, is

approved by the court before which the

liquidation or reorganization proceeding

is pending or is unconditionally

guaranteed, by a person not in

bankruptcy, to be met at or before the

time distribution of assets is required in

the standard termination.

(b) Alternative treatment of majority

owner’s benefit—(1) General rule. In

order to facilitate the termination of the

plan and distribution of assets in a

standard termination, a majority owner

may agree to forego receipt of all or part

of his or her benefit until the benefit

liabilities of all other plan participants

have been satisfied.

(2) Requirements for valid agreement.

Any agreement by a majority owner to

an alternative treatment of his or her

benefit is valid only if—

(i) The agreement is in writing;

(ii) In any case in which the total

value of the benefit (determined in

accordance with § 4041.6(b) of this part)

is greater than $3,500, the spouse, if

any, of the majority owner consents, in

writing, to the alternative treatment of

the benefit; and

(iii) The agreement is not inconsistent

with a qualified domestic relations

order (as defined in section 206(d)(3) of

ERISA).

§ 4041.8 Disaster relief.

(a) Notwithstanding any other

provision in this part, when the

President of the United States declares

that, under the Disaster Relief Act of

1974, as amended (42 U.S.C. 5121,

5122(2), 5141(b)), a major disaster

exists, the Executive Director of the

PBGC (or his or her designee) may, by

issuing one or more notices of disaster

relief, extend by up to 180 days the due

date for—

(1) Filing the standard termination

notice under § 4041.24;

(2) Completing the distribution of

plan assets in a standard termination

under § 4041.27;

(3) Filing the distress termination

notice pursuant to § 4041.43;

(4) Issuing the notices of benefit

distribution in a distress termination

pursuant to § 4041.46(a)(1); or

(5) Completing the distribution of

plan assets in a distress termination

pursuant to § 4041.48.

(b) The due date extension or

extensions described in paragraph (a) of

this section shall apply only to plan

terminations with respect to which the

principal place of business of the

contributing sponsor or the plan

administrator, or the office of the service

provider, bank, insurance company, or

other person maintaining the

information necessary to file the

standard or distress termination notice,

issue notices of plan benefits or benefit

distribution, or complete the

distribution of plan assets (as

applicable), is within a designated

disaster area.

(c) The standard or distress

termination notice or the postdistribution certification shall identify

the termination as being qualified for

the due date extension.

§ 4041.9 Filing with the PBGC.

(a) Date of filing. Any document

required or permitted to be filed with

the PBGC under this part shall be

deemed filed on the date that it is

received at the PBGC, providing it is

received no later than 4:00 p.m. on a

day other than Saturday, Sunday, or a

Federal holiday. Documents received

after 4:00 p.m. or on Saturday, Sunday,

or a Federal holiday shall be deemed

filed on the next regular business day.

(b) How to file. Except as may

otherwise be provided in applicable

forms and instructions, any document to

be filed under this part may be

delivered by mail or by hand to: Reports
34044 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Processing, Insurance Operations

Department, Pension Benefit Guaranty

Corporation, 1200 K Street NW.,

Washington, DC 20005–4026

§ 4041.10 Computation of time.

In computing any period of time

prescribed or allowed by this part, the

day of the act or event from which the

designated period of time begins to run

is not counted. The last day of the

period so computed shall be included,

unless it is a Saturday, Sunday, or

Federal holiday, in which event the

period runs until the end of the next day

that is not a Saturday, Sunday, or

Federal holiday. Notwithstanding the

preceding sentence, a proposed

termination date may be any day,

including a Saturday, Sunday, or

Federal holiday.

§ 4041.11 Maintenance of plan records.

Either the contributing sponsor or the

plan administrator of a plan terminating

in a standard termination or a plan

terminating in a distress termination

that closes out in accordance with

§ 4041.48 pursuant to a distribution

notice issued under § 4041.45(c) shall

maintain and preserve all records used

to compute benefits with respect to each

individual who is a plan participant or

a beneficiary of a deceased participant

as of the termination date in accordance

with the following rules:

(a) The records to be maintained and

preserved are those used to compute the

benefit for purposes of distribution to

each individual in accordance with

§ 4041.27(c) (in a standard termination)

or § 4041.48 (in a distress termination)

and include, but are not limited to, the

plan documents and all underlying data,

including worksheets prepared by or at

the direction of the enrolled actuary,

used in determining the amount, form,

and value of benefits.

(b) All records subject to this section

shall be preserved for six years after the

date the post-distribution certification

required under § 4041.27(h) (in a

standard termination) or § 4041.48(b) (in

a distress termination) is filed with the

PBGC.

(c) The contributing sponsor or plan

administrator, as appropriate, shall

make records subject to this section

available to the PBGC upon request for

inspection and photocopying, and shall

submit such records to the PBGC within

30 days after receipt of the PBGC’s

written request therefor (or such other

period as may be specified in such

written request).

§ 4041.12 Information collection.

The information collection

requirements contained in this part have

been approved by the Office of

Management and Budget under control

number 1212–0036.

Subpart B—Standard Termination

Process

§ 4041.21 Notice of intent to terminate.

(a) General rule. At least 60 days and

no more than 90 days before the

proposed termination date, the plan

administrator shall issue to each person

who is (as of the proposed termination

date) an affected party (other than the

PBGC) a written notice of intent to

terminate containing all of the

information specified in paragraph (d)

of this section. Failure to comply with

the requirements of this section shall

nullify the proposed termination.

(b) Discovery of other affected parties.

Notwithstanding the provisions of

paragraph (a) of this section, if the plan

administrator discovers additional

affected parties after the expiration of

the time period specified in paragraph

(a) of this section, the failure to issue the

notice of intent to terminate to such

parties within the specified time period

will not cause the notice to be untimely

under paragraph (a) of this section if the

plan administrator could not reasonably

have been expected to know of the

additional affected parties and if he or

she promptly issues the notice to each

additional affected party.

(c) Issuance—(1) Method. The plan

administrator shall issue the notice of

intent to terminate to each affected party

(other than the PBGC) individually

either by hand delivery or by first-class

mail or courier service directed to the

affected party’s last known address.

(2) When issued. The notice of intent

to terminate is deemed issued to each

affected party on the date on which it

is handed to the affected party or

deposited with a mail or courier service

(as evidenced by a postmark or written

receipt).

(d) Contents of notice. The plan

administrator shall include in the notice

of intent to terminate all of the

following information:

(1) The name of the plan and of the

contributing sponsor;

(2) The employer identification

number (‘‘EIN’’) of the contributing

sponsor and the plan number (‘‘PN’’); if

there is no EIN or PN, the notice shall

so state;

(3) The name, address, and telephone

number of the person who may be

contacted by an affected party with

questions concerning the plan’s

termination;

(4) A statement that the plan

administrator expects to terminate the

plan in a standard termination on a

proposed termination date that is

either—

(i) A specific date set forth in the

notice, or

(ii) A date to be determined that is

dependent on the occurrence of some

future event;

(5) If the proposed termination date is

dependent on the occurrence of a future

event, the nature of the event (such as

the merger of the contributing sponsor

with another entity), generally when the

event is expected to occur, and when

the termination will occur in relation to

the other event;

(6) A statement that benefit and

service accruals will continue until the

termination date or, if applicable, that

benefit accruals were or will be frozen

as of a specific date in accordance with

section 204(h) of ERISA;

(7) A statement that, in order to

terminate in a standard termination,

plan assets must be sufficient to provide

all benefit liabilities under the plan with

respect to each participant and each

beneficiary of a deceased participant;

(8) A statement that, after plan assets

have been distributed to provide all

benefit liabilities with respect to a

participant or a beneficiary of a

deceased participant, either by the

purchase of an irrevocable commitment

or commitments from an insurer to

provide benefits or by an alternative

form of distribution provided for under

the plan, the PBGC’s guarantee with

respect to that participant’s or

beneficiary’s benefit ends;

(9) If distribution of benefits under the

plan may be wholly or partially by the

purchase of irrevocable commitments

from an insurer—

(i) The name and address of the

insurer or insurers from whom, or (if not

then known) the insurers from among

whom, the plan administrator intends to

purchase the irrevocable commitments;

or

(ii) If the plan administrator has not

identified an insurer or insurers at the

time the notice of intent to terminate is

issued, a statement that—

(A) Irrevocable commitments may be

purchased from an insurer to provide

some or all of the benefits under the

plan,

(B) The insurer or insurers have not

yet been identified, and

(C) Affected parties (other than the

PBGC) will be notified at a later date

(but no later than 45 days before the

distribution date) of the name and

address of the insurer or insurers from

whom, or (if not then known) the

insurers from among whom, the plan

administrator intends to purchase the

irrevocable commitments;
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34045

(10) A statement that if the

termination does not occur, the plan

administrator will notify the affected

parties (other than the PBGC) in writing

of that fact;

(11) A statement that each affected

party, other than the PBGC or any

employee organization, will receive a

written notification of the benefits that

the person will receive; and

(12) For retirees only, a statement that

their monthly (or other periodic) benefit

amounts will not be affected by the

plan’s termination.

(e) Supplemental notice requirements.

(1) The plan administrator shall issue a

supplemental notice (or notices) of

intent to terminate to each affected party

(other than the PBGC) in accordance

with the rules in paragraph (e)(2) of this

section if—

(i) The plan administrator has not yet

identified an insurer or insurers at the

time the notice of intent to terminate is

issued; or

(ii) The plan administrator notifies

affected parties (other than the PBGC) of

the insurer or insurers from whom (or

from among whom) he or she intends to

purchase the irrevocable commitments,

either in the notice of intent to

terminate or in a later notice, but

subsequently decides to select a

different insurer.

(2) The plan administrator shall issue

each supplemental notice in the manner

provided in paragraph (c) of this section

no later than 45 days before the

distribution date and shall include the

name and address of the insurer or

insurers from whom, or (if not then

known) the insurers from among whom,

the plan administrator intends to

purchase the irrevocable commitments.

(3) Any supplemental notice or

notices meeting the requirements of

paragraph (e)(2) of this section shall be

deemed a part of the notice of intent to

terminate.

(f) Spin-off/termination transactions.

In the case of a spin-off/termination

transaction, the plan administrator shall

provide all participants in the original

plan who are covered by the ongoing

plan (as of the proposed termination

date) with a notice describing the

transaction no later than the date on

which the plan administrator completes

the issuance of notices of intent to

terminate under this section. A spin-off/

termination is a transaction in which a

single defined benefit plan is split into

two or more plans, in conjunction with

the termination of one or more of the

plans, resulting in a reversion of

residual assets to the employer.

§ 4041.22 Issuance of notices of plan

benefits.

(a) General rule. No later than the date

on which the plan administrator files

the standard termination notice with the

PBGC, as required by § 4041.24, the plan

administrator shall issue to each person

described in paragraph (b) of this

section a notice of that individual’s plan

benefits. The notice shall be in the form

and contain the information specified in

§ 4041.23. Failure to comply with the

requirements of this section shall nullify

the proposed termination.

(b) Persons entitled to notice. The

plan administrator shall issue a notice

of plan benefits to each person (other

than the PBGC or any employee

organization) who is an affected party as

of the proposed termination date (and,

in the case of a spin-off/termination

transaction as described in § 4043.21(f),

each person who is, as of the proposed

termination date, a participant in the

original plan who is covered by the

ongoing plan).

(c) Discovery of other affected parties.

Notwithstanding the provisions of

paragraph (a) of this section, if the plan

administrator discovers additional

persons entitled to a notice of plan

benefits after the expiration of the time

period specified in paragraph (a) of this

section, the failure to issue a notice of

plan benefits to such persons within the

specified time period will not cause

such notices to be untimely under

paragraph (a) of this section if the plan

administrator could not reasonably have

been expected to know of the additional

persons and if he or she promptly

issues, to each such additional person,

a notice of plan benefits in the form and

containing the information specified in

§ 4041.23.

(d) Issuance—(1) Method. The plan

administrator shall issue a notice of

plan benefits individually to each

person described in paragraph (b) of this

section, either by hand-delivery or by

first-class mail or courier service

directed to the person’s last known

address.

(2) When issued. A notice of plan

benefits is deemed issued to each

person on the date it is handed to the

person or deposited with a mail or

courier service (as evidenced by a

postmark or written receipt).

§ 4041.23 Form and contents of notices of

plan benefits.

(a) Form of notices. The plan

administrator shall provide notices of

plan benefits written in plain, nontechnical English that is likely to be

understood by the average participant or

beneficiary. If technical terms must be

used, their meaning shall be explained

in non-technical language.

(b) Foreign languages. The plan

administrator of a plan described in this

paragraph shall comply with paragraph

(a) of this section and also shall include

in the notices a statement, prominently

displayed, in the foreign language (or

languages) common to the non-English

speaking plan participants advising

them of how they may obtain assistance

in understanding the notice. The

assistance need not involve written

materials, but shall be adequate to

reasonably ensure that the participants

and beneficiaries understand the

information contained in their notices

and shall be provided through media

and at times and places that are

reasonably accessible to the participants

and beneficiaries. A plan is described in

this paragraph if, as of the proposed

termination date, the plan either—

(1) Covers fewer than 100 participants

and at least 25 percent of those

participants speak only the same nonEnglish language or

(2) Covers 100 or more participants

and at least the lesser of 500 or 10

percent of those participants speak the

same non-English language.

(c) Contents of notice. In addition to

the information described in paragraph

(d), (e), or (f) of this section, as

applicable, the plan administrator shall

include in each notice of plan benefits

the following information:

(1) The name of the plan, the

employer identification number (‘‘EIN’’)

of the contributing sponsor, and the

plan number (‘‘PN’’); if there is no EIN

or PN, the notice shall so state;

(2) The name, address, and telephone

number of the person who may be

contacted to answer questions

concerning a participant’s or

beneficiary’s benefit;

(3) The proposed termination date

and, if applicable, a statement that this

date is later than the proposed

termination date given in the notice of

intent to terminate; and

(4) If the amount of the plan benefits

set forth in a notice is an estimate, a

statement that the amount is an estimate

and that benefits paid may be greater

than or less than the estimate.

(d) Benefits of persons in pay status.

The plan administrator shall include in

the notice of plan benefits for a

participant or beneficiary in pay status

as of the proposed termination date the

following information:

(1) The amount and form of the

participant’s plan benefits payable as of

the proposed termination date;

(2) The amount and form of benefit,

if any, payable to a beneficiary upon the
34046 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

participant’s death and the name of the

beneficiary;

(3) The amount and date of any

increase or decrease in the benefit

scheduled to occur after the proposed

termination date (or that has already

occurred) and an explanation of the

increase or decrease, including, where

applicable, a reference to the pertinent

plan provision; and

(4) For benefits of participants or

beneficiaries in pay status for one year

or less as of the proposed termination

date, the specific personal data used to

calculate the plan benefits described in

paragraphs (d)(1) and (d)(2) of this

section, e.g., participant’s age at

retirement, spouse’s age, participant’s

length of service, and including, for

Social Security offset benefits, the

participant’s actual or, if unknown,

estimated Social Security benefit and,

for an estimated benefit, the

assumptions used for the participant’s

earnings history.

(e) Benefits of participants not in pay

status but form and starting date known.

The plan administrator shall include in

the notice of plan benefits for a

participant who is not in pay status as

of the proposed termination date, but

who has, as of that date, elected to retire

and has elected a form and starting date,

or with respect to whom the plan

administrator has determined a lump

sum distribution will be made, the

following information:

(1) The amount and form of the

participant’s plan benefits payable as of

the projected benefit starting date, and

what that date is;

(2) The amount and form of benefit,

if any, payable to a beneficiary upon the

participant’s death and the name of the

beneficiary;

(3) The amount and date of any

increase or decrease in the benefit

scheduled to occur after the proposed

termination date (or that has already

occurred) and an explanation of the

increase or decrease, including, where

applicable, a reference to the pertinent

plan provision; and

(4) If the age at which, or form in

which, the plan benefits will be paid

differs from the age or form in which the

participant’s accrued benefit at normal

retirement age is stated in the plan, the

age or form stated in the plan and the

age or form adjustment factors,

including, in the case of a lump sum

benefit, the interest rate used to convert

to the lump sum benefit described in

paragraph (e)(1) of this section and a

reference to the pertinent plan

provision;

(5) The specific personal data, as

described in paragraph (d)(4) of this

section, used to calculate the plan

benefits (other than a lump sum benefit)

described in paragraphs (e)(1) and (e)(2)

of this section and, with respect to a

benefit payable as a lump sum, the

personal data used to calculate the

underlying annuity; and

(6) If the plan benefits will be paid in

a lump sum, an explanation of how the

interest rate is used to calculate the

lump sum; a statement that the higher

the interest rate used, the smaller the

lump sum amount; and, if applicable, a

statement that the lump sum amount

given is an estimate because the

applicable interest rate may change

before the distribution date.

(f) Benefits of all other participants

not in pay status. The plan

administrator shall include in the notice

of plan benefits for any participant not

described in paragraph (d) or (e) of this

section, the following information:

(1) The amount and form of the

participant’s plan benefits payable at

normal retirement age in any form

permitted under the plan;

(2) The availability of any alternative

benefit forms, including those payable

to a beneficiary upon the participant’s

death either before or after retirement,

and, for any benefits to which the

participant is or may become entitled

that would be payable before normal

retirement age, the earliest benefit

commencement date, the amount

payable on and after such date, and

whether the benefit would be subject to

future reduction;

(3) The specific personal data, as

described in paragraph (d)(4) of this

section, used to calculate the plan

benefits described in paragraph (f)(1) of

this section and, with respect to a

benefit that may be paid in a lump sum,

the personal data used to calculate the

underlying annuity; and

(4) If the plan benefits may be paid in

a lump sum, an explanation of when a

lump sum may be paid without a

participant’s consent; an explanation of

how the interest rate is used to calculate

the lump sum; and a statement that the

higher the interest rate used, the smaller

the lump sum amount.

§ 4041.24 Standard termination notice.

(a) Form. The plan administrator shall

file with the PBGC a PBGC Form 500,

Standard Termination Notice, SingleEmployer Plan Termination, with

Schedule EA–S, Standard Termination

Certification of Sufficiency, that has

been completed in accordance with the

instructions thereto. Except as provided

in § 4041.8, the plan administrator shall

file the standard termination notice on

or before the 120th day after the

proposed termination date.

(b) Supplemental notice requirement.

If any of the benefits of the terminating

plan may be provided in annuity form

through the purchase of irrevocable

commitments from an insurer and either

of the conditions in paragraph (b)(1) of

this section is met, the plan

administrator shall file a supplemental

notice (or notices) with the PBGC in

accordance with the provisions in

paragraph (b)(2) of this section.

(1) The plan administrator shall file

with the PBGC a supplemental notice

(or notices) if—

(i) The insurer or insurers from whom

the plan administrator intends to

purchase irrevocable commitments is

not identified in the standard

termination notice filed with the PBGC,

or

(ii) The plan administrator has

notified the PBGC of the insurer or

insurers from whom he or she intends

to purchase irrevocable commitments,

either in the standard termination notice

or in a later notice pursuant to

paragraph (b)(2) of this section, and

subsequently decides to select a

different insurer.

(2) The supplemental notice (or

notices) may be filed at any time after

the filing of the standard termination

notice, but no later than 45 days before

the distribution date, and shall—

(i) Be in writing addressed to: Reports

Processing, Insurance Operations

Department, Pension Benefit Guaranty

Corporation, 1200 K Street NW.,

Washington, DC 20005–4026.

(ii) Give information identifying the

contributing sponsor and the plan by

name, address, employer identification

and plan numbers (‘‘EIN/PN’’), and

PBGC case number (if applicable); and

(iii) Give the name and address of the

insurer or insurers from whom, or (if not

then known) the insurers from among

whom, the plan administrator intends to

purchase the irrevocable commitments.

§ 4041.25 PBGC action upon filing of

standard termination notice.

(a) Review period upon filing of

standard termination notice—(1)

General rule. After a complete standard

termination notice has been filed in

accordance with § 4041.9, the PBGC has

60 days to review the notice, determine

whether to issue a notice of

noncompliance pursuant to § 4041.26,

and issue any such notice. The 60-day

review period begins on the day

following the filing of a complete

standard termination notice and

includes the 60th day. If the PBGC does

not issue a notice of noncompliance by

the last day of this 60-day period, the

plan administrator shall proceed to
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34047

close out the plan in accordance with

§ 4041.27.

(2) Extension of review period. The

60-day review period may be extended

according to the following rules:

(i) The PBGC and the plan

administrator may agree in writing,

before the expiration of the 60-day

review period, to extend the period for

up to an additional 60 days;

(ii) More than one such extension may

be made; and

(iii) Any extension may be made upon

whatever terms and conditions are

agreed to by the PBGC and the plan

administrator.

(3) Suspension of review period. The

60-day review period shall be

suspended in accordance with

paragraph (d) of this section if the PBGC

requests supplemental information.

(b) Acknowledgment of complete

standard termination notice. The PBGC

shall notify the plan administrator in

writing of the date on which a complete

standard termination notice was filed,

so that the plan administrator may

determine when the 60-day review

period will expire.

(c) Return of incomplete standard

termination notice. The PBGC shall

return an incomplete standard

termination notice and advise the plan

administrator in writing of the missing

item(s) of information and that the

complete standard termination notice

must be filed no later than the 120th day

after the proposed termination date or

the 20th day after the date of the PBGC

notice, whichever is later.

(d) Authority to request supplemental

information. Whenever the PBGC has

reason to believe that any of the

requirements of §§ 4041.21 through

4041.24 of this part were not complied

with, or in any proposed termination

that will result in a reversion of residual

assets to the contributing sponsor, the

PBGC may require the submission of

information supplementing that

furnished pursuant to § 4041.24. A

request for additional information under

this paragraph shall be in writing and

shall suspend the running of the 60-day

(or extended) review period described

in paragraph (a) of this section. That

period shall begin running again on the

day following the filing of the required

information. If a plan administrator or

contributing sponsor fails to submit

information required under this

paragraph within the period specified in

the PBGC’s request, the PBGC may issue

a notice of noncompliance in

accordance with § 4041.26 or take other

appropriate action to enforce the

requirements of Title IV of ERISA.

(e) Authority to suspend or nullify

proposed termination. Notwithstanding

any other provision of this part, the

PBGC may, by written notice to the plan

administrator, suspend or nullify a

proposed termination after expiration of

the 60-day (or extended) review period

in any case in which it determines that

such action is necessary to carry out the

purposes of Title IV of ERISA.

§ 4041.26 Notice of noncompliance.

(a) General. (1) The PBGC shall issue

to the plan administrator a written

notice of noncompliance, within the

period prescribed by § 4041.25,

whenever it makes one of the following

determinations:

(i) A determination that the plan

administrator failed to issue the notice

of intent to terminate in accordance

with § 4041.21.

(ii) A determination that the plan

administrator failed to issue notices of

plan benefits in accordance with

§§ 4041.22 and 4041.23.

(iii) A determination that the standard

termination notice, or any supplemental

notice, was not filed in accordance with

§ 4041.24.

(iv) A determination that, as of the

proposed distribution date, plan assets

will not be sufficient to satisfy all

benefit liabilities under the plan.

(2) The PBGC shall base any

determination described in paragraph

(a)(1) of this section on the information

contained in the standard termination

notice, including any supplemental

submission under § 4041.25(d) and any

supplemental notice under § 4041.24(b),

or on information provided by any

affected party or otherwise obtained by

the PBGC.

(b) Effect of notice of noncompliance.

A notice of noncompliance ends the

standard termination proceeding,

nullifies all actions taken to terminate

the plan, and renders the plan an

ongoing plan. The notice of

noncompliance is effective upon the

expiration of the period within which

the plan administrator may request

reconsideration pursuant to paragraph

(c) of this section but, once a notice is

issued, the plan administrator shall take

no further action to terminate the plan

(except by initiation of a new

termination) unless and until the notice

is revoked pursuant to a decision by the

PBGC on reconsideration.

(c) Reconsideration of notice of

noncompliance. A plan administrator

may request reconsideration of a notice

of noncompliance in accordance with

the rules prescribed in part 4003,

subpart C, of this chapter. Any request

for reconsideration automatically stays

the effectiveness of the notice of

noncompliance until the PBGC issues

its decision on reconsideration.

(d) Notice to affected parties—(1)

General rule. Upon a decision by the

PBGC on reconsideration affirming the

issuance of a notice of noncompliance

(or, if earlier, upon the plan

administrator’s decision not to request

reconsideration), the plan administrator

shall notify the affected parties (other

than the PBGC), and any persons who

were provided notice under

§ 4041.21(f)), in writing that the plan is

not going to terminate or, if applicable,

that the termination was invalid but that

a new notice of intent to terminate is

being issued.

(2) Method of issuance. The notices

shall be delivered by first-class mail or

by hand to each person described in

paragraph (d)(1) who is an employee

organization or a participant or

beneficiary who is then in pay status.

The notices to other participants and

beneficiaries shall be provided in any

manner reasonably calculated to reach

those participants and beneficiaries.

Reasonable methods of notification

include, but are not limited to, posting

the notice at participants’ worksites or

publishing the notice in an employee

organization newsletter or newspaper of

general circulation in the area or areas

where participants and beneficiaries

reside.

§ 4041.27 Closeout of plan.

(a) General rules—(1) Distribution.

Except as provided in paragraphs (b),

(e), and (f) of this section and § 4041.8

of this part, if the PBGC does not issue

a notice of noncompliance within the

period specified in § 4041.25 or, if a

notice of noncompliance is issued and

later revoked after reconsideration

under § 4041.26(c), the plan

administrator shall complete the

distribution of plan assets in accordance

with paragraph (c) of this section within

180 days after the expiration of the

review period specified in § 4041.25 (or,

if applicable, the date on which the

PBGC revokes the notice of

noncompliance) or, if applicable, within

the time prescribed in part 4050 of this

chapter.

(2) Post-distribution requirements.

The plan administrator shall file with

the PBGC a post-distribution

certification in accordance with

paragraph (h) of this section and, if any

of the plan’s benefit liabilities payable

to a participant or beneficiary have been

distributed through the purchase of

irrevocable commitments, the plan

administrator also shall provide such

participant or beneficiary with a notice,

contract, or certificate in accordance

with paragraph (g) of this section.

(b) Assets insufficient to satisfy

benefit liabilities. Before distributing
34048 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

plan assets to close out the plan, the

plan administrator shall determine that

plan assets are, in fact, sufficient to

satisfy all benefit liabilities. In

determining if plan assets are sufficient,

the plan administrator shall subtract all

liabilities (other than the future benefit

liabilities that will be provided when

assets are distributed), e.g., benefit

payments due before the distribution

date; PBGC premiums for all plan years

through and including the plan year in

which assets are distributed; expenses,

fees, and other administrative costs. If

plan assets are not sufficient to satisfy

all benefit liabilities, the plan

administrator shall not make any

distribution of assets to effect the plan’s

termination. In the event of an

insufficiency, the plan administrator

shall promptly notify the PBGC.

(c) Method of distribution. The plan

administrator shall distribute plan

assets in accordance with § 4041.6 by

purchasing irrevocable commitments

from an insurer in satisfaction of all

benefit liabilities that must be provided

in annuity form, and by otherwise

providing all benefit liabilities that need

not be provided in annuity form. The

plan administrator shall comply with

part 4050 of this chapter (dealing with

missing participants), if applicable.

(d) Failure to distribute within 180-

day period. Except as provided in

paragraphs (e) and (f) of this section,

failure to distribute assets in accordance

with paragraph (c) of this section within

the 180-day distribution period set forth

in paragraph (a)(1) of this section,

because of an insufficiency of plan

assets as described in paragraph (b) of

this section or for any other reason,

shall nullify the termination. All actions

taken to effect the plan’s termination

shall be null and void, and the plan

shall be an ongoing plan. In this event,

the plan administrator shall notify

affected parties (other than the PBGC) in

writing, in accordance with

§ 4041.26(d), that the plan is not going

to terminate or, if applicable, that the

termination was invalid but that a new

notice of intent to terminate is being

issued.

(e) Automatic extension of time for

distribution. (1) Requirements for

automatic extension. The plan

administrator shall be entitled to an

automatic extension of the 180-day

period in which to complete the

distribution of plan assets if the plan

administrator—

(i) Submits to the IRS a complete

request for a determination with respect

to the plan’s tax-qualification status

upon termination (‘‘determination

letter’’) on or before the date that the

plan administrator files the standard

termination notice with the PBGC;

(ii) Does not receive a determination

letter at least 60 days before the

expiration of the 180-day period; and

(iii) On or before the expiration of the

180-day period, notifies the PBGC in

writing that an extension of the

distribution deadline is required and

certifies that the conditions in this

paragraph have been met.

(2) Extension period. If the

requirements in paragraph (e)(1) of this

section are met, the time within which

the plan administrator shall complete

the distribution of plan assets is

automatically extended until the 60th

day after receipt of a favorable

determination letter from the IRS.

(f) Discretionary extension of time for

distribution. If the plan administrator

will be unable to complete the

distribution of plan assets within the

180-day (or extended) period for any

reason other than an insufficiency

described in paragraph (b) of this

section, the plan administrator may

request, and the PBGC shall grant or

deny, in its discretion, an extension of

time within which to complete the

distribution according to the following

rules:

(1) The plan administrator shall file a

written request for a discretionary

extension with the PBGC at least 30

days before the expiration of the 180-

day (or extended) distribution period,

explain the reason(s) for the request,

and provide a date certain by which the

distribution will be made if the

extension is granted.

(2) The PBGC will not grant a

discretionary extension based on failure

to meet the requirements for an

automatic extension under paragraph (e)

of this section or failure to locate all

participants or beneficiaries.

(3) The PBGC will grant a

discretionary extension, in whole or in

part, only if it is satisfied that the delay

in making the distribution is not due to

the action or inaction of the plan

administrator or the contributing

sponsor and that the distribution can in

fact be completed by the date requested.

(g) Notice of annuity contract. In the

case of the distribution of benefit

liabilities through the purchase of

irrevocable commitments—

(1) Either the plan administrator or

the insurer shall, as soon as practicable,

provide each participant and beneficiary

with a copy of the annuity contract or

certificate showing the insurer’s name

and address and clearly reflecting the

insurer’s obligation to provide the

participant’s or beneficiary’s benefit; (2)

If such a contract or certificate is not

available on or before the date on which

the post-distribution certificate is

required to be filed pursuant to

paragraph (h) of this section, the plan

administrator shall, no later than such

date, provide each participant and

beneficiary with a written notice

stating—

(i) That the obligation for providing

the participant’s or beneficiary’s plan

benefits has transferred to the insurer;

(ii) The name and address of the

insurer;

(iii) The name, address, and telephone

number of the person designated by the

insurer to answer questions concerning

the annuity; and

(iv) That the participant or beneficiary

will receive from the plan administrator

or insurer a copy of the annuity contract

or a certificate showing the insurer’s

name and address and clearly reflecting

the insurer’s obligation to provide the

participant’s or beneficiary’s benefit;

and

(3) The plan administrator shall

certify to the PBGC, as part of the postdistribution certification required under

paragraph (h) of this section, that the

requirements in paragraph (g)(1) or

(g)(2) of this section have been satisfied.

(h) Post-distribution certification.

Within 30 days after the last distribution

date, the plan administrator shall file

with the PBGC a PBGC Form 501, PostDistribution Certification for Standard

Termination, that has been completed in

accordance with the instructions

thereto. This requirement shall be

considered satisfied if, in accordance

with § 4050.6(a)(2) and (a)(3) of this

chapter, the plan administrator files a

preliminary post-distribution

certification within 30 days after the last

distribution date and, in addition,

timely files an amended postdistribution certification that otherwise

satisfies all applicable requirements.

Subpart C—Distress Termination

Process

§ 4041.41 Notice of intent to terminate.

(a) General rules. (1) At least 60 days

and no more than 90 days before the

proposed termination date, the plan

administrator shall issue to each person

who is (as of the proposed termination

date) an affected party a written notice

of intent to terminate.

(2) The plan administrator shall issue

the notice of intent to terminate to all

affected parties other than the PBGC at

or before the time he or she files the

notice with the PBGC.

(3) The notice to affected parties other

than the PBGC shall contain all of the

information specified in paragraph (d)

of this section.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34049

(4) The notice to the PBGC shall be

filed on PBGC Form 600, Distress

Termination, Notice of Intent to

Terminate, completed in accordance

with the instructions thereto.

(b) Discovery of other affected parties.

Notwithstanding the provisions of

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

section, if the plan administrator

discovers additional affected parties

after the expiration of the time period

specified in paragraphs (a)(1) or (a)(2) of

this section, the failure to issue the

notice of intent to terminate to such

parties within the specified time periods

will not cause the notice to be untimely

under paragraph (a) of this section if the

plan administrator could not reasonably

have been expected to know of the

additional affected parties and if he or

she promptly issues the notice to each

additional affected party.

(c) Issuance—(1) Method. The plan

administrator shall issue the notice of

intent to terminate individually to each

affected party. The notice to the PBGC

shall be filed in accordance with

§ 4041.9. The notice to each of the other

affected parties shall be either hand

delivered or delivered by first-class mail

or courier service directed to the

affected party’s last known address.

(2) When issued. The notice of intent

to terminate is deemed issued to the

PBGC on the date on which it is filed

and to any other affected party on the

date on which it is handed to the

affected party or deposited with a mail

or courier service (as evidenced by a

postmark or written receipt).

(d) Contents of notice to affected

parties other than the PBGC. The plan

administrator shall include in the notice

of intent to terminate to each affected

party other than the PBGC all of the

following information:

(1) The name of the plan and of the

contributing sponsor;

(2) The employer identification

number (‘‘EIN’’) of the contributing

sponsor and the plan number (‘‘PN’’); if

there is no EIN or PN, the notice shall

so state;

(3) The name, address, and telephone

number of the person who may be

contacted by an affected party with

questions concerning the plan’s

termination;

(4) A statement that the plan

administrator expects to terminate the

plan in a distress termination on a

specified proposed termination date.

(5) A statement that benefit and

service accruals will continue until the

termination date or, if applicable, that

benefit accruals were or will be frozen

as of a specific date in accordance with

section 204(h) of ERISA;

(6) A statement of whether plan assets

are sufficient to pay all guaranteed

benefits or all benefit liabilities;

(7) A brief description of what

benefits are guaranteed by the PBGC

(e.g., if only a portion of the benefits are

guaranteed because of the phase-in rule,

this should be explained), and a

statement that participants and

beneficiaries also may receive a portion

of the benefits to which each is entitled

under the terms of the plan in excess of

guaranteed benefits; and

(8) A statement, if applicable, that

benefits may be subject to reduction

because of the limitations on the

amounts guaranteed by the PBGC or

because plan assets are insufficient to

pay for full benefits (pursuant to part

4022, subparts B and D, of this chapter)

and that payments in excess of the

amount guaranteed by the PBGC may be

recouped by the PBGC (pursuant to part

4022, subpart E, of this chapter).

(e) Spin-off/termination transactions.

In the case of a spin-off/termination

transaction (as described in

§ 4041.21(f)), the plan administrator

shall provide all participants and

beneficiaries in the original plan who

are also participants or beneficiaries in

the ongoing plan (as of the proposed

termination date) with a notice

describing the transaction no later than

the date on which the plan

administrator completes the issuance of

notices of intent to terminate under this

section.

§ 4041.42 PBGC review of notice of intent

to terminate.

(a) General. When a notice of intent to

terminate is filed with it, the PBGC—

(1) Shall determine whether the

notice was issued in compliance with

§ 4041.41; and

(2) Shall advise the plan administrator

of its determination, in accordance with

paragraph (b) or (c) of this section, no

later than the proposed termination date

specified in the notice.

(b) Tentative finding of compliance. If

the PBGC determines that the issuance

of the notice of intent to terminate

appears to be in compliance with

§ 4041.41, it shall notify the plan

administrator in writing that—

(1) The PBGC has made a tentative

determination of compliance;

(2) The distress termination

proceeding may continue; and

(3) After reviewing the distress

termination notice filed pursuant to

§ 4041.43, the PBGC will make final, or

reverse, this tentative determination.

(c) Finding of noncompliance. If the

PBGC determines that the issuance of

the notice of intent to terminate was not

in compliance with § 4041.41 (except

for requirements that the PBGC elects to

waive under § 4041.3(d)(2)(i) with

respect to the notice filed with the

PBGC), the PBGC shall notify the plan

administrator in writing—

(1) That the PBGC has determined

that the notice of intent to terminate was

not properly issued; and

(2) That the proposed distress

termination is null and void and the

plan is an ongoing plan.

(d) Information on need to institute

section 4042 proceedings. The PBGC

may require the plan administrator to

submit, within 20 days after the plan

administrator’s receipt of the PBGC’s

written request (or such other period as

may be specified in such written

request), any information that the PBGC

determines it needs in order to decide

whether to institute termination or

trusteeship proceedings pursuant to

section 4042 of ERISA, whenever—

(1) A notice of intent to terminate

indicates that benefits currently in pay

status (or that should be in pay status)

are not being paid or that this is likely

to occur within the 180-day period

following the issuance of the notice of

intent to terminate;

(2) The PBGC issues a determination

under paragraph (c) of this section; or

(3) The PBGC has any reason to

believe that it may be necessary or

appropriate to institute proceedings

under section 4042 of ERISA.

(e) Reconsideration of finding of

noncompliance. A plan administrator

may request reconsideration of the

PBGC’s determination of

noncompliance under paragraph (c) of

this section in accordance with the rules

prescribed in part 4003, subpart C, of

this chapter. Any request for

reconsideration automatically stays the

effectiveness of the determination until

the PBGC issues its decision on

reconsideration, but does not stay the

time period within which information

must be submitted to the PBGC in

response to a request under paragraph

(d) of this section.

(f) Notice to affected parties. Upon a

decision by the PBGC affirming a

finding of noncompliance or upon the

expiration of the period within which

the plan administrator may request

reconsideration of a finding of

noncompliance (or, if earlier, upon the

plan administrator’s decision not to

request reconsideration), the plan

administrator shall notify the affected

parties (and any persons who were

provided notice under § 4041.41(e)) in

writing that the plan is not going to

terminate or, if applicable, that the

termination is invalid but that a new

notice of intent to terminate is being

issued. The notice required by this
34050 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

paragraph shall be provided in the

manner described in § 4041.26(d)(2).

§ 4041.43 Distress termination notice.

(a) General rule. The plan

administrator shall file with the PBGC a

PBGC Form 601, Distress Termination

Notice, Single-Employer Plan

Termination, with Schedule EA–D,

Distress Termination Enrolled Actuary

Certification, that has been completed in

accordance with the instructions

thereto, on or before the 120th day after

the proposed termination date or, if

applicable, no later than the due date

established in an extension notice

issued under § 4041.8.

(b) Participant and benefit

information. (1) Plan insufficient for

guaranteed benefits. Unless the enrolled

actuary certifies, in the Schedule EA–D

filed in accordance with paragraph (a) of

this section, that the plan is sufficient

either for guaranteed benefits or for

benefit liabilities, the plan administrator

shall file with the PBGC the participant

and benefit information described in

PBGC Form 601 and the instructions

thereto by the later of—

(i) 120 days after the proposed

termination date, or

(ii) 30 days after receipt of the PBGC’s

determination, pursuant to § 4041.44(b),

that the requirements for a distress

termination have been satisfied.

(2) Plan sufficient for guaranteed

benefits or benefit liabilities. If the

enrolled actuary certifies that the plan is

sufficient either for guaranteed benefits

or for benefit liabilities, the plan

administrator need not submit the

participant and benefit information

described in PBGC Form 601 and the

instructions thereto unless requested to

do so pursuant to paragraph (c) of this

section.

(3) Effect of failure to provide

information. The PBGC may void the

distress termination if the plan

administrator fails to provide complete

participant and benefit information in

accordance with this section.

(c) Additional information. The PBGC

may in any case require the submission

of any additional information that it

needs to make the determinations that it

is required to make under this part or

to pay benefits pursuant to section 4061

or 4022(c) of ERISA. The plan

administrator shall submit any

information requested under this

paragraph within 30 days after receiving

the PBGC’s written request (or such

other period as may be specified in such

written request).

(d) Due date extension.

Notwithstanding the provisions of

paragraphs (a), (b), and (c) of this

section, the due date for filing PBGC

Form 601 or other information required

under this section may be extended by

a notice issued under § 4041.8.

§ 4041.44 PBGC determination of

compliance with requirements for distress

termination.

(a) General. Based on the information

contained in and submitted with the

PBGC Form 600 and the PBGC Form

601, with Schedule EA–D, and on any

information submitted by an affected

party or otherwise obtained by the

PBGC, the PBGC shall determine

whether the requirements for a distress

termination set forth in § 4041.3(c) have

been met and shall notify the plan

administrator in writing of its

determination, in accordance with

paragraph (b) or (c) of this section.

(b) Qualifying termination. If the

PBGC determines that all of the

requirements of § 4041.3(c) have been

satisfied, it shall so advise the plan

administrator and shall also advise the

plan administrator of whether

participant and benefit information

must be submitted in accordance with

§ 4041.43(b).

(c) Non-qualifying termination. (1)

Except as provided in paragraph (c)(2)

of this section, if the PBGC determines

that any of the requirements of

§ 4041.3(c) has not been met, it shall

notify the plan administrator of its

determination, the basis therefor, and

the effect thereof (as provided in

§ 4041.3(d)).

(2) If the only basis for the PBGC’s

determination described in paragraph

(c)(1) of this section is that the distress

termination notice is incomplete, the

PBGC shall advise the plan

administrator of the missing item(s) of

information and that the information

must be filed with the PBGC no later

than the 120th day after the proposed

termination date or the 30th day after

the date of the PBGC’s notice of its

determination, whichever is later, or, if

applicable, no later than the due date

established in an extension notice

issued under § 4041.8.

(d) Reconsideration of determination

of non-qualification. A plan

administrator may request

reconsideration of the PBGC’s

determination under paragraph (c)(1) of

this section in accordance with the rules

prescribed in part 4003, subpart C, of

this chapter. The filing of a request for

reconsideration automatically stays the

effectiveness of the determination until

the PBGC issues its decision on

reconsideration.

(e) Notice to affected parties. Upon a

decision by the PBGC affirming a

determination of non-qualification or

upon the expiration of the period within

which the plan administrator may

request reconsideration of a

determination of non-qualification (or, if

earlier, upon the plan administrator’s

decision not to request reconsideration),

the plan administrator shall notify the

affected parties (and any persons who

were provided notice under

§ 4041.41(e)) in writing that the plan is

not going to terminate or, if applicable,

that the termination is invalid but that

a new notice of intent to terminate is

being issued. The notice required by

this paragraph shall be provided in the

manner described in § 4041.26(d)(2).

§ 4041.45 PBGC determination of plan

sufficiency/insufficiency.

(a) General. Upon receipt of

participant and benefit information filed

pursuant to § 4041.43 (b)(1) or (c), the

PBGC shall determine the degree to

which the plan is sufficient and notify

the plan administrator in writing of its

determination in accordance with

paragraph (b) or (c) of this section.

(b) Insufficiency for guaranteed

benefits. If the PBGC finds that it is

unable to determine that a plan is

sufficient for guaranteed benefits, it

shall issue a ‘‘notice of inability to

determine sufficiency’’ notifying the

plan administrator of this finding and

advising the plan administrator that—

(1) The plan administrator shall

continue to administer the plan under

the restrictions imposed by § 4041.4;

and

(2) The termination shall be

completed under section 4042 of ERISA.

(c) Sufficiency for guaranteed benefits

or benefit liabilities. If the PBGC

determines that a plan is sufficient for

guaranteed benefits but not for benefit

liabilities or is sufficient for benefit

liabilities, the PBGC shall issue to the

plan administrator a distribution notice

advising the plan administrator—

(1) To issue notices of benefit

distribution in accordance with

§ 4041.46;

(2) To close out the plan in

accordance with § 4041.48;

(3) To file a timely post-distribution

certification with the PBGC in

accordance with § 4041.48(b); and

(4) That either the plan administrator

or the contributing sponsor must

preserve and maintain plan records in

accordance with § 4041.11.

§ 4041.46 Notices of benefit distribution.

(a) General rules. When a distribution

notice is issued by the PBGC pursuant

to § 4041.45(c), the plan administrator

shall—

(1) No later than 60 days after

receiving the distribution notice or, if

applicable, no later than the due date
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34051

established in an extension notice

issued under § 4041.8, issue a notice of

benefit distribution in accordance with

the rules described in paragraphs (c)

and (d) of this section to each person

(other than any employee organization

or the PBGC) who is an affected party

as of the termination date (and, in the

case of a spin-off/termination

transaction as described in § 4041.21(f),

each person who is, as of the

termination date, a participant in the

original plan and covered by the

ongoing plan); and

(2) No later than 15 days after the date

on which the plan administrator

completes the issuance of the notices of

benefit distribution, file with the PBGC

a certification that the notices were so

issued in accordance with the

requirements of this section.

(b) Discovery of other affected parties.

Notwithstanding the provisions of

paragraph (a) of this section, if the plan

administrator discovers additional

persons entitled to a notice of benefit

distribution after the expiration of the

time period specified in paragraph (a)(1)

of this section, the failure to issue the

notices of benefit distribution to such

persons within the specified time period

will not cause such notices to be

untimely under paragraph (a) of this

section if the plan administrator could

not reasonably have been expected to

know of the additional persons and if he

or she promptly issues, to each such

additional person, a notice of benefit

distribution in the form and containing

the information specified in paragraph

(d) of this section.

(c) Issuance—(1) Method. The plan

administrator shall issue a notice of

benefit distribution individually to each

person, either by hand-delivery or by

first-class mail or courier service

directed to the person’s last known

address.

(2) When issued. A notice of benefit

distribution is deemed issued to each

person on the date it is handed to the

person or deposited with a mail or

courier service (as evidenced by a

postmark or written receipt).

(d) Form and content of notices. The

plan administrator shall provide notices

of benefit distribution in the form

described in § 4041.23 (a) and (b) of this

part and shall include in each—

(1) The information described in

§ 4041.23(c) of this part;

(2) The information described in

§ 4041.23 (d), (e), or (f) of this part, as

applicable (replacing the term ‘‘plan

benefits’’ with ‘‘Title IV benefits’’ and

‘‘proposed termination date’’ with

‘‘termination date’’.

(3) A statement that, after plan assets

have been distributed to provide all of

the Title IV benefits payable with

respect to a participant or a beneficiary

of a deceased participant, either by the

purchase of an irrevocable commitment

or commitments from an insurer to

provide benefits or by an alternative

form of distribution provided for under

the plan, the PBGC’s guarantee with

respect to that participant’s or

beneficiary’s benefit ends; and

(4) If distribution of benefits under the

plan may be wholly or partially by the

purchase of irrevocable commitments

from an insurer—

(i) The name and address of the

insurer or insurers from whom, or (if not

then known) the insurers from among

whom, the plan administrator intends to

purchase the irrevocable commitments;

or

(ii) If the plan administrator has not

identified an insurer or insurers at the

time the notice of distribution is issued,

a statement that the affected party to

whom the notice is directed will be

notified at a later date (but no later than

45 days before the distribution date) of

the name and address of the insurer or

insurers from whom, or (if not then

known) the insurers from among whom,

irrevocable commitments may be

purchased.

(e) Supplemental notice requirements.

(1) The plan administrator shall issue a

supplemental notice (or notices) of

distribution to each person in

accordance with the rules in paragraph

(e)(2) of this section if—

(i) The plan administrator has not yet

identified an insurer or insurers at the

time the notice of distribution is issued;

or

(ii) The plan administrator included

in the notice of distribution the name or

names of the insurer or insurers from

whom (or from among whom) he or she

intends to purchase the irrevocable

commitments, but subsequently decides

to select a different insurer.

(2) The plan administrator shall issue

each supplemental notice in the manner

provided in paragraph (c) of this section

no later than 45 days before the

distribution date and shall include the

name and address of the insurer or

insurers from whom, or (if not then

known) the insurers from among whom,

the plan administrator intends to

purchase the irrevocable commitments.

§ 4041.47 Verification of plan sufficiency

prior to closeout.

(a) General rule. Before distributing

plan assets pursuant to a closeout under

§ 4041.48, the plan administrator shall

verify whether the plan’s assets are still

sufficient to provide for benefits at the

level determined by the PBGC, i.e.,

guaranteed benefits or benefit liabilities.

If the plan administrator finds that the

plan is no longer able to provide for

benefits at the level determined by the

PBGC, then paragraph (b) or (c) of this

section, as appropriate, shall apply.

(b) Subsequent insufficiency for

guaranteed benefits. When a plan

administrator finds that a plan is no

longer sufficient for guaranteed benefits,

the plan administrator shall promptly

notify the PBGC in writing of that fact

and shall take no further action to

implement the plan termination,

pending the PBGC’s determination and

notice pursuant to paragraph (b)(1) or

(b)(2) of this section.

(1) PBGC concurrence with finding. If

the PBGC concurs with the plan

administrator’s finding, the distribution

notice shall be void, and the PBGC

shall—

(i) Issue the plan administrator a

notice of inability to determine

sufficiency in accordance with

§ 4041.45(b); and

(ii) Require the plan administrator to

submit a new valuation, certified to by

an enrolled actuary, of the benefit

liabilities and guaranteed benefits under

the plan, valued in accordance with

§§ 4044.41 through 4044.57 of this

chapter as of the date of the plan

administrator’s notice to the PBGC.

(2) PBGC non-concurrence with

finding. If the PBGC does not concur

with the plan administrator’s finding, it

shall so notify the plan administrator in

writing, and the distribution notice shall

remain in effect.

(c) Subsequent insufficiency for

benefit liabilities. When a plan

administrator finds that a plan is

sufficient for guaranteed benefits but is

no longer sufficient for benefit

liabilities, the plan administrator shall

immediately notify the PBGC in writing

of this fact, but shall continue with the

distribution of assets in accordance with

§ 4041.48.

(d) Finding by PBGC of subsequent

insufficiency. In any case in which the

PBGC finds on its own initiative that a

subsequent insufficiency for guaranteed

benefits has occurred, paragraph (b)(1)

of this section shall apply, except that

the guaranteed benefits shall be

revalued as of the date of the PBGC’s

finding.

(e) Restrictions upon finding of

subsequent insufficiency. When the plan

administrator makes the finding

described in paragraph (b) of this

section or receives notice that the PBGC

has made the finding described in

paragraph (d) of this section, the plan

administrator shall (except to the extent

the PBGC otherwise directs) be subject

to the prohibitions in § 4041.4(c).
34052 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

§ 4041.48 Closeout of plan.

(a) General rules—(1) Distribution. If a

plan administrator receives a

distribution notice from the PBGC

pursuant to § 4041.45(c) and neither the

plan administrator nor the PBGC makes

the finding described in § 4041.47 (b) or

(d), the plan administrator shall

distribute plan assets in accordance

with §§ 4041.6 and 4041.27(c) of this

part no earlier than the 61st day and

(except as provided in § 4041.8 or

4041.27 (e) or (f)) no later than the 180th

day following the day on which the plan

administrator completes the issuance of

the notices of benefit distribution

pursuant to § 4041.46(a), or, where

applicable, within the time prescribed

in part 4050 of this chapter. For

purposes of applying § 4041.27(e)(1)(i),

the phrase ‘‘the date that the plan

administrator files the standard

termination notice with the PBGC’’ shall

be replaced by ‘‘the date that the plan

administrator completes issuance of the

notices of benefit distribution.’’

(2) Notice of annuity contract. If any

of the plan’s benefit liabilities payable

to a participant or beneficiary have been

distributed through the purchase of

irrevocable commitments, the plan

administrator shall provide such

participant or beneficiary with a notice,

contract, or certificate in accordance

with § 4041.27(g).

(b) Post-distribution certification.

Within 30 days after the last distribution

date, the plan administrator shall file

with the PBGC a PBGC Form 602, PostDistribution Certification for Distress

Termination, that has been completed in

accordance with the instructions

thereto. This requirement shall be

considered satisfied if, in accordance

with § 4050.6 (a)(2) and (a)(3) of this

chapter, the plan administrator files a

preliminary post-distribution

certification within 30 days after the last

distribution date and, in addition,

timely files an amended postdistribution certification that otherwise

satisfies all applicable requirements.

Appendix to Part 4041—Agreement for

Commitment To Make Plan Sufficient

for Benefit Liabilities

This agreement, by and between [name of

company] XXXXXXXXXX (the ‘‘Company’’)

and [name of plan] XXXXXXXXXX (the

‘‘Plan’’) shall be effective as of the last date

executed.

Whereas, the Plan is an employee pension

benefit plan as described in section 3(2)(A)

of the Employee Retirement Income Security

Act of 1974 (‘‘ERISA’’), 29 U.S.C. 1001–1461;

and

Whereas the Company is [describe entity,

e.g., corporation, partnership]

XXXXXXXXXX; and

Whereas, the Company is a contributing

sponsor of the Plan, or a member of the

contributing sponsor’s controlled group, as

described in section 4001(a) (13) and (14) of

ERISA, 29 U.S.C. 1301(2) (13) and (14); and

Whereas, the Plan is covered by the

termination insurance provisions of Title IV

of ERISA, 29 U.S.C. 1301–1461; and

Whereas, the Plan administrator has issued

or intends to issue to each affected party a

notice of intent to terminate the Plan,

pursuant to section 4041(a)(2) of ERISA, 29

U.S.C. 1341(a)(2); and

Whereas, the Company wishes the Plan to

be sufficient for benefit liabilities, as

described in section 4001(a)(16) of ERISA, 29

U.S.C. 1301(a)(16); and

Whereas, the parties understand that if the

Plan is not able to satisfy all its obligations

for benefit liabilities, it will not be able to

terminate in a standard termination under

section 4041(b) of ERISA, 29 U.S.C. 1341(b);

and

Whereas, the Company is not a debtor in

a bankruptcy or other insolvency proceeding.

[Alternative Paragraph]

Whereas, the Company is a debtor in a

bankruptcy or other insolvency proceeding

and the court before which the proceeding is

pending approves this commitment.

Whereas, the Company is a debtor in a

bankruptcy or other insolvency proceeding

and this commitment is unconditionally

guaranteed, by an entity or person not in

bankruptcy, to be met at or before the time

distribution is required in this standard

termination.

Now Therefore, the parties hereto agree as

follows:

1. The Company promises to pay to the

Plan, on or before the date prescribed for

distribution of Plan assets by the plan

administrator, the amount necessary, if any,

to ensure that, on the date the plan

administrator distributes the assets of the

Plan, the Plan is able to provide all benefit

liabilities.

2. For the sole purpose of determining

whether the Plan is sufficient to provide all

benefit liabilities, an amount equal to the

amount described in paragraph 1 shall be

deemed a Plan asset available for allocation

among the participants and beneficiaries of

the Plan, in accordance with section 4044 of

ERISA, 29 U.S.C. 1344.

3. This Agreement shall in no way relieve

the Company of its obligations to pay

contributions under the Plan.

Date:

By:

Company:

By:

Plan:

PART 4041A—TERMINATION OF

MULTIEMPLOYER PLANS

Subpart A—General Provisions

Sec.

4041A.1 Purpose and scope.

4041A.2 Definitions.

4041A.3 Submission of documents.

Subpart B—Notice of Termination

4041A.11 Requirement of notice.

4041A.12 Contents of notice.

Subpart C—Plan Sponsor Duties

4041A.21 General rule.

4041A.22 Payment of benefits.

4041A.23 Imposition and collection of

withdrawal liability.

4041A.24 Annual plan valuations and

monitoring.

4041A.25 Periodic determinations of plan

solvency.

4041A.26 Financial assistance.

4041A.27 PBGC approval to pay benefits

not otherwise permitted.

Subpart D—Closeout of Sufficient Plans

4041A.41 General rule.

4041A.42 Method of distribution.

4041A.43 Benefit forms.

4041A.44 Cessation of withdrawal liability.

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

1441.

Subpart A—General Provisions

§ 4041A.1 Purpose and scope.

The purpose of this part is to establish

rules for notifying the PBGC of the

termination of a multiemployer plan

and rules for the administration of

multiemployer plans that have

terminated by mass withdrawal. Subpart

B prescribes the contents of and

procedures for filing a Notice of

Termination for a multiemployer plan.

Subpart C prescribes basic duties of

plan sponsors of mass-withdrawalterminated plans. (Other duties are

prescribed in part 4281 of this chapter.)

Subpart D contains procedures for

closing out sufficient plans. This part

applies to terminated multiemployer

plans covered by title IV of ERISA but,

in the case of subparts C and D, only to

plans terminated by mass withdrawal

under section 4041A(a)(2) of ERISA

(including plans created by partition

pursuant to section 4233 of ERISA).

§ 4041A.2 Definitions.

The following terms are defined in

§ 4001.l of this chapter: annuity, ERISA,

insurer, IRS, mass withdrawal,

multiemployer plan, nonforfeitable

benefit, PBGC, plan, and plan year.

In addition, for purposes of this part:

Available resources means, for a plan

year, available resources as described in

section 4245(b)(3) of ERISA.

Benefits subject to reduction means

those benefits accrued under plan

amendments (or plans) adopted after

March 26, 1980, or under collective

bargaining agreements entered into after

March 26, 1980, that are not eligible for

the PBGC’s guarantee under section

4022A(b) of ERISA.

Financial assistance means financial

assistance from the PBGC under section

4261 of ERISA.

Insolvency benefit level means the

greater of the resource benefit level or

the benefit level guaranteed by the
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34053

PBGC for each participant and

beneficiary in pay status.

Insolvency year means insolvency

year as described in section 4245(b)(4)

of ERISA.

Insolvent means that a plan is unable

to pay benefits when due during the

plan year. A plan terminated by mass

withdrawal is not insolvent unless it has

been amended to eliminate all benefits

that are subject to reduction under

section 4281(c) of ERISA, or, in the

absence of an amendment, no benefits

under the plan are subject to reduction

under section 4281(c) of ERISA.

Nonguaranteed benefits means those

benefits that are eligible for the PBGC’s

guarantee under section 4022A(b) of

ERISA, but exceed the guarantee limits

under section 4022A(c).

Resource benefit level means resource

benefit level as described in section

4245(b)(2) of ERISA.

§ 4041A.3 Submission of documents.

(a) Filing date. Any notice, document,

or information required to be filed with

the PBGC under this part shall be

deemed filed on the date of the

postmark stamped on the cover in

which the notice, document, or

information is mailed, provided that the

postmark was made by the United States

Postal Service and the document was

mailed postage prepaid, properly

packaged and addressed to the PBGC. If

these conditions are not met, the

document is considered filed on the

date it is received by the PBGC.

Documents received after regular

business hours are considered filed on

the next regular business day.

(b) Address. Any notice, document, or

information required to be filed with the

PBGC under this part shall be sent by

mail or submitted by hand during

normal working hours to Reports

Processing, Insurance Operations

Department, Pension Benefit Guaranty

Corporation, 1200 K Street NW.,

Washington, DC 20005–4026.

Subpart B—Notice of Termination

§ 4041A.11 Requirement of notice.

(a) General. A Notice of Termination

shall be filed with the PBGC by a

multiemployer plan when the plan has

terminated as described in section

4041A(a) of ERISA.

(b) Who shall file. The plan sponsor

or a duly authorized representative

acting on behalf of the plan sponsor

shall sign and file the Notice.

(c) When to file. (1) For a termination

pursuant to a plan amendment, the

Notice shall be filed with the PBGC

within thirty days after the amendment

is adopted or effective, whichever is

later.

(2) For a termination that results from

a mass withdrawal, the Notice shall be

filed with the PBGC within thirty days

after the last employer withdrew from

the plan or thirty days after the first day

of the first plan year for which no

employer contributions were required

under the plan, whichever is earlier.

(Approved by the Office of Management and

Budget under control number 1212–0020)

§ 4041A.12 Contents of notice.

(a) Information to be contained in

notice. Except to the extent provided in

paragraph (d), each Notice shall contain:

(1) The name of the plan;

(2) The name, address and telephone

number of the plan sponsor and of the

plan sponsor’s duly authorized

representative, if any;

(3) The name, address, and telephone

number of the person that will

administer the plan after the date of

termination, if other than the plan

sponsor;

(4) A copy of the plan’s most recent

Form 5500 (Annual Report Form),

including schedules; and

(5) The date of termination of the

plan.

(b) Information to be contained in a

notice involving a mass withdrawal. In

addition to the information contained in

paragraph (a) and except as provided in

paragraph (d), the following information

shall be contained in a Notice filed by

a plan that has terminated by mass

withdrawal:

(1) A copy of the plan document in

effect 5 years prior to the date of

termination and copies of any

amendments adopted after that date.

(2) A copy (or copies) of the trust

agreement (or agreements), if any,

authorizing the plan sponsor to control

and manage the operation and

administration of the plan.

(3) A copy of the most recent actuarial

statement and opinion (if any) relating

to the plan.

(4) A statement of any material change

in the assets or liabilities of the plan

occurring after either the date of the

actuarial statement referred to in item

(5) or the date of the plan’s Form 5500

submitted as part of the Notice.

(5) Complete copies of any letters of

determination issued by the IRS relating

to the establishment of the plan, any

letters of determination relating to the

disqualification of the plan and any

subsequent requalification, and any

letters of determination relating to the

termination of the plan.

(6) A statement whether the plan

assets will be sufficient to pay all

benefits in pay status during the 12-

month period following the date of

termination.

(7) If plan assets on hand are

sufficient to satisfy all nonforfeitable

benefits under the plan, and if the plan

sponsor intends to distribute such

assets, a brief description of the

proposed method of distributing the

plan assets.

(8) If plan assets on hand are not

sufficient to satisfy all nonforfeitable

benefits under the plan, the name and

address of any employer who

contributed to the plan within 3 plan

years prior to the date of termination.

(c) Certification. As part of the Notice,

the plan sponsor or duly authorized

representatives shall certify that all

information and documents submitted

pursuant to this section are true and

correct to the best of the plan sponsor’s

or representative’s knowledge and

belief.

(d) Avoiding duplication. Information

described in paragraphs (a) and (b) of

this section need not be supplied if it

duplicates information contained in

Form 5500, or a schedule thereof, that

a plan submits as part of the Notice.

(e) Additional information. In

addition to the information described in

paragraphs (a) and (b) of this section,

the PBGC may require the submission of

any other information which the PBGC

determines is necessary for review of a

Notice of Termination.

Subpart C—Plan Sponsor Duties

§ 4041A.21 General rule.

The plan sponsor of a multiemployer

plan that terminates by mass

withdrawal shall continue to administer

the plan in accordance with applicable

statutory provisions, regulations, and

plan provisions until a trustee is

appointed under section 4042 of ERISA

or until plan assets are distributed in

accordance with subpart D of this part.

In addition, the plan sponsor shall be

responsible for the specific duties

described in this subpart.

§ 4041A.22 Payment of benefits.

(a) Except as provided in paragraph

(b), the plan sponsor shall pay any

benefit attributable to employer

contributions, other than a death

benefit, only in the form of an annuity.

(b) The plan sponsor may pay a

benefit in a form other than an annuity

if—

(1) The plan distributes plan assets in

accordance with subpart D of this part;

(2) The PBGC approves the payment

of the benefit in an alternative form

pursuant to § 4041A.27; or

(3) The value of the entire

nonforfeitable benefit does not exceed

$1,750.

(c) Except to the extent provided in

the next sentence, the plan sponsor
34054 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

shall not pay benefits in excess of the

amount that is nonforfeitable under the

plan as of the date of termination,

unless authorized to do so by the PBGC

pursuant to § 4041A.27. Subject to the

restriction stated in paragraph (d) of this

section, however, the plan sponsor may

pay a qualified preretirement survivor

annuity with respect to a participant

who died after the date of termination.

(d) The payment of benefits subject to

reduction shall be discontinued to the

extent provided in § 4281.31 if the plan

sponsor determines, in accordance with

§ 4041A.24, that the plan’s assets are

insufficient to provide all nonforfeitable

benefits.

(e) The plan sponsor shall, to the

extent provided in § 4281.41, suspend

the payment of nonguaranteed benefits

if the plan sponsor determines, in

accordance with § 4041A.25, that the

plan is insolvent.

(f) The plan sponsor shall, to the

extent required by § 4281.42, make

retroactive payments of suspended

benefits if it determines under that

section that the level of the plan’s

available resources requires such

payments.

§ 4041A.23 Imposition and collection of

withdrawal liability.

Until plan assets are distributed in

accordance with subpart D of this part,

or until the end of the plan year as of

which the PBGC determines that plan

assets (exclusive of claims for

withdrawal liability) are sufficient to

satisfy all nonforfeitable benefits under

the plan, the plan sponsor shall be

responsible for determining, imposing

and collecting withdrawal liability

(including the liability arising as a result

of the mass withdrawal), in accordance

with part 4219, subpart C, of this

chapter and sections 4201 through 4225

of ERISA.

§ 4041A.24 Annual plan valuations and

monitoring.

(a) Annual valuation. Not later than

150 days after the end of the plan year,

the plan sponsor shall determine or

cause to be determined in writing the

value of nonforfeitable benefits under

the plan and the value of the plan’s

assets, in accordance with part 4281,

subpart B. This valuation shall be done

as of the end of the plan year in which

the plan terminates and each plan year

thereafter (exclusive of a plan year for

which the plan receives financial

assistance from the PBGC under section

4261 of ERISA) up to but not including

the plan year in which the plan is

closed out in accordance with subpart D

of this part.

(b) Plan monitoring. Upon receipt of

the annual valuation described in

paragraph (a) of this section, the plan

sponsor shall determine whether the

value of nonforfeitable benefits exceeds

the value of the plan’s assets, including

claims for withdrawal liability owed to

the plan. When benefits do exceed

assets, the plan sponsor shall—

(1) If the plan provides benefits

subject to reduction, amend the plan to

reduce those benefits in accordance

with the procedures in part 4281,

subpart C, of this chapter to the extent

necessary to ensure that the plan’s

assets are sufficient to discharge when

due all of the plan’s obligations with

respect to nonforfeitable benefits; or

(2) If the plan provides no benefits

subject to reduction, make periodic

determinations of plan solvency in

accordance with § 4041A.25.

(c) Notices of benefit reductions. The

plan sponsor of a plan that has been

amended to reduce benefits shall

provide participants and beneficiaries

and the PBGC notice of the benefit

reduction in accordance with § 4281.32.

§ 4041A.25 Periodic determinations of plan

solvency.

(a) Annual insolvency determination.

The plan sponsor of a plan that has been

amended to eliminate all benefits that

are subject to reduction under section

4281(c) of ERISA shall determine in

writing whether the plan is expected to

be insolvent for the first plan year

beginning after the effective date of the

amendment and for each plan year

thereafter. In the event that a plan

adopts more than one amendment

reducing benefits under section 4281(c)

of ERISA, the initial determination shall

be made for the first plan year beginning

after the effective date of the

amendment that effects the elimination

of all such benefits, and a determination

shall be made for each plan year

thereafter. The plan sponsor of a plan

under which no benefits are subject to

reduction under section 4281(c) of

ERISA as of the date the plan terminated

shall determine in writing whether the

plan is expected to be insolvent. The

initial determination shall be made for

the second plan year beginning after the

first plan year for which it is determined

under section 4281(b) of ERISA that the

value of nonforfeitable benefits under

the plan exceeds the value of the plan’s

assets. The plan sponsor shall also make

a solvency determination for each plan

year thereafter. A determination

required under this paragraph shall be

made no later than six months before

the beginning of the plan year to which

it applies.

(b) Other determination of insolvency.

Whether or not a prior determination of

plan solvency has been made under

paragraph (a) of this section (or under

section 4245 of ERISA), a plan sponsor

that has reason to believe, taking into

account the plan’s recent and

anticipated financial experience, that

the plan is or may be insolvent for the

current or next plan year shall

determine in writing whether the plan

is expected to be insolvent for that plan

year.

(c) Benefit suspensions. If the plan

sponsor determines that the plan is, or

is expected to be, insolvent for a plan

year, it shall suspend benefits in

accordance with § 4281.41.

(d) Insolvency notices. If the plan

sponsor determines that the plan is, or

is expected to be, insolvent for a plan

year, it shall issue notices of insolvency

or annual updates and notices of

insolvency benefit level of the PBGC

and to plan participants and

beneficiaries in accordance with part

4281, subpart D.

§ 4041A.26 Financial assistance.

A plan sponsor that determines a

resource benefit level under section

4245(b)(2) of ERISA that is below the

level of guaranteed benefits or that

determines that the plan will be unable

to pay guaranteed benefits for any

month during an insolvency year shall

apply for financial assistance from the

PBGC in accordance with § 4281.47.

§ 4041A.27 PBGC approval to pay benefits

not otherwise permitted.

Upon written application by the plan

sponsor, the PBGC may authorize the

plan to pay benefits other than

nonforfeitable benefits or to pay benefits

valued at more than $1,750 in a form

other than an annuity. The PBGC will

approve such payments if it determines

that the plan sponsor has demonstrated

that the payments are not adverse to the

interests of the plan’s participants and

beneficiaries generally and do not

unreasonably increase the PBGC’s risk

of loss with respect to the plan.

Subpart D—Closeout of Sufficient

Plans

§ 4041A.41 General rule.

If a plan’s assets, excluding any claim

of the plan for unpaid withdrawal

liability, are sufficient to satisfy all

obligations for nonforfeitable benefits

provided under the plan, the plan

sponsor may close out the plan in

accordance with this subpart by

distributing plan assets in full

satisfaction of all nonforfeitable benefits

under the plan.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34055

§ 4041A.42 Method of distribution.

The plan sponsor shall distribute plan

assets by purchasing from an insurer

contracts to provide all benefits required

by § 4041A.43 to be provided in annuity

form and by paying in a lump sum (or

other alternative elected by the

participant) all other benefits.

§ 4041A.43 Benefit forms.

(a) General rule. Except as provided in

paragraph (b) of this section, the

sponsor of a plan that is closed out shall

provide for the payment of any benefit

attributable to employer contributions

only in the form of an annuity.

(b) Exceptions. The plan sponsor may

pay a benefit attributable to employer

contributions in a form other than an

annuity if:

(1) The present value of the

participant’s entire nonforfeitable

benefit, determined using the interest

assumption under §§ 4044.41 through

4044.57, does not exceed $3,500.

(2) The payment is for death benefits

provided under the plan.

(3) The participant elects an

alternative form of distribution under

paragraph (c) of this section.

(c) Alternative forms of distribution.

The plan sponsor may allow

participants to elect alternative forms of

distribution in accordance with this

paragraph. When a form of distribution

is offered as an alternative to the normal

form, the plan sponsor shall notify each

participant, in writing, of the form and

estimated amount of the participant’s

normal form of distribution. The

notification shall also describe any risks

attendant to the alternative form.

Participants’ elections of alternative

forms shall be in writing.

§ 4041A.44 Cessation of withdrawal

liability.

The obligation of an employer to

make payments of initial withdrawal

liability and mass withdrawal liability

shall cease on the date on which the

plan’s assets are distributed in full

satisfaction of all nonforfeitable benefits

provided by the plan.

PART 4043—REPORTABLE EVENTS

AND CERTAIN OTHER NOTIFICATION

REQUIREMENTS

Subpart A—Reportable Events; In

General

Sec.

4043.1 Purpose and scope.

4043.2 Definitions.

4043.3 Requirement of notice.

4043.4 Reporting events on annual report.

4043.5 Obligation of contributing sponsor.

4043.6 Date of filing.

4043.7 Computation of time.

4043.11 Tax disqualification.

4043.12 Title I non-compliance.

4043.13 Amendment decreasing benefits

payable.

4043.14 Active participant reduction.

4043.15 Termination or partial termination.

4043.16 Failure to meet minimum funding

standards and granting of funding

waiver.

4043.17 Inability to pay benefits when due.

4043.18 Distribution to a substantial owner.

4043.19 Plan merger, consolidation or

transfer.

4043.20 Alternative compliance with

reporting and disclosure requirements of

Title I.

4043.21 Bankruptcy, insolvency, or similar

settlements.

4043.22 Liquidation or dissolution.

4043.23 Transaction involving a change in

contributing sponsor or controlled group.

Subpart B—Section 302(f); Notice of Failure

to Make Required Contributions

4043.31 PBGC Form 200, notice of failure to

make required contributions;

supplementary information.

Authority: 29 U.S.C. 1082(f), 1302(b)(3),

1343, 1365.

Subpart A—Reportable Events; In

General

§ 4043.1 Purpose and scope.

(a) Subpart A of this part contains

definitions applicable to this part and

prescribes specific requirements for

notification of the reportable events in

section 4043 of ERISA, including the

reportable events specified in section

4043 (c)(1) through (c)(8) and other

events that the PBGC has determined,

under section 4043(c)(13) (formerly

section 4043(b)(9)), may be indicative of

a need to terminate the plan. It also

implements the PBGC’s authority to

waive the requirement that plan

administrators notify the PBGC with

respect to certain reportable events and

with respect to certain plans. (The PBGC

has waived the requirements of section

4043 with respect to multiemployer

plans.) However, it does not include

rules based on the amendments made to

section 4043 by the Retirement

Protection Act of 1994 (Pub. L. 103–465,

section 771). Subpart B contains rules

for notifying the PBGC of a failure to

make certain required contributions

under section 302(f)(4) of ERISA or

section 412(n)(4) of the Code.

(b) This subpart applies with respect

to any single-employer plan which is

covered by section 4021 of ERISA and

for which either no notice of intent to

terminate has been issued or, if such a

notice has been issued, until the

proposed termination date specified

under section 4041 (b) or (c) of ERISA

and part 4041 of this chapter; provided,

that, if a termination proceeding is

suspended pursuant to § 4041.5 of this

chapter, this subpart continues to apply

unless and until the PBGC reactivates

the termination proceeding. The

collection of information requirements

contained in this subpart have been

approved by the Office of Management

and Budget under control number 1212–

0013.

§ 4043.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: Code,

contributing sponsor, controlled group,

ERISA, fair market value, insurer,

irrevocable commitment, IRS,

multiemployer plan, nonforfeitable

benefit, notice of intent to terminate,

PBGC, person, plan, plan administrator,

plan year, proposed termination date,

and single-employer plan.

In addition, for purposes of this part,

the following definitions apply:

Distribution means a direct or indirect

benefit payment made in any form by a

plan to a participant, including but not

limited to, a monthly annuity payment,

a lump-sum payment or a direct transfer

of a plan asset other than cash. A cash

payment made by an insurer pursuant to

an irrevocable commitment shall not be

considered a distribution.

Nonforfeitable benefits which are not

funded means nonforfeitable benefits, as

provided in § 4022.5 of this chapter, in

excess of plan assets.

Parent means the parent of a parentsubsidiary controlled group of

corporations or group of trades or

businesses under common control

(within the meaning of subsection (b) or

(c) of section 414 of the Code and the

regulations thereunder). Where there is

more than one parent in a parentsubsidiary group, the term parent (for

purposes of subpart B) refers to the

parent at the highest level in the chain

of corporations and/or other

organizations comprising the group.

Participant has the same meaning as

in § 4007.2 of this chapter.

Retirement benefit means a benefit

payable upon late, normal, early, or

disability retirement, other than a

welfare benefit described in section 3(1)

of ERISA, to a participant who leaves or

has left covered employment.

§ 4043.3 Requirement of notice.

(a) Obligation to file. Except where the

requirement is expressly waived by this

subpart, the plan administrator, or a

duly authorized representative, shall file

with the PBGC a notice of all reportable

events described in this subpart no later

than 30 days after the plan

administrator knows or has reason to

know a reportable event has occurred.

When a notice is submitted by a plan

administrator’s duly authorized

representative, other than an attorney at
34056 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

law, it shall be accompanied by a

notarized power of attorney, signed by

the plan administrator, which

authorizes the representative to sign and

submit a notice and, if desired, also

authorizes the representative to act on

behalf of the plan administrator in

connection with the notice.

(b) Contents of notice. The plan

administrator shall include the

information listed in this paragraph, and

when applicable, the information

specified in paragraph (c) of this

section, in a notice required to be

submitted under this section. The plan

administrator shall submit the most

recent information available. The plan

administrator shall identify the response

to each numbered item in this paragraph

by item number. If any requested

information is included in an IRS form

or submission attached to the notice,

instead, the information may be

incorporated by reference to the

number, date, and page(s) of the IRS

form or submission where it appears.

Any required documentation previously

filed with the PBGC need not be refiled,

but may be incorporated by reference to

the previous submission. The plan

administrator shall include the

following information in a notice:

(1) The name of the plan;

(2) The name, address, and telephone

number of the contributing sponsor(s);

(3) The name, address, and telephone

number of the plan administrator. If the

plan administrator is a corporate body,

the name of an individual that should

be contacted;

(4) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the contributing sponsor and

the three-digit Plan Number (PN)

assigned by the contributing sponsor to

the plan, and, if different, also state the

EIN–PN last filed with the PBGC. If an

EIN–PN has not been assigned, so

indicate;

(5) A brief statement of the pertinent

facts relating to the reportable event;

(6) A copy of the plan document

currently in effect, i.e., a copy of the last

restatement of the plan and all

subsequent amendments;

(7) A copy of the most recent actuarial

statement and opinion (if any) relating

to the plan;

(8) A statement of any material change

in the assets or liabilities of the plan

occurring after the date of the most

recent actuarial statement and opinion

relating to the plan; and

(9) A copy of the most recent

determination letter issued by the IRS (if

any) relating to the plan.

(c) Additional information. With

respect to the following reportable

events, the information specified below

must be submitted in addition to that

listed in paragraph (b) of this section:

(1) For an event described in

§ 4043.14(a) (relating to an active

participant reduction): The number of

participants and the number of active

participants as of the beginning of the

immediately preceding and the current

plan year and as of the date of the event;

the number of active participants with

fully vested rights, the number of such

participants with partially vested rights,

and the number of such participants

without vested rights, as of the date of

the event or, if this information is not

available as of this date, as of the

beginning of the current plan year; the

number of retired participants receiving

benefits as of the date of the event or,

if this information is not available as of

this date, as of the beginning of the

current plan year; the number of former

employees with vested rights and the

number of deceased participants whose

beneficiaries are receiving or entitled to

receive benefits as of the date of the

event or, if this information is not

available as of this date, the beginning

of the current plan year. (For those

plans determining the number of active

participants as of the end of a plan year,

instead of at the beginning of a plan

year, in accordance with § 4043.14(c),

the information required by this

paragraph as of the beginning of a plan

year shall be provided as of the end of

the previous plan year.)

(2) For an event described in

§ 4043.16(a) (relating to a minimum

funding violation):

A statement of the current funding

standard account, or its alternative,

showing the balance at the beginning of

the plan year and the charges and

credits to the account for the plan year

that are required under section 302 of

ERISA and section 412 of the Code; in

the case of a plan maintained by one

contributing sponsor or by two or more

contributing sponsors that are members

of the same controlled group, a copy of

the most recent audited (or if not

available, unaudited) financial

statements, and the most recent interim

financial statements, of the contributing

sponsor (individually or where financial

statements are only available on a

consolidated basis with other members

of the same controlled group, on a

consolidated basis), including balance

sheets, income statements, statements of

changes in financial position and

annual reports.

(3) For an event described in

§ 4043.17(a) (relating to an inability to

pay benefits when due):

The reason(s) why the plan is unable

to pay benefits, including a statement of

how long this inability is likely to

continue; the amount of the benefits due

during the current payment period and

the amount of assets available to pay

those benefits; the normal date of

benefit payment; the amount and date of

the last benefit payment.

(4) For an event described in

§ 4043.18(a) (relating to a distribution to

a substantial owner):

The amount and form of the

distribution; a statement of whether an

indemnity agreement has been entered

into between the participant receiving

the distribution and the plan trustee

concerning lump-sum distributions to

the 25 highest paid employees of the

benefits subject to the early termination

restrictions of Treas. Reg. § 1.401–4(c).

(5) For an event described in

§ 4043.21(a) (relating to a bankruptcy,

insolvency, or similar settlement):

A copy of all papers filed in the

relevant proceedings, including but not

limited to, petitions and supporting

schedules; the last date for filing claims,

if known; the name, address and

telephone number of any trustee or

receiver of the contributing sponsor.

(6) For an event described in

§ 4043.23(a) (relating to a transaction

involving a change in the same

controlled group as a contributing

sponsor):

The name, address, and telephone

number of the new contributing sponsor

or of the person no longer under

common control with the contributing

sponsor, as applicable; a copy of the

most recent audited (or if not available,

unaudited) financial statements, and the

most recent interim financial

statements, of the contributing sponsor

before and after the transaction and of

the person no longer under common

control with the contributing sponsor

(individually or where financial

statements are only available on a

consolidated basis with other members

of the same controlled group, on a

consolidated basis), including balance

sheets, income statements, statements of

changes in financial position and

annual reports.

(d) Requests for additional

information. The PBGC may, in any

case, require the submission of

additional information.

(e) How and where to file. A notice

and information required to be filed

with the PBGC by this subpart may be

sent by mail or submitted by hand

during normal working hours to:

Reports Processing, Insurance

Operations Department, Pension Benefit

Guaranty Corporation, 1200 K Street

NW., Washington, DC 20005–4026.

(f) Optional consolidated filing. A

plan administrator may file a single

notice with respect to the occurrence of
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34057

more than one reportable event, or two

or more plan administrators may file a

single notice with respect to one or

more reportable events when—

(1) More than one event for which a

notice is required by this section has

occurred and the plan administrator is

able to give the PBGC simultaneous

timely notification of the events; or

(2) An event described in

§§ 4043.21(a), 4043.22(a), or 4043.23(a)

has occurred, and all plan

administrators who are required to file

a notice pursuant to this section sign the

same notice.

(g) Effect of failure to file. Failure to

file a notice required by this section or

failure to include all information

required in the notice constitutes a

violation of title IV of ERISA.

§ 4043.4 Reporting of reportable events on

annual report.

The requirement that the plan

administrator report the occurrence of a

reportable event described in this

subpart in the annual report filed

pursuant to part 4065 of this chapter is

waived pursuant to the provisions of

section 4065 of ERISA.

§ 4043.5 Obligation of contributing

sponsor.

Whenever a contributing sponsor

under a plan covered by section 4021 of

ERISA, knows or has reason to know

that a reportable event has occurred, it

shall notify the plan administrator

immediately.

§ 4043.6 Date of filing.

(a) Any notice or document required

to be filed under this subpart is

considered filed on the date of the

United States postmark stamped on the

cover in which the document is mailed,

if—

(1) The postmark was made by the

United States Postal Service; and

(2) The document was mailed postage

prepaid, properly packaged and

addressed to the PBGC. If the conditions

stated in both paragraphs (a)(1) and

(a)(2) are not met, the notice or

document is considered filed on the

date it is received by the PBGC. Notices

or documents received after regular

business hours are considered filed on

the next regular business day.

§ 4043.7 Computation of time.

In computing any period of time

prescribed or allowed by the rules of

this subpart, the day of the act or event

from which the designated period of

time begins to run shall not be included.

The last day of the period so computed

shall be included, unless it is a

Saturday, Sunday, or Federal holiday, in

which event the period runs until the

end of the next day that is not a

Saturday, Sunday, or Federal holiday.

§ 4043.11 Tax disqualification.

(a) Reportable event. A reportable

event occurs when the Secretary of the

Treasury issues a notice that a plan has

ceased to be a plan described in section

4021(a)(2) of ERISA.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the event described in this

section.

§ 4043.12 Title I non-compliance.

(a) Reportable event. A reportable

event occurs when the Secretary of

Labor determines that a plan is not in

compliance with title I of ERISA.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the event described in this

section.

§ 4043.13 Amendment decreasing benefits

payable.

(a) Reportable event. A reportable

event occurs when an amendment to a

plan is adopted under which the

retirement benefit payable from

employer contributions with respect to

any participant may be decreased.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the event described in this

section.

§ 4043.14 Active participant reduction.

(a) Reportable event. A reportable

event occurs when the number of active

participants under a plan is less than 80

percent of the number of active

participants at the beginning of the plan

year, or is less than 75 percent of the

number of active plan participants at the

beginning of the previous plan year.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the event described in this

section, if the conditions in paragraph

(b)(1), (b)(2), or (b)(3) of this section

exist.

(1) The plan has less than 100

participants as of the beginning of either

the current or the previous plan year.

(2) With respect to a plan maintained

by one contributing sponsor or by two

or more contributing sponsors that are

members of the same controlled group,

as of the date of the event, the total

number of active participants covered

by all the plans covered by this part that

are maintained by a contributing

sponsor and all members of the same

controlled group, if any, either is not

less than 80 percent of the total number

of active participants in all such plans

determined as of the beginning of each

such plan’s current plan year, or is not

less than 75 percent of the total number

of active participants in all such plans

determined as of the beginning of each

such plan’s previous plan year.

(3) The present value of unfunded

vested benefits under the plan (as

reported on the most recently filed IRS/

DOL/PBGC Form 5500 or Form 5500–C/

R) is less than $250,000.

(c) Determination of the number of

active participants. (1) The number of

active participants as of the beginning of

a plan year may be determined as of the

end of the previous plan year.

(2) For purposes of this section and

information submitted pursuant to

§ 4043.3(c)(1), with respect to a plan

maintained by one contributing sponsor

or by two or more contributing sponsors

that are members of the same controlled

group, include as ‘‘active’’ only a

participant who—

(i) Is receiving compensation for work

performed;

(ii) Is on paid or unpaid leave granted

for a reason other than a layoff;

(iii) Is laid off from work for a period

of time that has lasted less than 30 days;

or

(iv) Is absent from work due to a

recurring reduction in employment that

occurs at least annually.

§ 4043.15 Termination or partial

termination.

(a) Reportable event. A reportable

event occurs when the Secretary of the

Treasury determines that there has been

a termination or partial termination of a

plan within the meaning of section

411(d)(3) of the Code.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the events described in this

section.

§ 4043.16 Failure to meet minimum

funding standards and granting of funding

waiver.

(a) Reportable event. A reportable

event occurs when a plan fails to meet

the minimum funding standards or is

granted a minimum funding waiver

under section 412 of the Code or section

302 of ERISA.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the event described in this

section, unless a plan fails to meet

minimum funding standards or is

granted a minimum funding waiver and

the present value of unfunded vested

benefits under the plan (as reported on

the most recently filed IRS/DOL/PBGC

Form 5500 or Form 5500–C/R) equals or

exceeds $250,000. In addition, the 30-

day notice requirement contained in

§ 4043.3(a) is waived for the event

described in this section if, with respect

to the same failure, Form 200 has been
34058 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

completed and submitted (including all

required documentation and other

information) in accordance with subpart

B of this part.

§ 4043.17 Inability to pay benefits when

due.

(a) Reportable event. A reportable

event occurs when a plan is unable to

pay benefits when due. Except as

provided in paragraph (c) of this

section, a plan is unable to pay benefits

when due if the plan does not pay any

participant, who is then entitled to

benefit payments, the full promised

benefits to which he or she is entitled

in the form prescribed under the terms

of the plan.

(b) Waiver. The 30-day notice

requirement in § 4043.3(a) is not waived

for the event described in this section.

(c) Administrative delays. A plan

shall not be treated as being unable to

pay benefits when due if its failure to

pay benefits is caused solely by: (1) The

need to verify any participant’s

eligibility for benefits; (2) the inability

to locate any participant; or (3) any

other administrative delay if such delay

lasts less than the shorter of two months

or two full benefit payment periods.

§ 4043.18 Distribution to a substantial

owner.

(a) Reportable event. A reportable

event occurs when there is a

distribution or distributions under the

plan to a participant who is a

substantial owner if—

(1) The total of all distributions to the

substantial owner within a 24-month

period has a value of $10,000 or more;

(2) The distribution or distributions

were not made by reason of the death

of the participant; and

(3) Immediately after the distribution

or the last distribution in a series, the

plan has nonforfeitable benefits which

are not funded.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3 is

waived for the event described in this

section, unless—

(1) A plan makes a distribution or

distributions within a 12-month period

to a substantial owner having a total

value of $10,000 or more; and

(2) The amount of the distribution or

distributions exceeds the amount of the

maximum guaranteeable benefit for the

substantial owner, determined under

§ 4022.27 of this chapter, for the year in

which the distribution or the last

distribution in a series was made.

(c) Valuation of distribution. The

value of a distribution described in

paragraph (a) or (b) of this section is

determined in accordance with the

provisions of this paragraph.

(1) The value of a distribution, other

than an irrevocable commitment, equals

the sum of the cash amounts actually

received by the participant and the fair

market value of any assets distributed in

a form other than cash, determined as of

the distribution date.

(2) The value of an irrevocable

commitment is the purchase price of the

irrevocable commitment, or the value,

determined in accordance with

reasonable actuarial assumptions, of the

benefits payable pursuant to that

irrevocable commitment. For this

purpose, reasonable actuarial

assumptions are the actuarial

assumptions used by the PBGC under

subpart B of part 4044 of this chapter,

or the actuarial assumptions used by the

plan for purposes of section 302 of

ERISA and section 412 of the Code.

(d) Date of substantial owner

distribution. The date of distribution to

a substantial owner of an irrevocable

commitment is the date on which the

obligation to provide benefits passes

from the plan to the insurer. The date

of distribution to a substantial owner of

a cash distribution shall be the date it

is received by the participant. The date

of all other distributions to a substantial

owner shall be the date when the plan

relinquishes control over the assets

transferred directly or indirectly to the

participant.

(e) Determination date. The

determination of whether a participant

is a substantial owner, or has been in

the preceding 60 months, is made on the

date when there has been a distribution

or distributions with a total value of

$10,000 or more.

(f) Valuation of assets and benefits.

For purposes of paragraph (a)(3) of this

section, in determining whether a plan

has nonforfeitable benefits which are

not funded—

(1) Assets are valued at fair market

value; and

(2) Benefits are valued in accordance

with reasonable actuarial assumptions.

For this purpose, reasonable actuarial

assumptions are the actuarial

assumptions used by the PBGC under

subpart B of part 4044 of this chapter,

or the actuarial assumptions used by the

plan for purposes of section 302 of

ERISA and section 412 of the Code.

§ 4043.19 Plan merger, consolidation or

transfer.

(a) Reportable event. A reportable

event occurs when a plan merges,

consolidates, or transfers its assets or

liabilities under section 208 of ERISA or

section 414(1) of the Code.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the events described in this

section.

§ 4043.20 Alternative compliance with

reporting and disclosure requirements of

Title I.

(a) Reportable event. A reportable

event occurs when an alternative

method of compliance (not of general

applicability) is prescribed for a plan by

the Secretary of Labor under section 110

of ERISA.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

waived for the event described in this

section.

§ 4043.21 Bankruptcy, insolvency, or

similar settlements.

(a) Reportable event. A reportable

event occurs with respect to a plan

maintained by one contributing sponsor

or by two or more contributing sponsors

that are members of the same controlled

group when a contributing sponsor—

(1) Commences a bankruptcy case

(under Title 11, U.S.C.), or has a

bankruptcy case commenced against it;

(2) Commences or has commenced

against it, any other type of insolvency

proceeding (including, but not limited

to the appointment of a receiver);

(3) Commences, or has commenced

against it, a proceeding to effect a

composition, extension or settlement

with creditors;

(4) Executes a general assignment for

the benefit of creditors; or

(5) Undertakes to effect any other nonjudicial composition, extension or

settlement with substantially all its

creditors.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

not waived for the event described in

this section.

§ 4043.22 Liquidation or dissolution.

(a) Reportable event. Except as

provided in paragraph (c) of this

section, a reportable event occurs with

respect to a plan maintained by one

contributing sponsor or by two or more

contributing sponsors that are members

of the same controlled group when a

contributing sponsor—

(1) Is involved in any transaction to

implement its complete liquidation; or

(2) Institutes or has instituted against

it a proceeding to be dissolved, or is

dissolved, whichever occurs first.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

not waived for the event described in

this section.

(c) Reorganizations described in

section 4069(b). This section does not

cover any of the reoganizations

described in section 4069(b) of ERISA.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34059

§ 4043.23 Transaction involving a change

in contributing sponsor or controlled group.

(a) Reportable event. Except as

provided in paragraph (c) of this

section, a reportable event occurs with

respect to a plan maintained by one

contributing sponsor or by two or more

contributing sponsors that are members

of the same controlled group with

nonforfeitable benefits which are not

funded of $1 million or more when—

(1) As a result of a transaction

involving a transfer of assets of or an

ownership interest in a contributing

sponsor—

(i) There is or will be a new

contributing sponsor that is not a

member of the controlled group of the

previous contributing sponsor;

(ii) The contributing sponsor leaves or

will leave the controlled group; or

(iii) The contributing sponsor

becomes or will become a member of a

different controlled group, except where

the new controlled group is or will be

the same, but for the addition of another

person, as the contributing sponsor’s

controlled group before the transaction;

or

(2) As a result of a transaction

involving a transfer by a contributing

sponsor of assets of or an ownership

interest in another person, the

contributing sponsor and that person are

or will be no longer part of the same

controlled group.

(b) Waiver. The 30-day notice

requirement contained in § 4043.3(a) is

not waived for the event described in

this section.

(c) Certain reorganizations. This

section does not apply to—

(1) A reorganization involving a mere

change in identity, form or place of

organization, however effected;

(2) A reorganization involving a

liquidation into a parent corporation;

and

(3) A reorganization involving a

merger, consolidation, or division solely

between (or among) members of the

same controlled group as the

contributing sponsor.

(d) Definition of transaction. For

purposes of this section, the term

transaction includes, but is not limited

to, a legally binding agreement, whether

or not written, to transfer, and a change

in ownership that occurs as a matter of

law or through the exercise or lapse of

pre-existing rights.

(e) Valuation of assets and benefits.

For purposes of paragraph (a) of this

section, in determining whether a plan

has nonforfeitable benefits which are

not funded of $1 million or more—

(1) Assets are valued at fair market

value; and

(2) Benefits are valued in accordance

with reasonable actuarial assumptions.

For this purpose, reasonable actuarial

assumptions are the actuarial

assumptions used by the PBGC under

subpart B of part 4044 of this chapter,

or the actuarial assumptions used by the

plan for purposes of section 302 of

ERISA and section 412 of the Code.

Subpart B—Section 302(f); Notice of

Failure To Make Required

Contributions

§ 4043.31 PBGC Form 200, notice of failure

to make required contributions;

supplementary information.

(a) General rules. To comply with the

notification requirement in section

302(f)(4) of ERISA and section 412(n)(4)

of the Code, a contributing sponsor of a

single-employer plan that is covered

under section 4021 of ERISA and, if that

contributing sponsor is a member of a

parent-subsidiary controlled group, the

parent must complete and submit a

properly certified Form 200 that

includes all required documentation

and other information, as described in

the related filing instructions, in

accordance with this section. Notice of

failure to make required contributions is

required whenever the unpaid balance

of a required installment or any other

payment required under section 302 of

ERISA and section 412 of the Code

(including interest), when added to the

aggregate unpaid balance of all

preceding such installments or other

payments for which payment was not

made when due (including interest),

exceeds $1 million.

(1) Form 200 must be filed with the

PBGC no later than 10 days after the due

date for any required payment for which

payment was not made when due.

(i) The 10-day period for filing Form

200 is computed in accordance with

§ 4043.7 of this chapter.

(ii) The filing date for Form 200 is the

date on which it is received by the

PBGC office specified in the instructions

if it is received no later than 4 p.m. on

a weekday other than a Federal holiday.

If it is received after 4 p.m. or on a

weekend or Federal holiday, the Form

200 is deemed to be filed on the next

regular business day.

(2) If a contributing sponsor or the

parent completes and submits Form 200

in accordance with this section, the

PBGC will deem the other person to

have so filed and it will consider the

notification requirement in section

302(f)(4) of ERISA and section 412(n)(4)

of the Code to be satisfied by all

members of a controlled group of which

the person who has filed Form 200 is a

member.

(b) Supplementary information. If,

upon review of a Form 200, the PBGC

concludes that it needs additional

information in order to make decisions

regarding enforcement of a lien imposed

by section 302(f) of ERISA and section

412(n) of the Code, the PBGC, by written

notification, may require any

contributing sponsor or member of a

controlled group of which a

contributing sponsor is a member to

supplement the Form 200. Such

additional information must be filed

with the PBGC office specified within 7

days after the date of the written

notification, as determined in

accordance with §§ 4043.6 and 4043.7 of

this chapter, or by a different time

specified therein.

PART 4044—ALLOCATION OF

ASSETS IN SINGLE-EMPLOYER

PLANS

Subpart A—Allocation of Assets

General Provisions

Sec.

4044.1 Purpose and scope.

4044.2 Definitions.

4044.3 General rule.

4044.4 Violations.

Allocation of Assets to Benefit Categories

4044.10 Manner of allocation.

4044.11 Priority category 1 benefits.

4044.12 Priority category 2 benefits.

4044.13 Priority category 3 benefits.

4044.14 Priority category 4 benefits.

4044.15 Priority category 5 benefits.

4044.16 Priority category 6 benefits.

4044.17 Subclasses.

Allocation of Residual Assets

4044.30 [Reserved.]

Subpart B—Valuation of Benefits and

Assets

General Provisions

4044.41 General valuation rules.

Trusteed Plans

4044.51 Benefits to be valued.

4044.52 Valuation of benefits.

4044.53 Mortality assumptions—in general.

4044.54 Mortality assumptions—lump

sums.

Expected Retirement Age

4044.55 XRA when a participant must retire

to receive a benefit.

4044.56 XRA when a participant need not

retire to receive a benefit.

4044.57 Special rule for facility closing.

Non-Trusteed Plans

4044.71 Valuation of annuity benefits.

4044.72 Form of annuity to be valued.

4044.73 Lump sums and other alternative

forms of distribution in lieu of annuities.

4044.74 Withdrawal of employee

contributions.

4044.75 Other lump sum benefits.
34060 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Appendix A to Part 4044—Mortality Rate

Tables

Appendix B to Part 4044—Interest Rates

Used to Value

Annuities and Lump Sums

Appendix C to Part 4044—Loading

Assumptions

Appendix D to Part 4044—Tables Used To

Determine Expected Retirement Age

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

1341, 1344, 1362.

Note: Certain provisions of part 4044 have

been superseded by legislative changes. For

example, there are references to provisions

formerly codified in 29 CFR part 2617,

subpart C (and to the Notice of Sufficiency

provided for thereunder) that no longer exist

because of changes in the PBGC’s plan

termination regulations in response to the

Single-Employer Pension Plan Amendments

Act of 1986 and the Pension Protection Act

of 1987. The PBGC intends to amend part

4044 at a later date to conform it to current

statutory provisions.

Subpart A—Allocation of Assets

General Provisions

§ 4044.1 Purpose and scope.

This part implements section 4044 of

ERISA, which contains rules for

allocating a plan’s assets when the plan

terminates. These rules have been in

effect since September 2, 1974, the date

of enactment of ERISA. This part

applies to any single-employer plan

covered by title IV of ERISA that

submits a notice of intent to terminate,

or for which PBGC commences an

action to terminate the plan under

section 4042 of ERISA.

(a) Subpart A. Sections 4044.1

through 4044.4 set forth general rules

for applying §§ 4044.10 through

4044.17. Sections 4044.10 through

4044.17 interpret the rules and describe

procedures for allocating plan assets to

priority categories 1 through 6.

(b) Subpart B. The purpose of subpart

B is to establish the method of

determining the value of benefits and

assets under terminating singleemployer pension plans covered by title

IV of ERISA. This valuation is needed

for both plans trusteed under title IV

and plans which are not trusteed. For

the former, the valuation is needed to

allocate plan assets in accordance with

subpart A of this part and to determine

the amount of any plan asset

insufficiency. For the latter, the

valuation is needed to allocate assets in

accordance with subpart A and to

distribute the assets in accordance with

subpart B of part 4041 of this chapter.

(1) Section 4044.41 sets forth the

general provisions of subpart B and

applies to all terminating singleemployer plans. Sections 4044.51

through 4044.57 prescribe the benefit

valuation rules for plans that receive or

that expect to receive a Notice of

Inability to Determine Sufficiency from

PBGC and are placed into trusteeship by

PBGC, including (in §§ 4044.55 through

4044.57) the rules and procedures a

plan administrator shall follow to

determine the expected retirement age

(XRA) for a plan participant entitled to

early retirement benefits for whom the

annuity starting date is not known as of

the valuation date. This applies to all

trusteed plans which have such early

retirement benefits. The plan

administrator shall determine an XRA

under § 4044.55, § 4044.56 or § 4044.57,

as appropriate, for each active

participant or participant with a

deferred vested benefit who is entitled

to an early retirement benefit and who

as of the valuation date has not selected

an annuity starting date. [See Note at

beginning of part 4044.]

(2) Sections 4044.71 through 4044.75

prescribe the benefit valuation rules for

calculating the value of a benefit to be

paid a participant or beneficiary under

a terminating pension plan that is

distributing assets where the plan has

received a Notice of Sufficiency issued

by PBGC pursuant to part 2617 of this

chapter and has not been placed into

trusteeship by PBGC. [See Note at

beginning of part 4044.]

§ 4044.2 Definitions.

(a) The following terms are defined in

§ 4001.2 of this chapter: annuity, basictype benefit, Code, distribution date,

ERISA, fair market value, guaranteed

benefit, insurer, IRS, irrevocable

commitment, mandatory employee

contributions, nonbasic-type benefit,

nonforfeitable benefit, normal

retirement age, notice of intent to

terminate, PBGC, person, plan, plan

administrator, single-employer plan,

substantial owner, termination date, and

voluntary employee contributions.

(b) For purposes of this part:

Deferred annuity means an annuity

under which the specified date or age at

which payments are to begin occurs

after the valuation date.

Earliest retirement age at valuation

date means the later of (a) a

participant’s age on his or her birthday

nearest to the valuation date, or (b) the

earliest age at which the participant can

retire under the terms of the plan.

Early retirement benefit means an

annuity benefit payable under the terms

of the plan, under which the participant

is entitled to begin receiving payments

before his or her normal retirement age

and which is not payable on account of

the disability of the participant. It may

be reduced according to the terms of the

plan.

Expected retirement age (XRA) means

the age, determined in accordance with

§§ 4044.55 through 4044.57, at which a

participant is expected to begin

receiving benefits when the participant

has not elected, before the allocation

date, an annuity starting date. This is

the age to which a participant’s benefit

payment is assumed to be deferred for

valuation purposes. An XRA is equal to

or greater than the participant’s earliest

retirement age at valuation date but less

than his or her normal retirement age.

Non-trusteed plan means a singleemployer plan which receives a Notice

of Sufficiency from PBGC and is able to

close out by purchasing annuities in the

private sector in accordance with part

2617 of this chapter. [See Note at

beginning of part 4044.]

Notice of Sufficiency means a notice

issued by the PBGC that it has

determined that plan assets are

sufficient to discharge when due all

obligations of the plan with respect to

benefits in priority categories 1 through

4 after plan assets have been allocated

to benefits in accordance with section

4044 of ERISA and this subpart. [See

Note at beginning of part 4044.]

Priority category means one of the

categories contained in sections 4044

(a)(1) through (a)(6) of ERISA that

establish the order in which plan assets

are to be allocated.

Trusteed plan means a singleemployer plan which has been placed

into trusteeship by PBGC.

Unreduced retirement age (URA)

means the earlier of the normal

retirement age specified in the plan or

the age at which an unreduced benefit

is first payable.

Valuation date means (1) for nontrusteed plans, the date of distribution

and (2) for trusteed plans, the date of

termination.

(c) For purposes of subpart B of this

part (unless otherwise required by the

context):

Age means the participant’s age at his

or her nearest birthday and is

determined by rounding the

individual’s exact age to the nearest

whole year. Half years are rounded to

the next highest year. This is also

known as the ‘‘insurance age.’’

(d) For purposes of §§ 4044.55

through 4044.57:

Monthly benefit means the guaranteed

benefit payable by PBGC.

(e) For purposes of §§ 4044.71 through

4044.75:

Lump sum payable in lieu of an

annuity means a benefit that is payable

in a single installment and is derived

from an annuity payable under the plan.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34061

Other lump sum benefit means a

benefit in priority category 5 or 6,

determined under subpart A of this part,

that is payable in a single installment

(or substantially so) under the terms of

the plan, and that is not derived from an

annuity payable under the plan. The

benefit may be a severance pay benefit,

a death benefit or other single

installment benefit.

Qualifying bid means a bid obtained

from an insurer in accordance with

§ 2617.14(b) of this chapter. [See Note at

beginning of part 4044.]

§ 4044.3 General rule.

(a) Asset allocation. Upon the

termination of a single-employer plan,

the plan administrator shall allocate the

plan assets available to pay for benefits

under the plan in the manner prescribed

by this subpart. Plan assets available to

pay for benefits include all plan assets

(valued according to § 4044.41(b))

remaining after the subtraction of all

liabilities, other than liabilities for

future benefit payments, paid or payable

from plan assets under the provisions of

the plan. Liabilities include expenses,

fees and other administrative costs, and

benefit payments due before the

allocation date. Except as provided in

§ 4044.4(b), an irrevocable commitment

by an insurer to pay a benefit, which

commitment is in effect on the date of

the asset allocation, is not considered a

plan asset, and a benefit payable under

such a commitment is excluded from

the allocation process.

(b) Allocation date. For plans that

close out pursuant to a Notice of

Sufficiency under the provisions of

subpart C of part 2617 of this chapter,

assets shall be allocated as of the date

plan assets are to be distributed. For

other plans, assets shall be allocated as

of the termination date. [See Note at

beginning of part 4044.]

§ 4044.4 Violations.

(a) General. A plan administrator

violates ERISA if plan assets are

allocated or distributed upon plan

termination in a manner other than that

prescribed in section 4044 of ERISA and

this subpart, except as may be required

to prevent disqualification of the plan

under the Code and regulations

thereunder.

(b) Distributions in anticipation of

termination. A distribution, transfer, or

allocation of assets to a participant or to

an insurance company for the benefit of

a participant, made in anticipation of

plan termination, is considered to be an

allocation of plan assets upon

termination, and is covered by

paragraph (a) of this section. In

determining whether a distribution,

transfer, or allocation of assets has been

made in anticipation of plan

termination PBGC will consider all of

the facts and circumstances including—

(1) Any change in funding or

operation procedures;

(2) Past practice with regard to

employee requests for forms of

distribution;

(3) Whether the distribution is

consistent with plan provisions; and

(4) Whether an annuity contract that

provides for a cutback based on the

guarantee limits in subpart B of part

4022 of this chapter could have been

purchased from an insurance company.

Allocation of Assets to Benefit

Categories

§ 4044.10 Manner of allocation.

(a) General. The plan administrator

shall allocate plan assets available to

pay for benefits under the plan using the

rules and procedures set forth in

paragraphs (b) through (f) of this

section, or any other procedure that

results in each participant (or

beneficiary) receiving the same benefits

he or she would receive if the

procedures in paragraphs (b) through (f)

were followed.

(b) Assigning benefits. The basic-type

and nonbasic-type benefits payable with

respect to each participant in a

terminated plan shall be assigned to one

or more priority categories in

accordance with §§ 4044.11 through

4044.16. Benefits derived from

voluntary employee contributions,

which are assigned only to priority

category 1, are treated, under section

204(c)(4) of ERISA and section 411(d)(5)

of the Code, as benefits under a separate

plan. The amount of a benefit payable

with respect to each participant shall be

determined as of the termination date.

(c) Valuing benefits. The value of a

participant’s benefit or benefits assigned

to each priority category shall be

determined, as of the allocation date, in

accordance with the provisions of

subpart B of this part. The value of each

participant’s basic-type benefit or

benefits in a priority category shall be

reduced by the value of the participant’s

benefit of the same type that is assigned

to a higher priority category. Except as

provided in the next two sentences, the

same procedure shall be followed for

nonbasic-type benefits. The value of a

participant’s nonbasic-type benefits in

priority categories 3, 5, and 6 shall not

be reduced by the value of the

participant’s nonbasic-type benefit

assigned to priority category 2. Benefits

in priority category 1 shall neither be

included in nor subtracted from lower

priority categories. In no event shall a

benefit assigned to a priority category be

valued at less than zero.

(d) Allocating assets to priority

categories. Plan assets available to pay

for benefits under the plan shall be

allocated to each priority category in

succession, beginning with priority

category 1. If the plan has sufficient

assets to pay for all benefits in a priority

category, the remaining assets shall then

be allocated to the next lower priority

category. This process shall be repeated

until all benefits in priority categories 1

through 6 have been provided or until

all available plan assets have been

allocated.

(e) Allocating assets within priority

categories. Except for priority category

5, if the plan assets available for

allocation to any priority category are

insufficient to pay for all benefits in that

priority category, those assets shall be

distributed among the participants

according to the ratio that the value of

each participant’s benefit or benefits in

that priority category bears to the total

value of all benefits in that priority

category. If the plan assets available for

allocation to priority category 5 are

insufficient to pay for all benefits in that

category, the assets shall be allocated,

first, to the value of each participant’s

nonforfeitable benefits that would be

assigned to priority category 5 under

§ 4044.15 after reduction for the value of

benefits assigned to higher priority

categories, based only on the provisions

of the plan in effect at the beginning of

the 5-year period immediately

preceding the termination date. If assets

available for allocation to priority

category 5 are sufficient to fully satisfy

the value of those benefits, assets shall

then be allocated to the value of the

benefit increase under the oldest

amendment during the 5-year period

immediately preceding the termination

date, reduced by the value of benefits

assigned to higher priority categories

(including higher subcategories in

priority category 5). This allocation

procedure shall be repeated for each

succeeding plan amendment within the

5-year period until all plan assets

available for allocation have been

exhausted. If an amendment decreased

benefits, amounts previously allocated

with respect to each participant in

excess of the value of the reduced

benefit shall be reduced accordingly. In

the subcategory in which assets are

exhausted, the assets shall be

distributed among the participants

according to the ratio that the value of

each participant’s benefit or benefits in

that subcategory bears to the total value

of all benefits in that subcategory.

(f) Applying assets to basic-type or

nonbasic-type benefits within priority
34062 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

categories. The assets allocated to a

participant’s benefit or benefits within

each priority category shall first be

applied to pay for the participant’s

basic-type benefit or benefits assigned to

that priority category. Any assets

allocated on behalf of that participant

remaining after satisfying the

participant’s basic-type benefit or

benefits in that priority category shall

then be applied to pay for the

participant’s nonbasic-type benefit or

benefits assigned to that priority

category. If the assets allocable to a

participant’s basic-type benefit or

benefits in all priority categories are

insufficient to pay for all of the

participant’s guaranteed benefits, the

assets allocated to that participant’s

benefit in priority category 4 shall be

applied, first, to the guaranteed portion

of the participant’s benefit in priority

category 4. The remaining assets

allocated to that participant’s benefit in

priority category 4, if any, shall be

applied to the nonguaranteed portion of

the participant’s benefit.

(g) Allocation to established

subclasses. Notwithstanding paragraphs

(e) and (f) of this section, the assets of

a plan that has established subclasses

within any priority category may be

allocated to the plan’s subclasses in

accordance with the rules set forth in

§ 4044.17.

§ 4044.11 Priority category 1 benefits.

(a) Definition. The benefits in priority

category 1 are participants’ accrued

benefits derived from voluntary

employee contributions.

(b) Assigning benefits. Absent an

election described in the next sentence,

the benefit assigned to priority category

1 with respect to each participant is the

balance of the separate account

maintained for the participant’s

voluntary contributions. If a participant

has elected to receive an annuity in lieu

of his or her account balance, the benefit

assigned to priority category 1 with

respect to that participant is the present

value of that annuity.

§ 4044.12 Priority category 2 benefits.

(a) Definition. The benefits in priority

category 2 are participants’ accrued

benefits derived from mandatory

employee contributions, whether to be

paid as an annuity benefit with a preretirement death benefit that returns

mandatory employee contributions or, if

a participant so elects under the terms

of the plan and subpart A of part 4022

of this chapter, as a lump sum benefit.

Benefits are primarily basic-type

benefits although nonbasic-type benefits

may also be included as follows:

(1) Basic-type benefits. The basic-type

benefit in priority category 2 with

respect to each participant is the sum of

the values of the annuity benefit and the

pre-retirement death benefit determined

under the provisions of paragraph (c)(1)

of this section.

(2) Nonbasic-type benefits. If a

participant elects to receive a lump sum

benefit and if the value of the lump sum

benefit exceeds the value of the basictype benefit in priority category 2

determined with respect to the

participant, the excess is a nonbasictype benefit. There is no nonbasic-type

benefit in priority category 2 for a

participant who does not elect to receive

a lump sum benefit.

(b) Conversion of mandatory

employee contributions to an annuity

benefit. Subject to the limitation set

forth in paragraph (b)(3) of this section,

a participant’s accumulated mandatory

employee contributions shall be

converted to an annuity form of benefit

payable at the normal retirement age or,

if the plan provides for early retirement,

at the expected retirement age. The

conversion shall be made using the

interest rates and factors specified in

paragraph (b)(2) of this section. The

form of the annuity benefit (e.g., straight

life annuity, joint and survivor annuity,

cash refund annuity, etc.) is the form

that the participant or beneficiary is

entitled to on the termination date. If

the participant does not have a

nonforfeitable right to a benefit, other

than the return of his or her mandatory

contributions in a lump sum, the

annuity form of benefit is the form the

participant would be entitled to if the

participant had a nonforfeitable right to

an annuity benefit under the plan on the

termination date.

(1) Accumulated mandatory employee

contributions. Subject to any addition

for the cost of ancillary benefits plus

interest, as provided in the following

sentence, the amount of the

accumulated mandatory employee

contributions for each participant is the

participant’s total nonforfeitable

mandatory employee contributions

remaining in the plan on the

termination date plus interest, if any,

under the plan provisions. Mandatory

employee contributions, if any, used

after the effective date of the minimum

vesting standards in section 203 of

ERISA and section 411 of the Code for

costs or to provide ancillary benefits

such as life insurance or health

insurance, plus interest under the plan

provisions, shall be added to the

contributions that remain in the plan to

determine the accumulated mandatory

employee contributions.

(2) Interest rates and conversion

factors. The interest rates and

conversion factors used in the

administration of the plan shall be used

to convert a participant’s accumulated

mandatory contributions to the annuity

form of benefit. In the absence of plan

rules and factors, the interest rates and

conversion factors established by the

IRS for allocation of accrued benefits

between employer and employee

contributions under the provisions of

section 204(c) of ERISA and section

411(c) of the Code shall be used.

(3) Minimum accrued benefit. The

annuity benefit derived from mandatory

employee contributions may not be less

than the minimum accrued benefit

under the provisions of section 204(c) of

ERISA and section 411(c) of the Code.

(c) Assigning benefits. If a participant

or beneficiary elects to receive a lump

sum benefit, his or her benefit shall be

determined under paragraph (c)(2) of

this section. Otherwise, the benefits

with respect to a participant shall be

determined under paragraph (c)(1) of

this section.

(1) Annuity benefit and pre-retirement

death benefit. The annuity benefit and

the pre-retirement death benefit

assigned to priority category 2 with

respect to a participant are determined

as follows:

(i) The annuity benefit is the benefit

computed under paragraph (b) of this

section.

(ii) Except for adjustments necessary

to meet the minimum lump sum

requirements as hereafter provided, the

pre-retirement death benefit is the

benefit under the plan that returns all or

a portion of the participant’s mandatory

employee contributions upon the death

of the participant before retirement. A

benefit that became payable in a single

installment (or substantially so) because

the participant died before the

termination date is a liability of the plan

within the meaning of § 4044.3(a) and

should not be assigned to priority

category 2. A benefit payable upon a

participant’s death that is included in

the annuity form of the benefit derived

from mandatory employee contributions

(e.g., the survivor’s portion of a joint

and survivor annuity or the cash refund

portion of a cash refund annuity) is

assigned to priority category 2 as part of

the annuity benefit under paragraph

(c)(1)(i) of this section and is not

assigned as a death benefit. The preretirement death benefit may not be less

than the minimum lump sum required

upon withdrawal of mandatory

employee contributions by the IRS

under section 204(c) of ERISA and

section 411(c) of the Code.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34063

(2) Lump sum benefit. Except for

adjustments necessary to meet the

minimum lump sum requirements as

hereafter provided, if a participant

elects to receive a lump sum benefit

under the provisions of the plan, the

amount of the benefit that is assigned to

priority category 2 with respect to the

participant is—

(i) The combined value of the annuity

benefit and the pre-retirement death

benefit determined according to

paragraph (c)(1) (which constitutes the

basic-type benefit) plus

(ii) The amount, if any, of the

participant’s accumulated mandatory

employee contributions that exceeds the

combined value of the annuity benefit

and the pre-retirement death benefit

(which constitutes the nonbasic-type

benefit), but not more than

(iii) The amount of the participant’s

accumulated mandatory contributions.

(3) For purposes of paragraph (c)(2) of

this section, accumulated mandatory

contributions means the contributions

with interest, if any, payable under plan

provisions to the participant or

beneficiary on termination of the plan

or, in the absence of such provisions,

the amount that is payable if the

participant withdrew his or her

contributions on the termination date.

The lump sum benefit may not be less

than the minimum lump required by the

IRS under section 204(c) of ERISA and

section 411(c) of the Code upon

withdrawal of mandatory employee

contributions.

§ 4044.13 Priority category 3 benefits.

(a) Definition. The benefits in priority

category 3 are those annuity benefits

that were in pay status before the

beginning of the 3-year period ending

on the termination date, and those

annuity benefits that could have been in

pay status for participants who were

eligible to receive annuity benefits

before the beginning of the 3-year period

ending on the termination date. Benefit

increases that became effective before

the beginning of the 5-year period

ending on the termination date,

including automatic benefit increases

after that date to the extent provided in

paragraph (b)(5) of this section, shall be

included in determining the priority

category 3 benefit. Benefits are primarily

basic-type benefits, although nonbasictype benefits will be included if any

portion of a participant’s priority

category 3 benefit is not guaranteeable

under the provisions of subpart A of

part 4022 of this chapter.

(b) Assigning benefits. The annuity

benefit that is assigned to priority

category 3 with respect to each

participant is the lowest annuity that

was paid or payable under the rules in

paragraphs (b)(2) through (b)(6) of this

section.

(1) Eligibility of participants and

beneficiaries. A participant or

beneficiary is eligible for a priority

category 3 benefit if either of the

following applies:

(i) The participant’s (or beneficiary’s)

benefit was in pay status before the

beginning of the 3-year period ending

on the termination date.

(ii) The participant was eligible for an

annuity and his or her benefit could

have been in pay status before the

beginning of the 3-year period ending

on the termination date. Whether a

participant was eligible to receive an

annuity before the beginning of the 3-

year period shall be determined using

the plan provisions in effect on the day

before the beginning of the 3-year

period.

(iii) If a participant described in either

of the preceding two paragraphs died

during the 3-year period ending on the

date of the plan termination and his or

her beneficiary is entitled to an annuity,

the beneficiary is eligible for a priority

category 3 benefit.

(2) Plan provisions governing

determination of benefit. In determining

the amount of the priority category 3

annuity with respect to a participant,

the plan administrator shall use the

participant’s age, service, actual or

expected retirement age, and other

relevant facts as of the following dates:

(i) Except as provided in the next

sentence, for a participant or beneficiary

whose benefit was in pay status before

the beginning of the 3-year period

ending on the termination date, the

priority category 3 benefit shall be

determined according to plan provisions

in effect on the date the benefit

commenced. Benefit increases that

became effective before the beginning of

the 5-year period ending on the date of

plan termination, including automatic

benefit increases after that date to the

extent provided in paragraph (b)(5) of

this section, shall be included in

determining the priority category 3

benefit. The form of annuity elected by

a retiree is considered the normal form

of annuity for that participant.

(ii) For a participant who was eligible

to receive an annuity before the

beginning of the 3-year period ending

on the termination date but whose

benefit was not in pay status, the

priority category 3 benefit and the

normal form of annuity shall be

determined according to plan provisions

in effect on the day before the beginning

of the 3-year period ending on the

termination date as if the benefit had

commenced at that time.

(3) General benefit limitations. The

general benefit limitation is determined

as follows:

(i) If a participant’s benefit was in pay

status before the beginning of the 3-year

period, the benefit assigned to priority

category 3 with respect to that

participant is limited to the lesser of the

lowest annuity benefit in pay status

during the 3-year period ending on the

termination date and the lowest annuity

benefit payable under the plan

provisions at any time during the 5-year

period ending on the termination date.

(ii) Unless a benefit was in pay status

before the beginning of the 3-year period

ending on the termination date, the

benefit assigned to priority category 3

with respect to a participant is limited

to the lowest annuity benefit payable

under the plan provisions, including

any reduction for early retirement, at

any time during the 5-year period

ending on the termination date. If the

annuity form of benefit under a formula

that appears to produce the lowest

benefit differs from the normal annuity

form for the participant under paragraph

(b)(2)(ii) of this section, the benefits

shall be compared after the differing

form is converted to the normal annuity

form, using plan factors. In the absence

of plan factors, the factors in subpart B

of part 4022 of this chapter shall be

used.

(iii) For purposes of this paragraph, if

a terminating plan has been in effect

less than five years on the termination

date, computed in accordance with

paragraph (b)(6) of this section, the

lowest annuity benefit under the plan

during the 5-year period ending on the

termination date is zero. If the plan is

a successor to a previously established

defined benefit plan within the meaning

of section 4021(a) of ERISA, the time it

has been in effect will include the time

the predecessor plan was in effect.

(4) Determination of beneficiary’s

benefit. If a beneficiary is eligible for a

priority category 3 benefit because of the

death of a participant during the 3-year

period ending on the termination date,

the benefit assigned to priority category

3 for the beneficiary shall be determined

as if the participant had died the day

before the 3-year period began.

(5) Automatic benefit increases. If

plan provisions adopted and effective

before the beginning of the 5-year period

ending on the termination date provided

for automatic increases in the benefit

formula for both active participants and

those in pay status or for participants in

pay status only, the lowest annuity

benefit payable during the 5-year period

ending on the termination date

determined under paragraph (b)(3) of

this section includes the automatic
34064 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

increases scheduled during the fourth

and fifth years preceding termination,

subject to the restriction that benefit

increases for active participants in

excess of the increases for retirees shall

not be taken into account.

(6) Computation of time periods. For

purposes of this section, a plan or

amendment is ‘‘in effect’’ on the later of

the date on which it is adopted or the

date it becomes effective.

§ 4044.14 Priority category 4 benefits.

The benefits assigned to priority

category 4 with respect to each

participant are the participant’s basictype benefits that do not exceed the

guarantee limits set forth in subpart B of

part 4022 of this chapter, except as

provided in the next sentence. The

benefit assigned to priority category 4

with respect to a participant is not

limited by the aggregate benefits

limitations set forth in § 4022B.1 of this

chapter for individuals who are

participants in more than one plan or by

the phase-in limitation applicable to

substantial owners set forth in

§ 4022.26.

§ 4044.15 Priority category 5 benefits.

The benefits assigned to priority

category 5 with respect to each

participant are all of the participant’s

nonforfeitable benefits under the plan.

§ 4044.16 Priority category 6 benefits.

The benefits assigned to priority

category 6 with respect to each

participant are all of the participant’s

benefits under the plan, whether

forfeitable or nonforfeitable.

§ 4044.17 Subclasses.

(a) General rule. A plan may establish

one or more subclasses within any

priority category, other than priority

categories 1 and 2, which subclasses

will govern the allocation of assets

within that priority category. The

subclasses may be based only on a

participant’s longer service, older age, or

disability, or any combination thereof.

(b) Limitation. Except as provided in

paragraph (c) of this section, whenever

the allocation within a priority category

on the basis of the subclasses

established by the plan increases or

decreases the cumulative amount of

assets that otherwise would be allocated

to guaranteed benefits, the assets so

shifted shall be reallocated to other

participants’ benefits within the priority

category in accordance with the

subclasses.

(c) Exception for subclasses in effect

on September 2, 1974. A plan

administrator may allocate assets to

subclasses within any priority category,

other than priority categories 1 and 2,

without regard to the limitation in

paragraph (b) of this section if, on

September 2, 1974, the plan provided

for allocation of plan assets upon

termination of the plan based on a

participant’s longer service, older age, or

disability, or any combination thereof,

and—

(1) Such provisions are still in effect;

or

(2) The plan, if subsequently amended

to modify or remove those subclasses, is

re-amended to re-establish the same

subclasses on or before July 28, 1981.

(d) Discrimination under Code.

Notwithstanding the provisions of

paragraphs (a) through (c) of this

section, allocation of assets to

subclasses established under this

section is permitted only to the extent

that the allocation does not result in

discrimination prohibited under the

Code and regulations thereunder.

Allocation of Residual Assets

§ 4044.30 [Reserved.]

Subpart B—Valuation of Benefits and

Assets

General Provisions

§ 4044.41 General valuation rules.

(a) Valuation of benefits—(1) Trusteed

plans. The plan administrator of a plan

that has been or will be placed into

trusteeship by the PBGC shall value

plan benefits in accordance with

§§ 4044.51 through 4044.57.

(2) Non-trusteed plans. The plan

administrator of a non-trusteed plan

shall value plan benefits in accordance

with § 4044.71 through 4044.75. If a

plan with respect to which PBGC has

issued a Notice of Sufficiency is unable

to satisfy all benefits assigned to priority

categories 1 through 4 on the

distribution date, the PBGC will place it

into trusteeship and the plan

administrator shall re-value the benefits

in accordance with §§ 4044.51 through

4044.57. [See Note at beginning of part

4044.]

(b) Valuation of assets. Plan assets

shall be valued at their fair market

value, based on the method of valuation

that most accurately reflects such fair

market value.

Trusteed Plans

§ 4044.51 Benefits to be valued.

(a) Form of benefit. The plan

administrator shall determine the form

of each benefit to be valued in

accordance with the following rules:

(1) If a benefit is in pay status as of

the valuation date, the plan

administrator shall value the form of the

benefit being paid.

(2) If a benefit is not in pay status as

of the valuation date but a valid election

with respect to the form of benefit has

been made on or before the valuation

date, the plan administrator shall value

the form of benefit so elected.

(3) If a benefit is not in pay status as

of the valuation date and no valid

election with respect to the form of

benefit has been made on or before the

valuation date, the plan administrator

shall value the form of benefit that,

under the terms of the plan, is payable

in the absence of a valid election.

(b) Timing of benefit. The plan

administrator shall value benefits whose

starting date is subject to election using

the assumption specified in paragraph

(b)(1) or (b)(2) of this section.

(1) Where election made. If a valid

election of the starting date of a benefit

has been made on or before the

valuation date, the plan administrator

shall assume that the starting date of the

benefit is the starting date so elected.

(2) Where no election made. If no

valid election of the starting date of a

benefit has been made on or before the

valuation date, the plan administrator

shall assume that the starting date of the

benefit is the later of—

(i) The expected retirement age, as

determined under §§ 4044.55 through

4044.57, of the participant with respect

to whom the benefit is payable, or

(ii) The valuation date.

§ 4044.52 Valuation of benefits.

(a) General rule. Except as otherwise

provided in paragraph (b) of this section

(regarding the valuation of benefits

payable as lump sums), the plan

administrator shall value annuity

benefits as of the valuation date by—

(1) Using the mortality assumptions

prescribed by § 4044.53 and the interest

assumptions prescribed by Table I of

appendix B to this part;

(2) Using interpolation methods,

where necessary, at least as accurate as

linear interpolation;

(3) Using valuation formulas that

accord with generally accepted actuarial

principles and practices;

(4) Taking mortality into account

during the deferral period of a deferred

joint and survivor benefit only with

respect to the participant (or other

principal annuitant), if upon the death

of the beneficiary the participant may

elect an actuarially increased single life

annuity or if a new beneficiary may

succeed to the survivor portion of the

benefit; and

(5) Adjusting the values to reflect the

loading for expenses in accordance with

appendix C to this part.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34065

(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 $3,500, the plan administrator

shall value benefits in the same manner

as benefits to be paid as annuities

except that—

(1) The mortality assumptions

prescribed in § 4044.54 and the interest

assumptions set forth in Table II of

appendix B to this part shall apply,

(2) There shall be no adjustment to

reflect the loading for expenses, and

(3) Beneficiary mortality during the

deferral period shall be disregarded as

provided in paragraph (a)(4) of this

section without regard to whether the

participant may elect an actuarially

increased single life annuity upon the

death of the beneficiary or whether a

new beneficiary may succeed to the

survivor portion of the benefit.

§ 4044.53 Mortality assumptions—in

general.

(a) General rule. Subject to paragraph

(b) of this section (regarding certain

death benefits), the plan administrator

shall use the mortality factors

prescribed in paragraphs (c), (d), and (e)

of this section to value benefits under

§ 4044.52(a).

(b) Certain death benefits. If an

annuity for one person is in pay status

on the valuation date, and if the

payment of a death benefit after the

valuation date to another person, who

need not be identifiable on the valuation

date, depends in whole or in part on the

death of the pay status annuitant, then

the plan administrator shall value the

death benefit using—

(1) the mortality rates that are

applicable to the annuity in pay status

under this section to represent the

mortality of the pay status annuitant;

and

(2) the mortality rates applicable to

annuities not in pay status and to

deferred benefits other than annuities,

under paragraph (c) of this section, to

represent the mortality of the death

beneficiary.

(c) Mortality rates for healthy lives.

The mortality rates applicable to

annuities in pay status on the valuation

date that are not being received as

disability benefits, to annuities not in

pay status on the valuation date, and to

deferred benefits other than annuities,

are—

(1) For male participants, the rates in

Table 1 of appendix A to this part, and

(2) For female participants, the rates

in Table 1 of appendix A to this part,

set back 6 years.

(d) Mortality rates for disabled lives

(other than Social Security disability).

The mortality rates applicable to

annuities in pay status on the valuation

date that are being received as disability

benefits and for which neither eligibility

for, nor receipt of, Social Security

disability benefits is a prerequisite,

are—

(1) For male participants, the rates in

Table 1 of appendix A to this part, set

forward 3 years, and

(2) For female participants, the rates

in Table 1 of appendix A to this part,

set back 3 years.

(e) Mortality rates for disabled lives

(Social Security disability). The

mortality rates applicable to annuities in

pay status on the valuation date that are

being received as disability benefits and

for which either eligibility for, or receipt

of, Social Security disability benefits is

a prerequisite, are the rates in Tables 2–

M and 2–F of appendix A to this part.

§ 4044.54 Mortality assumptions—lump

sums.

For determining whether the value of

a benefit is $3,500 or less under

§ 4022.7(b)(1) of this chapter and for

calculating the amount of a lump sum

benefit, the PBGC will use the mortality

rates in Table 3 of appendix A to this

part.

Expected Retirement Age

§ 4044.55 XRA when a participant must

retire to receive a benefit.

(a) Applicability. Except as provided

in § 4044.57, the plan administrator

shall determine the XRA under this

section when plan provisions or

established plan practice require a

participant to retire from his or her job

to begin receiving an early retirement

benefit.

(b) Data needed. The plan

administrator shall determine for each

participant who is entitled to an early

retirement benefit—

(1) The amount of the participant’s

monthly benefit payable at unreduced

retirement age in the normal form

payable under the terms of the plan or

in the form validly elected by the

participant before the termination date;

(2) The calendar year in which the

participant reaches unreduced

retirement age (‘‘URA’’);

(3) The participant’s URA; and

(4) The participant’s earliest

retirement age at the valuation date.

(c) Procedure. (1) The plan

administrator shall determine whether a

participant is in the high, medium or

low retirement rate category using the

applicable Selection of Retirement Rate

Category Table in appendix D, based on

the participant’s benefit determined

under paragraph (b)(1) of this section

and the year in which the participant

reaches URA.

(2) Based on the retirement rate

category determined under paragraph

(c)(1), the plan administrator shall

determine the XRA from Table II–A, II–

B or II–C, as appropriate, by using the

participant’s URA and earliest

retirement age at valuation date.

§ 4044.56 XRA when a participant need not

retire to receive a benefit.

(a) Applicability. Except as provided

in § 4044.57, the plan administrator

shall determine the XRA under this

section when plan provisions or

established plan practice do not require

a participant to retire from his or her job

to begin receiving his or her early

retirement benefit.

(b) Data needed. The plan

administrator shall determine for each

participant—

(1) The participant’s URA; and

(2) The participant’s earliest

retirement age at valuation date.

(c) Procedure. Participants in this case

are always assigned to the high

retirement rate category and therefore

the plan administrator shall use Table

II–C of appendix D to determine the

XRA. The plan administrator shall

determine the XRA from Table II–C by

using the participant’s URA and earliest

retirement age at termination date.

§ 4044.57 Special rule for facility closing.

(a) Applicability. The plan

administrator shall determine the XRA

under this section, rather than § 4044.55

or § 4044.56, when both the conditions

set forth in paragraphs (a)(1) and (a)(2)

of this section exist.

(1) The facility at which the

participant is or was employed

permanently closed within one year

before the valuation date, or is in the

process of being permanently closed on

the valuation date.

(2) The participant left employment at

the facility less than one year before the

valuation date or was still employed at

the facility on the valuation date.

(b) XRA. The XRA is equal to the

earliest retirement age at valuation date.

Non-Trusteed Plans

§ 4044.71 Valuation of annuity benefits.

The value of a benefit which is to be

paid as an annuity is the cost of

purchasing the annuity on the date of

distribution from an insurer under the

qualifying bid.

§ 4044.72 Form of annuity to be valued.

(a) When both the participant and

beneficiary are alive on the date of

distribution, the form of annuity to be

valued is—
34066 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(1) For a participant or beneficiary

already receiving a monthly benefit, that

form which is being received, or

(2) For a participant or beneficiary not

receiving a monthly benefit, the normal

annuity form payable under the plan or

the optional form for which the

participant has made a valid election

pursuant to § 2617.4(c) of this chapter.

[See Note at beginning of part 4044.]

(b) When the participant dies after the

date of plan termination but before the

date of distribution, the form of annuity

to be valued is determined under

paragraph (b)(1) or (b)(2) of this section:

(1) For a participant who was entitled

to a deferred annuity—

(i) If the form was a single or joint life

annuity, no benefit shall be valued; or

(ii) If the participant had made a valid

election of a lump sum benefit before he

or she died, the form to be valued is the

lump sum.

(2) For a participant who was eligible

for immediate retirement, and for a

participant who was in pay status at the

date of termination—

(i) If the form was a single life

annuity, no benefit shall be valued;

(ii) If the form was an annuity for a

period certain and life thereafter, the

form to be valued is an annuity for the

certain period;

(iii) If the form was a joint and

survivor annuity, the form to be valued

is a single life annuity payable to the

beneficiary, unless the beneficiary has

also died, in which case no benefit shall

be valued;

(iv) If the form was an annuity for a

period certain and joint and survivor

thereafter, the form to be valued is an

annuity for the certain period and the

life of the beneficiary thereafter, unless

the beneficiary has also died, in which

case the form to be valued is an annuity

for the certain period;

(v) If the form was a cash refund

annuity, the form to be valued is the

remaining lump sum death benefit; or

(vi) If the participant had elected a

lump sum benefit before he or she died,

the form to be valued is the lump sum.

(c) When the participant is still living

and the named beneficiary or spouse

dies after the date of termination but

before the date of distribution, the form

of annuity to be valued is determined

under paragraph (c)(1) or (c)(2) of this

section:

(1) For a participant entitled to a

deferred annuity—

(i) If the form was a joint and survivor

annuity, the form to be valued is a

single life annuity payable to the

participant; or

(ii) If the form was an annuity for a

period certain and joint and survivor

thereafter, the form to be valued is an

annuity for the certain period and the

life of the participant thereafter.

(2) For a participant eligible for

immediate retirement and for a

participant in pay status at the date of

termination—

(i) If the form was a joint and survivor

annuity, the form to be valued is a

single life annuity payable to the

participant; or

(ii) If the form was an annuity for a

period certain and joint survivor

thereafter annuity, the form to be valued

is an annuity for the certain period and

for the life of the participant thereafter.

§ 4044.73 Lump sums and other

alternative forms of distribution in lieu of

annuities.

(a) Valuation. (1) The value of the

lump sum or other alternative form of

distribution is the present value of the

normal form of benefit provided by the

plan payable at normal retirement age,

determined as of the date of distribution

using reasonable actuarial assumptions

as to interest and mortality.

(2) If the participant dies before the

date of distribution, but had elected a

lump sum benefit, the present value

shall be determined as if the participant

were alive on the date of distribution.

(b) Actuarial assumptions. The plan

administrator shall specify the actuarial

assumptions used to determine the

value calculated under paragraph (a) of

this section when the plan administrator

submits the benefit valuation data to the

PBGC pursuant to § 2617.12 of part 2617

of this chapter. The same actuarial

assumptions shall be used for all such

calculations. The PBGC reserves the

right to review the actuarial

assumptions used and to re-value the

benefits determined by the plan

administrator if the actuarial

assumptions are found to be

unreasonable.

[See Note at beginning of part 4044.]

§ 4044.74 Withdrawal of employee

contributions.

(a) If a participant has not started to

receive monthly benefit payments on

the date of distribution, the value of the

lump sum which returns mandatory

employee contributions is equal to the

total amount of contributions made by

the participant, plus interest that is

payable to the participant under the

terms of the plan, plus interest on that

total amount from the date of

termination to the date of distribution.

The rate of interest credited on

employee contributions up to the date of

termination shall be the greater of the

interest rate provided under the terms of

the plan or the interest rate required

under section 204(c) of ERISA or section

411(c) of the IRC.

(b) If a participant has started to

receive monthly benefit payments on

the date of distribution, part of which

are attributable to his or her

contributions, the value of the lump

sum which returns employee

contributions is equal to the excess of

the amount described in paragraph

(b)(1) of this section over the amount

computed in paragraph (b)(2) of this

section.

(1) The amount of accumulated

mandatory employee contributions

remaining in the plan as of the date of

termination plus interest from the date

of termination to the date of

distribution.

(2) The excess of benefit payments

made from the plan between date of

plan termination and the date of

distribution, over the amount of

payments that would have been made if

the employee contributions had been

paid as a lump sum on the date of plan

termination, with interest accumulated

on the excess from the date of payment

to the date of distribution.

(c) Interest assumptions. The interest

rate used under this section to credit

interest between the date of termination

to the date of distribution shall be a

reasonable rate and shall be the same for

both paragraphs (a) and (b).

§ 4044.75 Other lump sum benefits.

The value of a lump sum benefit

which is not covered under § 4044.73 or

§ 4044.74 is equal to—

(a) The value under the qualifying

bid, if an insurer provides the benefit;

or

(b) The present value of the benefit as

of the date of distribution, determined

using reasonable actuarial assumptions,

if the benefit is to be distributed other

than by the purchase of the benefit from

an insurer. The PBGC reserves the right

to review the actuarial assumptions as

to reasonableness and re-value the

benefit if the actuarial assumptions are

unreasonable.

[See Note at beginning of part 4044.]

Appendix A to Part 4044—Mortality

Rate Tables

The tables in this appendix set forth for

each age x the probability qX that an

individual aged x will not survive to attain

age x+1.

TABLE 1.—MORTALITY TABLE FOR

HEALTHY MALE PARTICIPANTS

Age x qx

5 .................................................... 0.000342

6 .................................................... 0.000318

7 .................................................... 0.000302

8 .................................................... 0.000294

9 .................................................... 0.000292
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34067

TABLE 1.—MORTALITY TABLE FOR

HEALTHY MALE PARTICIPANTS—Continued

Age x qx

10 .................................................. 0.000293

11 .................................................. 0.000298

12 .................................................. 0.000304

13 .................................................. 0.000310

14 .................................................. 0.000317

15 .................................................. 0.000325

16 .................................................. 0.000333

17 .................................................. 0.000343

18 .................................................. 0.000353

19 .................................................. 0.000365

20 .................................................. 0.000377

21 .................................................. 0.000392

22 .................................................. 0.000408

23 .................................................. 0.000424

24 .................................................. 0.000444

25 .................................................. 0.000464

26 .................................................. 0.000488

27 .................................................. 0.000513

28 .................................................. 0.000542

29 .................................................. 0.000572

30 .................................................. 0.000607

31 .................................................. 0.000645

32 .................................................. 0.000687

33 .................................................. 0.000734

34 .................................................. 0.000785

35 .................................................. 0.000860

36 .................................................. 0.000907

37 .................................................. 0.000966

38 .................................................. 0.001039

39 .................................................. 0.001128

40 .................................................. 0.001238

41 .................................................. 0.001370

42 .................................................. 0.001527

43 .................................................. 0.001715

44 .................................................. 0.001932

45 .................................................. 0.002183

46 .................................................. 0.002471

47 .................................................. 0.002790

48 .................................................. 0.003138

49 .................................................. 0.003513

50 .................................................. 0.003909

51 .................................................. 0.004324

52 .................................................. 0.004755

53 .................................................. 0.005200

54 .................................................. 0.005660

55 .................................................. 0.006131

56 .................................................. 0.006618

57 .................................................. 0.007139

58 .................................................. 0.007719

59 .................................................. 0.008384

60 .................................................. 0.009158

61 .................................................. 0.010064

62 .................................................. 0.011133

63 .................................................. 0.012391

64 .................................................. 0.013868

65 .................................................. 0.015592

66 .................................................. 0.017579

67 .................................................. 0.019804

68 .................................................. 0.022229

69 .................................................. 0.024817

70 .................................................. 0.027530

71 .................................................. 0.030354

72 .................................................. 0.033370

73 .................................................. 0.036680

74 .................................................. 0.040388

75 .................................................. 0.044597

76 .................................................. 0.049388

77 .................................................. 0.054758

78 .................................................. 0.060678

79 .................................................. 0.067125

TABLE 1.—MORTALITY TABLE FOR

HEALTHY MALE PARTICIPANTS—Continued

Age x qx

80 .................................................. 0.074070

81 .................................................. 0.081484

82 .................................................. 0.089320

83 .................................................. 0.097525

84 .................................................. 0.106047

85 .................................................. 0.114836

86 .................................................. 0.124170

87 .................................................. 0.133870

88 .................................................. 0.144073

89 .................................................. 0.154859

90 .................................................. 0.166307

91 .................................................. 0.178214

92 .................................................. 0.190460

93 .................................................. 0.203007

94 .................................................. 0.217904

95 .................................................. 0.234086

96 .................................................. 0.248436

97 .................................................. 0.263954

98 .................................................. 0.280803

99 .................................................. 0.299154

100 ................................................ 0.319185

101 ................................................ 0.341086

102 ................................................ 0.365052

103 ................................................ 0.393102

104 ................................................ 0.427255

105 ................................................ 0.469531

106 ................................................ 0.521945

107 ................................................ 0.586518

108 ................................................ 0.665268

109 ................................................ 0.760215

110 ................................................ 1.000000

TABLE 2–M.—MORTALITY TABLE FOR

DISABLED MALE PARTICIPANTS RECEIVING SOCIAL SECURITY DISABILITY BENEFIT PAYMENTS

Age x T2x

5 ............................................ 0.000000

6 ............................................ 0.000000

7 ............................................ 0.000000

8 ............................................ 0.000000

9 ............................................ 0.000000

10 .......................................... 0.000000

11 .......................................... 0.000000

12 .......................................... 0.000000

13 .......................................... 0.000000

14 .......................................... 0.000000

15 .......................................... 0.000000

16 .......................................... 0.000000

17 .......................................... 0.000000

18 .......................................... 0.000000

19 .......................................... 0.000000

20 .......................................... 0.048300

21 .......................................... 0.048300

22 .......................................... 0.048300

23 .......................................... 0.048300

24 .......................................... 0.048300

25 .......................................... 0.048300

26 .......................................... 0.046100

27 .......................................... 0.043600

28 .......................................... 0.041100

29 .......................................... 0.038600

30 .......................................... 0.036200

31 .......................................... 0.033900

32 .......................................... 0.032000

33 .......................................... 0.032000

TABLE 2–M.—MORTALITY TABLE FOR

DISABLED MALE PARTICIPANTS RECEIVING SOCIAL SECURITY DISABILITY BENEFIT PAYMENTS—Continued

Age x T2x

34 .......................................... 0.028800

35 .......................................... 0.027800

36 .......................................... 0.027200

37 .......................................... 0.027100

38 .......................................... 0.027300

39 .......................................... 0.027600

40 .......................................... 0.028200

41 .......................................... 0.028800

42 .......................................... 0.029700

43 .......................................... 0.030500

44 .......................................... 0.031400

45 .......................................... 0.032200

46 .......................................... 0.033000

47 .......................................... 0.034000

48 .......................................... 0.035300

49 .......................................... 0.036700

50 .......................................... 0.038300

51 .......................................... 0.040100

52 .......................................... 0.042000

53 .......................................... 0.043900

54 .......................................... 0.046000

55 .......................................... 0.048200

56 .......................................... 0.050600

57 .......................................... 0.053100

58 .......................................... 0.055500

59 .......................................... 0.058100

60 .......................................... 0.060300

61 .......................................... 0.062400

62 .......................................... 0.064300

63 .......................................... 0.065700

64 .......................................... 0.066800

65 .......................................... 0.069225

66 .......................................... 0.071813

67 .......................................... 0.074526

68 .......................................... 0.077350

69 .......................................... 0.080366

70 .......................................... 0.083676

71 .......................................... 0.087384

72 .......................................... 0.091593

73 .......................................... 0.096384

74 .......................................... 0.101754

75 .......................................... 0.107674

76 .......................................... 0.114121

77 .......................................... 0.121066

78 .......................................... 0.128480

79 .......................................... 0.136316

80 .......................................... 0.144521

81 .......................................... 0.153043

82 .......................................... 0.161832

83 .......................................... 0.171166

84 .......................................... 0.180866

85 .......................................... 0.191069

86 .......................................... 0.201855

87 .......................................... 0.213303

88 .......................................... 0.225210

89 .......................................... 0.237456

90 .......................................... 0.250003

91 .......................................... 0.264900

92 .......................................... 0.281082

93 .......................................... 0.295432

94 .......................................... 0.310950

95 .......................................... 0.327799

96 .......................................... 0.346150

97 .......................................... 0.366181

98 .......................................... 0.388082

99 .......................................... 0.412048

100 ........................................ 0.440098

101 ........................................ 0.474251
34068 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

TABLE 2–M.—MORTALITY TABLE FOR

DISABLED MALE PARTICIPANTS RECEIVING SOCIAL SECURITY DISABILITY BENEFIT PAYMENTS—Continued

Age x T2x

102 ........................................ 0.516527

103 ........................................ 0.568941

104 ........................................ 0.633514

105 ........................................ 0.712264

106 ........................................ 0.807211

107 ........................................ 1.000000

TABLE 2–F.—MORTALITY TABLE FOR

DISABLED FEMALE PARTICIPANTS

RECEIVING SOCIAL SECURITY DISABILITY BENEFIT PAYMENTS

Age x qx

5 .................................................... 0.000000

6 .................................................... 0.000000

7 .................................................... 0.000000

8 .................................................... 0.000000

9 .................................................... 0.000000

10 .................................................. 0.000000

11 .................................................. 0.000000

12 .................................................. 0.000000

13 .................................................. 0.000000

14 .................................................. 0.000000

15 .................................................. 0.000000

16 .................................................. 0.000000

17 .................................................. 0.000000

18 .................................................. 0.000000

19 .................................................. 0.000000

20 .................................................. 0.026300

21 .................................................. 0.026300

22 .................................................. 0.026300

23 .................................................. 0.026300

24 .................................................. 0.026300

25 .................................................. 0.026300

26 .................................................. 0.025700

27 .................................................. 0.025300

28 .................................................. 0.024700

29 .................................................. 0.024200

30 .................................................. 0.023700

31 .................................................. 0.023200

32 .................................................. 0.022700

33 .................................................. 0.022200

34 .................................................. 0.021800

35 .................................................. 0.021400

36 .................................................. 0.021200

37 .................................................. 0.021000

38 .................................................. 0.020800

39 .................................................. 0.020800

40 .................................................. 0.020900

41 .................................................. 0.021000

42 .................................................. 0.021300

43 .................................................. 0.021600

44 .................................................. 0.021900

45 .................................................. 0.022400

46 .................................................. 0.022900

47 .................................................. 0.023500

48 .................................................. 0.024200

49 .................................................. 0.024900

50 .................................................. 0.025700

51 .................................................. 0.026400

52 .................................................. 0.027200

53 .................................................. 0.028100

54 .................................................. 0.028800

55 .................................................. 0.029500

56 .................................................. 0.030100

57 .................................................. 0.030700

TABLE 2–F.—MORTALITY TABLE FOR

DISABLED FEMALE PARTICIPANTS

RECEIVING SOCIAL SECURITY DISABILITY BENEFIT PAYMENTS—Continued

Age x qx

58 .................................................. 0.031500

59 .................................................. 0.032300

60 .................................................. 0.033100

61 .................................................. 0.033900

62 .................................................. 0.034700

63 .................................................. 0.035500

64 .................................................. 0.036200

65 .................................................. 0.037269

66 .................................................. 0.038527

67 .................................................. 0.040004

68 .................................................. 0.041728

69 .................................................. 0.043715

70 .................................................. 0.045940

71 .................................................. 0.048365

72 .................................................. 0.050953

73 .................................................. 0.053666

74 .................................................. 0.056490

75 .................................................. 0.059506

76 .................................................. 0.062816

77 .................................................. 0.066524

78 .................................................. 0.070733

79 .................................................. 0.057524

80 .................................................. 0.080894

81 .................................................. 0.086814

82 .................................................. 0.093261

83 .................................................. 0.100206

84 .................................................. 0.107620

85 .................................................. 0.115456

86 .................................................. 0.123661

87 .................................................. 0.132183

88 .................................................. 0.140972

89 .................................................. 0.150306

90 .................................................. 0.160006

91 .................................................. 0.170209

92 .................................................. 0.180995

93 .................................................. 0.192443

94 .................................................. 0.204350

95 .................................................. 0.216596

96 .................................................. 0.229143

97 .................................................. 0.244040

98 .................................................. 0.260222

99 .................................................. 0.274572

100 ................................................ 0.290090

101 ................................................ 0.306939

102 ................................................ 0.325290

103 ................................................ 0.345321

104 ................................................ 0.367222

105 ................................................ 0.391188

106 ................................................ 0.419238

107 ................................................ 0.453391

108 ................................................ 0.495667

109 ................................................ 0.548081

110 ................................................ 0.612654

111 ................................................ 0.691404

112 ................................................ 0.786351

113 ................................................ 1.000000

TABLE 3.—LUMP SUM MORTALITY

TABLE

Age qx

12 .................................................. 0.000000

13 .................................................. 0.000000

14 .................................................. 0.000000

15 .................................................. 0.000000

TABLE 3.—LUMP SUM MORTALITY

TABLE—Continued

Age qx

16 .................................................. 0.001437

17 .................................................. 0.001414

18 .................................................. 0.001385

19 .................................................. 0.001351

20 .................................................. 0.001311

21 .................................................. 0.001267

22 .................................................. 0.001219

23 .................................................. 0.001167

24 .................................................. 0.001149

25 .................................................. 0.001129

26 .................................................. 0.001107

27 .................................................. 0.001083

28 .................................................. 0.001058

29 .................................................. 0.001083

30 .................................................. 0.001111

31 .................................................. 0.001141

32 .................................................. 0.001173

33 .................................................. 0.001208

34 .................................................. 0.001297

35 .................................................. 0.001398

36 .................................................. 0.001513

37 .................................................. 0.001643

38 .................................................. 0.001792

39 .................................................. 0.001948

40 .................................................. 0.002125

41 .................................................. 0.002327

42 .................................................. 0.002556

43 .................................................. 0.002818

44 .................................................. 0.003095

45 .................................................. 0.003410

46 .................................................. 0.003769

47 .................................................. 0.004180

48 .................................................. 0.004635

49 .................................................. 0.005103

50 .................................................. 0.005616

51 .................................................. 0.006196

52 .................................................. 0.006853

53 .................................................. 0.007543

54 .................................................. 0.008278

55 .................................................. 0.009033

56 .................................................. 0.009875

57 .................................................. 0.010814

58 .................................................. 0.011863

59 .................................................. 0.012952

60 .................................................. 0.014162

61 .................................................. 0.015509

62 .................................................. 0.017010

63 .................................................. 0.018685

64 .................................................. 0.020517

65 .................................................. 0.022562

66 .................................................. 0.024847

67 .................................................. 0.027232

68 .................................................. 0.029634

69 .................................................. 0.032073

70 .................................................. 0.034743

71 .................................................. 0.037667

72 .................................................. 0.040871

73 .................................................. 0.044504

74 .................................................. 0.048504

75 .................................................. 0.052913

76 .................................................. 0.057775

77 .................................................. 0.063142

78 .................................................. 0.068628

79 .................................................. 0.074648

80 .................................................. 0.081256

81 .................................................. 0.088518

82 .................................................. 0.096218

83 .................................................. 0.104310

84 .................................................. 0.112816

85 .................................................. 0.122079

86 .................................................. 0.132174
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34069

TABLE 3.—LUMP SUM MORTALITY

TABLE—Continued

Age qx

87 .................................................. 0.143179

88 .................................................. 0.155147

89 .................................................. 0.168208

90 .................................................. 0.182461

91 .................................................. 0.198030

92 .................................................. 0.215035

93 .................................................. 0.232983

94 .................................................. 0.252545

95 .................................................. 0.273878

TABLE 3.—LUMP SUM MORTALITY

TABLE—Continued

Age qx

96 .................................................. 0.297152

97 .................................................. 0.322553

98 .................................................. 0.349505

99 .................................................. 0.378865

100 ................................................ 0.410875

101 ................................................ 0.445768

102 ................................................ 0.483830

103 ................................................ 0.524301

104 ................................................ 0.568365

TABLE 3.—LUMP SUM MORTALITY

TABLE—Continued

Age qx

105 ................................................ 0.616382

106 ................................................ 0.668696

107 ................................................ 0.725745

108 ................................................ 0.786495

109 ................................................ 0.852659

110 ................................................ 0.924666

111 ................................................ 1.000000

Appendix B to Part 4044—Interest Rates Used To Value Annuities and Lump Sums

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 i1 are:

i1 for t= i1 for t= i1 for t=

November 1993 ............................................................................................................................ .0560 1–25 .0525 >25 N/A N/A

December 1993 ............................................................................................................................ .0560 1–25 .0525 >25 N/A N/A

January 1994 ................................................................................................................................ .0590 1–25 .0525 >25 N/A N/A

February 1994 ............................................................................................................................... .0590 1–25 .0525 >25 N/A N/A

March 1994 ................................................................................................................................... .0580 1–25 .0525 >25 N/A N/A

April 1994 ...................................................................................................................................... .0620 1–25 .0525 >25 N/A N/A

May 1994 ...................................................................................................................................... .0650 1–25 .0525 >25 N/A N/A

June 1994 ..................................................................................................................................... .0670 1–25 .0525 >25 N/A N/A

July 1994 ....................................................................................................................................... .0690 1–25 0.525 >25 N/A N/A

August 1994 .................................................................................................................................. .0700 1–25 .0525 >25 N/A N/A

September 1994 ........................................................................................................................... .0690 1–25 .0525 >25 N/A N/A

October 1994 ................................................................................................................................ .0700 1–25 .0525 >25 N/A N/A

November 1994 ............................................................................................................................ .0730 1–25 .0525 >25 N/A N/A

December 1994 ............................................................................................................................ .0750 1–25 .0525 >25 N/A N/A

January 1995 ................................................................................................................................ .0750 1–20 .0575 >20 N/A N/A

February 1995 ............................................................................................................................... .0730 1–20 .0575 >20 N/A N/A

March 1995 ................................................................................................................................... .0730 1–20 .0575 >20 N/A N/A

April 1995 ...................................................................................................................................... .0710 1–20 .0575 >20 N/A N/A

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

June 1995 ..................................................................................................................................... .0680 1–20 .0575 >20 N/A N/A

July 1995 ....................................................................................................................................... .0630 1–20 .0575 >20 N/A N/A

August 1995 .................................................................................................................................. .0620 1–20 .0575 >20 N/A N/A

September 1995 ........................................................................................................................... .0640 1–20 .0575 >20 N/A N/A

October 1995 ................................................................................................................................ .0630 1–20 .0575 >20 N/A N/A

November 1995 ............................................................................................................................ .0620 1–20 .0575 >20 N/A N/A

December 1995 ............................................................................................................................ .0600 1–20 .0575 >20 N/A N/A

January 1996 ................................................................................................................................ .0560 1–20 .0475 >20 N/A N/A

February 1996 ............................................................................................................................... .0540 1–20 .0475 >20 N/A N/A

March 1996 ................................................................................................................................... .0550 1–20 .0475 >20 N/A N/A

April 1996 ...................................................................................................................................... .0580 1–20 .0475 >20 N/A N/A

May 1996 ...................................................................................................................................... .0600 1–20 .0475 >20 N/A N/A

June 1996 ..................................................................................................................................... .0620 1–20 .0475 >20 N/A N/A

July 1996 ....................................................................................................................................... .0620 1–20 .0475 >20 N/A N/A
34070 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

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 interger and o < 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 (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; 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; 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

1 ................................................................................................... 11–1–93 12–1–93 4.25 4.00 4.00 4.00 7 8

2 ................................................................................................... 12–1–93 1–1–94 4.25 4.00 4.00 4.00 7 8

3 ................................................................................................... 1–1–94 2–1–94 4.50 4.00 4.00 4.00 7 8

4 ................................................................................................... 2–1–94 3–1–94 4.50 4.00 4.00 4.00 7 8

5 ................................................................................................... 3–1–94 4–1–94 4.50 4.00 4.00 4.00 7 8

6 ................................................................................................... 4–1–94 5–1–94 4.75 4.00 4.00 4.00 7 8

7 ................................................................................................... 5–1–94 6–1–94 5.25 4.50 4.00 4.00 7 8

8 ................................................................................................... 6–1–94 7–1–94 5.25 4.50 4.00 4.00 7 8

9 ................................................................................................... 7–1–94 8–1–94 5.50 4.75 4.00 4.00 7 8

10 ................................................................................................. 8–1–94 9–1–94 5.75 5.00 4.00 4.00 7 8

11 ................................................................................................. 9–1–94 10–1–94 5.50 4.75 4.00 4.00 7 8

12 ................................................................................................. 10–1–94 11–1–94 5.50 4.75 4.00 4.00 7 8

13 ................................................................................................. 11–1–94 12–1–94 6.00 5.25 4.00 4.00 7 8

14 ................................................................................................. 12–1–94 1–1–95 6.25 5.50 4.25 4.00 7 8

15 ................................................................................................. 1–1–95 2–1–95 6.00 5.25 4.00 4.00 7 8

16 ................................................................................................. 2–1–95 3–1–95 6.00 5.25 4.00 4.00 7 8

17 ................................................................................................. 3–1–95 4–1–95 6.00 5.25 4.00 4.00 7 8

18 ................................................................................................. 4–1–95 5–1–95 5.75 5.00 4.00 4.00 7 8

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

20 ................................................................................................. 6–1–95 7–1–95 5.50 4.75 4.00 4.00 7 8

21 ................................................................................................. 7–1–95 8–1–95 4.75 4.00 4.00 4.00 7 8

22 ................................................................................................. 8–1–95 9–1–95 4.75 4.00 4.00 4.00 7 8

23 ................................................................................................. 9–1–95 10–1–95 5.00 4.25 4.00 4.00 7 8

24 ................................................................................................. 10–1–95 11–1–95 4.75 4.00 4.00 4.00 7 8

25 ................................................................................................. 11–1–95 12–1–95 4.75 4.00 4.00 4.00 7 8

26 ................................................................................................. 12–1–95 1–1–96 4.50 4.00 4.00 4.00 7 8

27 ................................................................................................. 1–1–96 2–1–96 4.50 4.00 4.00 4.00 7 8

28 ................................................................................................. 2–1–96 3–1–96 4.25 4.00 4.00 4.00 7 8

29 ................................................................................................. 3–1–96 4–1–96 4.25 4.00 4.00 4.00 7 8

30 ................................................................................................. 4–1–96 5–1–96 4.75 4.00 4.00 4.00 7 8

31 ................................................................................................. 5–1–96 6–1–96 5.00 4.25 4.00 4.00 7 8

32 ................................................................................................. 6–1–96 7–1–96 5.00 4.25 4.00 4.00 7 8

33 ................................................................................................. 7–1–96 8–1–96 5.00 4.25 4.00 4.00 7 8

Appendix C to Part 4044—Loading Assumptions

If the total value of the plan’s benefit liabilities (as defined in

29 U.S.C. § 1301(a)(16)), exclusive of the loading charge,

is— The loading charge equals—

greater than but less than or equal to

$0 ........................................ $200,000 5% of the total value of the plan’s benefits, plus $200 for each plan participant.

$200,000 ............................. .................................................. $10,000, plus a percentage of the excess of the total value over $200,000, plus

$200 for each plan participant; the percentage is equal to 1%+[(P%¥7.50%)/

10], where P% is the initial rate, expressed as a percentage, set forth in Table

I of appendix B for the valuation of annuities.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34071

Appendix D to Part 4044—Tables Used To Determine Expected Retirement Age

TABLE I–96.—SELECTION OF RETIREMENT RATE CATEGORY

[For Plans with valuation dates after December 31, 1995, and before January 1, 1997]

Participant reaches NRA in year—

Participant’s retirement rate category is—

Low 1 if

monthly

benefit at

NRA is less

than—

Medium 2 if monthly benefit

at NRA is

High 3 if

monthly

benefit at

NRA is

greater

From To than—

1997 .................................................................................................................................. 400 400 1,684 1,684

1998 .................................................................................................................................. 413 413 1,738 1,738

1999 .................................................................................................................................. 426 426 1,794 1,794

2000 .................................................................................................................................. 440 440 1,850 1,850

2001 .................................................................................................................................. 453 453 1,907 1,907

2002 .................................................................................................................................. 467 467 1,966 1,966

2003 .................................................................................................................................. 482 482 2,027 2,027

2004 .................................................................................................................................. 497 497 2,090 2,090

2005 .................................................................................................................................. 512 512 2,155 2,155

2006 or later ..................................................................................................................... 528 528 2,221 2,221

1Table II–A.

2Table II–B.

3Table II–C.

TABLE II–A.—EXPECTED RETIREMENT AGES FOR INDIVIDUALS IN THE LOW CATEGORY

Participant’s earliest retirement age at valuation date.

Normal retirement age

60 61 62 63 64 65 66 67 68 69 70

42 ................................................................................................... 53 53 53 54 54 54 54 54 54 54 54

43 ................................................................................................... 53 54 54 54 55 55 55 55 55 55 55

44 ................................................................................................... 54 54 55 55 55 55 55 56 56 56 56

45 ................................................................................................... 54 55 55 56 56 56 56 56 56 56 56

46 ................................................................................................... 55 55 56 56 56 57 57 57 57 57 57

47 ................................................................................................... 56 56 56 57 57 57 57 57 57 57 57

48 ................................................................................................... 56 57 57 57 58 58 58 58 58 58 58

49 ................................................................................................... 56 57 58 58 58 58 59 59 59 59 59

50 ................................................................................................... 57 57 58 58 59 59 59 59 59 59 59

51 ................................................................................................... 57 58 58 59 59 60 60 60 60 60 60

52 ................................................................................................... 58 58 59 59 60 60 60 60 60 60 60

53 ................................................................................................... 58 59 59 60 60 61 61 61 61 61 61

54 ................................................................................................... 58 59 60 60 61 61 61 61 61 61 61

55 ................................................................................................... 59 59 60 61 61 61 62 62 62 62 62

56 ................................................................................................... 59 60 60 61 61 62 62 62 62 62 62

57 ................................................................................................... 59 60 61 61 62 62 62 62 62 62 62

58 ................................................................................................... 59 60 61 61 62 62 63 63 63 63 63

59 ................................................................................................... 59 60 61 62 62 63 63 63 63 63 63

60 ................................................................................................... 60 60 61 62 62 63 63 63 63 63 63

61 ................................................................................................... ........ 61 61 62 63 63 63 63 64 64 64

62 ................................................................................................... ........ ........ 62 62 63 63 63 64 64 64 64

63 ................................................................................................... ........ ........ ........ 63 63 64 64 64 65 65 65

64 ................................................................................................... ........ ........ ........ ........ 64 64 65 65 65 65 65

65 ................................................................................................... ........ ........ ........ ........ ........ 65 65 65 65 65 65

66 ................................................................................................... ........ ........ ........ ........ ........ ........ 66 66 66 66 66

67 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ 67 67 67 67

68 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ 68 68 68

69 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ ........ 69 69

70 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ 70

TABLE II–B.—EXPECTED RETIREMENT AGES FOR INDIVIDUALS IN THE MEDIUM CATEGORY

Participant’s earliest retirement age at valuation date

Normal retirement age

60 61 62 63 64 65 66 67 68 69 70

42 ................................................................................................... 49 49 49 49 49 49 49 49 49 49 49

43 ................................................................................................... 50 50 50 50 50 50 50 50 50 50 50

44 ................................................................................................... 50 51 51 51 51 51 51 51 51 51 51

45 ................................................................................................... 51 51 52 52 52 52 52 52 52 52 52

46 ................................................................................................... 52 52 52 53 53 53 53 53 53 53 53
34072 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

TABLE II–B.—EXPECTED RETIREMENT AGES FOR INDIVIDUALS IN THE MEDIUM CATEGORY—Continued

Participant’s earliest retirement age at valuation date

Normal retirement age

60 61 62 63 64 65 66 67 68 69 70

47 ................................................................................................... 53 53 53 53 53 54 54 54 54 54 54

48 ................................................................................................... 54 54 54 54 54 54 54 54 54 54 54

49 ................................................................................................... 54 55 55 55 55 55 55 55 55 55 55

50 ................................................................................................... 55 55 56 56 56 56 56 56 56 56 56

51 ................................................................................................... 56 56 56 57 57 57 57 57 57 57 57

52 ................................................................................................... 56 57 57 57 57 58 58 58 58 58 58

53 ................................................................................................... 57 57 58 58 58 58 58 58 58 58 58

54 ................................................................................................... 57 58 58 59 59 59 59 59 59 59 59

55 ................................................................................................... 58 58 59 59 59 60 60 60 60 60 60

56 ................................................................................................... 58 59 59 60 60 60 60 60 60 60 60

57 ................................................................................................... 59 59 60 60 61 61 61 61 61 61 61

58 ................................................................................................... 59 60 60 61 61 61 61 61 61 61 61

59 ................................................................................................... 59 60 61 61 62 62 62 62 62 62 62

60 ................................................................................................... 60 60 61 62 62 62 62 62 62 62 62

61 ................................................................................................... ........ 61 61 62 62 63 63 63 63 63 63

62 ................................................................................................... ........ ........ 62 62 62 63 63 63 63 63 63

63 ................................................................................................... ........ ........ ........ 63 63 64 64 64 64 64 64

64 ................................................................................................... ........ ........ ........ ........ 64 64 64 64 64 64 64

65 ................................................................................................... ........ ........ ........ ........ ........ 65 65 65 65 65 65

66 ................................................................................................... ........ ........ ........ ........ ........ ........ 66 66 66 66 66

67 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ 67 67 67 67

68 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ 68 68 68

69 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ ........ 69 69

70 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ 70

TABLE II–C.—EXPECTED RETIREMENT AGES FOR INDIVIDUALS IN THE HIGH CATEGORY

Participant’s earliest retirement age at valuation date.

Normal retirement age

60 61 62 63 64 65 66 67 68 69 70

42 ................................................................................................... 46 46 46 46 46 47 47 47 47 47 47

43 ................................................................................................... 47 47 47 47 47 47 47 47 47 47 47

44 ................................................................................................... 48 48 48 48 48 48 48 48 48 48 48

45 ................................................................................................... 49 49 49 49 49 49 49 49 49 49 49

46 ................................................................................................... 50 50 50 50 50 50 50 50 50 50 50

47 ................................................................................................... 51 51 51 51 51 51 51 51 51 51 51

48 ................................................................................................... 52 52 52 52 52 52 52 52 52 52 52

49 ................................................................................................... 53 53 53 53 53 53 53 53 53 53 53

50 ................................................................................................... 54 54 54 54 54 54 54 54 54 54 54

51 ................................................................................................... 54 55 55 55 55 55 55 55 55 55 55

52 ................................................................................................... 55 55 56 56 56 56 56 56 56 56 56

53 ................................................................................................... 56 56 56 57 57 57 57 57 57 57 57

54 ................................................................................................... 57 57 57 57 57 58 58 58 58 58 58

55 ................................................................................................... 57 58 58 58 58 58 58 58 58 58 58

56 ................................................................................................... 58 58 59 59 59 59 59 59 59 59 59

57 ................................................................................................... 58 59 59 60 60 60 60 60 60 60 60

58 ................................................................................................... 59 59 60 60 60 60 61 61 61 61 61

59 ................................................................................................... 59 60 60 61 61 61 61 61 61 61 61

60 ................................................................................................... 60 60 61 61 61 62 62 62 62 62 62

61 ................................................................................................... ........ 61 61 62 62 62 62 62 62 62 62

62 ................................................................................................... ........ ........ 62 62 62 62 62 62 62 62 62

63 ................................................................................................... ........ ........ ........ 63 63 63 64 64 64 64 64

64 ................................................................................................... ........ ........ ........ ........ 64 64 64 64 64 64 64

65 ................................................................................................... ........ ........ ........ ........ ........ 65 65 65 65 65 65

66 ................................................................................................... ........ ........ ........ ........ ........ ........ 66 66 66 66 66

67 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ 67 67 67 67

68 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ 68 68 68

69 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ ........ 69 69

70 ................................................................................................... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ 70
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34073

PART 4047—RESTORATION OF

TERMINATING AND TERMINATED

PLANS

Sec.

4047.1 Purpose and scope.

4047.2 Definitions.

4047.3 Funding of restored plan.

4047.4 Payment of premiums.

4047.5 Repayment of PBGC payments of

guaranteed benefits.

Authority: 29 U.S.C. 1302(b)(3), 1347.

§ 4047.1 Purpose and scope.

Section 4047 of ERISA gives the PBGC

broad authority to take any necessary

actions in furtherance of a plan

restoration order issued pursuant to

section 4047. This part (along with

Treasury regulation 26 CFR 1.412(c)(1)–

3) describes certain legal obligations

that arise incidental to a plan restoration

under section 4047. This part also

establishes procedures with respect to

these obligations that are intended to

facilitate the orderly transition of a

restored plan from terminated (or

terminating) status to ongoing status,

and to help ensure that the restored plan

will continue to be ongoing consistent

with the best interests of the plan’s

participants and beneficiaries and the

single-employer insurance program.

This part applies to terminated and

terminating single-employer plans

(except for plans terminated and

terminating under ERISA section

4041(b)) with respect to which the

PBGC has issued or is issuing a plan

restoration order pursuant to ERISA

section 4047.

§ 4047.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: controlled

group, ERISA, IRS, PBGC, plan, plan

administrator, plan year, and singleemployer plan.

§ 4047.3 Funding of restored plan.

(a) General. Whenever the PBGC

issues or has issued a plan restoration

order under ERISA section 4047, it shall

issue to the plan sponsor a restoration

payment schedule order in accordance

with the rules of this section. PBGC,

through its Executive Director, shall also

issue a certification to its Board of

Directors and the IRS, as described in

paragraph (c) of this section. If more

than one plan is or has been restored,

the PBGC shall issue a separate

restoration payment schedule order and

separate certification with respect to

each restored plan.

(b) Restoration payment schedule

order. A restoration payment schedule

order shall set forth a schedule of

payments sufficient to amortize the

initial restoration amortization base

described in paragraph (b) of 26 CFR

1.412(c)(1)–3 over a period extending no

more than 30 years after the initial postrestoration valuation date, as defined in

paragraph (a)(1) of 26 CFR 1.412(c)(1)–

3. The restoration payment schedule

shall be consistent with the

requirements of 26 CFR 1.412(c)(1)–3

and may require payments at intervals

of less than one year, as determined by

the PBGC. The PBGC may, in its

discretion, amend the restoration

payment schedule at any time,

consistent with the requirements of 26

CFR 1.412(c)(1)–3.

(c) Certification. The Executive

Director’s certification to the Board of

Directors and the IRS pursuant to

paragraph (a) of this section shall state

that the PBGC has reviewed the funding

of the plan, the financial condition of

the plan sponsor and its controlled

group members, the payments required

under the restoration payment schedule

(taking into account the availability of

deferrals as permitted under paragraph

(c)(4) of 26 CFR 1.412(c)(1)–3) and any

other factor that the PBGC deems

relevant, and, based on that review,

determines that it is in the best interests

of the plan’s participants and

beneficiaries and the single-employer

insurance program that the restored

plan not be reterminated.

(d) Periodic PBGC review. As long as

a restoration payment schedule order

issued under this section is in effect, the

PBGC shall review annually the funding

status of the plan with respect to which

the order applies. As part of this review,

the PBGC, through its Executive

Director, shall issue a certification in the

form described in paragraph (c) of this

section. As a result of its funding

review, PBGC may amend the

restoration payment schedule,

consistent with the requirements of

paragraph (c)(2) of 26 CFR 1.412(c)(1)–

3.

§ 4047.4 Payment of premiums.

(a) General. Upon restoration of a plan

pursuant to ERISA section 4047, the

obligation to pay PBGC premiums

pursuant to ERISA section 4007 is

reinstated as of the date on which the

plan was trusteed under section 4042 of

ERISA. Except as otherwise specifically

provided in paragraphs (b) and (c) of

this section, the amount of the

outstanding premiums owed shall be

computed and paid by the plan

administrator in accordance with part

4006 of this chapter (Premium Rates)

and the forms and instructions issued

pursuant thereto, as in effect for the

plan years for which premiums are

owed.

(b) Notification of premiums owed.

Whenever the PBGC issues or has issued

a plan restoration order, it shall send a

written notice to the plan administrator

of the restored plan advising the plan

administrator of the plan year(s) for

which premiums are owed. PBGC will

include with the notice the necessary

premium payment forms and

instructions. The notice shall prescribe

the payment due dates for the

outstanding premiums.

(c) Methods for determining variable

rate portion of the premium. In general,

the variable rate portion of the

outstanding premiums shall be

determined in accordance with the

premium regulation and forms, as

provided in paragraph (a) of this

section, except that for any plan year

following a plan year for which Form

5500, Schedule B was not filed because

the plan was terminated, the alternative

calculation method in § 4006.4(c) of this

chapter may not be used.

§ 4047.5 Repayment of PBGC payments of

guaranteed benefits.

(a) General. Upon restoration of a plan

pursuant to ERISA section 4047,

amounts paid by the PBGC from its

single-employer insurance fund (the

fund established pursuant to ERISA

section 4005(a)) to pay guaranteed

benefits and related expenses under the

plan while it was terminated are a debt

of the restored plan. The terms and

conditions for payment of this debt shall

be determined by the PBGC.

(b) Repayment terms. The PBGC shall

prescribe reasonable terms and

conditions for payment of the debt

described in paragraph (a) of this

section, including the number, amount

and commencement date of the

payments. In establishing the terms,

PBGC will consider the cash needs of

the plan, the timing and amount of

contributions owed to the plan, the

liquidity of plan assets, the interests of

the single-employer insurance program,

and any other factors PBGC deems

relevant. PBGC may, in its discretion,

revise any of the payment terms and

conditions, upon written notice to the

plan administrator in accordance with

paragraph (c) of this section.

(c) Notification to plan administrator.

Whenever the PBGC issues or has issued

a plan restoration order, it shall send a

written notice to the plan administrator

of the restored plan advising the plan

administrator of the amount owed the

PBGC pursuant to paragraph (a) of this

section. The notice shall also include

the terms and conditions for payment of

this debt, as established under

paragraph (b) of this section.
34074 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

PART 4050—MISSING PARTICIPANTS

Sec.

4050.1 Purpose and scope.

4050.2 Definitions.

4050.3 Method of distribution for missing

participants.

4050.4 Diligent search.

4050.5 Designated benefit.

4050.6 Payment and required

documentation.

4050.7 Benefits of missing participants—in

general.

4050.8 Automatic lump sum.

4050.9 Annuity or elective lump sum—

living missing participant.

4050.10 Annuity or elective lump sum—

beneficiary of deceased missing

participant.

4050.11 Limitations.

4050.12 Special rules.

4050.13 OMB control number.

Appendix A to Part 4050—Examples of

Designated Benefit Determinations for

Missing Participants Under § 4050.5

Appendix B to Part 4050—Examples of

Benefit Payments for Missing participants

Under §§ 4050.8 Through 4050.10

§ 4050.1 Purpose and scope.

This part prescribes rules for

distributing benefits under a terminating

single-employer plan for any individual

whom the plan administrator has not

located when distributing benefits

under § 4041.27(c) of this chapter. This

part applies to a plan if the plan’s

deemed distribution date (or the date of

a payment made in accordance with

§ 4050.12) is in a plan year beginning on

or after January 1, 1996.

§ 4050.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: annuity, benefit

liabilities, Code, ERISA, insurer,

irrevocable commitment, mandatory

employee contributions, normal

retirement age, PBGC, person, plan, plan

administrator, plan year and title IV

benefit.

In addition, for purposes of this part:

Deemed distribution date means the

last day of the period in which

distribution may be made (determined

without regard to the provisions of this

part) under § 4041.27(a) or § 4041.48(a)

of this chapter (whichever applies) or

such earlier date as may be selected by

the plan administrator of a terminating

plan that is on or after the date when all

benefit distributions have been made

under the plan except for distributions

to—

(1) Late-discovered participants,

(2) Missing participants (including

recently-missing participants) whose

designated benefits are paid to the

PBGC, and

(3) Recently-missing participants

whose benefits are distributed by

purchasing an irrevocable commitment

from an insurer.

Designated benefit means the amount

payable to the PBGC for a missing

participant pursuant to § 4050.5.

Designated benefit interest rate means

the rate of interest applicable to

underpayments of guaranteed benefits

by the PBGC under § 4022.81(d) of this

chapter.

Guaranteed benefit form means, with

respect to a benefit, the form in which

the PBGC would pay a guaranteed

benefit to a participant or beneficiary in

the PBGC’s program for trusteed plans

under subparts A and B of part 4022 of

this chapter (treating the deemed

distribution date as the termination date

for this purpose).

Late-discovered participant means a

participant or beneficiary entitled to a

distribution under a terminating plan

whom the plan administrator locates

before the plan administrator pays the

individual’s designated benefit to the

PBGC (or distributes the individual’s

benefit by purchasing an irrevocable

commitment from an insurer) and not

more than 90 days before the deemed

distribution date.

Missing participant means a

participant or beneficiary entitled to a

distribution under a terminating plan

whom the plan administrator has not

located as of the date when the plan

administrator pays the individual’s

designated benefit to the PBGC (or

distributes the individual’s benefit by

purchasing an irrevocable commitment

from an insurer). In the absence of proof

of death, individuals not located are

presumed living.

Missing participant annuity

assumptions means the interest rate

assumptions and actuarial methods

(using the interest rates for annuity

valuations in Table I of appendix B to

part 4044 of this chapter) for valuing a

benefit to be paid by the PBGC as an

annuity under subpart B of part 4044,

applied—

(1) As if the deemed distribution date

were the termination date;

(2) Using unisex mortality rates that

are a fixed blend of 50 percent of the

male mortality rates and 50 percent of

the female mortality rates from the 1983

Group Annuity Mortality Table as

prescribed in Rev. Rul. 95–6, 1995–1

C.B. 80 (Cumulative Bulletins are

available from the Superintendent of

Documents, Government Printing

Office, Washington, DC 20402);

(3) Without using the expected

retirement age assumptions in

§§ 4044.55 through 4044.57 of this

chapter;

(4) Without making the adjustment for

expenses provided for in § 4044.52(a)(5)

of this chapter; and

(5) By adding $300, as an adjustment

(loading) for expenses, for each missing

participant whose designated benefit

without such adjustment would be

greater than $3,500.

Missing participant forms and

instructions means PBGC Forms 501

and 602, Schedule MP thereto, and

related forms, and their instructions.

Missing participant lump sum

assumptions means the interest rate

assumptions and actuarial methods

(using the interest rates for lump sum

valuations in Table II of appendix B to

part 4044 of this chapter) for valuing a

benefit to be paid by the PBGC as a

lump sum under subpart B of part 4044

of this chapter, applied—

(1) As if the deemed distribution date

were the termination date;

(2) Using mortality assumptions from

Table 3 of appendix A to part 4044 of

this chapter; and

(3) Without using the expected

retirement age assumptions in

§§ 4044.55 through 4044.57 of this

chapter.

Pay status means, with respect to a

benefit under a plan, that the plan

administrator has made or (except for

administrative delay or a waiting

period) would have made one or more

benefit payments.

Post-distribution certification means

the post-distribution certification

required by § 4041.27(h) or § 4041.48(b)

of this chapter.

Recently-missing participant means a

participant or beneficiary whom the

plan administrator discovers to be a

missing participant on or after the 90th

day before the deemed distribution date.

Unloaded designated benefit means

the designated benefit reduced by $300;

except that the reduction shall not apply

in the case of a designated benefit

determined using the missing

participant annuity assumptions

without adding the $300 load described

in paragraph (5) of the definition of

‘‘missing participant annuity

assumptions.’’

§ 4050.3 Method of distribution for missing

participants.

The plan administrator of a

terminating plan shall distribute

benefits for each missing participant

by—

(a) purchasing from an insurer an

irrevocable commitment that satisfies

the requirements of § 4041.27(c) or

§ 4041.48(a)(1) of this chapter

(whichever is applicable); or

(b) paying the PBGC a designated

benefit in accordance with §§ 4050.4
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34075

through 4050.6 (subject to the special

rules in § 4050.12).

§ 4050.4 Diligent search.

(a) Search required. A diligent search

shall be made for each missing

participant whose designated benefit (or

voluntary employee contributions under

§ 4050.12(d)(2)) is paid to the PBGC.

The search shall be made before the

payment is made.

(b) Diligence. A search is a diligent

search only if the search—

(1) Begins not more than 6 months

before notices of intent to terminate are

issued and is carried on in such a

manner that if the individual is found,

distribution to the individual can

reasonably be expected to be made on

or before the deemed distribution date

(or, in the case of a recently-missing

participant, on or before the 90th day

after the deemed distribution date);

(2) Includes inquiry of any plan

beneficiaries (including alternate

payees) of the missing participant

whose names and addresses are known

to the plan administrator; and

(3) Includes use of a commercial

locator service to search for the missing

participant (without charge to the

missing participant or reduction of the

missing participant’s plan benefit).

§ 4050.5 Designated benefit.

(a) Amount of designated benefit. The

amount of the designated benefit shall

be the amount determined under

paragraph (a)(1), (a)(2), (a)(3), or (a)(4) of

this section (whichever is applicable) or,

if less, the maximum amount that could

be provided under the plan to the

missing participant in the form of a

single sum in accordance with section

415 of the Code.

(1) Mandatory lump sum. The

designated benefit of a missing

participant required under a plan to

receive a mandatory lump sum as of the

deemed distribution date shall be the

lump sum payment that the plan

administrator would have distributed to

the missing participant as of the deemed

distribution date.

(2) De minimis lump sum. The

designated benefit of a missing

participant not described in paragraph

(a)(1) of this section whose benefit is not

in pay status as of the deemed

distribution date and whose benefit has

a de minimis actuarial present value

($3,500 or less) as of the deemed

distribution date under the missing

participant lump sum assumptions shall

be such value.

(3) No lump sum. The designated

benefit of a missing participant not

described in paragraph (a)(1) or (a)(2) of

this section who, as of the deemed

distribution date, cannot elect an

immediate lump sum under the plan

shall be the actuarial present value of

the missing participant’s benefit as of

the deemed distribution date under the

missing participant annuity

assumptions.

(4) Elective lump sum. The designated

benefit of a missing participant not

described in paragraph (a)(1), (a)(2), or

(a)(3) of this section shall be the greater

of the amounts determined under the

methodologies of paragraph (a)(1) or

(a)(3) of this section.

(b) Assumptions. When the plan

administrator uses the missing

participant annuity assumptions or the

missing participant lump sum

assumptions for purposes of

determining the designated benefit

under paragraph (a) of this section, the

plan administrator shall value the most

valuable benefit, as determined under

paragraph (b)(1) of this section, using

the assumptions described in paragraph

(b)(2) or (b)(3) of this section (whichever

is applicable).

(1) Most valuable benefit. For a

missing participant whose benefit is in

pay status as of the deemed distribution

date, the most valuable benefit is the

pay status benefit. For a missing

participant whose benefit is not in pay

status as of the deemed distribution

date, the most valuable benefit is the

benefit payable at the age on or after the

deemed distribution date (beginning

with the participant’s earliest early

retirement age and ending with the

participant’s normal retirement age) for

which the present value as of the

deemed distribution date is the greatest.

The present value as of the deemed

distribution date with respect to any age

is determined by multiplying:

(i) the monthly (or other periodic)

benefit payable under the plan; by

(ii) the present value (determined as

of the deemed distribution date using

the missing participant annuity

assumptions) of a $1 monthly (or other

periodic) annuity beginning at the

applicable age.

(2) Participant. A missing participant

who is a participant, and whose benefit

is not in pay status as of the deemed

distribution date, is assumed to be

married to a spouse the same age, and

the form of benefit that must be valued

is the qualified joint and survivor

annuity benefit that would be payable

under the plan. If the participant’s

benefit is in pay status as of the deemed

distribution date, the form and

beneficiary of the participant’s benefit

are the form of benefit and beneficiary

of the pay status benefit.

(3) Beneficiary. A missing participant

who is a beneficiary, and whose benefit

is not in pay status as of the deemed

distribution date, is assumed not to be

married, and the form of benefit that

must be valued is the survivor benefit

that would be payable under the plan.

If the beneficiary’s benefit is in pay

status as of the deemed distribution

date, the form and beneficiary of the

beneficiary’s benefit are the form of

benefit and beneficiary of the pay status

benefit.

(4) Examples. See Appendix A to this

part for examples illustrating the

provisions of this section.

(c) Missed payments. In determining

the designated benefit, the plan

administrator shall include the value of

any payments that were due before the

deemed distribution date but that were

not made.

(d) Payment of designated benefits.

Payment of designated benefits shall be

made in accordance with § 4050.6 and

shall be deemed made on the deemed

distribution date.

§ 4050.6 Payment and required

documentation.

(a) Time of payment and filing—(1)

General rule. The plan administrator

shall pay designated benefits, and file

the information and certifications (of the

plan administrator and the plan’s

enrolled actuary) specified in the

missing participant forms and

instructions, by the time the postdistribution certification is due

(determined in accordance with

§ 4041.9 of this chapter). Except as

otherwise provided in the missing

participant forms and instructions, the

plan administrator shall submit the

designated benefits, information, and

certifications with the post-distribution

certification.

(2) Recently-missing participants. For

a recently-missing participant, the plan

administrator shall either purchase an

irrevocable commitment from an insurer

not later than 90 days after the deemed

distribution date or pay a designated

benefit to the PBGC by the time the

amended post-distribution certification

is due under paragraph (a)(2)(ii) of this

section. Except as otherwise provided in

the missing participant forms and

instructions—

(i) Payment. The plan administrator

shall submit the designated benefit with

the amended post-distribution

certification described in paragraph

(a)(2)(ii) of this section; and

(ii) Filing. If (in the case of a recentlymissing participant for whom a

designated benefit is to be paid to the

PBGC) a diligent search has not been

completed or (in the case of any other

recently-missing participant) an

irrevocable commitment has not been
34076 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

purchased when the plan administrator

submits the filing described in

paragraph (a)(1) of this section, the plan

administrator shall so indicate in that

filing and submit an amended filing

(including an amended post-distribution

certification) within 120 days after the

deemed distribution date (subject to

extension under § 4050.12(h)) in

accordance with the missing participant

forms and instructions.

(3) Late-discovered participants.

When it is impracticable for the plan

administrator to include complete and

accurate final information on a latediscovered participant in a timely postdistribution certification, the plan

administrator shall submit an amended

post-distribution certification within

120 days after the deemed distribution

date (subject to extension under

§ 4050.12(h)) in accordance with the

missing participant forms and

instructions.

(b) Interest on late payments. If the

plan administrator does not pay a

designated benefit by the time specified

in paragraph (a) of this section, the plan

administrator shall pay interest as

assessed by the PBGC for the period

beginning on the deemed distribution

date and ending on the date when the

payment is received by the PBGC.

Interest will be assessed at the rate

provided for late premium payments in

§ 4007.7 of this chapter. Interest

assessed under this paragraph shall be

deemed paid in full if payment of the

amount assessed is received by the

PBGC within 30 days after the date of

a PBGC bill for such amount.

(c) Supplemental information. Within

30 days after the date of a written

request from the PBGC, a plan

administrator required to provide the

information and certifications described

in paragraph (a) of this section shall file

supplemental information, as requested,

for the purpose of verifying designated

benefits, determining benefits to be paid

by the PBGC under this part, and

substantiating diligent searches.

(1) Information mailed. Supplemental

information filed under this paragraph

(c) is considered filed on the date of the

United States postmark stamped on the

cover in which the information is

mailed, if—

(i) The postmark was made by the

United States Postal Service; and

(ii) The information was mailed

postage prepaid, properly addressed to

the PBGC.

(2) Information delivered. When the

plan administrator sends or transmits

the information to the PBGC by means

other than the United States Postal

Service, the information is considered

filed on the date it is received by the

PBGC. Information received on a

weekend or Federal holiday or after 5:00

p.m. on a weekday is considered filed

on the next regular business day.

§ 4050.7 Benefits of missing participants—

in general.

(a) If annuity purchased. If a plan

administrator distributes a missing

participant’s benefit by purchasing an

irrevocable commitment from an

insurer, and the missing participant (or

his or her beneficiary or estate) later

contacts the PBGC, the PBGC will

inform the person of the identity of the

insurer and the relevant policy number.

(b) If designated benefit paid. If the

PBGC locates or is contacted by a

missing participant (or his or her

beneficiary or estate) for whom a plan

administrator paid a designated benefit

to the PBGC, the PBGC will pay benefits

in accordance with §§ 4050.8 through

4050.10 (subject to the limitations and

special rules in §§ 4050.11 and 4050.12).

(c) Examples. See Appendix B to this

part for examples illustrating the

provisions of §§ 4050.8 through 4050.10.

§ 4050.8 Automatic lump sum.

This section applies to a missing

participant whose designated benefit

was determined under § 4050.5(a)(1)

(mandatory lump sum) or § 4050.5(a)(2)

(de minimis lump sum).

(a) General rule—(1) Benefit paid. The

PBGC will pay a single sum benefit

equal to the designated benefit plus

interest at the designated benefit interest

rate from the deemed distribution date

to the date on which the PBGC pays the

benefit.

(2) Payee. Payment shall be made—

(i) To the missing participant, if

located;

(ii) If the missing participant died

before the deemed distribution date, and

if the plan so provides, to the missing

participant’s beneficiary or estate; or

(iii) If the missing participant dies on

or after the deemed distribution date, to

the missing participant’s estate.

(b) De minimis annuity alternative. If

the guaranteed benefit form for a

missing participant whose designated

benefit was determined under

§ 4050.5(a)(2) (de minimis lump sum)

(or the guaranteed benefit form for a

beneficiary of such a missing

participant) would provide for the

election of an annuity, the missing

participant (or the beneficiary) may

elect to receive an annuity. If such an

election is made—

(1) The PBGC will pay the benefit in

the elected guaranteed benefit form,

beginning on the annuity starting date

elected by the missing participant (or

the beneficiary), which shall not be

before the later of the date of the

election or the earliest date on which

the missing participant (or the

beneficiary) could have begun receiving

benefits under the plan; and

(2) The benefit paid will be actuarially

equivalent to the designated benefit, i.e.,

each monthly (or other periodic) benefit

payment will equal the designated

benefit divided by the present value

(determined as of the deemed

distribution date under the missing

participant lump sum assumptions) of a

$1 monthly (or other periodic) annuity

beginning on the annuity starting date.

§ 4050.9 Annuity or elective lump sum—

living missing participant.

This section applies to a missing

participant whose designated benefit

was determined under § 4050.5(a)(3) (no

lump sum) or § 4050.5(a)(4) (elective

lump sum) and who is living on the date

as of which the PBGC begins paying

benefits.

(a) Missing participant whose benefit

was not in pay status as of the deemed

distribution date. The PBGC will pay

the benefit of a missing participant

whose benefit was not in pay status as

of the deemed distribution date as

follows.

(1) Time and form of benefit. The

PBGC will pay the missing participant’s

benefit in the guaranteed benefit form,

beginning on the annuity starting date

elected by the missing participant

(which shall not be before the later of

the date of the election or the earliest

date on which the missing participant

could have begun receiving benefits

under the plan).

(2) Amount of benefit. The PBGC will

pay a benefit that is actuarially

equivalent to the unloaded designated

benefit, i.e., each monthly (or other

periodic) benefit payment will equal the

unloaded designated benefit divided by

the present value (determined as of the

deemed distribution date under the

missing participant annuity

assumptions) of a $1 monthly (or other

periodic) annuity beginning on the

annuity starting date.

(b) Missing participant whose benefit

was in pay status as of the deemed

distribution date. The PBGC will pay

the benefit of a missing participant

whose benefit was in pay status as of the

deemed distribution date as follows.

(1) Time and form of benefit. The

PBGC will pay the benefit in the form

that was in pay status, beginning when

the missing participant is located.

(2) Amount of benefit. The PBGC will

pay the monthly (or other periodic)

amount of the pay status benefit, plus a

lump sum equal to the payments the

missing participant would have
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34077

received under the plan, plus interest on

the missed payments (at the plan rate up

to the deemed distribution date and

thereafter at the designated benefit

interest rate) to the date as of which the

PBGC pays the lump sum.

(c) Payment of lump sum. If a missing

participant whose designated benefit

was determined under § 4050.5(a)(4)

(elective lump sum) so elects, the PBGC

will pay his or her benefit in the form

of a single sum. This election is not

effective unless the missing

participant’s spouse consents (if such

consent would be required under

section 205 of ERISA). The single sum

equals the designated benefit plus

interest (at the designated benefit

interest rate) from the deemed

distribution date to the date as of which

the PBGC pays the benefit.

§ 4050.10 Annuity or elective lump sum—

beneficiary of deceased missing

participant.

This section applies to a beneficiary

of a deceased missing participant whose

designated benefit was determined

under § 4050.5(a)(3) (no lump sum) or

§ 4050.5(a)(4) (elective lump sum) and

whose benefit is not payable under

§ 4050.9.

(a) If deceased missing participant’s

benefit was not in pay status as of the

deemed distribution date. The PBGC

will pay a benefit with respect to a

deceased missing participant whose

benefit was not in pay status as of the

deemed distribution date as follows.

(1) General rule.—(i) Beneficiary. The

PBGC will pay a benefit to the surviving

spouse of a missing participant who was

a participant (unless the surviving

spouse has properly waived a benefit in

accordance with section 205 of ERISA).

(ii) Form and amount of benefit. The

PBGC will pay the survivor benefit in

the form of a single life annuity. Each

monthly (or other periodic) benefit

payment will equal 50% of the quotient

that results when the unloaded

designated benefit is divided by the

present value (determined as of the

deemed distribution date under the

missing participant annuity

assumptions, and assuming that the

missing participant survived to the

deemed distribution date) of a $1

monthly (or other periodic) joint and 50

percent survivor annuity beginning on

the annuity starting date, under which

reduced payments (at the 50 percent

level) are made only after the death of

the missing participant during the life of

the spouse (and not after the death of

the spouse during the missing

participant’s life).

(iii) Time of benefit. The PBGC will

pay the survivor benefit beginning at the

time elected by the surviving spouse

(which shall not be before the later of

the date of the election or the earliest

date on which the surviving spouse

could have begun receiving benefits

under the plan).

(2) If missing participant died before

deemed distribution date.

Notwithstanding the provisions of

paragraph (a)(1) of this section, if a

beneficiary of a missing participant who

died before the deemed distribution

date establishes to the PBGC’s

satisfaction that he or she is the proper

beneficiary or would have received

benefits under the plan in a form, at a

time, or in an amount different from the

benefit paid under paragraph (a)(1)(ii) or

(a)(1)(iii) of this section, the PBGC will

make payments in accordance with the

facts so established, but only in the

guaranteed benefit form.

(3) Elective lump sum.

Notwithstanding the provisions of

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

section, if the beneficiary of a missing

participant whose designated benefit

was determined under § 4050.5(a)(4)

(elective lump sum) so elects, the PBGC

will pay his or her benefit in the form

of a single sum. The single sum will be

equal to the actuarial present value

(determined as of the deemed

distribution date under the missing

participant annuity assumptions) of the

death benefit payable on the annuity

starting date, plus interest (at the

designated benefit interest rate) from the

deemed distribution date to the date as

of which the PBGC pays the benefit.

(b) If deceased missing participant’s

benefit was in pay status as of the

deemed distribution date. The PBGC

will pay a benefit with respect to a

deceased missing participant whose

benefit was in pay status as of the

deemed distribution date as follows.

(1) Beneficiary. The PBGC will pay a

benefit to the beneficiary (if any) of the

benefit that was in pay status as of the

deemed distribution date.

(2) Form and amount of benefit. The

PBGC will pay a monthly (or other

periodic) amount equal to the monthly

(or other periodic) amount, if any, that

the beneficiary would have received

under the form of payment in effect,

plus a lump sum payment equal to the

payments the beneficiary would have

received under the plan subsequent to

the missing participant’s death and

prior to the date as of which the benefit

is paid under paragraph (b)(4) of this

section, plus interest on the missed

payments (at the plan rate up to the

deemed distribution date and thereafter

at the designated benefit interest rate) to

the date as of which the benefit is paid

under paragraph (b)(4) of this section.

(3) Lump sum payment to estate. The

PBGC will make a lump sum payment

to the missing participant’s estate equal

to the payments that the missing

participant would have received under

the plan for the period prior to the

missing participant’s death, plus

interest on the missed payments (at the

plan rate up to the deemed distribution

date and thereafter at the designated

benefit interest rate) to the date when

the lump sum is paid. Notwithstanding

the preceding sentence, if a beneficiary

of a missing participant other than the

estate establishes to the PBGC’s

satisfaction that the beneficiary is

entitled to the lump sum payment, the

PBGC will pay the lump sum to such

beneficiary.

(4) Time of benefit. The PBGC will

pay the survivor benefit beginning when

the beneficiary is located.

(5) Spouse deceased. If the PBGC

locates the estate of the deceased

missing participant’s spouse under

circumstances where a benefit would

have been paid under this paragraph (b)

if the spouse had been located while

alive, the PBGC shall pay to the spouse’s

estate a lump sum payment computed

in the same manner as provided for in

paragraph (b)(2) of this section based on

the period from the missing

participant’s death to the death of the

spouse.

§ 4050.11 Limitations.

(a) Exclusive benefit. The benefits

provided for under this part shall be the

only benefits payable by the PBGC to

missing participants or to beneficiaries

based on the benefits of deceased

missing participants.

(b) Limitation on benefit value. The

total actuarial present value of all

benefits paid with respect to a missing

participant under §§ 4050.8 through

4050.10, determined as of the deemed

distribution date, shall not exceed the

missing participant’s designated benefit.

(c) Guaranteed benefit. If a missing

participant or his or her beneficiary

establishes to the PBGC’s satisfaction

that the benefit under §§ 4050.8 through

4050.10 (based on the designated benefit

actually paid to the PBGC) is less than

the minimum benefit in this paragraph

(c), the PBGC shall instead pay the

minimum benefit. The minimum benefit

shall be the lesser of:

(1) The benefit as determined under

the PBGC’s rules for paying guaranteed

benefits in trusteed plans under

subparts A and B of part 4022 of this

chapter (treating the deemed

distribution date as the termination date

for this purpose); or
34078 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(2) The benefit based on the

designated benefit that should have

been paid under § 4050.5.

(d) Limitation on annuity starting

date. A missing participant (or his or

her survivor) may not elect an annuity

starting date after the later of—

(1) the required beginning date under

section 401(a)(9) of the Code; or

(2) the date when the missing

participant (or the survivor) is notified

of his or her right to a benefit.

§ 4050.12 Special rules.

(a) Late-discovered participants. The

plan administrator of a plan that

terminates with one or more latediscovered participants shall (after

issuing notices to each such participant

in accordance with §§ 4041.21 and

4041.41 or 4041.46 of this chapter

(whichever apply)), distribute each such

late-discovered participant’s benefit

within the period (determined without

regard to the provisions of this part)

described in § 4041.27(a) or § 4041.48(a)

of this chapter (whichever applies) if

practicable or (if not) as soon thereafter

as practicable, but not more than 90

days after the deemed distribution date

(subject to extension under

§ 4050.12(h)).

(b) Missing participants located

quickly. Notwithstanding the provisions

of §§ 4050.8 through 4050.10, if the

PBGC or the plan administrator locates

a missing participant within 30 days

after the PBGC receives the missing

participant’s designated benefit, the

PBGC may in its discretion return the

missing participant’s designated benefit

to the plan administrator, and the plan

administrator shall treat the missing

participant like a late-discovered

participant.

(c) Qualified domestic relations

orders. Plan administrators and the

PBGC shall take the provisions of

qualified domestic relations orders

(QDROs) under section 206(d)(3) of

ERISA or section 414(p) of the Code into

account in determining designated

benefits and benefit payments by the

PBGC, including treating an alternate

payee under an applicable QDRO as a

missing participant or as a beneficiary of

a missing participant, as appropriate, in

accordance with the terms of the QDRO.

For purposes of calculating the amount

of the designated benefit of an alternate

payee, the plan administrator shall use

the assumptions for a missing

participant who is a beneficiary under

§ 4050.5(b).

(d) Employee contributions—(1)

Mandatory employee contributions.

Notwithstanding the provisions of

§ 4050.5, if a missing participant made

mandatory contributions (within the

meaning of section 4044(a)(2) of ERISA),

the missing participant’s designated

benefit shall not be less than the sum of

the missing participant’s mandatory

contributions and interest to the deemed

distribution date at the plan’s rate or the

rate under section 204(c) of ERISA

(whichever produces the greater

amount).

(2) Voluntary employee contributions.

(i) Applicability. This paragraph (d)(2)

applies to any employee contributions

that were not mandatory (within the

meaning of section 4044(a)(2) of ERISA)

to which a missing participant is

entitled in connection with the

termination of a defined benefit plan.

(ii) Payment to PBGC. A plan

administrator, in accordance with the

missing participant forms and

instructions, shall pay the employee

contributions described in paragraph

(d)(2)(i) of this section (together with

any earnings thereon) to the PBGC, and

shall file Schedule MP with the PBGC,

by the time the designated benefit is due

under § 4050.6. Any such amount shall

be in addition to the designated benefit

and shall be separately identified.

(iii) Payment by PBGC. In addition to

any other amounts paid by the PBGC

under §§ 4050.8 through 4050.10, the

PBGC shall pay any amount paid to it

under paragraph (d)(2)(ii) of this

section, with interest at the designated

benefit interest rate from the date of

receipt by the PBGC to the date of

payment by the PBGC, in the same

manner as described in § 4050.8

(automatic lump sums), except that if

the missing participant died before the

deemed distribution date and there is no

beneficiary, payment shall be made to

the missing participant’s estate.

(e) Residual assets. The PBGC shall

determine, in a manner consistent with

the purposes of this part and section

4050 of ERISA, how the provisions of

this part shall apply to any distribution,

to participants and beneficiaries who

cannot be located, of residual assets

remaining after the satisfaction of

benefit liabilities in connection with the

termination of a defined benefit plan.

Unless the PBGC otherwise determines,

the deadline for payment of residual

assets for a missing participant and for

submission to the PBGC of a Schedule

MP (or an amended Schedule MP) is the

30th day after the date on which all

residual assets have been distributed to

all participants and beneficiaries other

than missing participants for whom

payment of residual assets is made to

the PBGC.

(f) Sufficient distress terminations. In

the case of a plan undergoing a distress

termination (under section 4041(c) of

ERISA) that is sufficient for at least all

guaranteed benefits and that distributes

its assets in the manner described in

section 4041(b)(3) of ERISA, the benefit

assumed to be payable by the plan for

purposes of determining the amount of

the designated benefit under § 4050.5

shall be limited to the Title IV benefit

plus any benefit to which funds under

section 4022(c) of ERISA have been

allocated.

(g) Similar rules for later payments. If

the PBGC determines that one or more

persons should receive benefits (which

may be in addition to benefits already

provided) in order for a plan

termination to be valid (e.g., upon audit

of the termination), and one or more of

such individuals cannot be located, the

PBGC shall determine, in a manner

consistent with the purposes of this part

and section 4050 of ERISA, how the

provisions of this part shall apply to

such benefits.

(h) Discretionary extensions. The

PBGC may in its sole discretion extend

the 120-day amended filing periods in

§ 4050.6(a)(2)(ii) and (3) and the 90-day

distribution periods in § 4050.6(a)(2)

and in paragraph (a) of this section—

(1) Where a recently-missing

participant becomes a late-discovered

participant,

(2) Where the PBGC returns the

designated benefit of a missing

participant who is located quickly to the

plan administrator under § 4050.12(b),

or

(3) In other unusual circumstances.

(i) Payments beginning after age 701⁄2.

If the PBGC begins paying an annuity

under § 4050.9(a) or 4050.10(a) to a

participant or a participant’s spouse

after the January 1 following the date

when the participant attained or would

have attained age 701⁄2, the PBGC shall

pay to the participant or the spouse (or

their respective estates) or both, as

appropriate, the lump sum equivalent of

the past annuity payments the

participant and spouse would have

received if the PBGC had begun making

payments on such January 1. The PBGC

shall also pay lump sum equivalents

under this paragraph (i) if the PBGC

locates the estate of the participant or

spouse after both are deceased. (Nothing

in this paragraph (i) shall increase the

total value of the benefits payable with

respect to a missing participant.)

§ 4050.13 OMB control number.

The collection of information

requirements contained in this part have

been approved by the Office of

Management under OMB Control

Number 1212–0036.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34079

Appendix A to part 4050—Examples of

Designated Benefit Determinations for

Missing Participants under § 4050.5

The calculation of the designated benefit

under § 4050.5 is illustrated by the following

examples.

Example 1. Plan A provides that any

participant whose benefit has a value at

distribution of $1,750 or less will be paid a

lump sum, and that no other lump sums will

be paid. P, Q, and R are missing participants.

(1) As of the deemed distribution date, the

value of P’s benefit is $1,700 under plan A’s

assumptions. Under § 4050.5(a)(1), the plan

administrator pays the PBGC $1,700 as P’s

designated benefit.

(2) As of the deemed distribution date, the

value of Q’s benefit is $3,700 under plan A’s

assumptions and $3,200 under the missing

participant lump sum assumptions. Under

§ 4050.5(a)(2), the plan administrator pays

the PBGC $3,200 as Q’s designated benefit.

(3) As of the deemed distribution date, the

value of R’s benefit is $3,400 under plan A’s

assumptions, $3,600 under the missing

participant lump sum assumptions, and

$3,450 under the missing participant annuity

assumptions. Under § 4050.5(a)(3), the plan

administrator pays the PBGC $3,450 as R’s

designated benefit.

Example 2. Plan B provides for a normal

retirement age of 65 and permits early

commencement of benefits at any age

between 60 and 65, with benefits reduced by

5 percent for each year before age 65 that the

benefit begins. The qualified joint and 50

percent survivor annuity payable under the

terms of the plan requires in all cases a 16

percent reduction in the benefit otherwise

payable. The plan does not provide for

elective lump sums.

(1) M is a missing participant who

separated from service under plan B with a

deferred vested benefit. M is age 50 at the

deemed distribution date, and has a normal

retirement benefit of $1,000 per month

payable at age 65 in the form of a single life

annuity. M’s benefit as of the deemed

distribution date has a value greater than

$3,500 using either plan assumptions or the

missing participant lump sum assumptions.

Accordingly, M’s designated benefit is to be

determined under § 4050.5(a)(3).

(2) For purposes of determining M’s

designated benefit, M is assumed to be

married to a spouse who is also age 50 on

the deemed distribution date. M’s monthly

benefit in the form of the qualified joint and

survivor annuity under the plan varies from

$840 at age 65 (the normal retirement age)

($1,000 × (1 ¥ .16)) to $630 at age 60 (the

earliest retirement age) ($1,000 × (1 ¥ 5 ×

(.05)) × (1 ¥ .16)).

(3) Under § 4050.5(a)(3), M’s benefit is to

be valued using the missing participant

annuity assumptions. The select and ultimate

interest rates on Plan B’s deemed distribution

date are 7.50 percent for the first 20 years and

5.75 percent thereafter. Using these rates and

the blended mortality table described in

paragraph (2) of the definition of ‘‘missing

participant annuity assumptions’’ in

§ 4050.2, the plan administrator determines

that the benefit commencing at age 60 is the

most valuable benefit (i.e., the benefit at age

60 is more valuable than the benefit at ages

61, 62, 63, 64 or 65). The present value as

of the deemed distribution date of each dollar

of annual benefit (payable monthly as a joint

and 50 percent survivor annuity) is $5.4307

if the benefit begins at age 60. (Because a new

spouse may succeed to the survivor benefit,

the mortality of the spouse during the

deferral period is ignored.) Thus, without

adjustment (loading) for expenses, the value

of the benefit beginning at age 60 is $41,056

(12 × $630 × 5.4307). The designated benefit

is equal to this value plus an expense

adjustment of $300, or a total of $41,356.

Appendix B to Part 4050—Examples of

Benefit Payments for Missing

Participants Under §§ 4050.8 Through

4050.10

The provisions of §§ 4050.8 through

4050.10 are illustrated by the following

examples.

Example 1. Participant M from Plan B (see

Example 2 in Appendix A of this part) is

located. M’s spouse is ten years younger than

M. M elects to receive benefits in the form

of a joint and 50 percent survivor annuity

commencing at age 62.

(1) M’s designated benefit was $41,356.

The unloaded designated benefit was

$41,056. As of Plan B’s deemed distribution

date (and using the missing participant

annuity assumptions), the present value per

dollar of monthly benefit (payable monthly

as a joint and 50 percent survivor annuity

commencing at age 62 and reflecting the

actual age of M’s spouse) is $4.7405. Thus,

the monthly benefit to M at age 62 is $722

($41,056 / (4.7405 × 12)). M’s spouse will

receive $361 (50 percent of $722) per month

for life after the death of M.

(2) If M had instead been found to have

died on or after the deemed distribution date,

and M’s spouse wanted benefits to

commence when M would have attained age

62, the same calculation would be performed

to arrive at a monthly benefit of $361 to M’s

spouse.

Example 2. Participant P is a missing

participant from Plan C, a plan that allows

elective lump sums upon plan termination.

Plan C’s administrator pays a designated

benefit of $10,000 to the PBGC on behalf of

P, who was age 30 on the deemed

distribution date.

(1) P’s spouse, S, is located and has a death

certificate showing that P died on or after the

deemed distribution date with S as spouse.

S is the same age as P, and would like

survivor benefits to commence immediately,

at age 55 (as permitted by the plan). S’s

benefit is the survivor’s share of the joint and

50 percent survivor annuity which is

actuarially equivalent, as of the deemed

distribution date, to $9,700 (the unloaded

designated benefit).

(2) The select and ultimate interest rates on

Plan C’s deemed distribution date were 7.50

percent for the first 20 years and 5.75 percent

thereafter. Using these rates and the blended

mortality table described in paragraph (2) of

the definition of ‘‘missing participant annuity

assumptions’’ in § 4050.2, the present value

as of the deemed distribution date of each

dollar of annual benefit (payable monthly as

a joint and 50 percent survivor annuity) is

$2.4048 if the benefit begins when S and P

would have been age 55. Thus, the monthly

benefit to S commencing at age 55 is $168 (50

percent of $9,700 / (2.4048 × 12)). Since P

could have elected a lump sum upon plan

termination, S may elect a lump sum. S’s

lump sum is the present value as of the

deemed distribution date (using the missing

participant annuity assumptions) of the

monthly benefit of $168, accumulated with

interest at the designated benefit interest rate

to the date paid.

PART 4061—AMOUNTS PAYABLE BY

THE PENSION BENEFIT GUARANTY

CORPORATION

§ 4061.1 Cross-references.

See part 4022 of this chapter

regarding benefits payable under

terminated single-employer plans and

§ 4281.47 of this chapter regarding

financial assistance to pay benefits

under insolvent multiemployer plans.

PART 4062—LIABILITY FOR

TERMINATION OF SINGLE-EMPLOYER

PLANS

Sec.

4062.1 Purpose and scope.

4062.2 Definitions.

4062.3 Amount and payment of section

4062(b) liability.

4062.4 Determinations of net worth and

collective net worth.

4062.5 Net worth record date.

4062.6 Net worth notification and

information.

4062.7 Calculating interest on liability and

refunds of overpayments.

4062.8 Arrangements for satisfying liability.

4062.9 Filing of documents.

4062.10 Computation of time.

Authority: 29 U.S.C. 1302(b)(3), 1362–

1364, 1367, 1368.

§ 4062.1 Purpose and scope.

The purpose of this part is to set forth

rules for determination and payment of

the liability incurred, under section

4062(b) of ERISA, upon termination of

any single-employer plan and, to the

extent appropriate, determination of the

liability incurred with respect to

multiple employer plans under sections

4063 and 4064 of ERISA. The provisions

of this part regarding the amount of

liability to the PBGC that is incurred

upon termination of a single-employer

plan apply with respect to a plan for

which a notice of intent to terminate

under section 4041(c) of ERISA is issued

or proceedings to terminate under

section 4042 of ERISA are instituted

after December 17, 1987. Those

provisions also apply, to the extent

described in paragraph (a) of this

section, to the amount of liability for

withdrawal from a multiple employer

plan after that date.
34080 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

§ 4062.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: benefit

liabilities, Code, contributing sponsor,

controlled group, ERISA, fair market

value, guaranteed benefit, multiple

employer plan, notice of intent to

terminate, PBGC, person, plan, plan

administrator, proposed termination

date, single-employer plan, and

termination date.

In addition, for purposes of this part,

the term collective net worth of persons

subject to liability in connection with a

plan termination means the sum of the

individual net worths of all persons that

have individual net worths which are

greater than zero and that (as of the

termination date) are contributing

sponsors of the terminated plan or

members of their controlled groups, as

determined in accordance with section

4062(d)(1) of ERISA and § 4062.4 of this

part.

§ 4062.3 Amount and payment of section

4062(b) liability.

(a) Amount of liability.—(1) General

rule. Except as provided in paragraph

(a)(2) of this section, the amount of

section 4062(b) liability is the total

amount (as of the termination date) of

the unfunded benefit liabilities (within

the meaning of section 4001(a)(18) of

ERISA) to all participants and

beneficiaries under the plan, together

with interest calculated from the

termination date in accordance with

§ 4062.7.

(2) Special rule in case of subsequent

finding of inability to pay guaranteed

benefits. In any distress termination

proceeding under section 4041(c) of

ERISA and part 4041 of this chapter in

which (as described in section

4041(c)(3)(C)(ii) of ERISA), after a

determination that the plan is sufficient

for benefit liabilities or for guaranteed

benefits, the plan administrator finds

that the plan is or will be insufficient for

guaranteed benefits and the PBGC

concurs with that finding, or the PBGC

makes such a finding on its own

initiative, actuarial present values shall

be determined as of the date of the

notice to, or the finding by, the PBGC

of insufficiency for guaranteed benefits.

(b) Payment of liability. Section

4062(b) liability is due and payable as

of the termination date, in cash or

securities acceptable to the PBGC,

except that, as provided in § 4062.8(c),

the PBGC shall prescribe commercially

reasonable terms for payment of so

much of such liability as exceeds 30

percent of the collective net worth of

persons subject to liability in

connection with a plan termination. The

PBGC may make alternative

arrangements, as provided in

§ 4062.8(b).

§ 4062.4 Determinations of net worth and

collective net worth.

(a) General rules. When a contributing

sponsor, or member(s) of a contributing

sponsor’s controlled group, notifies and

submits information to the PBGC in

accordance with § 4062.6, the PBGC

shall determine the net worth, as of the

net worth record date, of that

contributing sponsor and any members

of its controlled group based on the

factors set forth in paragraph (c) of this

section and shall include the value of

any assets that it determines, pursuant

to paragraph (d) of this section, have

been improperly transferred. In making

such determinations, the PBGC will

consider information submitted

pursuant to § 4062.6. The PBGC shall

then determine the collective net worth

of persons subject to liability in

connection with a plan termination.

(b) Partnerships and sole

proprietorships. In the case of a person

that is a partnership or a sole

proprietorship, net worth does not

include the personal assets and

liabilities of the partners or sole

proprietor, except for the assets

included pursuant to paragraph (d) of

this section. As used in this paragraph,

‘‘personal assets’’ are those assets which

do not produce income for the business

being valued or are not used in the

business.

(c) Factors for determining net worth.

A person’s net worth is equal to its fair

market value and fair market value shall

be determined on the basis of the factors

set forth below, to the extent relevant;

different factors may be considered with

respect to different portions of the

person’s operations.

(1) A bona fide sale of, agreement to

sell, or offer to purchase or sell the

business of the person made on or about

the net worth record date.

(2) A bona fide sale of, agreement to

sell, or offer to purchase or sell stock or

a partnership interest in the person,

made on or about the net worth record

date.

(3) If stock in the person is publicly

traded, the price of such stock on or

about the net worth record date.

(4) The price/earnings ratios and

prices of stocks of similar trades or

businesses on or about the net worth

record date.

(5) The person’s economic outlook, as

reflected by its earnings and dividend

projections, current financial condition,

and business history.

(6) The economic outlook for the

person’s industry and the market it

serves.

(7) The appraised value, including the

liquidating value, of the person’s

tangible and intangible assets.

(8) The value of the equity assumed

in a plan of reorganization of a person

in a case under title 11, United States

Code, or any similar law of a state or

political subdivision thereof.

(9) Any other factor relevant in

determining the person’s net worth.

(d) Improper transfers. A person’s net

worth shall include the value of any

assets transferred by the person which

the PBGC determines were improperly

transferred for the purpose, as inferred

from all the facts and circumstances,

and with the effect of avoiding liability

under this part. Assets ‘‘improperly

transferred’’ include but are not limited

to assets sold, leased or otherwise

transferred for less than adequate

consideration and assets distributed as

gifts, capital distributions and stock

redemptions inconsistent with past

practices of the employer. The word

‘‘transfer’’ includes but is not limited to

sales, assignments, pledges, leases, gifts

and dividends.

§ 4062.5 Net worth record date.

(a) General. Unless the PBGC

establishes an earlier net worth record

date pursuant to paragraph (b) of this

section, the net worth record date, for

all purposes under this part, is the

plan’s termination date.

(b) Establishment of an earlier net

worth record date. At any time during

a termination proceeding, the PBGC, in

order to prevent undue loss to or abuse

of the plan termination insurance

system, may establish as the net worth

record date an earlier date during the

120-day period ending with the

termination date.

(c) Notification. Whenever the PBGC

establishes an earlier net worth record

date, it shall immediately give liable

person(s) written notification of that

fact. The written notice may also

include a request for additional

information, as provided in

§ 4062.6(a)(3).

§ 4062.6 Net worth notification and

information.

(a) General. (1) A contributing

sponsor or member of the contributing

sponsor’s controlled group that believes

section 4062(b) liability exceeds 30

percent of the collective net worth of

persons subject to liability in

connection with a plan termination

shall—

(i) So notify the PBGC by the 90th day

after the notice of intent to terminate is

filed with the PBGC or, if no notice of

intent to terminate is filed with the

PBGC and the PBGC institutes
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34081

proceedings under section 4042 of

ERISA, within 30 days after the

establishment of the plan’s termination

date in such proceedings; and

(ii) Submit to the PBGC the

information specified in paragraph (b) of

this section with respect to the

contributing sponsor and each member

of the contributing sponsor’s controlled

group (if any)—

(A) By the 120th day after the

proposed termination date, or

(B) If no notice of intent to terminate

is filed with the PBGC and the PBGC

institutes proceedings under section

4042 of ERISA, within 120 days after the

establishment of the plan’s termination

date in such proceedings.

(2) If a contributing sponsor or a

member of its controlled group complies

with the requirements of paragraph

(a)(1) of this section, the PBGC will

consider the requirements to be satisfied

by all members of that controlled group.

(3) The PBGC may require any person

subject to liability—

(i) To submit the information

specified in paragraph (b) of this section

within a shorter period whenever the

PBGC believes that its ability to obtain

information or payment of liability is in

jeopardy, and

(ii) To submit additional information

within 30 days, or a different specified

time, after the PBGC’s written

notification that it needs such

information to make net worth

determinations.

(4) If a provision of paragraph (b) of

this section or a PBGC notice specifies

information previously submitted to the

PBGC, a person may respond by

identifying the previous submission in

which the response was provided.

(b) Net worth information. The

following information specifications

apply, individually, with respect to each

person subject to liability:

(1) An estimate, made in accordance

with § 4062.4, of the person’s net worth

on the net worth record date and a

statement, with supporting evidence, of

the basis for the estimate.

(2) A copy of the person’s audited (or

if not available, unaudited) financial

statements for the 5 full fiscal years plus

any partial fiscal year preceding the net

worth record date. The statements must

include balance sheets, income

statements, and statements of changes in

financial position and must be

accompanied by the annual reports, if

available.

(3) A statement of all sales and copies

of all offers or agreements to buy or sell

at least 25 percent of the person’s assets

or at least 5 percent of the person’s stock

or partnership interest, made on or

about the net worth record date.

(4) A statement of the person’s current

financial condition and business

history.

(5) A statement of the person’s

business plans, including projected

earnings and, if available, dividend

projections.

(6) Any appraisal of the person’s fixed

and intangible assets made on or about

the net worth record date.

(7) A copy of any plan of

reorganization, whether or not

confirmed, with respect to a case under

title 11, United States Code, or any

similar law of a state or political

subdivision thereof, involving the

person and occurring within 5 calendar

years prior to or any time after the net

worth record date.

(c) Incomplete submission. If a

contributing sponsor and/or members of

the contributing sponsor’s controlled

group do not submit all of the

information required pursuant to

paragraph (a) of this section (other than

the estimate described in paragraph

(b)(1) of this section) with respect to

each person subject to liability, the

PBGC may base determinations of net

worth and the collective net worth of

persons subject to liability in

connection with a plan termination on

any such information that such

person(s) did submit, as well as any

other pertinent information that the

PBGC may have. In general, the PBGC

will view information as of a date

further removed from the net worth

record date as having less probative

value than information as of a date

nearer to the net worth record date.

§ 4062.7 Calculating interest on liability

and refunds of overpayments.

(a) Interest. Whether or not the PBGC

has granted deferred payment terms

pursuant to § 4062.8, the amount of

liability under this part includes

interest, from the termination date, on

any unpaid portion of the liability. Such

interest accrues at the rate set forth in

paragraph (c) of this section until the

liability is paid in full and is

compounded daily. When liability

under this part is paid in more than one

payment, the PBGC will apply each

payment to the satisfaction of accrued

interest and then to the reduction of

principal.

(b) Refunds. If a contributing sponsor

or member(s) of a contributing sponsor’s

controlled group pays the PBGC an

amount that exceeds the full amount of

liability under this part, the PBGC shall

refund the excess amount, with interest

at the rate set forth in paragraph (c) of

this section. Interest on an overpayment

accrues from the later of the date of the

overpayment or 10 days prior to the

termination date until the date of the

refund and is compounded daily.

(c) Interest rate. The interest rate on

liability under this part and refunds

thereof is the annual rate prescribed in

section 6601(a) of the Code, and will

change whenever the interest rate under

section 6601(a) of the Code changes.

§ 4062.8 Arrangements for satisfying

liability.

(a) General. The PBGC will defer

payment, or agree to other arrangements

for the satisfaction, of any portion of

liability to the PBGC only when—

(1) As provided in paragraph (b) of

this section, the PBGC determines that

such action is necessary to avoid the

imposition of a severe hardship and that

there is a reasonable possibility that the

terms so prescribed will be met and the

entire liability paid; or

(2) As provided in paragraph (c) of

this section, the PBGC determines that

section 4062(b) liability exceeds 30

percent of the collective net worth of

persons subject to liability in

connection with a plan termination.

(b) Upon request. If the PBGC

determines that such action is necessary

to avoid the imposition of a severe

hardship on persons that are or may

become liable under section 4062, 4063,

or 4064 of ERISA and that there is a

reasonable possibility that persons so

liable will be able to meet the terms

prescribed and pay the entire liability,

the PBGC, in its discretion and when so

requested in accordance with paragraph

(b)(2) of this section, may grant deferred

payment or other terms for the

satisfaction of such liability.

(1) In determining what, if any, terms

to grant, the PBGC shall examine the

following factors:

(i) The ratio of the liability to the net

worth of the person making the request

and (if different) to the collective net

worth of persons subject to liability in

connection with a plan termination.

(ii) The overall financial condition of

persons that are or may become liable,

including, with respect to each such

person—

(A) The amounts and terms of existing

debts;

(B) The amount and availability of

liquid assets;

(C) Current and past cash flow; and

(D) Projected cash flow, including a

projection of the impact on operations

that would be caused by the immediate

full payment of the liability.

(iii) The availability of credit from

private sector sources to the person

making the request and to other liable

persons.

(2) A contributing sponsor or member

of a contributing sponsor’s controlled
34082 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

group may request deferred payment or

other terms for the satisfaction of any

portion of the liability under section

4062, 4063, or 4064 of ERISA at any

time by filing a written request. The

request must include the information

specified in § 4062.6(b), except that—

(i) If the request is filed one year or

more after the net worth record date,

references to ‘‘the net worth record

date’’ in § 4062.6(b) shall be replaced by

‘‘the most recent annual anniversary of

the net worth record date’’; and

(ii) Information that already has been

submitted to the PBGC need not be

submitted again.

(c) Liability exceeding 30 percent of

collective net worth. If the PBGC

determines that section 4062(b) liability

exceeds 30 percent of the collective net

worth of persons subject to the liability,

the PBGC will, after making a

reasonable effort to reach agreement

with such persons, prescribe

commercially reasonable terms for

payment of so much of the liability as

exceeds 30 percent of the collective net

worth of such persons. The terms

prescribed by the PBGC for payment of

that portion of the liability (including

interest) will provide for deferral of 50

percent of any amount otherwise

payable for any year if a person subject

to such liability demonstrates to the

satisfaction of the PBGC that no person

subject to such liability has any

individual pre-tax profits (within the

meaning of section 4062(d)(2) of ERISA)

for such person’s last full fiscal year

ending during that year.

(d) Interest. Interest on unpaid

liability is calculated in accordance

with § 4062.7(a).

(e) Security during period of deferred

payment. As a condition to the granting

of deferred payment terms, PBGC may,

in its discretion, require that the liable

person(s) provide PBGC with such

security for its obligations as the PBGC

deems adequate.

§ 4062.9 Filing of documents.

(a) Date of filing. Any document

(including information) required or

permitted to be filed under this part is

considered filed on the date of the

United States postmark stamped on the

cover in which the document is mailed,

provided that—

(1) The postmark was made by the

United States Postal Service; and

(2) The document was mailed postage

prepaid, properly packaged and

addressed to the PBGC. If the conditions

stated in both paragraphs (a)(1) and

(a)(2) of this section are not met, the

document is considered filed on the

date it is received by the PBGC.

Documents received after regular

business hours are considered filed on

the next regular business day.

(b) Where to file. Payments of liability

shall be clearly designated as such and

include the name of the plan. Such

payments shall be sent to the address

specified in the notification or demand

for liability issued by the PBGC under

§ 4068.3 or, if not so specified, to the

address provided, upon request, by the

Investment Management Division,

Pension Benefit Guaranty Corporation,

1200 K Street, NW., Washington, DC

20005–4026. Any document (including

information) required or permitted to be

filed under this part, except for

documents relating to appeals, shall be

submitted to the Insurance Operations

Department, Pension Benefit Guaranty

Corporation, at the above address. Any

document submitted pursuant to part

4003 in connection with an appeal of an

initial determination shall be submitted

to the Appeals Board, Pension Benefit

Guaranty Corporation, at the above

address.

§ 4062.10 Computation of time.

In computing any period of time

prescribed or allowed by this subpart,

the day of the act, event, or default from

which the designated period of time

begins to run is not counted. The last

day of the period so computed shall be

included, unless it is a Saturday,

Sunday, or Federal holiday, in which

event the period runs until the end of

the next day which is not a Saturday,

Sunday, or a Federal holiday. For the

purpose of computing interest accrued,

a Saturday, Sunday or Federal holiday

referred to in the previous sentence

shall be included.

(Approved by the Office of Management and

Budget under control number 1212–0017.)

PART 4063—WITHDRAWAL LIABILITY;

PLANS UNDER MULTIPLE

CONTROLLED GROUPS

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

§ 4063.1 Cross-references.

(a) Part 4062, subpart A, of this

chapter sets forth rules for

determination and payment of the

liability incurred, under section 4062(b)

of ERISA, upon termination of any

single-employer plan and, to the extent

appropriate, determination of the

liability incurred with respect to

multiple employer plans under sections

4063 and 4064 of ERISA.

(b) Part 4068 of this chapter includes

rules regarding the PBGC’s lien under

section 4068 of ERISA with respect to

liability arising under section 4062,

4063, or 4064.

PART 4064—LIABILITY ON

TERMINATION OF SINGLE-EMPLOYER

PLANS UNDER MULTIPLE

CONTROLLED GROUPS

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

§ 4064.1 Cross-references.

(a) Part 4062, subpart A, of this

chapter sets forth rules for

determination and payment of the

liability incurred under section 4062(b)

of ERISA, upon termination of any

single-employer plan and, to the extent

appropriate, determination of the

liability incurred with respect to

multiple employer plans under sections

4063 and 4064 of ERISA.

(b) Part 4068 of this chapter includes

rules regarding the PBGC’s lien under

section 4068 of ERISA with respect to

liability arising under section 4062,

4063, or 4064.

PART 4065—ANNUAL REPORT

Sec.

4065.1 Purpose and scope.

4065.2 Definitions.

4065.3 Filing requirement.

Authority: 29 U.S.C. 1302, 1365.

§ 4065.1 Purpose and scope.

The purpose of this part is to specify

the form and content of the Annual

Report required by section 4065 of

ERISA. This part applies to all plans

covered by title IV of ERISA.

§ 4065.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: ERISA, IRS,

PBGC, and plan.

§ 4065.3 Filing requirement.

Plan administrators shall file the

Annual Report on IRS/DOL/PBGC

Forms 5500, 5500–C, 5500–K or 5500–

R, as appropriate, in accordance with

the instructions therein. (Approved by

the Office of Management and Budget

under control number 1212–0026.)

PART 4067—RECOVERY OF LIABILITY

FOR PLAN TERMINATIONS

§ 4067.1 Cross-reference.

Section 4062.8 of this chapter

contains rules on deferred payment and

other arrangements for satisfaction of

liability to the PBGC after termination of

single-employer plans.

PART 4068—LIEN FOR LIABILITY

Sec.

4068.1 Purpose; cross-references.

4068.2 Definitions.

4068.3 Notification of and demand for

liability.

4068.4 Lien.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34083

Authority: 29 U.S.C. 1302(b)(3), 1362–

1364, 1367–1368.

§ 4068.1 Purpose; cross-references.

This part contains rules regarding the

PBGC’s lien under section 4068 of

ERISA with respect to liability arising

under section 4062, 4063, or 4064 of

ERISA.

§ 4068.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: ERISA, PBGC,

person, plan, and termination date.

Collective net worth of persons subject

to liability in connection with a plan

termination has the meaning in

§ 4062.2.

§ 4068.3 Notification of and demand for

liability.

(a) Notification of liability. Except as

provided in paragraph (c) of this

section, when the PBGC has determined

the amount of the liability under part

4062 and whether or not the liability

has already been paid, the PBGC shall

notify liable person(s) in writing of the

amount of the liability. If the full

liability has not yet been paid, the

notification will include a request for

payment of the full liability and will

indicate that, as provided in § 4062.8,

the PBGC will prescribe commercially

reasonable terms for payment of so

much of the liability as it determines

exceeds 30 percent of the collective net

worth of persons subject to liability in

connection with a plan termination. In

all cases, the notification will include a

statement of the right to appeal the

assessment of liability pursuant to part

4003.

(b) Demand for liability. Except as

provided in paragraph (c) of this

section, if person(s) liable to the PBGC

fail to pay the full liability and no

appeal is filed or an appeal is filed and

the decision on appeal finds liability,

the PBGC will issue a demand letter for

the liability—

(1) If no appeal is filed, upon the

expiration of time to file an appeal

under part 4003; or

(2) If an appeal is filed, upon issuance

of a decision on the appeal finding that

there is liability under this part.

The demand letter will indicate that,

as provided in § 4062.8, the PBGC will

prescribe commercially reasonable

terms for payment of so much of the

liability as it determines exceeds 30

percent of the collective net worth of

such persons.

(c) Special rule. Notwithstanding

paragraphs (a) and (b) of this section,

the PBGC may, in any case in which it

believes that its ability to assert or

obtain payment of liability is in

jeopardy, issue a demand letter for the

liability under this part immediately

upon determining the liability, without

first issuing a notification of liability

pursuant to paragraph (a) of this section.

When the PBGC issues a demand letter

under this paragraph, there is no right

to an appeal pursuant to part 4003 of

this chapter.

§ 4068.4 Lien.

If any person liable to the PBGC under

section 4062, 4063, or 4064 of ERISA

fails or refuses to pay the full amount

of such liability within the time

specified in the demand letter issued

under § 4068.3, the PBGC shall have a

lien in the amount of the liability,

including interest, arising as of the

plan’s termination date, upon all

property and rights to property, whether

real or personal, belonging to that

person, except that such lien may not be

in an amount in excess of 30 percent of

the collective net worth of all persons

described in section 4062(a) of ERISA

and part 4062 of this chapter.

PART 4203—EXTENSION OF SPECIAL

WITHDRAWAL LIABILITY RULES

Sec.

4203.1 Purpose and scope.

4203.2 Definitions.

4203.3 Plan adoption of special withdrawal

rules.

4203.4 Requests for PBGC approval of plan

amendments.

4203.5 PBGC action on requests.

4203.6 OMB control number.

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

§ 4203.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to prescribe procedures whereby a

multiemployer plan may, pursuant to

sections 4203(f) and 4208(e)(3) of

ERISA, request the PBGC to approve a

plan amendment which establishes

special complete or partial withdrawal

liability rules.

(b) Scope. This part applies to a

multiemployer pension plan covered by

Title IV of ERISA.

§ 4203.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: complete

withdrawal, employer, ERISA,

multiemployer plan, PBGC, person,

plan, plan sponsor, and plan year.

§ 4203.3 Plan adoption of special

withdrawal rules.

(a) General rule. A plan may, subject

to the approval of the PBGC, establish

by plan amendment special complete or

partial withdrawal liability rules. A

complete withdrawal liability rule

adopted pursuant to this part shall be

similar to the rules for the construction

and entertainment industries described

in section 4203 (b) and (c) of ERISA. A

partial withdrawal liability rule adopted

pursuant to this part shall be consistent

with the complete withdrawal rule

adopted by the plan. A plan amendment

adopted under this part may not be put

into effect until it is approved by the

PBGC.

(b) Discretionary provisions of the

plan amendment. A plan amendment

adopted pursuant to this part may—

(1) Cover an entire industry or

industries, or be limited to a segment of

an industry; and

(2) Apply to cessations of the

obligation to contribute that occurred

prior to the adoption of the amendment.

§ 4203.4 Requests for PBGC approval of

plan amendments.

(a) Filing of request. A plan shall

apply to the PBGC for approval of a plan

amendment which establishes special

complete or partial withdrawal liability

rules. The request for approval shall be

filed after the amendment is adopted.

PBGC approval shall also be required for

any subsequent modification of the plan

amendment, other than a repeal of the

amendment which results in employers

being subject to the general statutory

rules on withdrawal.

(b) Who may request. The plan

sponsor, or a duly authorized

representative acting on behalf of the

plan sponsor, shall sign and submit the

request.

(c) Where to file. The request shall be

delivered by mail or submitted by hand

to Reports Processing, Insurance

Operations Department, Pension Benefit

Guaranty Corporation, 1200 K Street

NW., Washington, DC 20005–4026.

(d) Information. Each request shall

contain the following information:

(1) The name and address of the plan

for which the plan amendment is being

submitted, and the telephone number of

the plan sponsor or its authorized

representative.

(2) A copy of the executed

amendment, including the proposed

effective date.

(3) A statement certifying that notice

of the adoption of the amendment and

the request for approval filed under this

part has been given to all employers

who have an obligation to contribute

under the plan and to all employee

organizations representing employees

covered under the plan.

(4) A statement indicating how the

withdrawal rules in the plan

amendment would operate in the event

of a sale of assets by a contributing

employer or the cessation of the

obligation to contribute or the cessation

of covered operations by all employers.

(5) A copy of the plan’s most recent

actuarial valuation.
34084 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(6) For each of the previous five plan

years, information on the number of

plan participants by category (active,

retired and separate vested) and a

complete financial statement. This

requirement may be satisfied by the

submission for each of those years of

Form 5500, including schedule B, or

similar reports required under prior law.

(7) A detailed description of the

industry to which the plan amendment

will apply, including information

sufficient to demonstrate the effect of

withdrawals on the plan’s contribution

base, and information establishing

industry characteristics which would

indicate that withdrawals in the

industry do not typically have an

adverse effect on the plan’s contribution

base. Such industry characteristics

include the mobility of employees, the

intermittent nature of employment, the

project-by-project nature of the work,

extreme fluctuations in the level of an

employer’s covered work under the

plan, the existence of a consistent

pattern of entry and withdrawal by

employers, and the local nature of the

work performed.

(e) Supplemental information. In

addition to the information described in

paragraph (d) of this section, a plan may

submit any other information it believes

is pertinent to its request. The PBGC

may require the plan sponsor to submit

any other information the PBGC

determines it needs to review a request

under this part.

§ 4203.5 PBGC action on requests.

(a) General. The PBGC shall approve

a plan amendment providing for the

application of special complete or

partial withdrawal liability rules upon a

determination by the PBGC that the plan

amendment—

(1) Will apply only to an industry that

has characteristics that would make use

of the special withdrawal rules

appropriate; and

(2) Will not pose a significant risk to

the insurance system.

(b) Notice of pendency of request. As

soon as practicable after receiving a

request for approval of a plan

amendment containing all the

information required under § 4203.4, the

PBGC shall publish a notice of the

pendency of the request in the Federal

Register. The notice shall contain a

summary of the request and invite

interested persons to submit written

comments to the PBGC concerning the

request. The notice will normally

provide for a comment period of 45

days.

(c) PBGC decision on request. After

the close of the comment period, PBGC

shall issue its decision in writing on the

request for approval of a plan

amendment. Notice of the decision shall

be published in the Federal Register.

§ 4203.6 OMB control number.

The collections of information

contained in this part have been

approved by the Office of Management

and Budget under OMB control number

1212–0050.

PART 4204—VARIANCES FOR SALE

OF ASSETS

Subpart A—General

Sec.

4204.1 Purpose and scope.

4204.2 Definitions.

Subpart B—Variance of the Statutory

Requirements

4204.11 Variance of the bond/escrow and

sale-contract requirements.

4204.12 De minimis transactions.

4204.13 Net income and net tangible assets

tests.

Subpart C—Procedures for Individual and

Class Variances or Exemptions

4204.21 Requests to PBGC for variances and

exemptions.

4204.22 PBGC action on requests.

Authority: 29 U.S.C. 1302(b)(3), 1384(c).

Subpart A—General

§ 4204.1 Purpose and scope.

(a) Purpose. Under section 4204 of

ERISA, an employer that ceases covered

operations under a multiemployer plan,

or ceases to have an obligation to

contribute for such operations, because

of a bona fide, arm’s-length sale of assets

to an unrelated purchaser does not incur

withdrawal liability if certain

conditions are met. One condition is

that the sale contract provide that the

seller will be secondarily liable if the

purchaser withdraws from the plan

within five years and does not pay its

withdrawal liability. Another condition

is that the purchaser furnish a bond or

place funds in escrow, for a period of

five plan years, in a prescribed amount.

Section 4204 also authorizes the PBGC

to provide for variances or exemptions

from these requirements. Subpart B of

this part provides variances and

exemptions from the requirements for

certain sales of assets. Subpart C of this

part establishes procedures under which

a purchaser or seller may, when the

conditions set forth in subpart B are not

satisfied or when the parties decline to

provide certain financial information to

the plan, request the PBGC to grant

individual or class variances or

exemptions from the requirements.

(b) Scope. In general, this part applies

to any sale of assets described in section

4204(a)(1) of ERISA. However, this part

does not apply to a sale of assets

involving operations for which the

seller is obligated to contribute to a plan

described in section 404(c) of the Code,

or a continuation of such a plan, unless

the plan is amended to provide that

section 4204 applies.

§ 4204.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: Code,

employer, ERISA, IRS, multiemployer

plan, PBGC, person, plan, plan

administrator, plan sponsor, and plan

year.

In addition, for purposes of this part:

Date of determination means the date

on which a seller ceases covered

operations or ceases to have an

obligation to contribute for such

operations as a result of a sale of assets

within the meaning of section 4204(a) of

ERISA.

Net income after taxes means revenue

minus expenses after taxes (excluding

extraordinary and non-recurring income

or expenses), as presented in an audited

financial statement or, in the absence of

such statement, in an unaudited

financial statement, each prepared in

conformance with generally accepted

accounting principles.

Net tangible assets means tangible

assets (assets other than licenses,

patents copyrights, trade names,

trademarks, goodwill, experimental or

organizational expenses, unamortized

debt discounts and expenses and all

other assets which, under generally

accepted accounting principles, are

deemed intangible) less liabilities (other

than pension liabilities). Encumbered

assets shall be excluded from net

tangible assets only to the extent of the

amount of the encumbrance.

Purchaser means a purchaser

described in section 4204(a)(1) of

ERISA.

Seller means a seller described in

section 4204(a)(1) of ERISA.

Subpart B—Variance of the Statutory

Requirements

§ 4204.11 Variance of the bond/escrow and

sale-contract requirements.

(a) General rule. A purchaser’s bond

or escrow under section 4204(a)(1)(B) of

ERISA and the sale-contract provision

under section 4204(a)(1)(C) are not

required if the parties to the sale inform

the plan in writing of their intention

that the sale be covered by section 4204

of ERISA and demonstrate to the

satisfaction of the plan that at least one

of the criteria contained in § 4204.12 or

§ 4204.13(a) is satisfied.

(b) Requests after posting of bond or

establishment of escrow. A request for a
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34085

variance may be filed at any time. If,

after a purchaser has posted a bond or

placed money in escrow pursuant to

section 4204(a)(1)(B) of ERISA, the

purchaser demonstrates to the

satisfaction of the plan that the criterion

in either § 4204.13 (a)(1) or (a)(2) is

satisfied, then the bond shall be

cancelled or the amount in escrow shall

be refunded. For purposes of

considering a request after the bond or

escrow is in place, the words ‘‘the year

preceding the date of the variance

request’’ shall be substituted for ‘‘the

date of determination’’ for the first

mention of that term in both § 4204.13

(a)(1) and (a)(2). In addition, in

determining the purchaser’s average net

income after taxes under § 4204.13(a)(1),

for any year included in the average for

which the net income figure does not

reflect the interest expense incurred

with respect to the sale, the purchaser’s

net income shall be reduced by the

amount of interest paid with respect to

the sale in the fiscal year following the

date of determination.

(c) Information required. A request for

a variance shall contain financial or

other information that is sufficient to

establish that one of the criteria in

§ 4204.12 or § 4204.13(a) is satisfied. A

request on the basis of either § 4204.13

(a)(1) or (a)(2) shall also include a copy

of the purchaser’s audited (if available)

or (if not) unaudited financial

statements for the specified time period.

(d) Limited exemption during

pendency of request. Provided that all of

the information required to be

submitted is submitted before the first

day of the first plan year beginning after

the sale, a plan may not, pending its

decision on the variance, require a

purchaser to post a bond or place an

amount in escrow pursuant to section

4204(a)(1)(B). In the event a bond or

escrow is not in place pursuant to the

preceding sentence, and the plan

determines that the request does not

qualify for a variance, the purchaser

shall comply with section 4204(a)(1)(B)

within 30 days after the date on which

it receives notice of the plan’s decision.

(Approved by the Office of Management and

Budget under control number 1212—0021)

§ 4204.12 De minimis transactions.

The criterion under this section is that

the amount of the bond or escrow does

not exceed the lesser of $250,000 or two

percent of the average total annual

contributions made by all employers to

the plan, for the purposes of section

412(b)(3)(A) of the Code, for the three

most recent plan years ending before the

date of determination. For this purpose,

‘‘contributions made’’ shall have the

same meaning as the term has under

§ 4211.12(a) of this chapter.

§ 4204.13 Net income and net tangible

assets tests.

(a) General. The criteria under this

section are that either—

(1) Net income test. The purchaser’s

average net income after taxes for its

three most recent fiscal years ending

before the date of determination (as

defined in § 4204.12), reduced by any

interest expense incurred with respect

to the sale which is payable in the fiscal

year following the date of

determination, equals or exceeds 150

percent of the amount of the bond or

escrow required under ERISA section

4204(a)(1)(B); or

(2) Net tangible assets test. The

purchaser’s net tangible assets at the

end of the fiscal year preceding the date

of determination (as defined in

§ 4204.12), equal or exceed—

(i) If the purchaser was not obligated

to contribute to the plan before the sale,

the amount of unfunded vested benefits

allocable to the seller under section

4211 (with respect to the purchased

operations), as of the date of

determination, or

(ii) If the purchaser was obligated to

contribute to the plan before the sale,

the sum of the amount of unfunded

vested benefits allocable to the

purchaser and to the seller under ERISA

section 4211 (with respect to the

purchased operations), each as of the

date of determination.

(b) Special rule when more than one

plan is covered by request. For the

purposes of paragraphs (a)(1) and (a)(2),

if the transaction involves the

assumption by the purchaser of the

seller’s obligation to contribute to more

than one multiemployer plan, then the

total amount of the bond or escrow or

of the unfunded vested benefits, as

applicable, for all of the plans with

respect to which the purchaser has not

posted a bond or escrow shall be used

to determine whether the applicable test

is met.

(c) Non-applicability of tests in event

of purchaser’s insolvency. A purchaser

will not qualify for a variance under this

subpart pursuant to paragraph (a)(1) or

(a)(2) of this section if, as of the earlier

of the date of the plan’s decision on the

variance request or the first day of the

first plan year beginning after the date

of determination, the purchaser is the

subject of a petition under title 11,

United States Code, or of a proceeding

under similar provisions of state

insolvency laws.

Subpart C—Procedures for Individual

and Class Variances or Exemptions

§ 4204.21 Requests to PBGC for variances

and exemptions.

(a) General. If a transaction covered

by this part does not satisfy the

conditions set forth in subpart B of this

part, or if the parties decline to provide

to the plan privileged or confidential

financial information within the

meaning of section 552(b)(4) of the

Freedom of Information Act (5 U.S.C.

552), the purchaser or seller may request

from the PBGC an exemption or

variance from the requirements of

section 4204(a)(1) (B) and (C) of ERISA.

(b) Who may request. A purchaser or

a seller may file a request for a variance

or exemption. The request may be

submitted by one or more duly

authorized representatives acting on

behalf of the party or parties. When a

contributing employer withdraws from a

plan as a result of related sales of assets

involving several purchasers, or

withdraws from more than one plan as

a result of a single sale, the application

may request a class variance or

exemption for all the transactions.

(c) Where to file. The request shall be

delivered by mail or submitted by hand

to Reports Processing, Insurance

Operations Department, Pension Benefit

Guaranty Corporation, 1200 K Street

NW., Washington, DC 20005–4026.

(d) Information. Each request shall

contain the following information:

(1) The name and address of the plan

or plans for which the variance or

exemption is being requested, and the

telephone number of the plan

administrator of each plan.

(2) For each plan described in

paragraph (d)(1) of this section, the

nine-digit Employer Identification

Number (EIN) assigned by the IRS to the

plan sponsor and the three-digit Plan

Identification Number (PN) assigned by

the plan sponsor to the plan, and, if

different, also the EIN and PN last filed

with the PBGC. If an EIN or PN has not

been assigned, that should be indicated.

(3) The name, address and telephone

number of the seller and of its duly

authorized representative, if any.

(4) The name, address and telephone

number of the purchaser and of its duly

authorized representative, if any.

(5) A full description of each

transaction for which the request is

being made, including effective date.

(6) A statement explaining why the

requested variance or exemption would

not significantly increase the risk of

financial loss to the plan, including

evidence, financial or otherwise, that

supports that conclusion.
34086 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(7) When the request for a variance or

exemption is filed by the seller alone, a

statement signed by the purchaser

indicating its intention that section 4204

of ERISA apply to the sale of assets.

(8) A statement indicating the amount

of the purchaser’s bond or escrow

required under section 4204(a)(1)(B) of

ERISA.

(9) The estimated amount of

withdrawal liability that the seller

would otherwise incur as a result of the

sale if section 4204 did not apply to the

sale.

(10) A certification that a complete

copy of the request has been sent to

each plan described in paragraph (d)(1)

of this section and each collective

bargaining representative of the seller’s

employees by certified mail, return

receipt requested.

(e) Additional information. In

addition to the information described in

paragraph (d) of this section, the PBGC

may require the purchaser, the seller, or

the plan to submit any other

information the PBGC determines it

needs to review the request.

(f) Disclosure of information. Any

party submitting information pursuant

to this section may include a statement

of whether any of the information is of

a nature that its disclosure may not be

required under the Freedom of

Information Act, 5 U.S.C. 552. The

statement should specify the

information that may not be subject to

disclosure and the grounds therefor.

(Approved by the Office of Management and

Budget under control number 1212–0021)

§ 4204.22 PBGC action on requests.

(a) General. The PBGC shall approve

a request for a variance or exemption if

PBGC determines that approval of the

request is warranted, in that it—

(1) Would more effectively or

equitably carry out the purposes of title

IV of ERISA; and

(2) Would not significantly increase

the risk of financial loss to the plan.

(b) Notice of pendency of request. As

soon as practicable after receiving a

variance or exemption request

containing all the information specified

in § 4204.21, the PBGC shall publish a

notice of the pendency of the request in

the Federal Register. The notice shall

provide that any interested person may,

within the period of time specified

therein, submit written comments to the

PBGC concerning the request. The

notice will usually provide for a

comment period of 45 days.

(c) PBGC decision on request. The

PBGC shall issue a decision on a

variance or exemption request as soon

as practicable after the close of the

comment period described in paragraph

(b) of this section. PBGC’s decision shall

be in writing, and if the PBGC

disapproves the request, the decision

shall state the reasons therefor. Notice of

the decision shall be published in the

Federal Register.

PART 4206—ADJUSTMENT OF

LIABILITY FOR A WITHDRAWAL

SUBSEQUENT TO A PARTIAL

WITHDRAWAL

Sec.

4206.1 Purpose and scope.

4206.2 Definitions.

4206.3 Credit against liability for a

subsequent withdrawal.

4206.4 Amount of credit in plans using the

presumptive method.

4206.5 Amount of credit in plans using the

modified presumptive method.

4206.6 Amount of credit in plans using the

rolling-5 method.

4206.7 Amount of credit in plans using the

direct attribution method.

4206.8 Reduction of credit for abatement or

other reduction of prior partial

withdrawal liability.

4206.9 Amount of credit in plans using

alternative allocation methods.

4206.10 Special rule for 70-percent decline

partial withdrawals.

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

1386(b).

§ 4206.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to prescribe rules, pursuant to section

4206(b) of ERISA, for adjusting the

partial or complete withdrawal liability

of an employer that previously partially

withdrew from the same multiemployer

plan. Section 4206(b)(1) provides that

when an employer that has partially

withdrawn from a plan subsequently

incurs liability for another partial or a

complete withdrawal from that plan, the

employer’s liability for the subsequent

withdrawal is to be reduced by the

amount of its liability for the prior

partial withdrawal (less any waiver or

reduction of that prior liability). Section

4206(b)(2) requires the PBGC to

prescribe regulations adjusting the

amount of this credit to ensure that the

liability for the subsequent withdrawal

properly reflects the employer’s share of

liability with respect to the plan. The

purpose of the credit is to protect a

withdrawing employer from being

charged twice for the same unfunded

vested benefits of the plan. The

reduction in the credit protects the other

employers in the plan from becoming

responsible for unfunded vested

benefits properly allocable to the

withdrawing employer. In the interests

of simplicity, the rules in this part

provide for, generally, a one-step

calculation of the adjusted credit under

section 4206(b)(2) against the

subsequent liability, rather than for

separate calculations first of the credit

under section 4206(b)(1) and then of the

reduction in the credit under paragraph

(b)(2) of that section. In cases where the

withdrawal liability for the prior partial

withdrawal was reduced by an

abatement or other reduction of that

liability, the adjusted credit is further

reduced in accordance with § 4206.8 of

this part.

(b) Scope. This part applies to

multiemployer plans covered under

Title IV of ERISA, and to employers that

have partially withdrawn from such

plans after September 25, 1980 and

subsequently completely or partially

withdraw from the same plan.

§ 4206.2 Definitions.

The following are defined in § 4001.2

of this chapter: Code, employer, ERISA,

multiemployer plan, PBGC, plan, and

plan year.

In addition, for purposes of this part:

Complete withdrawal means a

complete withdrawal as described in

section 4203 of ERISA.

Partial withdrawal means a partial

withdrawal as described in section 4205

of ERISA.

§ 4206.3 Credit against liability for a

subsequent withdrawal.

Whenever an employer that was

assessed withdrawal liability for a

partial withdrawal from a plan partially

or completely withdraws from that plan

in a subsequent plan year, it shall

receive a credit against the new

withdrawal liability in an amount

greater than or equal to zero, determined

in accordance with this part. If the

credit determined under §§ 4206.4

through 4206.9 is less than zero, the

amount of the credit shall equal zero.

§ 4206.4 Amount of credit in plans using

the presumptive method.

(a) General. In a plan that uses the

presumptive allocation method

described in section 4211(b) of ERISA,

the credit shall equal the sum of the

unamortized old liabilities determined

under paragraph (b) of this section,

multiplied by the fractions described or

determined under paragraph (c) of this

section. When an employer’s prior

partial withdrawal liability has been

reduced or waived, this credit shall be

adjusted in accordance with § 4206.8.

(b) Unamortized old liabilities. The

amounts determined under this

paragraph are the employer’s

proportional shares, if any, of the

unamortized amounts as of the end of

the plan year preceding the withdrawal

for which the credit is being calculated,

of—
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34087

(1) The plan’s unfunded vested

benefits as of the end of the last plan

year ending before September 26, 1980;

(2) The annual changes in the plan’s

unfunded vested benefits for plan years

ending after September 25, 1980, and

before the year of the prior partial

withdrawal; and

(3) The reallocated unfunded vested

benefits (if any), as determined under

section 4211(b)(4) of ERISA, for plan

years ending before the year of the prior

partial withdrawal.

(c) Employer’s allocable share of old

liabilities. The sum of the amounts

determined under paragraph (b) are

multiplied by the two fractions

described in this paragraph in order to

determine the amount of the old

liabilities that was previously assessed

against the employer.

(1) The first fraction is the fraction

determined under section 4206(a)(2) of

ERISA for the prior partial withdrawal.

(2) The second fraction is a fraction,

the numerator of which is the amount

of the liability assessed against the

employer for the prior partial

withdrawal, and the denominator of

which is the product of—

(i) The amount of unfunded vested

benefits allocable to the employer as if

it had completely withdrawn as of the

date of the prior partial withdrawal

(determined without regard to any

adjustments), multiplied by—

(ii) The fraction determined under

section 4206(a)(2) of ERISA for the prior

partial withdrawal.

§ 4206.5 Amount of credit in plans using

the modified presumptive method.

(a) General. In a plan that uses the

modified presumptive method

described in section 4211(c)(2) of

ERISA, the credit shall equal the sum of

the unamortized old liabilities

determined under paragraph (b) of this

section, multiplied by the fractions

described or determined under

paragraph (c) of this section. When an

employer’s prior partial withdrawal

liability has been reduced or waived,

this credit shall be adjusted in

accordance with § 4206.8.

(b) Unamortized old liabilities. The

amounts described in this paragraph

shall be determined as of the end of the

plan year preceding the withdrawal for

which the credit is being calculated, and

are the employer’s proportional shares,

if any, of—

(1) The plan’s unfunded vested

benefits as of the end of the last plan

year ending before September 26, 1980,

reduced as if those obligations were

being fully amortized in level annual

installments over 15 years beginning

with the first plan year ending on or

after such date; and

(2) The aggregate post-1980 change

amount determined under section

4211(c)(2)(C) of ERISA as if the

employer had completely withdrawn in

the year of the prior partial withdrawal,

reduced as if those obligations were

being fully amortized in level annual

installments over the 5-year period

beginning with the plan year in which

the prior partial withdrawal occurred.

(c) Employer’s allocable share of old

liabilities. The sum of the amounts

determined under paragraph (b) are

multiplied by the two fractions

described in this paragraph in order to

determine the amount of old liabilities

that was previously assessed against the

employer.

(1) The first fraction is the fraction

determined under section 4206(a)(2) of

ERISA for the prior partial withdrawal.

(2) The second fraction is a fraction,

the numerator of which is the amount

of the liability assessed against the

employer for the prior partial

withdrawal, and the denominator of

which is the product of—

(i) The amount of unfunded vested

benefits allocable to the employer as if

it had completely withdrawn as of the

date of the prior partial withdrawal

(determined without regard to any

adjustments), multiplied by—

(ii) The fraction determined under

section 4206(a)(2) of ERISA for the prior

partial withdrawal.

§ 4206.6 Amount of credit in plans using

the rolling-5 method.

In a plan that uses the rolling-5

allocation method described in section

4211(c)(3) of ERISA, the credit shall

equal the amount of the liability

assessed for the prior partial

withdrawal, reduced as if that amount

was being fully amortized in level

annual installments over the 5-year

period beginning with the plan year in

which the prior partial withdrawal

occurred. When an employer’s prior

partial withdrawal liability has been

reduced or waived, this credit shall be

adjusted in accordance with § 4206.8.

§ 4206.7 Amount of credit in plans using

the direct attribution method.

In a plan that uses the direct

attribution allocation method described

in section 4211(c)(4) of ERISA, the

credit shall equal the amount of the

liability assessed for the prior partial

withdrawal, reduced as if that amount

was being fully amortized in level

annual installments beginning with the

plan year in which the prior partial

withdrawal occurred, over the greater of

10 years or the amortization period for

the resulting base when the combined

charge base and the combined credit

base are offset under section 412(b)(4) of

the Code. When an employer’s prior

partial withdrawal liability has been

reduced or waived, this credit shall be

adjusted in accordance with § 4206.8.

§ 4206.8 Reduction of credit for abatement

or other reduction of prior partial

withdrawal liability.

(a) General. If an employer’s

withdrawal liability for a prior partial

withdrawal has been reduced or waived,

the credit determined pursuant to

§§ 4206.4 through 4206.7 shall be

adjusted in accordance with this

section.

(b) Computation. The adjusted credit

is calculated by multiplying the credit

determined under the preceding

sections of this part by a fraction—

(1) the numerator of which is the

excess of the total partial withdrawal

liability of the employer for all partial

withdrawals in prior years (excluding

those partial withdrawals for which the

credit is zero) over the present value of

each abatement or other reduction of

that prior withdrawal liability

calculated as of the date on which that

prior partial withdrawal liability was

determined; and

(2) the denominator of which is the

total partial withdrawal liability of the

employer for all partial withdrawals in

prior years (excluding those partial

withdrawals for which the credit is

zero).

§ 4206.9 Amount of credit in plans using

alternative allocation methods.

A plan that has adopted an alternative

method of allocating unfunded vested

benefits pursuant to section 4211(c)(5)

of ERISA and part 4211 of this chapter

shall adopt, by plan amendment, a

method of calculating the credit

provided by § 4206.3 that is consistent

with the rules in §§ 4206.4 through

4206.8 for plans using the statutory

allocation method most similar to the

plan’s alternative allocation method.

§ 4206.10 Special rule for 70-percent

decline partial withdrawals.

For the purposes of applying the rules

in §§ 4206.4 through 4206.9 in any case

in which either the prior or subsequent

partial withdrawal resulted from a 70-

percent contribution decline (or a 35-

percent decline in the case of certain

retail food industry plans), the first year

of the 3-year testing period shall be

deemed to be the plan year in which the

partial withdrawal occurred.
34088 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

PART 4207—REDUCTION OR WAIVER

OF COMPLETE WITHDRAWAL

LIABILITY

Sec.

4207.1 Purpose and scope.

4207.2 Definitions.

4207.3 Abatement.

4207.4 Withdrawal liability payments

during pendency of abatement

determination.

4207.5 Requirements for abatement.

4207.6 Partial withdrawals after reentry.

4207.7 Liability for subsequent complete

withdrawals and related adjustments for

allocating unfunded vested benefits.

4207.8 Liability for subsequent partial

withdrawals.

4207.9 Special rules.

4207.10 Plan rules for abatement.

Authority: 29 U.S.C. 1302(b)(3), 1387.

§ 4207.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to prescribe rules, pursuant to section

4207(a) of ERISA, for reducing or

waiving the withdrawal liability of

certain employers that have completely

withdrawn from a multiemployer plan

and subsequently resume covered

operations under the plan. This part

prescribes rules pursuant to which the

plan must waive the employer’s

obligation to make future liability

payments with respect to its complete

withdrawal and must calculate the

amount of the employer’s liability for a

partial or complete withdrawal from the

plan after its reentry into the plan. This

part also provides procedures, pursuant

to section 4207(b) of ERISA, for plan

sponsors of multiemployer plans to

apply to PBGC for approval of plan

amendments that provide for the

reduction or waiver of complete

withdrawal liability under conditions

other than those specified in section

4207(a) of ERISA and this part.

(b) Scope. This part applies to

multiemployer plans covered under title

IV of ERISA, and to employers that have

completely withdrawn from such plans

after September 25, 1980, and that have

not, as of the date of their reentry into

the plan, fully satisfied their obligation

to pay withdrawal liability arising from

the complete withdrawal.

§ 4207.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: employer,

ERISA, IRS, Multiemployer Act,

multiemployer plan, nonforfeitable

benefit, PBGC, plan, and plan year .

In addition, for purposes of this part:

Complete withdrawal means a

complete withdrawal as described in

section 4203 of ERISA.

Eligible employer means the

employer, as defined in section 4001(b)

of ERISA, as it existed on the date of its

initial partial or complete withdrawal,

as applicable. An eligible employer

shall continue to be an eligible

employer notwithstanding the

occurrence of any of the following

events:

(1) A restoration involving a mere

change in identity, form or place of

organization, however effected;

(2) A reorganization involving a

liquidation into a parent corporation;

(3) A merger, consolidation or

division solely between (or among)

trades or businesses (whether or not

incorporated) of the employer; or

(4) An acquisition by or of, or a

merger or combination with another

trade or business.

Partial withdrawal means a partial

withdrawal as described in section 4205

of ERISA.

Period of withdrawal means the plan

year in which the employer completely

withdrew from the plan, the plan year

in which the employer reentered the

plan and all intervening plan years.

§ 4207.3 Abatement.

(a) General. Whenever an eligible

employer that has completely

withdrawn from a multiemployer plan

reenters the plan, it may apply to the

plan for abatement of its complete

withdrawal liability. Applications shall

be filed by the date of the first

scheduled withdrawal liability payment

falling due after the employer resumes

covered operations or, if later, the

fifteenth calendar day after the

employer resumes covered operations.

Applications shall identify the eligible

employer, the withdrawn employer, if

different, the date of withdrawal, and

the date of resumption of covered

operations. Upon receiving an

application for abatement, the plan

sponsor shall determine, in accordance

with paragraph (b) of this section,

whether the employer satisfies the

requirements for abatement of its

complete withdrawal liability under

§ 4207.5, § 4207.9, or a plan amendment

which has been approved by PBGC

pursuant to § 4207.10. If the plan

sponsor determines that the employer

satisfies the requirements for abatement

of its complete withdrawal liability, the

provisions of paragraph (c) of this

section shall apply. If the plan sponsor

determines that the employer does not

satisfy the requirements for abatement

of its complete withdrawal liability, the

provisions of paragraphs (d) and (e) of

this section shall apply.

(b) Determination of abatement. As

soon as practicable after an eligible

employer that completely withdrew

from a multiemployer plan applies for

abatement, the plan sponsor shall

determine whether the employer

satisfies the requirements for abatement

of its complete withdrawal liability

under this part and shall notify the

employer in writing of its determination

and of the consequences of its

determination, as described in

paragraphs (c) or (d) and (e) of this

section, as appropriate. If a bond or

escrow has been provided to the plan

under § 4207.4, the plan sponsor shall

send a copy of the notice to the bonding

or escrow agent.

(c) Effects of abatement. If the plan

sponsor determines that the employer

satisfies the requirements for abatement

of its complete withdrawal liability

under this part, then—

(1) The employer shall have no

obligation to make future withdrawal

liability payments to the plan with

respect to its complete withdrawal;

(2) The employer’s liability for a

subsequent withdrawal shall be

determined in accordance with § 4207.7

or § 4207.8, as applicable;

(3) Any bonds furnished under

§ 4207.4 shall be cancelled and any

amounts held in escrow under § 4207.4

shall be refunded to the employer; and

(4) Any withdrawal liability payments

due after the reentry and made by the

employer to the plan shall be refunded

by the plan without interest.

(d) Effects of non-abatement. If the

plan sponsor determines that the

employer does not satisfy the

requirements for abatement of its

complete withdrawal liability under this

part, then—

(1) The bond or escrow furnished

under § 4207.4 shall be paid to the plan

within 30 days after the date of the plan

sponsor’s notice under paragraph (b) of

this section;

(2) The employer shall pay to the plan

within 30 days after the date of the plan

sponsor’s notice under paragraph (b) of

this section, the amount of its

withdrawal liability payment or

payments, with respect to which the

bond or escrow was furnished, in excess

of the bond or escrow;

(3) The employer shall resume making

its withdrawal liability payments as

they are due to the plan; and

(4) The employer shall be treated as

a new employer for purposes of any

future application of the withdrawal

liability rules in sections 4201–4225 of

title IV of ERISA with respect to its

participation in the plan after its reentry

into the plan, except that in plans using

the ‘‘direct attribution’’ method (section

4211(c)(4) of ERISA), the nonforfeitable

benefits attributable to service with the

employer shall include nonforfeitable

benefits attributable to service prior to
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34089

reentry that were not nonforfeitable at

that time.

(e) Collection of payments due and

review of non-abatement determination.

The rules in part 4219, subpart C, of this

chapter (relating to overdue, defaulted,

and overpaid withdrawal liability) shall

apply with respect to all payments

required to be made under paragraphs

(d)(2) and (d)(3) of this section. For this

purpose, a payment required to be made

under paragraph (d)(2) shall be treated

as a withdrawal liability payment due

on the 30th day after the date of the plan

sponsor’s notice under paragraph (b) of

this section.

(1) Review of non-abatement

determination. A plan sponsor’s

determination that the employer does

not satisfy the requirements for

abatement under this part shall be

subject to plan review under section

4219(b)(2) of ERISA and to arbitration

under section 4221 of ERISA, within the

times prescribed by those sections. For

this purpose, the plan sponsor’s notice

under paragraph (b) of this section shall

be treated as a demand under section

4219(b)(1) of ERISA.

(2) Determination of abatement. If the

plan sponsor or an arbitrator determines

that the employer satisfies the

requirements for abatement of its

complete withdrawal liability under this

part, the plan sponsor shall immediately

refund the following payments (plus

interest, except as indicated below,

determined in accordance with

§ 4219.31(d) of this chapter as if the

payments were overpayments of

withdrawal liability) to the employer in

a lump sum:

(i) The amount of the employer’s

withdrawal liability payment or

payments, without interest, due after its

reentry and made by the employer.

(ii) The bond or escrow paid to the

plan under paragraph (d)(1) of this

section.

(iii) The amount of the employer’s

withdrawal liability payment or

payments in excess of the bond or

escrow, paid to the plan under

paragraph (d)(2) of this section.

(iv) Any withdrawal liability payment

made by the employer to the plan

pursuant to paragraph (d)(3) of this

section after the plan sponsor’s notice

under paragraph (b) of this section.

§ 4207.4 Withdrawal liability payments

during pendency of abatement

determination.

(a) General rule. An eligible employer

that completely withdraws from a

multiemployer plan and subsequently

reenters the plan may, in lieu of making

withdrawal liability payments due after

its reentry, provide a bond to, or

establish an escrow account for, the

plan that satisfies the requirements of

paragraph (b) of this section or any plan

rules adopted under paragraph (d) of

this section, pending a determination by

the plan sponsor under § 4207.3(b) of

whether the employer satisfies the

requirements for abatement of its

complete withdrawal liability. An

employer that applies for abatement and

neither provides a bond/escrow nor

pays its withdrawal liability payments

remains eligible for abatement.

(b) Bond/escrow. The bond or escrow

allowed by this section shall be in an

amount equal to 70 percent of the

withdrawal liability payments that

would otherwise be due. The bond or

escrow relating to each payment shall be

furnished before the due date of that

payment. A single bond or escrow may

be provided for more than one payment

due during the pendency of the plan

sponsor’s determination. The bond or

escrow agreement shall provide that if

the plan sponsor determines that the

employer does not satisfy the

requirements for abatement of its

complete withdrawal liability under this

part, the bond or escrow shall be paid

to the plan upon notice from the plan

sponsor to the bonding or escrow agent.

A bond provided under this paragraph

shall be issued by a corporate surety

company that is an acceptable surety for

purposes of section 412 of ERISA.

(c) Notice of bond/escrow.

Concurrently with posting a bond or

establishing an escrow account under

paragraph (b) of this section, the

employer shall notify the plan sponsor.

The notice shall include a statement of

the amount of the bond or escrow, the

scheduled payment or payments with

respect to which the bond or escrow is

being furnished, and the name and

address of the bonding or escrow agent.

(d) Plan amendments concerning

bond/escrow. A plan may, by

amendment, adopt rules decreasing the

amount specified in paragraph (b) of a

bond or escrow allowed under this

section. A plan amendment adopted

under this paragraph may be applied

only to the extent that it is consistent

with the purposes of ERISA.

§ 4207.5 Requirements for abatement.

(a) General rule. Except as provided in

§ 4207.9 (d) and (e) (pertaining to

acquisitions, mergers and other

combinations), an eligible employer that

completely withdraws from a

multiemployer plan and subsequently

reenters the plan shall have its liability

for that withdrawal abated in

accordance with § 4207.3(c) if the

employer resumes covered operations

under the plan, and the number of

contribution base units with respect to

which the employer has an obligation to

contribute under the plan for the

measurement period (as defined in

paragraph (b) of this section) after it

resumes covered operations exceeds 30

percent of the number of contribution

base units with respect to which the

employer had an obligation to

contribute under the plan for the base

year (as defined in paragraph (c) of this

section).

(b) Measurement period. If the

employer resumes covered operations

under the plan at least six full months

prior to the end of a plan year and

would satisfy the test in paragraph (a)

based on its contribution base units for

that plan year, then the measurement

period shall be the period from the date

it resumes covered operations until the

end of that plan year. If the employer

would not satisfy this test, or if the

employer resumes covered operations

under the plan less than six full months

prior to the end of the plan year, the

measurement period shall be the first

twelve months after it resumes covered

operations.

(c) Base year. For purposes of

paragraph (a) of this section, the

employer’s number of contribution base

units for the base year is the average

number of contribution base units for

the two plan years in which its

contribution base units were the

highest, within the five plan years

immediately preceding the year of its

complete withdrawal.

§ 4207.6 Partial withdrawals after reentry.

(a) General rule. For purposes of

determining whether there is a partial

withdrawal of an eligible employer

whose liability is abated under this part

upon the employer’s reentry into the

plan or at any time thereafter, the plan

sponsor shall apply the rules in section

4205 of ERISA, as modified by the rules

in this section, and section 108 of the

Multiemployer Act. A partial

withdrawal of an employer whose

liability is abated under this part may

occur under these rules upon the

employer’s reentry into the plan.

However, a plan sponsor may not

demand payment of withdrawal liability

for a partial withdrawal occurring upon

the employer’s reentry before the plan

sponsor has determined that the

employer’s liability for its complete

withdrawal is abated under this part

and has so notified the employer in

accordance with § 4207.3(b).

(b) Partial withdrawal—70-percent

contribution decline. The plan sponsor

shall determine whether there is a

partial withdrawal described in section

4205(a)(1) of ERISA (relating to a 70-
34090 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

percent contribution decline) in

accordance with the rules in section

4205 of ERISA and section 108 of the

Multiemployer Act, as modified by the

rules in this paragraph, and shall

determine the amount of an employer’s

liability for that partial withdrawal in

accordance with the rules in § 4207.8(b).

(1) Definition of ‘‘3-year testing

period.’’ For purposes of section

4205(b)(1) of ERISA, the term ‘‘3-year

testing period’’ means the period

consisting of the plan year for which the

determination is made and the two

immediately preceding plan years,

excluding any plan year during the

period of withdrawal.

(2) Contribution base units for high

base year. For purposes of section

4205(b)(1) of ERISA and except as

provided in section 108(d)(3) of the

Multiemployer Act, in determining the

number of contribution base units for

the high base year, if the five plan years

immediately preceding the beginning of

the 3-year testing period include a plan

year during the period of withdrawal,

the number of contribution base units

for each such year of withdrawal shall

be deemed to be the greater of—

(i) The employer’s contribution base

units for that plan year; or

(ii) The average of the employer’s

contribution base units for the three

plan years preceding the plan year in

which the employer completely

withdrew from the plan.

(c) Partial withdrawal—partial

cessation of contribution obligation. The

plan sponsor shall determine whether

there is a partial withdrawal described

in section 4205(a)(2) of ERISA (relating

to a partial cessation of the employer’s

contribution obligation) in accordance

with the rules in section 4205 of ERISA,

as modified by the rules in this

paragraph, and section 108 of the

Multiemployer Act. In making this

determination, the sponsor shall

exclude all plan years during the period

of withdrawal. A partial withdrawal

under this paragraph can occur no

earlier than the plan year of reentry. If

the sponsor determines that there was a

partial withdrawal, it shall determine

the amount of an employer’s liability for

that partial withdrawal in accordance

with the rules in § 4207.8(c).

§ 4207.7 Liability for subsequent complete

withdrawals and related adjustments for

allocating unfunded vested benefits.

(a) General. When an eligible

employer that has had its liability for a

complete withdrawal abated under this

part completely withdraws from the

plan, the employer’s liability for that

subsequent withdrawal shall be

determined in accordance with the rules

in sections 4201–4225 of title IV, as

modified by the rules in this section,

and section 108 of the Multiemployer

Act. In the case of a combination

described in § 4207.9(d), the

modifications described in this section

shall be applied only with respect to

that portion of the eligible employer that

had previously withdrawn from the

plan. In the case of a combination

described in § 4207.9(e), the

modifications shall be applied

separately with respect to each

previously withdrawn employer that

comprises the eligible employer. In

addition, when a plan has abated the

liability of a reentered employer, if the

plan uses either the ‘‘presumptive’’ or

the ‘‘direct attribution’’ method (section

4211(b) or (c)(4), respectively) for

allocating unfunded vested benefits, the

plan shall modify those allocation

methods as described in this section in

allocating unfunded vested benefits to

any employer that withdraws from the

plan after the reentry.

(b) Allocation of unfunded vested

benefits for subsequent withdrawal in

plans using ‘‘presumptive’’ method. In a

plan using the ‘‘presumptive’’ allocation

method under section 4211(b) of ERISA,

the amount of unfunded vested benefits

allocable to a reentered employer for a

subsequent withdrawal shall equal the

sum of—

(1) The unamortized amount of the

employer’s allocable shares of the

amounts described in section 4211(b)(1),

for the plan years preceding the initial

withdrawal, determined as if the

employer had not previously

withdrawn;

(2) The sum of the unamortized

annual credits attributable to the year of

the initial withdrawal and each

succeeding year ending prior to reentry;

and

(3) The unamortized amount of the

employer’s allocable shares of the

amounts described in section 4211(b)(1)

(A) and (C) for plan years ending after

its reentry. For purposes of paragraph

(b)(2), the annual credit for a plan year

is the amount by which the employer’s

withdrawal liability payments for the

year exceed the greater of the

employer’s imputed contributions or

actual contributions for the year. The

employer’s imputed contributions for a

year shall equal the average annual

required contributions of the employer

for the three plan years preceding the

initial withdrawal. The amount of the

credit for a plan year is reduced by 5

percent of the original amount for each

succeeding plan year ending prior to the

year of the subsequent withdrawal.

(c) Allocation of unfunded vested

benefits for subsequent withdrawal in

plans using ‘‘modified presumptive’’ or

‘‘rolling-5’’ method. In a plan using

either the ‘‘modified presumptive’’

allocation method under section

4211(c)(2) of ERISA or the ‘‘rolling-5’’

method under section 4211(c)(3), the

amount of unfunded vested benefits

allocable to a reentered employer for a

subsequent withdrawal shall equal the

sum of—

(1) The amount determined under

section 4211 (c)(2) or (c)(3) of ERISA, as

appropriate, as if the date of reentry

were the employer’s initial date of

participation in the plan; and

(2) The outstanding balance, as of the

date of reentry, of the unfunded vested

benefits allocated to the employer for its

previous withdrawal (as defined in

paragraph (c)(2)(i) of this section)

reduced as if that amount were being

fully amortized in level annual

installments, at the plan’s funding rate

as of the date of reentry, over the period

described in paragraph (c)(2)(ii),

beginning with the first plan year after

reentry.

(i) The outstanding balance of the

unfunded vested benefits allocated to an

employer for its previous withdrawal is

the excess of the amount determined

under section 4211 (c)(2) or (c)(3) of

ERISA as of the end of the plan year in

which the employer initially withdrew,

accumulated with interest at the plan’s

funding rate for that year, from that year

to the date of reentry, over the

withdrawal liability payments made by

the employer, accumulated with interest

from the date of payment to the date of

reentry at the plan’s funding rate for the

year of entry.

(ii) The period referred to in

paragraph (c)(2) for plans using the

modified presumptive method is the

greater of five years, or the number of

full plan years remaining on the

amortization schedule under section

4211(c)(2)(B)(i) of ERISA. For plans

using the rolling-5 method, the period is

five years.

(d) Adjustments applicable to all

employers in plans using ‘‘presumptive’’

method. In a plan using the

‘‘presumptive’’ allocation method under

section 4211(b) of ERISA, when the plan

has abated the withdrawal liability of a

reentered employer pursuant to this

part, the following adjustments to the

allocation method shall be made in

computing the unfunded vested benefits

allocable to any employer that

withdraws from the plan in a plan year

beginning after the reentry:

(1) The sum of the unamortized

amounts of the annual credits of a

reentered employer shall be treated as a
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34091

reallocated amount under section

4211(b)(4) of ERISA in the plan year in

which the employer reenters.

(2) In the event that the 5-year period

used to compute the denominator of the

fraction described in section 4211

(b)(2)(E) and (b)(4)(D) of ERISA includes

a year during the period of withdrawal

of a reentered employer, the

contributions for a year during the

period of withdrawal shall be adjusted

to include any actual or imputed

contributions of the employer, as

determined under paragraph (b) of this

section.

(e) Adjustments applicable to all

employers in plans using ‘‘direct

attribution’’ method. In a plan using the

‘‘direct attribution’’ method under

section 4211(c)(4) of ERISA, when the

plan has abated the withdrawal liability

of a reentered employer pursuant to this

part, the following adjustments to the

allocation method shall be made in

computing the unfunded vested benefits

allocable to any employer that

withdraws from the plan in a plan year

beginning after the reentry:

(1) The nonforfeitable benefits

attributable to service with a reentered

employer prior to its initial withdrawal

shall be treated as benefits that are

attributable to service with that

employer.

(2) For purposes of section

4211(c)(4)(D) (ii) and (iii) of ERISA,

withdrawal liability payments made by

a reentered employer shall be treated as

contributions made by the reentered

employer.

(f) Plans using alternative allocation

methods under section 4211(c)(5). A

plan that has adopted an alternative

method of allocating unfunded vested

benefits pursuant to section 4211(c)(5)

of ERISA and part 4211 of this chapter

shall adopt by plan amendment a

method of determining a reentered

employer’s allocable share of the plan’s

unfunded vested benefits upon its

subsequent withdrawal. The method

shall treat the reentered employer and

other withdrawing employers in a

manner consistent with the treatment

under the paragraph(s) of this section

applicable to plans using the statutory

allocation method most similar to the

plan’s alternative allocation method.

(g) Adjustments to amount of annual

withdrawal liability payments for

subsequent withdrawal. For purposes of

section 4219(c)(1)(C) (i)(I) and (ii)(I) of

ERISA, in determining the amount of

the annual withdrawal liability

payments for a subsequent complete

withdrawal, if the period of ten

consecutive plan years ending before

the plan year in which the withdrawal

occurs includes a plan year during the

period of withdrawal, the employer’s

number of contribution base units, used

in section 4219(c)(1)(C)(i)(I), or the

required employer contributions, used

in section 4219(c)(1)(C)(ii)(I), for each

such plan year during the period of

withdrawal shall be deemed to be the

greater of—

(1) The employer’s contribution base

units or the required employer

contributions, as applicable, for that

year; or

(2) The average of the employer’s

contribution base units or of the

required employer contributions, as

applicable, for those plan years not

during the period of withdrawal, within

the ten consecutive plan years ending

before the plan year in which the

employer’s subsequent complete

withdrawal occurred.

§ 4207.8 Liability for subsequent partial

withdrawals.

(a) General. When an eligible

employer that has had its liability for a

complete withdrawal abated under this

part partially withdraws from the plan,

the employer’s liability for that

subsequent partial withdrawal shall be

determined in accordance with the rules

in sections 4201–4225 of ERISA, as

modified by the rules in § 4207.7 (b)

through (g) of this part and the rules in

this section, and section 108 of the

Multiemployer Act.

(b) Liability for a 70-percent

contribution decline. The amount of an

employer’s liability under section

4206(a) (relating to the calculation of

liability for a partial withdrawal),

section 4208 (relating to the reduction of

liability for a partial withdrawal) and

section 4219(c)(1) (relating to the

schedule of partial withdrawal liability

payments) of ERISA, for a subsequent

partial withdrawal described in section

4205(a)(1) of ERISA (relating to a 70-

percent contribution decline) shall be

modified in accordance with the rules

in this paragraph.

(1) Definition of ‘‘3-year testing

period.’’ For purposes of sections

4206(a) and 4219(c)(1) of ERISA, and

paragraphs (b)(2)–(b)(4) of this section,

the term ‘‘3-year testing period’’ means

the period consisting of the plan year for

which the determination is made and

the two immediately preceding plan

years, excluding any plan year during

the period of withdrawal.

(2) Determination date of section 4211

allocable share. For purposes of section

4206(a)(1)(B) of ERISA, the amount

determined under section 4211 shall be

determined as if the employer had

withdrawn from the plan in a complete

withdrawal on the last day of the first

plan year in the 3-year testing period or

the last day of the plan year in which

the employer reentered the plan,

whichever is later.

(3) Calculation of fractional share of

section 4211 amount. For purposes of

sections 4206(a)(2)(B)(ii) and

4219(c)(1)(E)(ii) of ERISA, if the five

plan years immediately preceding the

beginning of the 3-year testing period

include a plan year during the period of

withdrawal, then, in determining the

denominator of the fraction described in

section 4206(a)(2), the employer’s

contribution base units for each such

year of withdrawal shall be deemed to

be the greater of—

(i) The employer’s contribution base

units for that plan year; or

(ii) The average of the employer’s

contribution base units for the three

plan years preceding the plan year in

which the employer completely

withdrew from the plan.

(4) Contribution base units for high

base year. If the five plan years

immediately preceding the beginning of

the 3-year testing period include a plan

year during the period of withdrawal,

then for purposes of section 4208 (a)

and (b)(1) of ERISA, the number of

contribution base units for the high base

year shall be the number of contribution

base units determined under paragraph

(b)(3) of this section.

(c) Liability for partial cessation of

contribution obligation. The amount of

an employer’s liability under section

4206(a) (relating to the calculation of

liability for a partial withdrawal) and

section 4219(c)(1) (relating to the

amount of the annual partial withdrawal

liability payments) of ERISA, for a

subsequent partial withdrawal

described in section 4205(a)(2) of ERISA

(relating to a partial cessation of the

contribution obligation) shall be

modified in accordance with the rules

in this paragraph. For purposes of

sections 4206(a)(2)(B)(i) and

4219(c)(1)(E)(ii) of ERISA, if the five

plan years immediately preceding the

plan year in which the partial

withdrawal occurs include a plan year

during the period of withdrawal, the

denominator of the fraction described in

section 4206(a)(2) shall be determined

in accordance with the rule set forth in

paragraph (b)(3) of this section.

§ 4207.9 Special rules.

(a) Employer that has withdrawn and

reentered the plan before the effective

date of this part. This part shall apply,

in accordance with the rules in this

paragraph, with respect to an eligible

employer that completely withdraws

from a multiemployer plan after

September 25, 1980, and is performing

covered work under the plan on the
34092 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

effective date of this part. Upon the

application of an employer described in

the preceding sentence, the plan

sponsor of a multiemployer plan shall

determine whether the employer

satisfies the requirements for abatement

of its complete withdrawal liability

under this part. Pending the plan

sponsor’s determination, the employer

may provide the plan with a bond or

escrow that satisfies the requirements of

§ 4207.4, in lieu of making its

withdrawal liability payments due after

its application for an abatement

determination. The plan sponsor shall

notify the employer in writing of its

determination and the consequences of

its determination as described in

§ 4207.3 (c) or (d) and (e), as applicable.

If the plan sponsor determines that the

employer qualifies for abatement, only

withdrawal liability payments made

prior to the employer’s reentry shall be

retained by the plan; payments made by

the employer after its reentry shall be

refunded to the employer, with interest

on those made prior to the application

for abatement, in accordance with

§ 4207.3(e)(2). If a bond or escrow has

been provided to the plan in accordance

with § 4207.4, the plan sponsor shall

send a copy of the notice to the bonding

or escrow agent. Sections 4207.6

through 4207.8 shall apply with respect

to the employer’s subsequent complete

withdrawal occurring on or after the

effective date of this part, or partial

withdrawal occurring either before or

after that date. This paragraph shall not

negate reasonable actions taken by plans

prior to the effective date of this part

under plan rules implementing section

4207(a) of ERISA that were validly

adopted pursuant to section 405 of the

Multiemployer Act.

(b) Employer with multiple complete

withdrawals that has reentered the plan

before effective date of this part. If an

employer described in paragraph (a) of

this section has completely withdrawn

from a multiemployer plan on two or

more occasions before the effective date

of this part, the rules in paragraph (a) of

this section shall be applied as modified

by this paragraph.

(1) The plan sponsor shall determine

whether the employer satisfies the

requirements for abatement under

§ 4207.5 based on the most recent

complete withdrawal.

(2) If the employer satisfies the

requirements for abatement, the

employer’s liability with respect to all

previous complete withdrawals shall be

abated.

(3) If the liability is abated, §§ 4207.6

and 4207.7 shall be applied as if the

employer’s earliest complete

withdrawal were its initial complete

withdrawal.

(c) Employer with multiple complete

withdrawals that has not reentered the

plan as of the effective date of this part.

If an eligible employer has completely

withdrawn from a multiemployer plan

on two or more occasions between

September 26, 1980 and the effective

date of this part and is not performing

covered work under the plan on the

effective date of this regulation, the

rules in this part shall apply, subject to

the modifications specified in

paragraphs (b)(1)–(b)(3) of this section,

upon the employer’s reentry into the

plan.

(d) Combination of withdrawn

employer with contributing employer. If

a withdrawn employer merges or

otherwise combines with an employer

that has an obligation to contribute to

the plan from which the first employer

withdrew, the combined entity is the

eligible employer, and the rules of

§ 4207.5 shall be applied—

(1) By subtracting from the

measurement period contribution base

units the contribution base units for

which the non-withdrawn portion of the

employer was obligated to contribute in

the last plan year ending prior to the

combination;

(2) By determining the base year

contribution base units solely by

reference to the contribution base units

of the withdrawn portion of the

employer; and

(3) By using the date of the

combination, rather than the date of

resumption of covered operations, to

begin the measurement period.

(e) Combination of two or more

withdrawn employers. If two or more

withdrawn employers merge or

otherwise combine, the combined entity

is the eligible employer, and the rules of

§ 4207.5 shall be applied by combining

the number of contribution base units

with respect to which each portion of

the employer had an obligation to

contribute under the plan for its base

year. However, the combined number of

contribution base units shall not include

contribution base units of a withdrawn

portion of the employer that had fully

paid its withdrawal liability as of the

date of the resumption of covered

operations.

§ 4207.10 Plan rules for abatement.

(a) General rule. Subject to the

approval of the PBGC, a plan may, by

amendment, adopt rules for the

reduction or waiver of complete

withdrawal liability under conditions

other than those specified in §§ 4207.5

and 4207.9 (c) and (d), provided that

such conditions relate to events

occurring or factors existing subsequent

to a complete withdrawal year. The

request for PBGC approval shall be filed

after the amendment is adopted. A plan

amendment under this section may not

be put into effect until it is approved by

the PBGC. However, an amendment that

is approved by the PBGC may apply

retroactively to the date of the adoption

of the amendment. PBGC approval shall

also be required for any subsequent

modification of the amendment, other

than repeal of the amendment. Sections

4207.6, 4207.7, and 4207.8 shall apply

to all subsequent partial withdrawals

after a reduction or waiver of complete

withdrawal liability under a plan

amendment approved by the PBGC

pursuant to this section.

(b) Who may request. The plan

sponsor, or a duly authorized

representative acting on behalf of the

plan sponsor, shall sign and submit the

request.

(c) Where to file. The request shall be

addressed to Reports Processing,

Insurance Operations Department,

Pension Benefit Guaranty Corporation,

1200 K Street, NW., Washington, DC

20005–4026.

(d) Information. Each request shall

contain the following information:

(1) The name and address of the plan

for which the plan amendment is being

submitted and the telephone number of

the plan sponsor or its duly authorized

representative.

(2) The nine-digit Employer

Identification Number (EIN) assigned to

the plan sponsor by the IRS and the

three-digit Plan Identification Number

(PN) assigned to the plan by the plan

sponsor, and, if different, the EIN and

PN last filed with the PBGC. If no EIN

or PN has been assigned, that should be

indicated.

(3) A copy of the executed

amendment, including—

(i) The date on which the amendment

was adopted;

(ii) The proposed effective date; and

(iii) The full text of the rules on the

reduction or waiver of complete

withdrawal liability.

(4) A copy of the most recent actuarial

valuation report of the plan.

(5) A statement certifying that notice

of the adoption of the amendment and

of the request for approval filed under

this section has been given to all

employers that have an obligation to

contribute under the plan and to all

employee organizations representing

employees covered under the plan.

(e) Supplemental information. In

addition to the information described in

paragraph (d) of this section, a plan may

submit any other information that it

believes it pertinent to its request. The
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34093

PBGC may require the plan sponsor to

submit any other information that the

PBGC determines it needs to review a

request under this section.

(f) Criteria for PBGC approval. The

PBGC shall approve a plan amendment

authorized by paragraph (a) of this

section if it determines that the rules

therein are consistent with the purposes

of ERISA. An abatement rule is not

consistent with the purposes of ERISA

if—

(1) Implementation of the rule would

be adverse to the interest of plan

participants and beneficiaries; or

(2) The rule would increase the

PBGC’s risk of loss with respect to the

plan.

(Approved by the Office of Management and

Budget under control number 1212–0044)

PART 4208—REDUCTION OR WAIVER

OF PARTIAL WITHDRAWAL LIABILITY

Sec.

4208.1 Purpose and scope.

4208.2 Definitions.

4208.3 Abatement.

4208.4 Conditions for abatement.

4208.5 Withdrawal liability payments

during pendency of abatement

determination.

4208.6 Computation of reduced annual

partial withdrawal liability payment.

4208.7 Adjustment of withdrawal liability

for subsequent withdrawals.

4208.8 Multiple partial withdrawals in one

plan year.

4208.9 Plan adoption of additional

abatement conditions.

Authority: 29 U.S.C. 1302(b)(3), 1388 (c)

and (e).

§ 4208.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to establish rules for reducing or

waiving the liability of certain

employers that have partially

withdrawn from a multiemployer

pension plan.

(b) Scope. This part applies to

multiemployer pension plans covered

under title IV of ERISA and to

employers that have partially

withdrawn from such plans after

September 25, 1980, and that have not,

as of the date on which they satisfy the

conditions for reducing or eliminating

their partial withdrawal liability, fully

satisfied their obligation to pay that

partial withdrawal liability. This rule

shall not negate reasonable actions

taken by plans prior to the effective date

of this part under plan rules

implementing section 4208 of ERISA

that were validly adopted pursuant to

section 405 of the Multiemployer Act.

§ 4208.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: employer,

ERISA, IRS, Multiemployer Act,

multiemployer plan, PBGC, plan, and

plan year.

In addition, for purposes of this part:

Complete withdrawal means a

complete withdrawal as described in

section 4203 of ERISA.

Eligible employer means the

employer, as defined in section 4001(b)

of ERISA, as it existed on the date of its

initial partial or complete withdrawal,

as applicable. An eligible employer

shall continue to be an eligible

employer notwithstanding the

occurrence of any of the following

events:

(1) A restoration involving a mere

change in identity, form or place of

organization, however effected;

(2) A reorganization involving a

liquidation into a parent corporation;

(3) A merger, consolidation or

division solely between (or among)

trades or businesses (whether or not

incorporated) of the employer; or

(4) An acquisition by or of, or a

merger or combination with another

trade or business.

Partial withdrawal means a partial

withdrawal as described in section 4205

of ERISA.

Partial withdrawal year means the

third year of the 3-year testing period in

the case of a partial withdrawal caused

by a 70-percent contribution decline, or

the year of the partial cessation in the

case of a partial withdrawal caused by

a partial cessation of the employer’s

contribution obligation.

§ 4208.3 Abatement.

(a) General. Whenever an eligible

employer that has partially withdrawn

from a multiemployer plan satisfies the

requirements in § 4208.4 for the

reduction or waiver of its partial

withdrawal liability, it may apply to the

plan for abatement of its partial

withdrawal liability. Applications shall

identify the eligible employer, the

withdrawn employer (if different), the

date of withdrawal, and the basis for

reduction or waiver of its withdrawal

liability. Upon receiving a complete

application for abatement, the plan

sponsor shall determine, in accordance

with paragraph (b) of this section,

whether the employer satisfies the

requirements for abatement of its partial

withdrawal liability under § 4208.4. If

the plan sponsor determines that the

employer satisfies the requirements for

abatement of its partial withdrawal

liability, the provisions of paragraph (c)

of this section shall apply. If the plan

sponsor determines that the employer

does not satisfy the requirements for

abatement of its partial withdrawal

liability, the provisions of paragraphs

(d) and (e) of this section shall apply.

(b) Determination of abatement.

Within 60 days after an eligible

employer that partially withdrew from a

multiemployer plan applies for

abatement in accordance with paragraph

(a) of this section, the plan sponsor shall

determine whether the employer

satisfies the requirements for abatement

of its partial withdrawal liability under

§ 4208.4 and shall notify the employer

in writing of its determination and of

the consequences of its determination,

as described in paragraphs (c) or (d) and

(e) of this section, as appropriate. If a

bond or escrow has been provided to the

plan under § 4208.5 of this part, the

plan sponsor shall send a copy of the

notice to the bonding or escrow agent.

(c) Effects of abatement. If the plan

sponsor determines that the employer

satisfies the requirements for abatement

of its partial withdrawal liability under

§ 4208.4, then—

(1) The employer’s partial withdrawal

liability shall be eliminated or its

annual partial withdrawal liability

payments shall be reduced in

accordance with § 4208.6, as applicable;

(2) The employer’s liability for a

subsequent withdrawal shall be

determined in accordance with § 4208.7;

(3) Any bonds furnished under

§ 4208.5 shall be canceled and any

amounts held in escrow under § 4208.5

shall be refunded to the employer; and

(4) Any withdrawal liability payments

originally due and paid after the end of

the plan year in which the conditions

for abatement were satisfied, in excess

of the amount due under this part after

that date shall be credited to the

remaining withdrawal liability

payments, if any, owed by the employer,

beginning with the first payment due

after the revised payment schedule is

issued pursuant to this paragraph. If the

credited amount is greater than the

outstanding amount of the employer’s

partial withdrawal liability, the amount

remaining after satisfaction of the

liability shall be refunded to the

employer. Interest on the credited

amount at the rate prescribed in part

4219, subpart C, of this chapter (relating

to overdue, defaulted, and overpaid

withdrawal liability) shall be added if

the plan sponsor does not issue a

revised payment schedule reflecting the

credit or make the required refund

within 60 days after receipt by the plan

sponsor of a complete abatement

application. Interest shall accrue from

the 61st day.

(d) Effects of non-abatement. If the

plan sponsor determines that the

employer does not satisfy the

requirements for abatement of its partial
34094 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

withdrawal liability under § 4208.4,

then the employer shall take or cause to

be taken the actions set forth in

paragraphs (d)(1)–(d)(3) of this section.

The rules in part 4219, subpart C, shall

apply with respect to all payments

required to be made under paragraphs

(d)(2) and (d)(3). For this purpose, a

payment required under paragraph

(d)(2) shall be treated as a withdrawal

liability payment due on the 30th day

after the date of the plan sponsor’s

notice under paragraph (b) of this

section.

(1) Any bond or escrow furnished

under § 4208.5 shall be paid to the plan

within 30 days after the date of the plan

sponsor’s notice under paragraph (b) of

this section.

(2) The employer shall pay to the plan

within 30 days after the date of the plan

sponsor’s notice under paragraph (b) of

this section, the amount of its

withdrawal liability payment or

payments, with respect to which the

bond or escrow was furnished, in excess

of the bond or escrow.

(3) The employer shall resume or

continue making its partial withdrawal

liability payments as they are due to the

plan.

(e) Review of non-abatement

determination. A plan sponsor’s

determinations that the employer does

not satisfy the requirements for

abatement under § 4208.4 and of the

amount of reduction determined under

§ 4208.6 shall be subject to plan review

under section 4219(b)(2) of ERISA and

to arbitration under section 4221 of

ERISA and part 4221 of this chapter,

within the times prescribed by those

provisions. For this purpose, the plan

sponsor’s notice under paragraph (b) of

this section shall be treated as a demand

under section 4219(b)(1) of ERISA. If the

plan sponsor upon review or an

arbitrator determines that the employer

satisfies the requirements for abatement

of its partial withdrawal liability under

§ 4208.4, the plan sponsor shall

immediately refund the amounts

described in paragraph (e)(1) of this

section if the liability is waived, or

credit and refund the amounts described

in paragraph (e)(2) if the annual

payment is reduced.

(1) Refund for waived liability. If the

employer’s partial withdrawal liability

is waived, the plan sponsor shall refund

to the employer the payments made

pursuant to paragraphs (d)(1)–(d)(3) of

this section (plus interest determined in

accordance with § 4219.31(d) of this

chapter as if the payments were

overpayments of withdrawal liability).

(2) Credit for reduced annual

payment. If the employer’s annual

partial withdrawal liability payment is

reduced, the plan sponsor shall credit

the payments made pursuant to

paragraphs (d)(1)–(d)(3) of this section

(plus interest determined in accordance

with § 4219.31(d) of this chapter as if

the payments were overpayments of

withdrawal liability) to future

withdrawal liability payments owed by

the employer, beginning with the first

payment that is due after the

determination, and refund any credit

(including interest) remaining after

satisfaction of the outstanding amount

of the employer’s partial withdrawal

liability.

§ 4208.4 Conditions for abatement.

(a) Waiver of liability for a 70-percent

contribution decline. An employer that

has incurred a partial withdrawal under

section 4205(a)(1) of ERISA shall have

no obligation to make payments with

respect to that partial withdrawal (other

than delinquent payments) for plan

years beginning after the second

consecutive plan year in which the

conditions of either paragraph (a)(1) or

(a)(2) are satisfied for each of the two

years:

(1) The number of contribution base

units with respect to which the

employer has an obligation to contribute

under the plan for each year is not less

than 90 percent of the total number of

contribution base units with respect to

which the employer had an obligation to

contribute to the plan for the high base

year (as defined in paragraph (d) of this

section).

(2) The conditions of this paragraph

are satisfied if—

(i) The number of contribution base

units with respect to which the

employer has an obligation to contribute

for each year exceeds 30 percent of the

total number of contribution base units

with respect to which the employer had

an obligation to contribute to the plan

for the high base year (as defined in

paragraph (d) of this section); and

(ii) The total number of contribution

base units with respect to which all

employers under the plan have

obligations to contribute in each of the

two years is not less than 90 percent of

the total number of contribution base

units for which all employers had

obligations to contribute in the partial

withdrawal year.

(b) Waiver of liability for a partial

cessation of the employer’s contribution

obligation. Except as provided in

§ 4208.8, an employer that has incurred

partial withdrawal liability under

section 4205(a)(2) of ERISA shall have

no obligation to make payments with

respect to that partial withdrawal (other

than delinquent payments) for plan

years beginning after the second

consecutive plan year in which the

employer satisfies the conditions under

either paragraph (b)(1) or (b)(2) of this

section.

(1) Partial restoration of withdrawn

work. The employer satisfies the

conditions under this paragraph if, for

each of two consecutive plan years—

(i) The employer makes contributions

for the same facility or under the same

collective bargaining agreement that

gave rise to the partial withdrawal;

(ii) The employer’s contribution base

units for that facility or under that

agreement exceed 30 percent of the

contribution base units with respect to

which the employer had an obligation to

contribute for that facility or under that

agreement for the high base year (as

defined in paragraph (d) of this section);

and

(iii) The total number of contribution

base units with respect to which the

employer has an obligation to contribute

to the plan equals at least 90 percent of

the total number of contribution base

units with respect to which the

employer had an obligation to

contribute under the plan for the high

base year (as defined in paragraph (d) of

this section).

(2) Substantial restoration of

withdrawn work. The employer satisfies

the conditions under this paragraph if,

for each of two consecutive plan years—

(i) The employer makes contributions

for the same facility or under the same

collective bargaining agreement that

gave rise to the partial withdrawal;

(ii) The employer’s contribution base

units for that facility or under that

agreement are not less than 90 percent

of the contribution base units with

respect to which the employer had an

obligation to contribute for that facility

or under that agreement for the high

base year (as defined in paragraph (d) of

this section); and

(iii) The total number of contribution

base units with respect to which the

employer has an obligation to contribute

to the plan equals or exceeds the sum

of—

(A) The number of contribution base

units with respect to which the

employer had an obligation to

contribute in the year prior to the partial

withdrawal year, determined without

regard to the contribution base units for

the facility or under the agreement that

gave rise to the partial withdrawal; and

(B) 90 percent of the contribution base

units with respect to which the

employer had an obligation to

contribute for that facility or under that

agreement in either the year prior to the

partial withdrawal year or the high base

year (as defined in paragraph (d) of this

section), whichever is less.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34095

(c) Reduction in annual partial

withdrawal liability payment—

(1) Partial withdrawals under section

4205(a)(1). An employer shall be

entitled to a reduction of its annual

partial withdrawal liability payment for

a plan year if the number of

contribution base units with respect to

which the employer had an obligation to

contribute during the plan year exceeds

the greater of—

(i) 110 percent (or such lower number

as the plan may, by amendment, adopt)

of the number of contribution base units

with respect to which the employer had

an obligation to contribute in the partial

withdrawal year; or

(ii) The total number of contribution

base units with respect to which the

employer had an obligation to

contribute to the plan for the plan year

following the partial withdrawal year.

(2) Partial withdrawals under section

4205(a)(2). An employer that resumes

the obligation to contribute with respect

to a facility or collective bargaining

agreement that gave rise to a partial

withdrawal, but does not qualify to have

that liability waived under paragraph (b)

of this section, shall have its annual

partial withdrawal liability payment

reduced for any plan year in which the

total number of contribution base units

with respect to which the employer has

an obligation to contribute equals or

exceeds the sum of—

(i) The number of contribution base

units for the reentered facility or

agreement during that year; and

(ii) The total number of contribution

base units with respect to which the

employer had an obligation to

contribute to the plan for the year

following the partial withdrawal year.

(d) High base year. For purposes of

paragraphs (a) and (b)(1)(iii) of this

section, the high base year contributions

are the average of the total contribution

base units for the two plan years for

which the employer’s total contribution

base units were highest within the five

plan years immediately preceding the

beginning of the 3-year testing period

defined in section 4205(b)(1)(B)(i) of

ERISA, with respect to paragraph (a) of

this section, or the partial withdrawal

year, with respect to paragraph (b)(1)(iii)

of this section. For purposes of

paragraphs (b)(1)(ii) and (b)(2) of this

section, the high base year contributions

are the average number of contribution

base units for the facility or under the

agreement for the two plan years for

which the employer’s contribution base

units for that facility or under that

agreement were highest within the five

plan years immediately preceding the

partial withdrawal.

§ 4208.5 Withdrawal liability payments

during pendency of abatement

determination.

(a) Bond/Escrow. An employer that

has satisfied the requirements of

§ 4208.4(a)(1) without regard to ‘‘90

percent of’’ or § 4208.4(b) for one year

with respect to all partial withdrawals it

incurred in a plan year may, in lieu of

making scheduled withdrawal liability

payments in the second year for those

withdrawals, provide a bond to, or

establish an escrow account for, the

plan that satisfies the requirements of

paragraph (b) of this section or any plan

rules adopted under paragraph (d) of

this section, pending a determination by

the plan sponsor of whether the

employer satisfies the requirements of

§ 4208.4 (a)(1) or (b) for the second

consecutive plan year. An employer that

applies for abatement and neither

provides a bond/escrow nor makes its

withdrawal liability payments remains

eligible for abatement.

(b) Amount of bond/escrow. The bond

or escrow allowed by this section shall

be in an amount equal to 50 percent of

the withdrawal liability payments that

would otherwise be due. The bond or

escrow relating to each payment shall be

furnished before the due date of that

payment. A single bond or escrow may

be provided for more than one payment

due during the pendency of the plan

sponsor’s determination. The bond or

escrow agreement shall provide that if

the plan sponsor determines that the

employer does not satisfy the

requirements for abatement of its partial

withdrawal liability under § 4208.4

(a)(1) or (b), the bond or escrow shall be

paid to the plan upon notice from the

plan sponsor to the bonding or escrow

agent. A bond provided under this

paragraph shall be issued by a corporate

surety company that is an acceptable

surety for purposes of section 412 of

ERISA.

(c) Notice of bond/escrow.

Concurrently with posting a bond or

establishing an escrow account under

this section, the employer shall notify

the plan sponsor. The notice shall

include a statement of the amount of the

bond or escrow, the scheduled payment

or payments with respect to which the

bond or escrow is being furnished, and

the name and address of the bonding or

escrow agent.

(d) Plan amendments concerning

bond/escrow. A plan may, by

amendment, adopt rules decreasing the

amount of the bond or escrow specified

in paragraph (b) of this section. A plan

amendment adopted under this

paragraph may be applied only to the

extent that it is consistent with the

purposes of ERISA. An amendment

satisfies this requirement only if it does

not create an unreasonable risk of loss

to the plan.

(e) Plan sponsor determination.

Within 60 days after the end of the plan

year in which the bond/escrow is

furnished, the plan sponsor shall

determine whether the employer

satisfied the requirements of § 4208.4

(a)(1) or (b) for the second consecutive

plan year. The plan sponsor shall notify

the employer and the bonding or escrow

agent in writing of its determination and

of the consequences of its

determination, as described in § 4208.3

(c) or (d) and (e), as appropriate.

§ 4208.6 Computation of reduced annual

partial withdrawal liability payment.

(a) Amount of reduced payment. An

employer that satisfies the requirements

of § 4208.4 (c)(1) or (c)(2) shall have its

annual partial withdrawal liability

payment for that plan year reduced in

accordance with paragraph (a)(1) or

(a)(2) of this section, respectively.

(1) The reduced annual payment

amount for an employer that satisfies

§ 4208.4(c)(1) shall be determined by

substituting the number of contribution

base units in the plan year in which the

requirements are satisfied for the

number of contribution base units in the

year following the partial withdrawal

year in the numerator of the fraction

described in section 4206(a)(2)(A) of

ERISA.

(2) The reduced annual payment for

an employer that satisfies § 4208.4(c)(2)

shall be determined by adding the

contribution base units for which the

employer is obligated to contribute with

respect to the reentered facility or

agreement in the year in which the

requirements are satisfied to the

numerator of the fraction described in

section 4206(a)(2)(A) of ERISA.

(b) Credit for reduction. The plan

sponsor shall credit the account of an

employer that satisfies the requirements

of § 4208.4(c)(1) or (c)(2) with the

amount of annual withdrawal liability

that it paid in excess of the amount

described in paragraph (a)(1) or (a)(2) of

this section, as appropriate. The credit

shall be applied, a revised payment

schedule issued, refund made and

interest added, all in accordance with

§ 4208.3(c)(4).

§ 4208.7 Adjustment of withdrawal liability

for subsequent withdrawals.

The liability of an employer for a

partial or complete withdrawal from a

plan subsequent to a partial withdrawal

from that plan in a prior plan year shall

be reduced in accordance with part

4206 of this chapter.
34096 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

§ 4208.8 Multiple partial withdrawals in

one plan year.

(a) General rule. If an employer

partially withdraws from the same

multiemployer plan on two or more

occasions during the same plan year, the

rules of § 4208.4 shall be applied as

modified by this section.

(b) Partial withdrawals under section

4205 (a)(1) and (a)(2) in the same plan

year. If an employer partially withdraws

from the same multiemployer plan as a

result of a 70-percent contribution

decline and a partial cessation of the

employer’s contribution obligation in

the same plan year, the employer shall

not be eligible for abatement under

§ 4208.4 (b) or (c)(2) or under paragraph

(c) of this section. The employer may

qualify for abatement under § 4208.4(a)

and (c)(1) and under any rules adopted

by the plan pursuant to § 4208.9.

(c) Multiple partial cessations of the

employer’s contribution obligation. If an

employer permanently ceases to have an

obligation to contribute for more than

one facility, under more than one

collective bargaining agreement, or for

one or more facilities and under one or

more collective bargaining agreements,

resulting in multiple partial

withdrawals under section 4205(b)(2)(A)

in the same plan year, the abatement

rules in § 4208.4(b) shall be applied as

modified by this paragraph. If an

employer resumes work at all such

facilities and under all such collective

bargaining agreements, the

determination of whether the employer

qualifies for elimination of its liability

under § 4208.4(b) shall be made by

substituting the test set forth in

paragraph (c)(1) of this section for that

prescribed by § 4208.4 (b)(1)(ii) or

(b)(2)(ii), as applicable. If the employer

resumes work at or under fewer than all

the facilities or collective bargaining

agreements described in this paragraph,

the employer cannot qualify for

elimination of its liability under

§ 4208.4(b). However, the employer may

qualify for a reduction in its partial

withdrawal liability pursuant to

paragraph (c)(2) of this section.

(1) Resumption of work at all facilities

and under all bargaining agreements.

The test under this paragraph is

satisfied if for each of the two

consecutive plan years referred to in

§ 4208.4(b), the employer’s total

contribution base units for the facilities

and under the collective bargaining

agreements with respect to which the

employer incurred the multiple partial

withdrawals exceed 30 percent of the

total number of contribution base units

with respect to which the employer had

an obligation to contribute for those

facilities and under those agreements for

the base year (as defined in paragraph

(d) of this section).

(2) Resumption at fewer than all

facilities or under fewer than all

bargaining agreements. If the employer

satisfies the conditions in § 4208.4

(b)(1)(i) and (b)(1)(iii) and paragraph

(c)(2)(i) of this section, or the conditions

in § 4208.4 (b)(2)(i) and (b)(2)(iii) and

paragraph (c)(2)(ii) of this section, as

applicable, the employer’s withdrawal

liability shall be partially waived as set

forth in paragraph (c)(2)(iii) of this

section.

(i) With respect to a resumption of

work under § 4208.4(b)(1), the condition

under this paragraph is satisfied if, for

the two consecutive plan years referred

to in § 4208.4(b)(1), the employer’s

contribution base units for any

reentered facility or agreement exceed

30 percent of the number of

contribution base units with respect to

which the employer had an obligation to

contribute for that facility or under that

agreement for the base year (as defined

in paragraph (d) of this section).

(ii) With respect to a resumption of

work under § 4208.4(b)(2), the condition

under this paragraph is satisfied if, for

the two consecutive plan years referred

to in § 4208.4(b)(2), the employer’s

contribution base units for any

reentered facility or agreement exceed

90 percent of the number of

contribution base units with respect to

which the employer had an obligation to

contribute for that facility or under that

agreement for the base year (as defined

in paragraph (d) of this section).

(iii) The employer’s reduced

withdrawal liability and, if any, the

reduced annual payments of the liability

shall be determined by adding the

average number of contribution base

units that the employer is required to

contribute for those two consecutive

years for that facility(ies) or

agreement(s) to the numerator of the

fraction described in section

4206(a)(2)(A) of ERISA. The amount of

any remaining partial withdrawal

liability shall be paid over the schedule

originally established starting with the

first payment due after the revised

payment schedule is issued under

§ 4208.3(c)(4).

(d) Base Year. For purposes of this

section, the base year contribution base

units for a reentered facility(ies) or

under a reentered agreement(s) are the

average number of contribution base

units for the facility(ies) or under the

agreement(s) for the two plan years for

which the employer’s contribution base

units for that facility(ies) or under that

agreement(s) were highest within the

five plan years immediately preceding

the partial withdrawal.

§ 4208.9 Plan adoption of additional

abatement conditions.

(a) General rule. A plan may by

amendment, subject to the approval of

the PBGC, adopt rules for the reduction

or waiver of partial withdrawal liability

under conditions other than those

specified in § 4208.4, provided that such

conditions relate to events occurring or

factors existing subsequent to a partial

withdrawal year. The request for PBGC

approval shall be filed after the

amendment is adopted. PBGC approval

shall also be required for any

subsequent modification of the

amendment, other than repeal of the

amendment. A plan amendment under

this section may not be put into effect

until it is approved by the PBGC. An

amendment that is approved by the

PBGC may apply retroactively.

(b) Who may request. The plan

sponsor, or a duly authorized

representative acting on behalf of the

plan sponsor, shall sign and submit the

request.

(c) Where to file. The request shall be

addressed to Reports Processing,

Insurance Operations Department,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026.

(d) Information. Each request shall

contain the following information:

(1) The name and address of the plan

for which the plan amendment is being

submitted and the telephone number of

the plan sponsor or its duly authorized

representative.

(2) The nine-digit Employer

Identification Number (EIN) assigned to

the plan sponsor by the IRS and the

three-digit Plan Identification Number

(PIN) assigned to the plan by the plan

sponsor, and, if different, also the EIN–

PIN last filed with the PBGC. If an EIN–

PIN has not been assigned, that should

be indicated.

(3) A copy of the executed

amendment, including—

(i) the date on which the amendment

was adopted;

(ii) the proposed effective date;

(iii) the full text of the rules on the

reduction or waiver of partial

withdrawal liability; and

(iv) the full text of the rules adjusting

the reduction in the employer’s liability

for a subsequent partial or complete

withdrawal, as required by section

4206(b)(1) of ERISA.

(4) A copy of the most recent actuarial

valuation report of the plan.

(5) A statement certifying that notice

of the adoption of the amendment and

of the request for approval filed under

this section has been given to all

employers that have an obligation to

contribute under the plan and to all
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34097

employee organizations representing

employees covered under the plan.

(e) Supplemental information. In

addition to the information described in

paragraph (d) of this section, a plan may

submit any other information that it

believes is pertinent to its request. The

PBGC may require the plan sponsor to

submit any other information that the

PBGC determines that it needs to review

a request under this section.

(f) Criteria for PBGC approval. The

PBGC shall approve a plan amendment

authorized by paragraph (a) of this

section if it determines that the rules

therein are consistent with the purposes

of ERISA. An abatement amendment is

not consistent with the purposes of

ERISA unless the PBGC determines

that—

(1) The amendment is not adverse to

the interests of plan participants and

beneficiaries in the aggregate; and

(2) The amendment would not

significantly increase the PBGC’s risk of

loss with respect to the plan.

(Approved by the Office of Management and

Budget under control no. 1212–0039)

PART 4211—ALLOCATING UNFUNDED

VESTED BENEFITS TO WITHDRAWING

EMPLOYERS

Subpart A—General

Sec.

4211.1 Purpose and scope.

4211.2 Definitions.

4211.3 Special rules for construction

industry and IRC section 404(c) plans.

Subpart B—Changes Not Subject to PBGC

Approval

4211.11 Changes not subject to PBGC

approval.

4211.12 Modifications to the presumptive,

modified presumptive and rolling-5

methods.

4211.13 Modifications to the direct

attribution method.

Subpart C—Changes Subject to PBGC

Approval

4211.21 Changes subject to PBGC approval.

4211.22 Requests for PBGC approval.

4211.23 Approval of alternative method.

4211.24 Special rule for certain alternative

methods previously approved.

Subpart D—Allocation Methods for Merged

Multiemployer Plans

4211.31 Allocation of unfunded vested

benefits following the merger of plans.

4211.32 Presumptive method for

withdrawals after the initial plan year.

4211.33 Modified presumptive method for

withdrawals after the initial plan year.

4211.34 Rolling-5 method for withdrawals

after the initial plan year.

4211.35 Direct attribution method for

withdrawals after the initial plan year.

4211.36 Modifications to the determination

of initial liabilities, the amortization of

initial liabilities, and the allocation

fraction.

4211.37 Allocating unfunded vested

benefits for withdrawals before the end

of the initial plan year.

Authority: 29 U.S.C. 1302(b)(3); 1391(c)(1),

(c)(2)(D), (c)(5)(A), (c)(5)(B), (c)(5)(D), and (f).

Subpart A—General

§ 4211.1 Purpose and scope.

(a) Purpose. Section 4211 of ERISA

provides four methods for allocating

unfunded vested benefits to employers

that withdraw from a multiemployer

plan: the presumptive method (section

4211(b)); the modified presumptive

method (section 4211(c)(2)); the rolling5 method (section 4211(c)(3)); and the

direct attribution method (section

4211(c)(4)). With the minor exceptions

covered in § 4211.3, a plan determines

the amount of unfunded vested benefits

allocable to a withdrawing employer in

accordance with the presumptive

method, unless the plan is amended to

adopt an alternative allocative method.

Generally, the PBGC must approve the

adoption of an alternative allocation

method. On September 25, 1984, 49 FR

37686, the PBGC granted a class

approval of all plan amendments

adopting one of the statutory alternative

allocation methods. Subpart C sets forth

the criteria and procedures for PBGC

approval of nonstatutory alternative

allocation methods. Section 4211(c)(5)

of ERISA also permits certain

modifications to the statutory allocation

methods. The PBGC is to prescribe these

modifications in a regulation, and plans

may adopt them without PBGC

approval. Subpart B contains the

permissible modifications to the

statutory methods. Plans may adopt

other modifications subject to PBGC

approval under subpart C. Finally,

under section 4211(f) of ERISA, the

PBGC is required to prescribe rules

governing the application of the

statutory allocation methods or

modified methods by plans following

merger of multiemployer plans. Subpart

D sets forth alternative allocative

methods to be used by merged plans. In

addition, such plans may adopt any of

the allocation methods or modifications

described under subparts B and C in

accordance with the rules under

subparts B and C.

(b) Scope. This part applies to all

multiemployer plans covered by title IV

of ERISA.

§ 4211.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: Code,

employer, IRS, multiemployer plan,

nonforfeitable benefit, PBGC, plan, and

plan year.

In addition, for purposes of this part:

Initial plan year means a merged

plan’s first complete plan year that

begins after the establishment of the

merged plan.

Initial plan year unfunded vested

benefits means the unfunded vested

benefits as of the close of the initial plan

year, less the value as of the end of the

initial plan year of all outstanding

claims for withdrawal liability that can

reasonably be expected to be collected

from employers that had withdrawn as

of the end of the initial plan year.

Merged plan means a plan that is the

result of the merger of two or more

multiemployer plans.

Merger means the combining of two or

more multiemployer plans into one

multiemployer plan.

Prior plan means the plan in which an

employer participated immediately

before that plan became a part of the

merged plan.

Unfunded vested benefits means an

amount by which the value of

nonforfeitable benefits under the plan

exceeds the value of the assets of the

plan.

Withdrawing employer means the

employer for whom withdrawal liability

is being calculated under section 4201

of ERISA.

Withdrawn employer means an

employer who, prior to the withdrawing

employer, has discontinued

contributions to the plan or covered

operations under the plan and whose

obligation to contribute has not been

assumed by a successor employer

within the meaning of section 4204 of

ERISA. A temporary suspension of

contributions, including a suspension

described in section 4218(2) of ERISA,

is not considered a discontinuance of

contributions.

§ 4211.3 Special rules for construction

industry and IRC section 404(c) plans.

(a) Construction plans. Except as

provided in §§ 4211.11(b) and

4211.21(b), a plan that primarily covers

employees in the building and

construction industry shall use the

presumptive method for allocating

unfunded vested benefits.

(b) Section 404(c) plans. A plan

described in section 404(c) of the Code

or a continuation of such a plan shall

allocate unfunded vested benefits under

the rolling-5 method unless the plan, by

amendment, adopts an alternative

method or modification.
34098 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Subpart B—Changes Not Subject to

PBGC Approval

§ 4211.11 Changes not subject to PBGC

approval.

(a) General rule. A plan, other than a

plan that primarily covers employees in

the building and construction industry,

may adopt, by amendment, any of the

statutory allocation methods and any of

the modifications set forth in §§ 4211.12

and 4211.13, without the approval of

the PBGC.

(b) Building and construction industry

plans. A plan that primarily covers

employees in the building and

construction industry may adopt, by

amendment, any of the modifications to

the presumptive rule set forth in

§ 4211.12 without the approval of the

PBGC.

§ 4211.12 Modifications to the

presumptive, modified presumptive and

rolling-5 methods.

(a) ‘‘Contributions made’’ and ‘‘total

amount contributed’’. Each of the

allocation fractions used in the

presumptive, modified presumptive and

rolling-5 methods is based on

contributions that certain employers

have made to the plan for a five-year

period. For purposes of these methods,

and except as provided in paragraph (b)

of this section, ‘‘the sum of all

contributions made’’ or ‘‘total amount

contributed’’ by employers for a plan

year means the amounts (other than

withdrawal liability payments)

considered contributed to the plan for

the plan year for purposes of section

412(b)(3)(A) of the Code. For plan years

before section 412 applies to the plan,

‘‘the sum of all contributions made’’ or

‘‘total amount contributed’’ means the

amount reported to the IRS or the

Department of Labor as total

contributions for the plan year; for

example, for plan years in which the

plan filed the Form 5500, the amount

reported as total contributions on that

form. Employee contributions, if any,

shall be excluded from the totals.

(b) Changing the period for counting

contributions. A plan sponsor may

amend a plan to modify the

denominators in the presumptive,

modified presumptive and rolling-5

methods in accordance with one of the

alternatives described in this paragraph.

Except as provided in paragraph (b)(4)

of this section, any amendment adopted

under this paragraph shall be applied

consistently to all plan years.

Contributions counted for one plan year

may be not counted for any other plan

year. If a contribution is counted as part

of the ‘‘total amount contributed’’ for

any plan year used to determine a

denominator, that contribution may not

also be counted as a contribution owed

with respect to an earlier year used to

determine the same denominator,

regardless of when the plan collected

that contribution.

(1) A plan sponsor may amend a plan

to provide that ‘‘the sum of all

contributions made’’ or ‘‘total amount

contributed’’ for a plan year means the

amount of contributions that the plan

actually received during the plan year,

without regard to whether the

contributions are treated as made for

that plan year under section

412(b)(3)(A) of the Code.

(2) A plan sponsor may amend a plan

to provide that ‘‘the sum of all

contributions made’’ or ‘‘total amount

contributed’’ for a plan year means the

amount of contributions actually

received during the plan year, increased

by the amount of contributions received

during a specified period of time after

the close of the plan year not to exceed

the period described in section

412(c)(10) of the Code and regulations

thereunder.

(3) A plan sponsor may amend a plan

to provide that ‘‘the sum of all

contributions made’’ or ‘‘total amount

contributed’’ for a plan year means the

amount of contributions actually

received during the plan year, increased

by the amount of contributions accrued

during the plan year and received

during a specified period of time after

the close of the plan year not to exceed

the period described in section

412(c)(10) of the Code and regulations

thereunder.

(4) A plan sponsor may amend a plan

to provide that—

(i) For plan years ending before

September 26, 1980, ‘‘the sum of all

contributions made’’ or ‘‘total amount

contributed’’ means the amount of total

contributions reported on Form 5500

and, for years before the plan was

required to file Form 5500, the amount

of total contributions reported on any

predecessor reporting form required by

the Department of Labor or the IRS; and

(ii) For subsequent plan years, ‘‘the

sum of all contributions made’’ or ‘‘total

amount contributed’’ means the amount

described in paragraph (a) of this

section, or the amount described in

paragraph (b)(1), (b)(2) or (b)(3) of this

section.

(c) Excluding contributions of

significant withdrawn employers.

Contributions of certain withdrawn

employers are excluded from the

denominator in each of the fractions

used to determine a withdrawing

employer’s share of unfunded vested

benefits under the presumptive,

modified presumptive and rolling-5

methods. Except as provided in

paragraph (c)(1) of this section,

contributions of all employers that

permanently cease to have an obligation

to contribute to the plan or permanently

cease covered operations before the end

of the period of plan years used to

determine the fractions for allocating

unfunded vested benefits under each of

those methods (and contributions of all

employers that withdrew before

September 26, 1980) are excluded from

the denominators of the fractions.

(1) The plan sponsor of a plan using

the presumptive, modified presumptive

or rolling-5 method may amend the plan

to provide that only the contributions of

significant withdrawn employers shall

be excluded from the denominators of

the fractions used in those methods.

(2) For purposes of this paragraph (c),

‘‘significant withdrawn employer’’

means—

(i) An employer to which the plan has

sent a notice of withdrawal liability

under section 4219 of ERISA; or

(ii) A withdrawn employer that in any

plan year used to determine the

denominator of a fraction contributed at

least $250,000 or, if less, 1% of all

contributions made by employers for

that year.

(3) If a group of employers withdraw

in a concerted withdrawal, the plan

shall treat the group as a single

employer in determining whether the

members are significant withdrawn

employers under paragraph (c)(2) of this

section. A ‘‘concerted withdrawal’’

means a cessation of contributions to

the plan during a single plan year—

(i) By an employer association;

(ii) By all or substantially all of the

employers covered by a single collective

bargaining agreement; or

(iii) By all or substantially all of the

employers covered by agreements with

a single labor organization.

§ 4211.13 Modifications to the direct

attribution method.

(a) Error in direct attribution method.

The unfunded vested benefits allocated

to a withdrawing employer under the

direct attribution method are the sum of

the employer’s attributable liability,

determined under section 4211(c)(4)

(A)(i) and (B) of ERISA, and the

employer’s share of the plan’s

unattributable liability, determined

under section 4211(c)(4)(E) and

allocated to the employer under section

4211(c)(4)(F). Plan sponsors should

allocate unattributable liabilities on the

basis of the employer’s share of the

attributable liabilities. However, section

4211(c)(4)(F) of ERISA, which describes

the allocation of unattributable

liabilities, contains a typographical
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34099

error. Therefore, plans adopting the

direct attribution method shall modify

the phrase ‘‘as the amount determined

under subparagraph (C) for the

employer bears to the sum of the

amounts determined under

subparagraph (C) for all employers

under the plan’’ in section 4211(c)(4)(F)

by substituting ‘‘subparagraph (B)’’ for

‘‘subparagraph (C)’’ in both places it

appears.

(b) Allocating unattributable liability

based on contributions in period before

withdrawal. A plan that is amended to

adopt the direct attribution method may

provide that instead of allocating the

unattributable liability in accordance

with section 4211(c)(4)(F) of ERISA, the

employer’s share of the plan’s

unattributable liability shall be

determined by multiplying the plan’s

unattributable liability determined

under section 4211(c)(4)(E) by a

fraction—

(1) The numerator of which is the

total amount of contributions required

to be made by the withdrawing

employer over a period of consecutive

plan years (not fewer than five) ending

before the withdrawal; and

(2) The denominator of which is the

total amount contributed under the plan

by all employers for the same period of

years used in paragraph (b)(1) of this

section, decreased by any amount

contributed by an employer that

withdrew from the plan during those

plan years.

Subpart C—Changes Subject to PBGC

Approval

§ 4211.21 Changes subject to PBGC

approval.

(a) General rule. Subject to the

approval of the PBGC pursuant to this

subpart, a plan, other than a plan that

primarily covers employees in the

building and construction industry, may

adopt, by amendment, any allocation

method or modification to an allocation

method that is not permitted under

subpart B of this part.

(b) Building and construction industry

plans. Subject to the approval of the

PBGC pursuant to this subpart, a plan

that primarily covers employees in the

building and construction industry may

adopt, by amendment, any allocation

method or modification to an allocation

method that is not permitted under

§ 4211.12 if the method or modification

is applicable only to its employers that

are not construction industry employers

within the meaning of section

4203(b)(1)(A) of ERISA.

(c) Substantial overallocation not

allowed. No plan may adopt an

allocation method or modification to an

allocation method that results in a

systematic and substantial

overallocation of the plan’s unfunded

vested benefits.

(d) Use of method prior to approval.

A plan may implement an alternative

allocation method or modification to an

allocation method that requires PBGC

approval before that approval is given.

However, the plan sponsor shall assess

liability in accordance with this

paragraph.

(1) Demand for payment. Until the

PBGC approves the allocation method or

modification, a plan may not demand

withdrawal liability under section 4219

of ERISA in an amount that exceeds the

lesser of the amount calculated under

the amendment or the amount

calculated under the allocation method

that the plan would be required to use

if the PBGC did not approve the

amendment. The plan must inform each

withdrawing employer of both amounts

and explain that the higher amount may

become payable depending on the

PBGC’s decision on the amendment.

(2) Adjustment of liability. When

necessary because of the PBGC decision

on the amendment, the plan shall adjust

the amount demanded from each

employer under paragraph (c)(1) of this

section and the employer’s withdrawal

liability payment schedule. The length

of the payment schedule shall be

increased, as necessary. The plan shall

notify each affected employer of the

adjusted liability and payment schedule

and shall collect the adjusted amount in

accordance with the adjusted schedule.

§ 4211.22 Requests for PBGC approval.

(a) General. A plan shall submit a

request for approval of an alternative

allocation method or modification to an

allocation method to the PBGC in

accordance with the requirements of

this section as soon as practicable after

the adoption of the amendment.

(b) Who shall submit. The plan

sponsor, or a duly authorized

representative acting on behalf of the

plan sponsor, shall sign the request.

(c) Where to submit. The plan shall

submit the request by first class mail or

courier service to Reports Processing,

Insurance Operations Department,

Pension Benefit Guaranty Corporation,

1200 K Street, NW., Washington, DC

20005–4026, or by hand to the above

address.

(d) Content. Each request shall

contain the following information:

(1) The name, address and telephone

number of the plan sponsor, and of the

duly authorized representative, if any,

of the plan sponsor.

(2) The name of the plan.

(3) The nine-digit Employer

Identification Number (EIN) that the

Internal Revenue Service assigned to the

plan sponsor and the three-digit Plan

Identification Number (PIN) that the

plan sponsor assigned to the plan, and,

if different, also the EIN-PIN that the

plan last filed with the PBGC. If the plan

has no EIN-PIN, the request shall so

indicate.

(4) The date the amendment was

adopted.

(5) A copy of the amendment, setting

forth the full text of the alternative

allocation method or modification.

(6) The allocation method that the

plan currently uses and a copy of the

plan amendment (if any) that adopted

the method.

(7) A statement certifying that notice

of the adoption of the amendment has

been given to all employers that have an

obligation to contribute under the plan

and to all employee organizations that

represent employees covered by the

plan.

(e) Additional information. In

addition to the information listed in

paragraph (d) of this section, the PBGC

may require the plan sponsor to submit

any other information that the PBGC

determines is necessary for the review

of an alternative allocation method or

modification to an allocation method.

(Approved by the Office of Management and

Budget under control number 1212–0035)

§ 4211.23 Approval of alternative method.

(a) General. The PBGC shall approve

an alternative allocation method or

modification to an allocation method if

the PBGC determines that adoption of

the method or modification would not

significantly increase the risk of loss to

plan participants and beneficiaries or to

the PBGC.

(b) Criteria. An alternative allocation

method or modification to an allocation

method satisfies the requirements of

paragraph (a) of this section if it meets

the following three conditions:

(1) The method or modification

allocates a plan’s unfunded vested

benefits, both for the adoption year and

for the five subsequent plan years, to the

same extent as any of the statutory

allocation methods, or any modification

to a statutory allocation method

permitted under subpart B.

(2) The method or modification

allocates unfunded vested benefits to

each employer on the basis of either the

employer’s share of contributions to the

plan or the unfunded vested benefits

attributable to each employer. The

method or modification may take into

account differences in contribution rates

paid by different employers and
34100 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

differences in benefits of different

employers’ employees.

(3) The method or modification fully

reallocates among employers that have

not withdrawn from the plan all

unfunded vested benefits that the plan

sponsor has determined cannot be

collected from withdrawn employers, or

that are not assessed against withdrawn

employers because of sections 4209,

4219(c)(1)(B) or 4225 of ERISA.

(c) PBGC action on request. The

PBGC’s decision on a request for

approval shall be in writing. If the PBGC

disapproves the request, the decision

shall state the reasons for the

disapproval and shall include a

statement of the sponsor’s right to

request a reconsideration of the decision

pursuant to part 4003 of this chapter.

§ 4211.24 Special rule for certain

alternative methods previously approved.

A plan may not apply to any

employer withdrawing on or after

November 25, 1987, an allocation

method approved by the PBGC before

that date that allocates to the employer

the greater of the amounts of unfunded

vested benefits determined under two

different allocation rules. Until a plan

that has been using such a method is

amended to adopt a valid allocation

method, its allocation method shall be

deemed to be the statutory allocation

method that would apply if it had never

been amended.

Subpart D—Allocation Methods for

Merged Multiemployer Plans

§ 4211.31 Allocation of unfunded vested

benefits following the merger of plans.

(a) General Rule. Except as provided

in paragraphs (b) through (d) of this

section, when two or more

multiemployer plans merge, the merged

plan shall adopt one of the statutory

allocation methods, in accordance with

subpart B of this part, or one of the

allocation methods prescribed in

§§ 4211.32 through 4211.35, and the

method adopted shall apply to all

employer withdrawals occurring after

the initial plan year. Alternatively, a

merged plan may adopt its own

allocation method in accordance with

subpart C of this part. If a merged plan

fails to adopt an allocation method

pursuant to this subpart or subpart B or

C, it shall use the presumptive

allocation method prescribed in

§ 4211.32. In addition, a merged plan

may adopt any of the modifications

prescribed in § 4211.36 or in subpart B

of this part.

(b) Construction plans. Except as

provided in the next sentence, a merged

plan that primarily covers employees in

the building and construction industry

shall use the presumptive allocation

method prescribed in § 4211.32.

However, the plan may, with respect to

employers that are not construction

industry employers within the meaning

of section 4203(b)(1)(A) of ERISA,

adopt, by amendment, one of the

alternative methods prescribed in

§§ 4211.33 through 4211.35 or any other

allocation method. Any such

amendment shall be adopted in

accordance with subpart C of this part.

A construction plan may, without the

PBGC’s approval, adopt by amendment

any of the modifications set forth in

§ 4211.36 or any of the modifications to

the statutory presumptive method set

forth in § 4211.12.

(c) Section 404(c) plans. A merged

plan that is a continuation of a plan

described in section 404(c) of the Code

shall use the rolling-5 allocation method

prescribed in § 4211.34, unless the plan,

by amendment, adopts an alternative

method. The plan may adopt one of the

statutory allocation methods or one of

the allocation methods set forth in

§§ 4211.32 through 4211.35 without

PBGC approval; adoption of any other

allocation method is subject to PBGC

approval under subpart B of this plan.

The plan may, without the PBGC’s

approval, adopt by amendment any of

the modifications set forth in § 4211.36

or in subpart B of this part.

(d) Withdrawals before the end of the

initial plan year. For employer

withdrawals after the effective date of a

merger and prior to the end of the initial

plan year, the amount of unfunded

vested benefits allocable to a

withdrawing employer shall be

determined in accordance with

§ 4211.37.

§ 4211.32 Presumptive method for

withdrawals after the initial plan year.

(a) General rule. Under this section,

the amount of unfunded vested benefits

allocable to an employer that withdraws

from a merged plan after the initial plan

year is the sum (but not less than zero)

of—

(1) The employer’s proportional share,

if any, of the unamortized amount of the

plan’s initial plan year unfunded vested

benefits, as determined under paragraph

(b) of this section;

(2) The employer’s proportional share

of the unamortized amount of the

change in the plan’s unfunded vested

benefits for plan years ending after the

initial plan year, as determined under

paragraph (c) of this section; and

(3) The employer’s proportional share

of the unamortized amounts of the

reallocated unfunded vested benefits (if

any) as determined under paragraph (d)

of this section.

(b) Share of initial plan year

unfunded vested benefits. An

employer’s proportional share, if any, of

the unamortized amount of the plan’s

initial plan year unfunded vested

benefits is the sum of the employer’s

share of its prior plan’s liabilities

(determined under paragraph (b)(1) of

this section) and the employer’s share of

the adjusted initial plan year unfunded

vested benefits (determined under

paragraph (b)(2) of this section), with

such sum reduced by five percent of the

original amount for each plan year

subsequent to the initial year.

(1) Share of prior plan liabilities. An

employer’s share of its prior plan’s

liabilities is the amount of unfunded

vested benefits that would have been

allocable to the employer if it had

withdrawn on the first day of the initial

plan year, determined as if each plan

had remained a separate plan.

(2) Share of adjusted initial plan year

unfunded vested benefits. An

employer’s share of the adjusted initial

plan year unfunded vested benefits

equals the plan’s initial plan year

unfunded vested benefits, less the

amount that would be determined under

paragraph (b)(1) of this section for each

employer that had not withdrawn as of

the end of the initial plan year,

multiplied by a fraction—

(i) The numerator of which is the

amount determined under paragraph

(b)(1) of this section; and

(ii) The denominator of which is the

sum of the amounts that would be

determined under paragraph (b)(1) of

this section for each employer that had

not withdrawn as of the end of the

initial plan year.

(c) Share of annual changes. An

employer’s proportional share of the

unamortized amount of the change in

the plan’s unfunded vested for the plan

years ending after the end of the initial

plan year is the sum of the employer’s

proportional shares (determined under

paragraph (c)(2) of this section) of the

unamortized amount of the change in

unfunded vested benefits (determined

under paragraph (c)(1) of this section)

for each plan year in which the

employer has an obligation to contribute

under the plan ending after the initial

plan year and before the plan year in

which the employer withdraws.

(1) Change in plan’s unfunded vested

benefits. The change in a plan’s

unfunded vested benefits for a plan year

is the amount by which the unfunded

vested benefits at the end of a plan year,

less the value as of the end of such year

of all outstanding claims for withdrawal

liability that can reasonably be expected
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34101

to be collected from employers that had

withdrawn as of the end of the initial

plan year, exceed the sum of the

unamortized amount of the initial plan

year unfunded vested benefits

(determined under paragraph (c)(1)(i) of

this section) and the unamortized

amounts of the change in unfunded

vested benefits for each plan year

ending after the initial plan year and

preceding the plan year for which the

change is determined (determined

under paragraph (c)(1)(ii) of this

section).

(i) Unamortized amount of initial

plan year unfunded vested benefits. The

unamortized amount of the initial plan

year unfunded vested benefits is the

amount of those benefits reduced by five

percent of the original amount for each

succeeding plan year.

(ii) Unamortized amount of the

change. The unamortized amount of the

change in a plan’s unfunded vested

benefits with respect to a plan year is

the change in unfunded vested benefits

for the plan year, reduced by five

percent of such change for each

succeeding plan year.

(2) Employer’s proportional share. An

employer’s proportional share of the

amount determined under paragraph

(c)(1) of this section is computed by

multiplying that amount by a fraction—

(i) The numerator of which is the total

amount required to be contributed

under the plan (or under the employer’s

prior plan) by the employer for the plan

year in which the change arose and the

four preceding full plan years; and

(ii) The denominator of which is the

total amount contributed under the plan

(or under employer’s prior plan) for the

plan year in which the change arose and

the four preceding full plan years by all

employers that had an obligation to

contribute under the plan for the plan

year in which such change arose,

reduced by any amount contributed by

an employer that withdrew from the

plan in the year in which the change

arose.

(d) Share of reallocated amounts. An

employer’s proportional share of the

unamortized amounts of the reallocated

unfunded vested benefits, if any, is the

sum of the employer’s proportional

shares (determined under paragraph

(d)(2) of this section) of the unamortized

amount of the reallocated unfunded

vested benefits (determined under

paragraph (d)(1) of this section) for each

plan year ending before the plan year in

which the employer withdrew from the

plan.

(1) Unamortized amount of

reallocated unfunded vested benefits.

The unamortized amount of the

reallocated unfunded vested benefits

with respect to a plan year is the sum

of the amounts described in paragraphs

(d)(1)(i), (d)(1)(ii), and (d)(1)(iii) of this

section for the plan year, reduced by

five percent of such sum for each

succeeding plan year.

(i) Uncollectible amounts. Amounts

included as reallocable under this

paragraph are those that the plan

sponsor determines in that plan year to

be uncollectible for reasons arising out

of cases or proceedings under Title 11,

United States Code, or similar

proceedings, with respect to an

employer that withdrew after the close

of the initial plan year.

(ii) Relief amounts. Amounts included

as reallocable under this paragraph are

those that the plan sponsor determines

in that plan year will not be assessed as

a result of the operation of sections

4209, 4219(c)(1)(B), or 4225 of ERISA

with respect to an employer that

withdrew after the close of the initial

plan year.

(iii) Other amounts. Amounts

included as reallocable under this

paragraph are those that the plan

sponsor determines in that plan year to

be uncollectible or unassessable for

other reasons under standards not

inconsistent with regulations prescribed

by the PBGC.

(2) Employer’s proportional share. An

employer’s proportional share of the

amount of the reallocated unfunded

vested benefits with respect to a plan

year is computed by multiplying the

unamortized amount of the reallocated

unfunded vested benefits (as of the end

of the year preceding the plan year in

which the employer withdraws) by the

allocation fraction described in

paragraph (c)(2) of this section for the

same plan year.

§ 4211.33 Modified presumptive method

for withdrawals after the initial plan year.

(a) General rule. Under this section,

the amount of unfunded vested benefits

allocable to an employer that withdraws

from a merged plan after the initial plan

year is the sum of the employer’s

proportional share, if any, of the

unamortized amount of the plan’s initial

plan year unfunded vested benefits

(determined under paragraph (b) of this

section) and the employer’s

proportional share of the unamortized

amount of the unfunded vested benefits

arising after the initial plan year

(determined under paragraph (c) of this

section).

(b) Share of initial plan year

unfunded vested benefits. An

employer’s proportional share, if any, of

the unamortized amount of the plan’s

initial plan year unfunded vested

benefits is the sum of the employer’s

share of its prior plan’s liabilities, as

determined under § 4211.32(b)(1), and

the employer’s share of the adjusted

initial plan year unfunded vested

benefits, as determined under

§ 4211.32(b)(2), with such sum reduced

as if it were being fully amortized in

level annual installments over fifteen

years beginning with the first plan year

after the initial plan year.

(c) Share of unfunded vested benefits

arising after the initial plan year. An

employer’s proportional share of the

amount of the plan’s unfunded vested

benefits arising after the initial plan year

is the employer’s proportional share

(determined under paragraph (c)(2) of

this section) of the plan’s unfunded

vested benefits as of the end of the plan

year preceding the plan year in which

the employer withdraws, reduced by the

amount of the plan’s unfunded vested

benefits as of the close of the initial plan

year (determined under paragraph (c)(1)

of this section).

(1) Amount of unfunded vested

benefits. The plan’s unfunded vested

benefits as of the end of the plan year

preceding the plan year in which the

employer withdraws shall be reduced

by the sum of—

(i) The value as of that date of all

outstanding claims for withdrawal

liability that can reasonably be expected

to be collected, with respect to

employers that withdrew before that

plan year; and

(ii) The sum of the amounts that

would be allocable under paragraph (b)

of this section to all employers that have

an obligation to contribute in the plan

year preceding the plan year in which

the employer withdraws and that also

had an obligation to contribute in the

first plan year ending after the initial

plan year.

(2) Employer’s proportional share. An

employer’s proportional share of the

amount determined under paragraph

(c)(1) of this section is computed by

multiplying that amount by a fraction—

(i) The numerator of which is the total

amount required to be contributed

under the plan (or under the employer’s

prior plan) by the employer for the last

five full plan years ending before the

date on which the employer withdraws;

and

(ii) The denominator of which is the

total amount contributed under the plan

(or under each employer’s prior plan) by

all employers for the last five full plan

years ending before the date on which

the employer withdraws, increased by

the amount of any employer

contributions owed with respect to

earlier periods that were collected in

those plan years, and decreased by any

amount contributed by an employer that
34102 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

withdrew from the plan (or prior plan)

during those plan years.

§ 4211.34 Rolling-5 method for

withdrawals after the initial plan year.

(a) General rule. Under this section,

the amount of unfunded vested benefits

allocable to an employer that withdraws

from a merged plan after the initial plan

year is the sum of the employer’s

proportional share, if any, of the

unamortized amount of the plan’s initial

plan year unfunded vested benefits

(determined under paragraph (b) of this

section) and the employer’s

proportional share of the unamortized

amount of the unfunded vested benefits

arising after the initial plan year

(determined under paragraph (c) of this

section).

(b) Share of initial plan year

unfunded vested benefits. An

employer’s proportional share, if any, of

the unamortized amount of the plan’s

initial plan year unfunded vested

benefits is the sum of the employer’s

share of its prior plan’s liabilities, as

determined under § 4211.32(b)(1), and

the employer’s share of the adjusted

initial plan year unfunded vested

benefits, as determined under

§ 4211.32(b)(2), with such sum reduced

as if it were being fully amortized in

level annual installments over five years

beginning with the first plan year after

the initial plan year.

(c) Share of unfunded vested benefits

arising after the initial plan year. An

employer’s proportional share of the

amount of the plan’s unfunded vested

benefits arising after the initial plan year

is the employer’s proportional share

determined under § 4211.33(c).

§ 4211.35 Direct attribution method for

withdrawals after the initial plan year.

The allocation method under this

section is the allocation method

described in section 4211(c)(4) of

ERISA.

§ 4211.36 Modifications to the

determination of initial liabilities, the

amortization of initial liabilities, and the

allocation fraction.

(a) General rule. A plan using any of

the allocation methods described in

§§ 4211.32 through 4211.34 may, by

plan amendment and without PBGC

approval, adopt any of the modifications

described in this section.

(b) Restarting initial liabilities. A plan

may be amended to allocate the initial

plan year unfunded vested benefits

under § 4211.32(b), § 4211.33(b), or

§ 4211.34(b) without separately

allocating to employers the liabilities

attributable to their participation under

their prior plans. An amendment under

this paragraph must include an

allocation fraction under paragraph (d)

of this section for determining the

employer’s proportional share of the

total unfunded benefits as of the close

of the initial plan year.

(c) Amortizing initial liabilities. A

plan may by amendment modify the

amortization of initial liabilities in

either of the following ways:

(1) If two or more plans that use the

presumptive allocation method of

section 4211(b) of ERISA merge, the

merged plan may adjust the

amortization of initial liabilities under

§ 4211.32(b) to amortize those unfunded

vested benefits over the remaining

length of the prior plans’ amortization

schedules.

(2) A plan that has adopted the

allocation method under § 4211.33 or

§ 4211.34 may adjust the amortization of

initial liabilities under § 4211.33(b) or

§ 4211.34(b) to amortize those unfunded

vested benefits in level annual

installments over any period of at least

five and not more than fifteen years.

(d) Changing the allocation fraction.

A plan may by amendment replace the

allocation fraction under § 4211.32(b),

§ 4211.33(b), or § 4211.34(b) with any of

the following contribution-based

fractions—

(1) A fraction, the numerator of which

is the total amount required to be

contributed under the merged and prior

plans by the withdrawing employer in

the 60-month period ending on the last

day of the initial plan year, and the

denominator of which is the sum for

that period of the contributions made by

all employers that had not withdrawn as

of the end of the initial plan year;

(2) A fraction, the numerator of which

is the total amount required to be

contributed by the withdrawing

employer for the initial plan year and

the four preceding full plan years of its

prior plan, and the denominator of

which is the sum of all contributions

made over that period by employers that

had not withdrawn as of the end of the

initial plan year; or

(3) A fraction, the numerator of which

is the total amount required to be

contributed to the plan by the

withdrawing employer since the

effective date of the merger, and the

denominator of which is the sum of all

contributions made over that period by

employers that had not withdrawn as of

the end of the initial plan year.

§ 4211.37 Allocating unfunded vested

benefits for withdrawals before the end of

the initial plan year.

If an employer withdraws after the

effective date of a merger and before the

end of the initial plan year, the amount

of unfunded vested benefits allocable to

the employer shall be determined as if

each plan had remained a separate plan.

In making this determination, the plan

sponsor shall use the allocation method

of the withdrawing employer’s prior

plan and shall compute the employer’s

allocable share of the plan’s unfunded

vested benefits as if the day before the

effective date of the merger were the end

of the last plan year prior to the

withdrawal.

PART 4219—NOTICE, COLLECTION,

AND REDETERMINATION OF

WITHDRAWAL LIABILITY

Subpart A—General

Sec.

4219.1 Purpose and scope.

4219.2 Definitions.

Subpart B—Redetermination of Withdrawal

Liability Upon Mass Withdrawal

4219.11 Withdrawal liability upon mass

withdrawal.

4219.12 Employers liable upon mass

withdrawal.

4219.13 Amount of liability for de minimis

amounts.

4219.14 Amount of liability for 20-yearlimitation amounts.

4219.15 Determination of reallocation

liability.

4219.16 Imposition of liability.

4219.17 Filings with PBGC.

4219.18 Withdrawal in a plan year in which

substantially all employers withdraw.

4219.19 Information collection.

Subpart C—Overdue, Defaulted, and

Overpaid Withdrawal Liability

4219.31 Overdue and defaulted withdrawal

liability; overpayment.

4219.32 Interest on overdue, defaulted and

overpaid withdrawal liability.

4219.33 Plan rules concerning overdue and

defaulted withdrawal liability.

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

1399(c)(6).

Subpart A—General

§ 4219.1 Purpose and scope.

(a) Subpart A. Subpart A of this part

describes the purpose and scope of the

provisions in this part and defined

terms used in this part.

(b) Subpart B.

(1) Purpose. When a multiemployer

plan terminates by the withdrawal of

every employer from the plan, or when

substantially all employers withdraw

from a multiemployer plan pursuant to

an agreement or arrangement to

withdraw from the plan, section

4219(c)(1)(D)(i) of ERISA requires that

the liability of such withdrawing

employers be determined (or

redetermined) without regard to the 20-

year limitation on annual payments

established in section 4219(c)(1)(B) of

ERISA. In addition, section

4219(c)(1)(D)(ii) requires that, upon the
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34103

occurrence of a withdrawal described

above, the total unfunded vested

benefits of the plan be fully allocated

among such withdrawing employers in

a manner that is not inconsistent with

PBGC regulations. Section 4209(c) of

ERISA provides that the de minimis

reduction established in sections 4209

(a) and (b) of ERISA shall not apply to

an employer that withdraws in a plan

year in which substantially all

employers withdraw from the plan, or to

an employer that withdraws pursuant to

an agreement to withdraw during a

period of one or more plan years during

which substantially all employers

withdraw pursuant to an agreement or

arrangement to withdraw. The purpose

of subpart B of this part is to prescribe

rules, pursuant to sections 4219(c)(1)(D)

and 4209(c) of ERISA, for redetermining

an employer’s withdrawal liability and

fully allocating the unfunded vested

benefits of a multiemployer plan in

either of two mass-withdrawal

situations: the termination of a plan by

the withdrawal of every employer and

the withdrawal of substantially all

employers pursuant to an agreement or

arrangement to withdraw. Subpart B

also prescribes rules for redetermining

the liability of an employer without

regard to section 4209 (a) or (b) when

the employer withdraws in a plan year

in which substantially all employers

withdraw, regardless of the occurrence

of a mass withdrawal. (See part 4281

regarding the valuation of unfunded

vested benefits to be fully allocated

under subpart B, and parts 4041A and

4281 regarding the powers and duties of

the plan sponsor of a plan terminated by

mass withdrawal.)

(2) Scope. Subpart B applies to

multiemployer plans covered by title IV

of ERISA, with respect to which there is

a termination by the withdrawal of

every employer (including a plan

created by a partition pursuant to

section 4233 of ERISA) or a withdrawal

of substantially all employers in the

plan pursuant to an agreement or

arrangement to withdraw from the plan,

and to employers that withdraw from

such multiemployer plans. The

obligations of a plan sponsor of a masswithdrawal-terminated plan under

subpart B shall cease to apply when the

plan assets are distributed in full

satisfaction of all nonforfeitable benefits

under the plan. Subpart B also applies,

to the extent appropriate, to

multiemployer plans with respect to

which there is a withdrawal of

substantially all employers in a single

plan year and to employers that

withdraw from such plans in that plan

year.

(c) Subpart C. Subpart C establishes

the interest rate to be charged on

overdue, defaulted and overpaid

withdrawal liability under section

4219(c)(6) of ERISA, and authorizes

multiemployer plans to adopt

alternative rules concerning assessment

of interest and related matters. Subpart

C applies to multiemployer plans

covered under title IV of ERISA, and to

employers that have withdrawn from

such plans after April 28, 1980 (May 2,

1979, for certain employers in the

seagoing industry).

§ 4219.2 Definitions.

(a) The following terms are defined in

section 4001.2 of this chapter: employer,

ERISA, IRS, mass withdrawal,

multiemployer plan, nonforfeitable

benefit, PBGC, plan, and plan year.

(b) For purposes of this part:

Initial withdrawal liability means the

amount of withdrawal liability

determined in accordance with sections

4201 through 4225 of title IV without

regard to the occurrence of a mass

withdrawal.

Mass withdrawal liability means the

sum of an employer’s liability for de

minimis amounts, liability for 20-yearlimitation amounts, and reallocation

liability.

Mass withdrawal valuation date

means—

(1) In the case of a termination by

mass withdrawal, the last day of the

plan year in which the plan terminates;

or

(2) in the case of a withdrawal of

substantially all employers pursuant to

an agreement or arrangement to

withdraw, the last day of the plan year

as of which substantially all employers

have withdrawn.

Reallocation liability means the

amount of unfunded vested benefits

allocated to an employer in the event of

a mass withdrawal.

Reallocation record date means a date

selected by the plan sponsor, which

shall be not earlier than the date of the

plan’s actuarial report for the year of the

mass withdrawal and not later than one

year after the mass withdrawal

valuation date.

Redetermination liability means the

sum of an employer’s liability for de

minimis amounts and the employer’s

liability for 20-year-limitation amounts.

Unfunded vested benefits means the

amount by which the present value of

a plan’s vested benefits exceeds the

value of plan assets (including claims of

the plan for unpaid initial withdrawal

liability and redetermination liability),

determined in accordance with section

4281 of ERISA and part 4281, subpart B.

(c) For purposes of subpart B—

Withdrawal means a complete

withdrawal as defined in section 4203

of ERISA.

Subpart B—Redetermination of

Withdrawal Liability Upon Mass

Withdrawal

§ 4219.11 Withdrawal liability upon mass

withdrawal.

(a) Initial withdrawal liability. The

plan sponsor of a multiemployer plan

that experiences a mass withdrawal

shall determine initial withdrawal

liability pursuant to section 4201 of

ERISA of every employer that has

completely or partially withdrawn from

the plan and for whom the liability has

not previously been determined and, in

accordance with section 4202 of ERISA,

notify each employer of the amount of

the initial withdrawal liability and

collect the amount of the initial

withdrawal liability from each

employer.

(b) Mass withdrawal liability. The

plan sponsor of a multiemployer plan

that experiences a mass withdrawal

shall also—

(1) Notify withdrawing employers, in

accordance with § 4219.16(a), that a

mass withdrawal has occurred;

(2) Within 150 days after the mass

withdrawal valuation date, determine

the liability of withdrawn employers for

de minimis amounts and for 20-yearlimitation amounts in accordance with

§§ 4219.13 and 4219.14;

(3) Within one year after the

reallocation record date, determine the

reallocation liability of withdrawn

employers in accordance with

§ 4219.15;

(4) Notify each withdrawing employer

of the amount of mass withdrawal

liability determined pursuant to this

subpart and the schedule for payment of

such liability, and demand payment of

and collect that liability, in accordance

with § 4219.16; and

(5) Notify the PBGC of the occurrence

of a mass withdrawal and certify, in

accordance with § 4219.17, that

determinations of mass withdrawal

liability have been completed.

(c) Extensions of time. The plan

sponsor of a multiemployer plan that

experiences a mass withdrawal may

apply to the PBGC for an extension of

the deadlines contained in paragraph (b)

of this section. The PBGC shall approve

such a request only if it finds that

failure to grant the extension will create

an unreasonable risk of loss to plan

participants or the PBGC.

§ 4219.12 Employers liable upon mass

withdrawal.

(a) Liability for de minimis amounts.

An employer shall be liable for de
34104 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

minimis amounts to the extent provided

in section 4219(c)(1)(D) of ERISA if the

employer’s initial withdrawal liability

was reduced pursuant to section 4209

(a) or (b) of ERISA.

(b) Liability for 20-year-limitation

amounts. An employer shall be liable

for 20-year-limitation amounts to the

extent provided in section 4219(c)(1)(D)

of ERISA.

(c) Liability for reallocation liability.

An employer shall be liable for

reallocation liability if the employer

withdrew pursuant to an agreement or

arrangement to withdraw from a

multiemployer plan from which

substantially all employers withdrew

pursuant to an agreement or

arrangement to withdraw, or if the

employer withdrew after the beginning

of the second full plan year preceding

the termination date from a plan that

terminated by the withdrawal of every

employer, and, as of the reallocation

record date—

(1) The employer has not been

completely liquidated or dissolved;

(2) The employer is not the subject of

a case or proceeding under title 11,

United States Code, or any case or

proceeding under similar provisions of

state insolvency laws, except that a plan

sponsor may determine that such an

employer is liable for reallocation

liability if the plan sponsor determines

that the employer is reasonably

expected to be able to pay its initial

withdrawal liability and its

redetermination liability in full and on

time to the plan; and

(3) The plan sponsor has not

determined that the employer’s initial

withdrawal liability or its

redetermination liability is limited by

section 4225 of ERISA.

(d) General exclusion. In the event

that a plan experiences successive mass

withdrawals, an employer that has been

determined to be liable under this

subpart for any component of mass

withdrawal liability shall not be liable

as a result of the same withdrawal for

that component of mass withdrawal

liability with respect to a subsequent

mass withdrawal.

(e) Free-look rule. An employer that is

not liable for initial withdrawal liability

pursuant to a plan amendment adopting

section 4210(a) of ERISA shall not be

liable for de minimis amounts or for 20-

year-limitation amounts, but shall be

liable for reallocation liability in

accordance with paragraph (c) of this

section.

(f) Payment of initial withdrawal

liability. An employer’s payment of its

total initial withdrawal liability,

whether by prepayment or otherwise,

for a withdrawal which is later

determined to be part of a mass

withdrawal shall not exclude the

employer from or otherwise limit the

employer’s mass withdrawal liability

under this subpart.

(g) Agreement presumed. Withdrawal

by an employer during a period of three

consecutive plan years within which

substantially all employers withdraw

from a plan shall be presumed to be a

withdrawal pursuant to an agreement or

arrangement to withdraw unless the

employer proves otherwise by a

preponderance of the evidence.

§ 4219.13 Amount of liability for de

minimis amounts.

An employer that is liable for de

minimis amounts shall be liable to the

plan for the amount by which the

employer’s allocable share of unfunded

vested benefits for the purpose of

determining its initial withdrawal

liability was reduced pursuant to

section 4209 (a) or (b) of ERISA. Any

liability for de minimis amounts

determined under this section shall be

limited by section 4225 of ERISA to the

extent that section would have been

limiting had the employer’s initial

withdrawal liability been determined

without regard to the de minimis

reduction.

§ 4219.14 Amount of liability for 20-yearlimitation amounts.

An employer that is liable for 20-yearlimitation amounts shall be liable to the

plan for an amount equal to the present

value of all initial withdrawal liability

payments for which the employer was

not liable pursuant to section

4219(c)(1)(B) of ERISA. The present

value of such payments shall be

determined as of the end of the plan

year preceding the plan year in which

the employer withdrew, using the

assumptions that were used to

determine the employer’s payment

schedule for initial withdrawal liability

pursuant to section 4219(c)(1)(A)(ii) of

ERISA. Any liability for 20-yearlimitation amounts determined under

this section shall be limited by section

4225 of ERISA to the extent that section

would have been limiting had the

employer’s initial withdrawal liability

been determined without regard to the

20-year limitation.

§ 4219.15 Determination of reallocation

liability.

(a) General rule. In accordance with

the rules in this section, the plan

sponsor shall determine the amount of

unfunded vested benefits to be

reallocated and shall fully allocate those

unfunded vested benefits among all

employers liable for reallocation

liability.

(b) Amount of unfunded vested

benefits to be reallocated. For purposes

of this section, the amount of a plan’s

unfunded vested benefits to be

reallocated shall be the amount of the

plan’s unfunded vested benefits,

determined as of the mass withdrawal

valuation date, adjusted to exclude from

plan assets the value of the plan’s

claims for unpaid initial withdrawal

liability and unpaid redetermination

liability that are deemed to be

uncollectible under § 4219.12(c)(1) or

(c)(2).

(c) Amount of reallocation liability.

An employer’s reallocation liability

shall be equal to the sum of the

employer’s initial allocable share of the

plan’s unfunded vested benefits, as

determined under paragraph (c)(1) of

this section, plus any unassessable

amounts allocated to the employer

under paragraph (c)(2), limited by

section 4225 of ERISA to the extent that

section would have been limiting had

the employer’s reallocation liability

been included in the employer’s initial

withdrawal liability. If a plan is

determined to have no unfunded vested

benefits to be reallocated, the

reallocation liability of each liable

employer shall be zero.

(1) Initial allocable share. Except as

otherwise provided in rules adopted by

the plan pursuant to paragraph (d) of

this section, and in accordance with

paragraph (c)(3) of this section, an

employer’s initial allocable share shall

be equal to the product of the plan’s

unfunded vested benefits to be

reallocated, multiplied by a fraction—

(i) The numerator of which is the sum

of the employer’s initial withdrawal

liability and the employer’s

redetermination liability, if any; and

(ii) The denominator of which is the

sum of all initial withdrawal liabilities

and all the redetermination liabilities of

all employers liable for reallocation

liability.

(2) Allocation of unassessable

amounts. If after computing each

employer’s initial allocable share of

unfunded vested benefits, the plan

sponsor knows that any portion of an

employer’s initial allocable share is

unassessable as withdrawal liability

because of the limitations in section

4225 of ERISA, the plan sponsor shall

allocate any such unassessable amounts

among all other liable employers. This

allocation shall be done by prorating the

unassessable amounts on the basis of

each such employer’s initial allocable

share. No employer shall be liable for

unfunded vested benefits allocated

under paragraph (c)(1) or this paragraph

to another employer that are determined

to be unassessable or uncollectible
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34105

subsequent to the plan sponsor’s

demand for payment of reallocation

liability.

(3) Special rule for certain employers

with no or reduced initial withdrawal

liability. If an employer has no initial

withdrawal liability because of the

application of the free-look rule in

section 4210 of ERISA, then, in

computing the fraction prescribed in

paragraph (c)(1), the plan sponsor shall

use the employer’s allocable share of

unfunded vested benefits, determined

under section 4211 of ERISA at the time

of the employer’s withdrawal and

adjusted in accordance with section

4225 of ERISA, if applicable. If an

employer’s initial withdrawal liability

was reduced pursuant to section 4209(a)

or (b) of ERISA and the employer is not

liable for de minimis amounts pursuant

to § 4219.13, then, in computing the

fraction prescribed in paragraph (c)(1) of

this section, the plan sponsor shall use

the employer’s allocable share of

unfunded vested benefits, determined

under section 4211 of ERISA at the time

of the employer’s withdrawal and

adjusted in accordance with section

4225 of ERISA, if applicable.

(d) Plan rules. Plans may adopt rules

for calculating an employer’s initial

allocable share of the plan’s unfunded

vested benefits in a manner other than

that prescribed in paragraph (c)(1) of

this section, provided that those rules

allocate the plan’s unfunded vested

benefits to substantially the same extent

the prescribed rules would. Plan rules

adopted under this paragraph shall

operate and be applied uniformly with

respect to each employer. If such rules

would increase the reallocation liability

of any employer, they may be effective

with respect to that employer earlier

than three full plan years after their

adoption only if the employer consents

to the application of the rules to itself.

The plan sponsor shall give a written

notice to each contributing employer

and each employee organization that

represents employees covered by the

plan of the adoption of plan rules under

this paragraph.

§ 4219.16 Imposition of liability.

(a) Notice of mass withdrawal. Within

30 days after the mass withdrawal

valuation date, the plan sponsor shall

give written notice of the occurrence of

a mass withdrawal to each employer

that the plan sponsor reasonably expects

may be a liable employer under

§ 4219.12. The notice shall include—

(1) The mass withdrawal valuation

date;

(2) A description of the consequences

of a mass withdrawal under this

subpart; and

(3) A statement that each employer

obligated to make initial withdrawal

liability payments shall continue to

make those payments in accordance

with its schedule. Failure of the plan

sponsor to notify an employer of a mass

withdrawal as required by this

paragraph shall not cancel the

employer’s mass withdrawal liability or

waive the plan’s claim for such liability.

(b) Notice of redetermination liability.

Within 30 days after the date as of

which the plan sponsor is required

under § 4219.11(b)(2) to have

determined the redetermination liability

of employers, the plan sponsor shall

issue a notice of redetermination

liability in writing to each employer

liable under § 4219.12 for de minimis

amounts or 20-year-limitation amounts,

or both. The notice shall include—

(1) The amount of the employer’s

liability, if any, for de minimis amounts

determined pursuant to § 4219.13;

(2) The amount of the employer’s

liability, if any, for 20-year-limitation

amounts determined pursuant to

§ 4219.14;

(3) The schedule for payment of the

liability determined under paragraph (f)

of this section;

(4) A demand for payment of the

liability in accordance with the

schedule; and

(5) A statement of when the plan

sponsor expects to issue notices of

reallocation liability to liable employers.

(c) Notice of reallocation liability.

Within 30 days after the date as of

which the plan sponsor is required

under § 4219.11(b)(3) to have

determined the reallocation liability of

employers, the plan sponsor shall issue

a notice of reallocation liability in

writing to each employer liable for

reallocation liability. The notice shall

include—

(1) The amount of the employer’s

reallocation liability determined

pursuant to § 4219.15;

(2) The schedule for payment of the

liability determined under paragraph (f)

of this section; and

(3) A demand for payment of the

liability in accordance with the

schedule.

(d) Notice to employers not liable. The

plan sponsor shall notify in writing any

employer that receives a notice of mass

withdrawal under paragraph (a) of this

section and subsequently is determined

not to be liable for mass withdrawal

liability or any component thereof. The

notice shall specify the liability from

which the employer is excluded and

shall be provided to the employer not

later than the date by which liable

employers are to be provided notices of

reallocation liability pursuant to

paragraph (c) of this section. If the

employer is not liable for mass

withdrawal liability, the notice shall

also include a statement, if applicable,

that the employer is obligated to

continue to make initial withdrawal

liability payments in accordance with

its existing schedule for payment of

such liability.

(e) Combined notices. A plan sponsor

may combine a notice of

redetermination liability with the notice

of and demand for payment of initial

withdrawal liability. If a mass

withdrawal and a withdrawal described

in § 4219.18 occur concurrently, a plan

sponsor may combine—

(1) A notice of mass withdrawal with

a notice of withdrawal issued pursuant

to § 4219.18(d); and

(2) A notice of redetermination

liability with a notice of liability issued

pursuant to § 4219.18(e).

(f) Payment schedules. The plan

sponsor shall establish payment

schedules for payment of an employer’s

mass withdrawal liability in accordance

with the rules in section 4219(c) of

ERISA, as modified by this paragraph.

For an employer that owes initial

withdrawal liability as of the mass

withdrawal valuation date, the plan

sponsor shall establish new payment

schedules for each element of mass

withdrawal liability by amending the

initial withdrawal liability payment

schedule in accordance with the

paragraph (f)(1) of this section. For all

other employers, the payment schedules

shall be established in accordance with

paragraph (f)(2).

(1) Employers owing initial

withdrawal liability as of mass

withdrawal valuation date. For an

employer that owes initial withdrawal

liability as of the mass withdrawal

valuation date, the plan sponsor shall

amend the existing schedule of

payments in order to amortize the new

amounts of liability being assessed, i.e.,

redetermination liability and

reallocation liability. With respect to

redetermination liability, the plan

sponsor shall add that liability to the

total initial withdrawal liability and

determine a new payment schedule, in

accordance with section 4219(c)(1) of

ERISA, using the interest assumptions

that were used to determine the original

payment schedule. For reallocation

liability, the plan sponsor shall add that

liability to the present value, as of the

date following the mass withdrawal

valuation date, of the unpaid portion of

the amended payment schedule

described in the preceding sentence and

determine a new payment schedule of

level annual payments, calculated as if

the first payment were made on the day
34106 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

following the mass withdrawal

valuation date using the interest

assumptions used for determining the

amount of unfunded vested benefits to

be reallocated.

(2) Other employers. For an employer

that had no initial withdrawal liability,

or had fully paid its liability prior to the

mass withdrawal valuation date, the

plan sponsor shall determine the

payment schedule for redetermination

liability, in accordance with section

4219(c)(1) of ERISA, in the same manner

and using the same interest assumptions

as were used or would have been used

in determining the payment schedule

for the employer’s initial withdrawal

liability. With respect to reallocation

liability, the plan sponsor shall follow

the rules prescribed in paragraph (f)(1)

of this section.

(g) Review of mass withdrawal

liability determinations. Determinations

of mass withdrawal liability made

pursuant to this subpart shall be subject

to plan review under section 4219(b)(2)

of ERISA and to arbitration under

section 4221 of ERISA within the times

prescribed by those sections. Matters

that relate solely to the amount of, and

schedule of payments for, an employer’s

initial withdrawal liability are not

matters relating to the employer’s

liability under this subpart and are not

subject to review pursuant to this

paragraph.

(h) Cessation of withdrawal liability

obligations. If the plan sponsor of a

terminated plan distributes plan assets

in full satisfaction of all nonforfeitable

benefits under the plan, the plan

sponsor’s obligation to impose and

collect liability, and each employer’s

obligation to pay liability, in accordance

with this subpart ceases on the date of

such distribution.

(i) Determination that a mass

withdrawal has not occurred. If a plan

sponsor determines, after imposing

mass withdrawal liability pursuant to

this subpart, that a mass withdrawal has

not occurred, the plan sponsor shall

refund to employers all payments of

mass withdrawal liability with interest,

except that a plan sponsor shall not

refund payments of liability for de

minimis amounts to an employer that

remains liable for such amounts under

§ 4219.18. Interest shall be credited at

the interest rate prescribed in subpart C

and shall accrue from the date the

payment was received by the plan until

the date of the refund.

§ 4219.17 Filings with PBGC.

(a) Filing requirements. The plan

sponsor shall file with PBGC a notice

that a mass withdrawal has occurred

and separate certifications that

determinations of redetermination

liability and reallocation liability have

been made and notices provided to

employers in accordance with this

subpart.

(b) Who shall file. The plan sponsor

or a duly authorized representative

acting on behalf of the plan sponsor

shall sign and file the notice and the

certifications.

(c) When to file. A notice of mass

withdrawal for a plan from which

substantially all employers withdraw

pursuant to an agreement or

arrangement to withdraw shall be filed

with the PBGC no later than 30 days

after the mass withdrawal valuation

date. A notice of mass withdrawal

termination shall be filed within the

time prescribed for the filing of that

notice in part 4041A, subparts A and B,

of this chapter. Certifications of liability

determinations shall be filed with the

PBGC no later than 30 days after the

date on which the plan sponsor is

required to have provided employers

with notices pursuant to § 4219.16.

(d) Where to file. The notice and

certifications may be sent by mail or

submitted by hand during normal

working hours to Reports Processing,

Insurance Operations Department,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026.

(e) Filing date. For purposes of

paragraph (c)—

(1) The notice is considered filed on

the date of the postmark stamped on the

cover in which the notice is mailed if—

(i) The postmark was made by the

United States Postal Service; and

(ii) The notice was mailed postage

prepaid, properly packaged and

addressed to the PBGC.

(2) If both conditions described in

paragraph (e)(1) are not met, the notice

is considered filed on the date it is

received by the PBGC, except that

notices received after regular business

hours are considered filed on the next

regular business day.

(f) Contents of notice of mass

withdrawal. If a plan terminates by the

withdrawal of every employer, a notice

of termination filed in accordance with

part 4041A, subparts A and B, of this

chapter shall satisfy the requirements

for a notice of mass withdrawal under

this subpart. If substantially all

employers withdraw from a plan

pursuant to an agreement or

arrangement to withdraw, the notice of

mass withdrawal shall contain the

following information:

(1) The name of the plan.

(2) The name, address and telephone

number of the plan sponsor and of the

duly authorized representative, if any,

of the plan sponsor.

(3) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Identification Number

(PIN) assigned by the plan sponsor to

the plan, and, if different, the EIN or

PIN last filed with the PBGC. If no EIN

or PIN has been assigned, the notice

shall so indicate.

(4) The mass withdrawal valuation

date.

(5) A description of the facts on which

the plan sponsor has based its

determination that a mass withdrawal

has occurred, including the number of

contributing employers withdrawn and

the number remaining in the plan, and

a description of the effect of the mass

withdrawal on the plan’s contribution

base.

(g) Contents of certifications. Each

certification shall contain the following

information:

(1) The name of the plan.

(2) The name, address and telephone

number of the plan sponsor and of the

duly authorized representative, if any,

of the plan sponsor.

(3) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Identification Number

(PIN) last assigned by the plan sponsor

to the plan, and, if different, the EIN or

PIN filed with the PBGC. If no EIN or

PIN has been assigned, the notice shall

so indicate.

(4) Identification of the liability

determination to which the certification

relates.

(5) A certification, signed by the plan

sponsor or a duly authorized

representative, that the determinations

have been made and the notices given

in accordance with this subpart.

(6) For reallocation liability

certifications—

(i) A certification, signed by the plan’s

actuary, that the determination of

unfunded vested benefits has been done

in accordance with part 4281, subpart B;

and

(ii) A copy of plan rules, if any,

adopted pursuant to § 4219.15(d).

(h) Additional information. In

addition to the information described in

paragraph (g) of this section, the PBGC

may require the plan sponsor to submit

any other information the PBGC

determines it needs in order to monitor

compliance with this subpart.

§ 4219.18 Withdrawal in a plan year in

which substantially all employers withdraw.

(a) General rule. An employer that

withdraws in a plan year in which

substantially all employers withdraw
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34107

from the plan shall be liable to the plan

for de minimis amounts if the

employer’s initial withdrawal liability

was reduced pursuant to section 4209(a)

or (b) of ERISA.

(b) Amount of liability. An employer’s

liability for de minimis amounts under

this section shall be determined

pursuant to § 4219.13.

(c) Plan sponsor’s obligations. The

plan sponsor of a plan that experiences

a withdrawal described in paragraph (a)

shall—

(1) Determine and collect initial

withdrawal liability of every employer

that has completely or partially

withdrawn, in accordance with sections

4201 and 4202 of ERISA;

(2) Notify each employer that is or

may be liable under this section, in

accordance with paragraph (d) of this

section;

(3) Within 90 days after the end of the

plan year in which the withdrawal

occurred, determine, in accordance with

paragraph (b) of this section, the

liability of each withdrawing employer

that is liable under this section;

(4) Notify each liable employer, in

accordance with paragraph (e) of this

section, of the amount of its liability

under this section, demand payment of

and collect that liability; and

(5) Certify to the PBGC that

determinations of liability have been

completed, in accordance with

paragraph (g) of this section.

(d) Notice of withdrawal. Within 30

days after the end of a plan year in

which a plan experiences a withdrawal

described in paragraph (a), the plan

sponsor shall notify in writing each

employer that is or may be liable under

this section. The notice shall specify the

plan year in which substantially all

employers have withdrawn, describe the

consequences of such withdrawal under

this section, and state that an employer

obligated to make initial withdrawal

liability payments shall continue to

make those payments in accordance

with its schedule.

(e) Notice of liability. Within 30 days

after the determination of liability, the

plan sponsor shall issue a notice of

liability in writing to each liable

employer. The notice shall include—

(1) The amount of the employer’s

liability for de minimis amounts;

(2) A schedule for payment of the

liability, determined under § 4219.16(f);

and

(3) A demand for payment of the

liability in accordance with the

schedule.

(f) Review of liability determinations.

Determinations of liability made

pursuant to this section shall be subject

to plan review under section 4219(b)(2)

of ERISA and to arbitration under

section 4221 of ERISA, subject to the

limitations contained in § 4219.16(g).

(g) Notice to the PBGC. No later than

30 days after the notices of liability

under this section are required to be

provided to liable employers, the plan

sponsor shall file with the PBGC a

notice. The notice shall include the

items described in § 4219.17 (g)(1)

through (g)(3), as well as the

information listed below. In addition,

the PBGC may require the plan sponsor

to submit any further information that

the PBGC determines it needs in order

to monitor compliance with this section.

(1) The plan year in which the

withdrawal occurred.

(2) A description of the effect of the

withdrawal, including the number of

contributing employers that withdrew

in the plan year in which substantially

all employers withdrew, the number of

employers remaining in the plan, and a

description of the effect of the

withdrawal on the plan’s contribution

base.

(3) A certification, signed by the plan

sponsor or duly authorized

representative, that determinations have

been made and notices given in

accordance with this section.

§ 4219.19 Information collection.

The information collection

requirements contained in §§ 4219.16,

4219.17, and 4219.18 have been

approved by the Office of Management

and Budget under control number 1212–

0034.

Subpart C—Overdue, Defaulted, and

Overpaid Withdrawal Liability

§ 4219.31 Overdue and defaulted

withdrawal liability; overpayment.

(a) Overdue withdrawal liability

payment. Except as otherwise provided

in rules adopted by the plan in

accordance with § 4219.33, a

withdrawal liability payment is overdue

if it is not paid on the date set forth in

the schedule of payments established by

the plan sponsor.

(b) Default.

(1) Except as provided in paragraph

(c)(1), ‘‘default’’ means—

(i) The failure of an employer to pay

any overdue withdrawal liability

payment within 60 days after the

employer receives written notification

from the plan sponsor that the payment

is overdue; and

(ii) Any other event described in rules

adopted by the plan which indicates a

substantial likelihood that an employer

will be unable to pay its withdrawal

liability.

(2) In the event of a default, a plan

sponsor may require immediate

payment of all or a portion of the

outstanding amount of an employer’s

withdrawal liability, plus interest. In the

event that the plan sponsor accelerates

only a portion of the outstanding

amount of an employer’s withdrawal

liability, the plan sponsor shall establish

a new schedule of payments for the

remaining amount of the employer’s

withdrawal liability.

(c) Plan review or arbitration of

liability determination. The following

rules shall apply with respect to the

obligation to make withdrawal liability

payments during the period for plan

review and arbitration and with respect

to the failure to make such payments:

(1) A default as a result of failure to

make any payments shall not occur

until the 61st day after the last of—

(i) Expiration of the period described

in section 4219(b)(2)(A) of ERISA;

(ii) If the employer requests review

under section 4219(b)(2)(A) of ERISA of

the plan’s withdrawal liability

determination or the schedule of

payments established by the plan,

expiration of the period described in

section 4221(a)(1) of ERISA for

initiation of arbitration; or

(iii) If arbitration is timely initiated

either by the plan, the employer or both,

issuance of the arbitrator’s decision.

(2) Any amounts due before the

expiration of the period described in

paragraph (c)(1) shall be paid in

accordance with the schedule

established by the plan sponsor. If a

payment is not made when due under

the schedule, the payment is overdue

and interest shall accrue in accordance

with the rules and at the same rate set

forth in § 4219.32.

(d) Overpayments. If the plan sponsor

or an arbitrator determines that

payments made in accordance with the

schedule of payments established by the

plan sponsor have resulted in an

overpayment of withdrawal liability, the

plan sponsor shall refund the

overpayment, with interest, in a lump

sum. The plan sponsor shall credit

interest on the overpayment from the

date of the overpayment to the date on

which the overpayment is refunded to

the employer at the same rate as the rate

for overdue withdrawal liability

payments, as established under

§ 4219.32 or by the plan pursuant to

§ 4219.33.

§ 4219.32 Interest on overdue, defaulted

and overpaid withdrawal liability.

(a) Interest assessed. The plan sponsor

of a multiemployer plan—

(1) Shall assess interest on overdue

withdrawal liability payments from the

due date, as defined in paragraph (d) of
34108 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

this section, until the date paid, as

defined in paragraph (e); and

(2) In the event of a default, may

assess interest on any accelerated

portion of the outstanding withdrawal

liability from the due date, as defined in

paragraph (d) of this section, until the

date paid, as defined in paragraph (e).

(b) Interest rate. Except as otherwise

provided in rules adopted by the plan

pursuant to § 4219.33, interest under

this section shall be charged or credited

for each calendar quarter at an annual

rate equal to the average quoted prime

rate on short-term commercial loans for

the fifteenth day (or next business day

if the fifteenth day is not a business day)

of the month preceding the beginning of

each calendar quarter, as reported by the

Board of Governors of the Federal

Reserve System in Statistical Release

H.15 (‘‘Selected Interest Rates’’).

(c) Calculation of interest. The

interest rate under paragraph (b) of this

section is the nominal rate for any

calendar quarter or portion thereof. The

amount of interest due the plan for

overdue or defaulted withdrawal

liability, or due the employer for

overpayment, is equal to the overdue,

defaulted, or overpaid amount

multiplied by:

(1) For each full calendar quarter in

the period from the due date (or date of

overpayment) to the date paid (or date

of refund), one-fourth of the annual rate

in effect for that quarter;

(2) For each full calendar month in a

partial quarter in that period, onetwelfth of the annual rate in effect for

that quarter; and

(3) For each day in a partial month in

that period, one-three-hundred-sixtieth

of the annual rate in effect for that

month.

(d) Due date. Except as otherwise

provided in rules adopted by the plan,

the due date from which interest

accrues shall be, for an overdue

withdrawal liability payment and for an

amount of withdrawal liability in

default, the date of the missed payment

that gave rise to the delinquency or the

default.

(e) Date paid. Any payment of

withdrawal liability shall be deemed to

have been paid on the date on which it

is received.

§ 4219.33 Plan rules concerning overdue

and defaulted withdrawal liability.

Plans may adopt rules relating to

overdue and defaulted withdrawal

liability, provided that those rules are

consistent with ERISA. These rules may

include, but are not limited to, rules for

determining the rate of interest to be

charged on overdue, defaulted and

overpaid withdrawal liability (provided

that the rate reflects prevailing market

rates for comparable obligations); rules

providing reasonable grace periods

during which late payments may be

made without interest; additional

definitions of default which indicate a

substantial likelihood that an employer

will be unable to pay its withdrawal

liability; and rules pertaining to

acceleration of the outstanding balance

on default. Plan rules adopted under

this section shall be reasonable. Plan

rules shall operate and be applied

uniformly with respect to each

employer, except that the rules may take

into account the creditworthiness of an

employer. Rules which take into

account the creditworthiness of an

employer shall state with particularity

the categories of creditworthiness the

plan will use, the specific differences in

treatment accorded employers in

different categories, and the standards

and procedures for assigning an

employer to a category.

PART 4220—PROCEDURES FOR

PBGC APPROVAL OF PLAN

AMENDMENTS

Sec.

4220.1 Purpose and scope.

4220.2 Definitions.

4220.3 Requests for PBGC approval.

4220.4 PBGC action on requests.

Authority: 29 U.S.C. 1302(b)(3), 1400.

§ 4220.1 Purpose and scope.

(a) General. This part establishes

procedures under which a plan sponsor

shall request the PBGC to approve a

plan amendment under section 4220 of

ERISA. This part applies to all

multiemployer plans covered by title IV

of ERISA that adopt amendments

pursuant to the authorization of sections

4201–4219 of ERISA (except for

amendments adopted pursuant to

section 4211(c)(5)). (The covered

amendments are set forth in paragraph

(b) of this section.) The subsequent

modification of a plan amendment

adopted by authorization of those

sections is also covered by this part.

This part does not, however, cover a

plan amendment that merely repeals a

previously adopted amendment,

returning the plan to the statutorily

prescribed rule.

(b) Covered amendments.

Amendments made pursuant to the

following sections of ERISA are covered

by this part:

(1) Section 4203 (b)(1)(B)(ii).

(2) Section 4203(c)(4).

(3) Section 4205(c)(1).

(4) Section 4205(d).

(5) Section 4209(b).

(6) Section 4210(b)(2).

(7) Section 4211(c)(1).

(8) Section 4211(c)(4)(D).

(9) Section 4211(d)(1).

(10) Section 4211(d)(2).

(11) Section 4219(c)(1)(C)(ii)(I).

(12) Section 4219(c)(1)(C)(iii).

(c) Exception. Submission of a request

for approval under this part is not

required for a plan amendment for

which the PBGC has published a notice

in the Federal Register granting class

approval.

§ 4220.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: employer,

ERISA, IRS, multiemployer plan, PBGC,

plan, and plan sponsor.

§ 4220.3 Requests for PBGC approval.

(a) Filing of request. A request for

approval of an amendment filed with

the PBGC in accordance with this

section shall constitute notice to the

PBGC for purposes of the 90-day period

specified in section 4220 of ERISA. A

request is deemed filed on the date on

which a request containing all

information required by paragraph (d) of

this section is received by the PBGC.

(b) Who may request. The plan

sponsor, or a duly authorized

representative acting on behalf of a plan

sponsor, shall sign and submit the

request.

(c) Where to file. The request shall be

delivered by hand or by mail to Reports

Processing, Insurance Operations

Department, Pension Benefit Guaranty

Corporation, 1200 K Street NW.,

Washington, DC 20005–4026.

(d) Information. Each request filed

shall contain the following information:

(1) The name of the plan for which

the amendment is being submitted, and

the name, address and the telephone

number of the plan sponsor or its duly

authorized representative.

(2) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Identification Number

(PIN) assigned by the plan sponsor to

the plan, and, if different, the EIN or

PIN last filed with PBGC. If no EIN or

PIN has been assigned, that fact must be

indicated.

(3) A copy of the amendment as

adopted, including its proposed

effective date.

(4) A copy of the most recent actuarial

valuation of the plan.

(5) A statement containing a

certification that notice of the adoption

of the amendment has been given to all

employers who have an obligation to

contribute under the plan and to all

employee organizations representing

employees covered by the plan.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34109

(6) Any other information that the

plan sponsor believes to be pertinent to

its request.

(e) Supplemental information. The

PBGC may require a plan sponsor to

submit any other information that the

PBGC determines to be necessary to

review a request under this part. The

PBGC may suspend the running of the

90-day period pursuant to § 4220.4(c),

pending the submission of the

supplemental information.

(Approved by the Office of Management and

Budget under control number 1212–0031)

§ 4220.4 PBGC action on requests.

(a) General. Upon receipt of a

complete request, the PBGC shall notify

the plan sponsor in writing of the date

of commencement of the 90-day period

specified in section 4220 of ERISA.

Except as provided in paragraph (c) of

this section, the PBGC shall approve or

disapprove a plan amendment

submitted to it under this part within 90

days after receipt of a complete request

for approval. If the PBGC fails to act

within the 90-day period, or within that

period notifies the plan sponsor that it

will not disapprove the amendment, the

amendment may be made effective

without the approval of the PBGC.

(b) Decision on request. The PBGC’s

decision on a request for approval shall

be in writing. If the PBGC disapproves

the plan amendment, the decision shall

state the reasons for the disapproval. An

approval by the PBGC constitutes its

finding only with respect to the issue of

risk as set forth in section 4220(c) of

ERISA, and not with respect to whether

the amendment is otherwise properly

adopted in accordance with the terms of

ERISA and the plan in question.

(c) Suspension of the 90-day period.

The PBGC may suspend the running of

the 90-day period referred to in

paragraph (a) of this section if it

determines that additional information

is required under § 4220.3(e). When it

does so, PBGC’s request for additional

information will advise the plan

sponsor that the running of 90-day

period has been suspended. The 90-day

period will resume running on the date

on which the additional information is

received by the PBGC, and the PBGC

will notify the plan sponsor of that date

upon receipt of the information.

PART 4221—ARBITRATION OF

DISPUTES IN MULTIEMPLOYER

PLANS

Sec.

4221.1 Purpose and scope.

4221.2 Definitions.

4221.3 Initiation of arbitration.

4221.4 Appointment of the arbitrator.

4221.5 Powers and duties of the

arbitrator.

4221.6 Hearing.

4221.7 Reopening of proceedings.

4221.8 Award.

4221.9 Reconsideration of award.

4221.10 Costs.

4221.11 Waiver of rules.

4221.12 Calculation of periods of time.

4221.13 Filing or service of documents.

4221.14 PBGC-approved arbitration

procedures.

Authority: 29 U.S.C. 1302(b)(3), 1401.

§ 4221.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to establish procedures for the

arbitration, pursuant to section 4221 of

ERISA, of withdrawal liability disputes

arising under sections 4201 through

4219 and 4225 of ERISA.

(b) Scope. This part applies to

arbitration proceedings initiated

pursuant to section 4221 of ERISA and

this part on or after September 26, 1985.

On and after the effective date, any plan

rules governing arbitration procedures

(other than a plan rule adopting a PBGCapproved arbitration procedure in

accordance with § 4221.14) are effective

only to the extent that they are

consistent with this part and adopted by

the arbitrator in a particular proceeding.

§ 4221.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: ERISA, IRS,

multiemployer plan, PBGC, plan, and

plan sponsor.

In addition, for purposes of this part:

Arbitrator means an individual or

panel of individuals selected according

to this part to decide a dispute

concerning withdrawal liability.

Employer means an individual,

partnership, corporation or other entity

against which a plan sponsor has made

a demand for payment of withdrawal

liability pursuant to section 4219(b)(1)

of ERISA.

Party or parties means the employer

and the plan sponsor involved in a

withdrawal liability dispute.

Withdrawal liability dispute means a

dispute described in § 4221.1(a) of this

chapter.

§ 4221.3 Initiation of arbitration.

(a) Time limits—in general.

Arbitration of a withdrawal liability

dispute may be initiated within the time

limits described in section 4221(a)(1) of

ERISA.

(b) Waiver or extension of time limits.

Arbitration shall be initiated in

accordance with this section,

notwithstanding any inconsistent

provision of any agreement entered into

by the parties before the date on which

the employer received notice of the

plan’s assessment of withdrawal

liability. The parties may, however,

agree at any time to waive or extend the

time limits for initiating arbitration.

(c) Establishment of timeliness of

initiation. A party that unilaterally

initiates arbitration is responsible for

establishing that the notice of initiation

of arbitration was timely received by the

other party. If arbitration is initiated by

agreement of the parties, the date on

which the agreement to arbitrate was

executed establishes whether the

arbitration was timely initiated.

(d) Contents of agreement or notice. If

the employer initiates arbitration, it

shall include in the notice of initiation

a statement that it disputes the plan

sponsor’s determination of its

withdrawal liability and is initiating

arbitration. A copy of the demand for

withdrawal liability and any request for

reconsideration, and the response

thereto, shall be attached to the notice.

If a party other than an employer

initiates arbitration, it shall include in

the notice a statement that it is initiating

arbitration and a brief description of the

questions on which arbitration is

sought. If arbitration is initiated by

agreement, the agreement shall include

a brief description of the questions

submitted to arbitration. In no case is

compliance with formal rules of

pleading required.

(e) Effect of deficient agreement or

notice. If a party fails to object promptly

in writing to deficiencies in an initiation

agreement or a notice of initiation of

arbitration, it waives its right to object.

§ 4221.4 Appointment of the arbitrator.

(a) Appointment of and acceptance by

arbitrator. The parties shall select the

arbitrator within 45 days after the

arbitration is initiated, or within such

other period as is mutually agreed after

the initiation of arbitration, and shall

mail to the designated arbitrator a notice

of his or her appointment. The notice of

appointment shall include a copy of the

notice or agreement initiating

arbitration, a statement that the

arbitration is to be conducted in

accordance with this part, and a request

for a written acceptance by the

arbitrator. The arbitrator’s appointment

becomes effective upon his or her

written acceptance, stating his or her

availability to serve and making any

disclosures required by paragraph (b) of

this section. If the arbitrator does not

accept in writing within 15 days after

the notice of appointment is mailed or

delivered to him or her, he or she is

deemed to have declined to act, and the

parties shall select a new arbitrator in

accordance with paragraph (d) of this

section.
34110 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(b) Disclosure by arbitrator and

disqualification. Upon accepting the

appointment, the arbitrator shall

disclose to the parties any

circumstances likely to affect his or her

impartiality, including any bias or any

financial or personal interest in the

result of the arbitration and any past or

present relationship with the parties or

their counsel. If any party determines

that the arbitrator should be disqualified

because of the information disclosed,

that party shall notify all other parties

and the arbitrator no later than 10 days

after the arbitrator makes the disclosure

required by this paragraph (but in no

event later than the commencement of

the hearing under § 4221.6). The

arbitrator shall then withdraw, and the

parties shall select another arbitrator in

accordance with paragraph (d) of this

section.

(c) Challenge and withdrawal. After

the arbitrator has been selected, a party

may request that he or she withdraw

from the proceedings at any point before

a final award is rendered on the ground

that he or she is unable to render an

award impartially. The request for

withdrawal shall be served on all other

parties and the arbitrator by hand or by

certified or registered mail and shall

include a statement of the

circumstances that, in the requesting

party’s view, affect the arbitrator’s

impartiality and a statement that the

requesting party has brought these

circumstances to the attention of the

arbitrator and the other parties at the

earliest practicable point in the

proceedings. If the arbitrator determines

that the circumstances adduced are

likely to affect his or her impartiality

and have been presented in a timely

fashion, he or she shall withdraw from

the proceedings and notify the parties of

the reasons for his or her withdrawal.

The parties shall then select a new

arbitrator in accordance with paragraph

(d) of this section.

(d) Filling vacancies. If the designated

arbitrator declines his or her

appointment or, after accepting his or

her appointment, is disqualified,

resigns, dies, withdraws, or is unable to

perform his or her duties at any time

before a final award is rendered, the

parties shall select another arbitrator to

fill the vacancy. The selection shall be

made, in accordance with the procedure

used in the initial selection, within 20

days after the parties receive notice of

the vacancy. The matter shall then be

reheard by the newly chosen arbitrator,

who may, in his or her discretion, rely

on all or any portion of the record

already established.

(e) Failure to select arbitrator. If the

parties fail to select an arbitrator within

the time prescribed by this section,

either party or both may seek the

designation and appointment of an

arbitrator in a United States district

court pursuant to the provisions of title

9 of the United States Code.

§ 4221.5 Powers and duties of the

arbitrator.

(a) Arbitration hearing. Except as

otherwise provided in this part, the

arbitrator shall conduct the arbitration

hearing under § 4221.6 in the same

manner, and shall possess the same

powers, as an arbitrator conducting a

proceeding under title 9 of the United

States Code.

(1) Application of the law. In reaching

his or her decision, the arbitrator shall

follow applicable law, as embodied in

statutes, regulations, court decisions,

interpretations of the agencies charged

with the enforcement of ERISA, and

other pertinent authorities.

(2) Prehearing discovery. The

arbitrator may allow any party to

conduct prehearing discovery by

interrogatories, depositions, requests for

the production of documents, or other

means, upon a showing that the

discovery sought is likely to lead to the

production of relevant evidence and

will not be disproportionately

burdensome to the other parties. The

arbitrator may impose appropriate

sanctions if he or she determines that a

party has failed to respond to discovery

in good faith or has conducted

discovery proceedings in bad faith or for

the purpose of harassment. The

arbitrator may, at the request of any

party or on his or her own motion,

require parties to give advance notice of

expert or other witnesses that they

intend to introduce.

(3) Admissibility of evidence. The

arbitrator determines the relevance and

materiality of the evidence offered

during the course of the hearing and is

the judge of the admissibility of

evidence offered. Conformity to legal

rules of evidence is not necessary. To

the extent reasonably practicable, all

evidence shall be taken in the presence

of the arbitrator and the parties. The

arbitrator may, however, consider

affidavits, transcripts of depositions,

and similar documents.

(4) Production of documents or other

evidence. The arbitrator may subpoena

witnesses or documents upon his or her

own initiative or upon request by any

party after determining that the

evidence is likely to be relevant to the

dispute.

(b) Prehearing conference. If it

appears that a prehearing conference

will expedite the proceedings, the

arbitrator may, at any time before the

commencement of the arbitration

hearing under § 4221.6, direct the

parties to appear at a conference to

consider settlement of the case,

clarification of issues and stipulation of

facts not in dispute, admission of

documents to avoid unnecessary proof,

limitations on the number of expert or

other witnesses, and any other matters

that could expedite the disposition of

the proceedings.

(c) Proceeding without hearing. The

arbitrator may render an award without

a hearing if the parties agree and file

with the arbitrator such evidence as the

arbitrator deems necessary to enable

him or her to render an award under

§ 4221.8.

§ 4221.6 Hearing.

(a) Time and place of hearing

established. Unless the parties agree to

proceed without a hearing as provided

in § 4221.5(c), the parties and the

arbitrator shall, no later than 15 days

after the written acceptance by the

arbitrator is mailed to the parties,

establish a date and place for the

hearing. If agreement is not reached

within the 15-day period, the arbitrator

shall, within 10 additional days, choose

a location and set a hearing date. The

date set for the hearing may be no later

than 50 days after the mailing date of

the arbitrator’s written acceptance.

(b) Notice. After the time and place for

the hearing have been established, the

arbitrator shall serve a written notice of

the hearing on the parties by hand or by

certified or registered mail.

(c) Appearances. The parties may

appear in person or by counsel or other

representatives. Any party that, after

being duly notified and without good

cause shown, fails to appear in person

or by representative at a hearing or

conference, or fails to file documents in

a timely manner, is deemed to have

waived all rights with respect thereto

and is subject to whatever orders or

determinations the arbitrator may make.

(d) Record and transcript of hearing.

Upon the request of either party, the

arbitrator shall arrange for a record of

the arbitration hearing to be made by

stenographic means or by tape

recording. The cost of making the record

and the costs of transcription and

copying are costs of the arbitration

proceedings payable as provided in

§ 4221.10(b) except that, if only one

party requests that a transcript of the

record be made, that party shall pay the

cost of the transcript.

(e) Order of hearing. The arbitrator

shall conduct the hearing in accordance

with the following rules:

(1) Opening. The arbitrator shall open

the hearing and place in the record the
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34111

notice of initiation of arbitration or the

initiation agreement. The arbitrator may

ask for statements clarifying the issues

involved.

(2) Presentation of claim and

response. The arbitrator shall establish

the procedure for presentation of claim

and response in such a manner as to

afford full and equal opportunity to all

parties for the presentation of their

cases.

(3) Witnesses. All witnesses shall

testify under oath or affirmation and are

subject to cross-examination by

opposing parties. If testimony of an

expert witness is offered by a party

without prior notice to the other party,

the arbitrator shall grant the other party

a reasonable time to prepare for crossexamination and to produce expert

witnesses on its own behalf. The

arbitrator may on his or her own

initiative call expert witnesses on any

issue raised in the arbitration. The cost

of any expert called by the arbitrator is

a cost of the proceedings payable as

provided in § 4221.10(b).

(f) Continuance of hearing. The

arbitrator may, for good cause shown,

grant a continuance for a reasonable

period. When granting a continuance,

the arbitrator shall set a date for

resumption of the hearing.

(g) Filing of briefs. Each party may file

a written statement of facts and

argument supporting the party’s

position. The parties’ briefs are due no

later than 30 days after the close of the

hearing. Within 15 days thereafter, each

party may file a reply brief concerning

matters contained in the opposing brief.

The arbitrator may establish a briefing

schedule and may reduce or extend

these time limits. Each party shall

deliver copies of all of its briefs to the

arbitrator and to all opposing parties.

§ 4221.7 Reopening of proceedings.

(a) Grounds for reopening. At any

time before a final award is rendered,

the proceedings may be reopened, on

the motion of the arbitrator or at the

request of any party, for the purpose of

taking further evidence or rehearing or

rearguing any matter, if the arbitrator

determines that—

(1) The reopening is likely to result in

new information that will have a

material effect on the outcome of the

arbitration;

(2) Good cause exists for the failure of

the party that requested reopening to

present such information at the hearing;

and

(3) The delay caused by the reopening

will not be unfairly injurious to any

party.

(b) Comments on and notice of

reopening. The arbitrator shall allow all

affected parties the opportunity to

comment on any motion or request to

reopen the proceedings. If he or she

determines that the proceedings should

be reopened, he or she shall give all

parties written notice of the reasons for

reopening and of the schedule of the

reopened proceedings.

§ 4221.8 Award.

(a) Form. The arbitrator shall render a

written award that—

(1) States the basis for the award,

including such findings of fact and

conclusions of law (which need not be

explicitly designated as such) as are

necessary to resolve the dispute;

(2) Adjusts (or provides a method for

adjusting) the amount or schedule of

payments to be made after the award to

reflect overpayments or underpayments

made before the award was rendered or

requires the plan sponsor to refund

overpayments in accordance with

§ 4219.31(d); and

(3) Provides for an allocation of costs

in accordance with § 4221.10.

(b) Time of award. Except as provided

in paragraphs (c), (d), and (e) of this

section, the arbitrator shall render the

award no later than 30 days after the

proceedings close. The award is

rendered when filed or served on the

parties as provided in § 4221.13. The

award is final when the period for

seeking modification or reconsideration

in accordance with § 4221.9(a) has

expired or the arbitrator has rendered a

revised award in accordance with

§ 4221.9(c).

(c) Reopened proceedings. If the

proceedings are reopened in accordance

with § 4221.7 after the close of the

hearing, the arbitrator shall render the

award no later than 30 days after the

date on which the reopened proceedings

are closed.

(d) Absence of hearing. If the parties

have chosen to proceed without a

hearing, the arbitrator shall render the

award no later than 30 days after the

date on which final statements and

proofs are filed with him or her.

(e) Agreement for extension of time.

Notwithstanding paragraphs (b), (c), and

(d), the parties may agree to an

extension of time for the arbitrator’s

award in light of the particular facts and

circumstances of their dispute.

(f) Close of proceedings. For purposes

of paragraphs (b) and (c) of this section,

the proceedings are closed on the date

on which the last brief or reply brief is

due or, if no briefs are to be filed, on the

date on which the hearing or rehearing

closes.

(g) Publication of award. After a final

award has been rendered, the plan

sponsor shall make copies available

upon request to the PBGC and to all

companies that contribute to the plan.

The plan sponsor may impose

reasonable charges for copying and

postage.

§ 4221.9 Reconsideration of award.

(a) Motion for reconsideration and

objections. A party may seek

modification or reconsideration of the

arbitrator’s award by filing a written

motion with the arbitrator and all

opposing parties within 20 days after

the award is rendered. Opposing parties

may file objections to modification or

reconsideration within 10 days after the

motion is filed. The filing of a written

motion for modification or

reconsideration suspends the 30-day

period under section 4221(b)(2) of

ERISA for requesting court review of the

award. The 30-day statutory period

again begins to run when the arbitrator

denies the motion pursuant to

paragraph (c) of this section or renders

a revised award.

(b) Grounds for modification or

reconsideration. The arbitrator may

grant a motion for modification or

reconsideration of the award only if—

(1) There is a numerical error or a

mistake in the description of any

person, thing, or property referred to in

the award; or

(2) The arbitrator has rendered an

award upon a matter not submitted to

the arbitrator and the matter affects the

merits of the decision; or

(3) The award is imperfect in a matter

of form not affecting the merits of the

dispute.

(c) Decision of arbitrator. The

arbitrator shall grant or deny the motion

for modification or reconsideration, and

may render an opinion to support his or

her decision within 20 days after the

motion is filed with the arbitrator, or

within 30 days after the motion is filed

if an objection is also filed.

§ 4221.10 Costs.

The costs of arbitration under this

part shall be borne by the parties as

follows:

(a) Witnesses. Each party to the

dispute shall bear the costs of its own

witnesses.

(b) Other costs of arbitration. Except

as provided in § 4221.6(d) with respect

to a transcript of the hearing, the parties

shall bear the other costs of the

arbitration proceedings equally unless

the arbitrator determines otherwise. The

parties may, however, agree to a

different allocation of costs if their

agreement is entered into after the

employer has received notice of the

plan’s assessment of withdrawal

liability.
34112 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(c) Attorneys’ fees. The arbitrator may

require a party that initiates or contests

an arbitration in bad faith or engages in

dilatory, harassing, or other improper

conduct during the course of the

arbitration to pay reasonable attorneys’

fees of other parties.

§ 4221.11 Waiver of rules.

Any party that fails to object in

writing in a timely manner to any

deviation from any provision of this part

is deemed to have waived the right to

interpose that objection thereafter.

§ 4221.12 Calculation of periods of time.

For purposes of calculating any

period of time under this part, the

period begins to run on the day

following the day that a communication

is received or an act is completed. If the

last day of the period is a Federal, State,

or local holiday or a non-business day

for one of the parties or the arbitrator,

the period runs until the end of the first

business day that follows. Holidays or

non-business days occurring during the

running of the period of time are

included in calculating the period.

§ 4221.13 Filing or service of documents.

(a) By mail. A document that is to be

filed or served under this part is

considered filed or served on—

(1) The date of the receipt provided to

the sender by the United States Postal

Service, if the document was sent by

certified or registered mail, postage

prepaid, properly packaged, and

properly addressed; or

(2) The date of the United States

Postal Service postmark stamped on the

cover in which the document is mailed,

if paragraph (a)(1) is not applicable, a

legible postmark was made, and the

document was sent postage prepaid,

properly packaged, and properly

addressed.

(b) By means other than mail. A

document required to be delivered

under this part that is not mailed in

accordance with paragraph (a) of this

section is considered filed or served on

the date on which it is received.

§ 4221.14 PBGC-approved arbitration

procedures.

(a) Use of PBGC-approved arbitration

procedures. In lieu of the procedures

prescribed by this part, an arbitration

may be conducted in accordance with

an alternative arbitration procedure

approved by the PBGC in accordance

with paragraph (c) of this section. A

plan may by plan amendment require

the use of a PBGC-approved procedure

for all arbitrations of withdrawal

liability disputes, or the parties may

agree to the use of a PBGC-approved

procedure in a particular case.

(b) Scope of alternative procedures. If

an arbitration is conducted in

accordance with a PBGC-approved

arbitration procedure, the alternative

procedure shall govern all aspects of the

arbitration, with the following

exceptions:

(1) The time limits for the initiation

of arbitration may not differ from those

provided for by § 4221.3.

(2) The arbitrator shall be selected

after the initiation of the arbitration.

(3) The arbitrator shall give the parties

opportunity for prehearing discovery

substantially equivalent to that provided

by § 4221.5(a)(2).

(4) The award shall be made available

to the public to at least the extent

provided by § 4221.8(g).

(5) The costs of arbitration shall be

allocated in accordance with § 4221.10.

(c) Procedure for approval of

alternative procedures. The PBGC may

approve arbitration procedures on its

own initiative by publishing an

appropriate notice in the Federal

Register. The sponsor of an arbitration

procedure may request PBGC approval

of its procedures by submitting an

application to the PBGC. The

application shall be submitted to

Reports Processing, Insurance

Operations Department, Pension Benefit

Guaranty Corporation, 1200 K Street,

NW., Washington, DC 20005–4026, and

shall include:

(1) A copy of the procedures for

which approval is sought;

(2) A description of the history,

structure and membership of the

organization that sponsors the

procedures; and

(3) A discussion of the reasons why,

in the sponsoring organization’s

opinion, the procedures satisfy the

criteria for approval set forth in this

section.

(d) Criteria for approval of alternative

procedures. The PBGC shall approve an

application if it determines that the

proposed procedures will be

substantially fair to all parties involved

in the arbitration of a withdrawal

liability dispute and that the sponsoring

organization is neutral and able to carry

out its role under the procedures. The

PBGC may request comments on the

application by publishing an

appropriate notice in the Federal

Register. Notice of the PBGC’s decision

on the application shall be published in

the Federal Register. Unless the notice

of approval specifies otherwise,

approval will remain effective until

revoked by the PBGC through a Federal

Register notice.

PART 4231—MERGERS AND

TRANSFERS BETWEEN

MULTIEMPLOYER PLANS

Sec.

4231.1 Purpose and scope.

4231.2 Definitions.

4231.3 Requirements for mergers and

transfers.

4231.4 Preservation of accrued benefits.

4231.5 Valuation requirement.

4231.6 Plan solvency tests.

4231.7 De minimis mergers and transfers.

4231.8 Notice of merger or transfer.

4231.9 Request for compliance

determination.

4231.10 Actuarial calculations and

assumptions.

Authority: 29 U.S.C. 1302(b)(3), 1411.

§ 4231.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to prescribe notice requirements

under section 4231 of ERISA for mergers

and transfers of assets or liabilities

among multiemployer pension plans.

This part also interprets the other

requirements of section 4231 and

prescribes special rules for de minimis

mergers and transfers.

(b) Scope. This part applies to mergers

and transfers among multiemployer

plans where all of the plans

immediately before and immediately

after the transaction are multiemployer

plans covered by title IV of ERISA.

§ 4231.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: ERISA, fair

market value, IRS, multiemployer plan,

PBGC, plan, and plan year.

In addition, for purposes of this part:

Actuarial valuation means a valuation

of assets and liabilities performed by an

enrolled actuary using the actuarial

assumptions used for purposes of

determining the charges and credits to

the funding standard account under

section 302 of ERISA and section 412 of

the Code.

Certified change of collective

bargaining representative means a

change of collective bargaining

representative certified under the LaborManagement Relations Act of 1947, as

amended, or the Railway Labor Act, as

amended.

Fair market value of assets has the

same meaning as the term has for

minimum funding purposes under

section 302 of ERISA and section 412 of

the Code.

Merger means the combining of two or

more plans into a single plan. For

example, a consolidation of two plans

into a new plan is a merger.

Significant transfer means the transfer

of assets that equal or exceed 15% of the

assets of the transferor plan before the

transfer or the transfer of unfunded
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34113

accrued benefits that equal or exceed

15% of the assets of the transferee plan

(including a plan that did not exist prior

to the transfer) before the transfer.

Transfer and transfer of assets or

liabilities mean a diminution of assets or

liabilities with respect to one plan and

the acquisition of these assets or the

assumption of these liabilities by

another plan or plans (including a plan

that did not exist prior to the transfer).

However, the shifting of assets or

liabilities pursuant to a written

reciprocity agreement between two

multiemployer plans in which one plan

assumes liabilities of another plan is not

a transfer of assets or liabilities. In

addition, the shifting of assets between

several funding media used for a single

plan (such as between trusts, between

annuity contracts, or between trusts and

annuity contracts) is not a transfer of

assets or liabilities.

§ 4231.3 Requirements for mergers and

transfers.

(a) General requirements. A plan

sponsor may not cause a multiemployer

plan to merge with one or more

multiemployer plans or transfer assets

or liabilities to or from another

multiemployer plan unless the merger

or transfer satisfies all of the following

requirements:

(1) No participant’s or beneficiary’s

accrued benefit may be lower

immediately after the effective date of

the merger or transfer than the benefit

immediately before the merger or

transfer.

(2) Actuarial valuations of the plans

involved in the merger or transfer shall

have been performed in accordance

with § 4231.5.

(3) For each plan involved in the

transaction, an enrolled actuary shall-

(i) Determine that the plan meets the

applicable plan solvency requirement

set forth in § 4231.6; or

(ii) Otherwise demonstrate that

benefits under the plan are not

reasonably expected to be subject to

suspension under section 4245 of

ERISA.

(4) The plan sponsor shall notify the

PBGC of the merger or transfer in

accordance with § 4231.8.

(b) Compliance determination. If a

plan sponsor requests a determination

that a merger or transfer that may

otherwise be prohibited by section

406(a) or (b)(2) of ERISA satisfies the

requirements of section 4231 of ERISA,

the plan sponsor shall submit the

information described in § 4231.9 in

addition to the information required by

§ 4231.8. PBGC may request additional

information if necessary to determine

whether a merger or transfer complies

with the requirements of section 4231

and this part. Plan sponsors are not

required to request a compliance

determination. Under section 4231(c) of

ERISA, if the PBGC determines that the

merger or transfer complies with section

4231 of ERISA and this part, the merger

or transfer will not constitute a violation

of the prohibited transaction provisions

of section 406(a) and (b)(2) of ERISA.

(c) Certified change in bargaining

representative. Transfers of assets and

liabilities pursuant to a certified change

in bargaining representative are

governed by section 4235 of ERISA.

Plan sponsors involved in such transfers

are not required to comply with this

part. However, under section 4235(f)(1)

of ERISA, the plan sponsors of the plans

involved in the transfer may agree to a

transfer that complies with sections

4231 and 4234 of ERISA. Plan sponsors

that elect to comply with sections 4231

and 4234 must comply with the rules in

this part.

(Approved by the Office of Management and

Budget under control number 1212–0022)

§ 4231.4 Preservation of accrued benefits.

Section 4231(b)(2) of ERISA and

§ 4231.3(a)(1) require that no

participant’s or beneficiary’s accrued

benefit may be lower immediately after

the effective date of the merger or

transfer than the benefit immediately

before the merger or transfer. A plan

that assumes an obligation to pay

benefits for a group of participants

satisfies this requirement only if the

plan contains a provision preserving all

accrued benefits. The determination of

what is an accrued benefit shall be made

in accordance with section 411 of the

Code and the regulations thereunder.

§ 4231.5 Valuation requirement.

(a) Mergers and non-significant

transfers. A merger or a transfer that is

not significant (‘‘non-significant

transfer’’) satisfies section 4231(b)(4) of

ERISA and § 4231.3(a)(2) (requiring an

actuarial valuation) if an actuarial

valuation has been performed for each

plan involved in the merger or transfer,

based on the assets and liabilities of the

plan as of a date not more than three

years before the date on which the

notice of the merger or transfer is filed.

(b) Significant transfers. A significant

transfer satisfies section 4231(b)(4) of

ERISA and § 4231.3(a)(2) if an actuarial

valuation has been performed for each

plan involved in the transfer, based on

the assets and liabilities of the plan as

of a date not earlier than the first day

of the last plan year ending before the

proposed effective date of the transfer.

The valuation shall separately identify

assets, contributions and liabilities

being transferred, and shall be based on

the actuarial assumptions and methods

that are expected to be used for the first

plan year beginning after the transfer.

§ 4231.6 Plan solvency tests.

(a) Significant transfers. A significant

transfer satisfies the plan solvency

requirement of section 4231(b)(3) of

ERISA and § 4231.3(a)(3)(i) if all of the

following requirements are met by each

plan involved in the transfer:

(1) Expected contributions shall equal

or exceed the estimated amount

necessary to satisfy the minimum

funding requirement of section 412(a) of

the Code (including reorganization

funding, if applicable) for the five plan

years beginning on or after the proposed

effective date of the transfer.

(2) The fair market value of plan

assets immediately after the transfer

shall equal or exceed the total amount

of expected benefit payments during the

first five plan years beginning on or after

the proposed effective date of the

transfer.

(3) Expected contributions for the first

plan year beginning on or after the

proposed effective date of the transfer

shall equal or exceed expected benefit

payments for that plan year.

(4) Contributions for the amortization

period shall equal or exceed unfunded

accrued benefits plus expected normal

costs.

(i) Notwithstanding paragraph (c)(4)

of this section, ‘‘unfunded accrued

benefits’’ means the excess of the

present value of accrued benefits over

the fair market value of the assets,

determined on the basis of the actuarial

valuation required under § 4231.5(b).

(ii) ‘‘Amortization period’’ means

either 25 plan years or the amortization

period for the resulting base when the

combined charge base and the combined

credit base are offset under section

412(b)(4) of the Code. The actuary may

select either period.

(b) Mergers and non-significant

transfers. A merger or non-significant

transfer satisfies the plan solvency

requirement of section 4231(b)(3) of

ERISA and § 4231.3(a)(3)(i) if, for the

merged plan or for each plan that

continues after the transfer—

(1) The fair market value of plan

assets immediately after the merger or

transfer equals or exceeds five times the

benefit payments in the last plan year

ending before the proposed effective

date of the merger or transfer; or

(2) In each of the first five plan years

beginning after the proposed effective

date of the merger or transfer, expected

plan assets plus expected contributions

and investment earnings equal or
34114 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

exceed expected expenses and benefit

payments for the plan year.

(c) Rules for determinations. In

determining whether a transaction

satisfies the plan solvency requirements

set forth in this section, the following

rules apply:

(1) Expected contributions after a

merger or transfer shall be determined

by assuming that contributions will

equal contributions received in or

accrued for the last full plan year ending

before the date on which the notice of

merger or transfer is filed with the

PBGC. Contributions shall be adjusted,

however, to reflect any change in the

rate of employer contributions that has

been negotiated (whether or not in

effect), or a trend of changing

contribution base units over the

preceding five plan years or other

period of time that can be demonstrated

to be more appropriate.

(2) Expected normal costs shall be

determined under the funding method

and assumptions used by the plan

actuary for purposes of determining the

minimum funding requirement under

section 412 of the Code (which requires

that such assumptions be reasonable in

the aggregate). If the plan is using an

aggregate funding method, normal costs

shall be determined under the entry age

normal method.

(3) Expected benefit payments shall

be determined by assuming that current

benefits remain in effect and that all

scheduled increases in benefits occur.

(4) The fair market value of plan

assets immediately after the merger or

transfer shall be based on the most

recent data available to the plan sponsor

immediately before the date on which

the notice is filed.

(5) Expected investment earnings

shall be determined using the same

interest assumption used for

determining the minimum funding

requirement under section 412 of the

Code.

(6) Expected expenses shall be

determined using expenses in the last

plan year ending before the notice is

filed, adjusted to reflect any anticipated

changes.

(7) Expected plan assets for a plan

year shall be determined by adjusting

the most current data on fair market

value of plan assets to reflect expected

contributions, investment earnings,

benefit payments and expenses for each

plan year between the date of the most

current data and the beginning of the

plan year for which expected assets are

being determined.

§ 4231.7 De minimis mergers and

transfers.

(a) Special plan solvency rule. In

order to determine whether a de

minimis merger or transfer satisfies the

plan solvency requirement in

§ 4231.6(b), the plan assets, expected

contributions and expected benefits may

be determined without regard to any de

minimis mergers or transfers that have

occurred since the last valuation

performed to establish charges and

credits to the minimum funding

standard account under section 412(b)

of the Code.

(b) De minimis merger defined. A

merger is de minimis if the present

value of accrued benefits (whether or

not vested) of one plan is less than 3

percent of the fair market value of the

other plan’s assets.

(c) De minimis transfer defined. A

transfer of assets or liabilities is de

minimis if—

(1) The fair market value of the assets

transferred, if any, is less than 3 percent

of the fair market value of all the assets

of the transferor plan; and

(2) The present value of the accrued

benefits transferred (whether or not

vested) is less than 3 percent of the fair

market value of all the assets of the

transferee plan.

(d) Value of assets and benefits. For

purposes of paragraphs (b) and (c) of

this section, the value of plan assets and

accrued benefits may be determined as

of any date prior to the proposed

effective date of the merger or transfer,

but not earlier than the date of the most

recent valuation performed for purposes

of section 412(b) of the Code.

(e) Aggregation required. In

determining whether a merger or

transfer is de minimis, the assets and

accrued benefits transferred in previous

de minimis mergers and transfers within

the same plan year shall be aggregated

as described in paragraphs (e)(1) and

(e)(2) of this section. For the purposes

of those paragraphs, the value of plan

assets may be determined as of the date

during the plan year on which the total

value of the plan’s assets is the highest.

(1) A merger is not de minimis if the

total present value of accrued benefits

merged into a plan, when aggregated

with all prior de minimis mergers of and

transfers to that plan effective within

the same plan year, equals or exceeds 3

percent of the value of the plan’s assets.

(2) A transfer is not de minimis if,

when aggregated with all previous

mergers and transfers effective within

the same plan year—

(i) The value of all assets transferred

from the plan equals or exceeds 3

percent of the value of the plan’s assets;

or

(ii) The present value of all accrued

benefits transferred to the plan equals or

exceeds 3 percent of the plan’s assets.

§ 4231.8 Notice of merger or transfer.

(a) When to file. Except as provided in

paragraph (f) of this section, a notice of

a proposed merger or transfer shall be

filed not less than 120 days before the

effective date of the transaction. For

purposes of this part, the effective date

of a merger or transfer is the earlier of—

(1) The date on which one plan

assumes liability for benefits accrued

under another plan involved in the

transaction; or

(2) The date on which one plan

transfers assets to another plan involved

in the transaction.

(b) Who shall file. The plan sponsors

of all plans involved in a merger or

transfer, or the duly authorized

representative(s) acting on behalf of the

plan sponsors, shall jointly file the

notice required by this section.

(c) Where to file. The notice shall be

delivered by mail or submitted by hand

to Reports Processing, Insurance

Operations Department, Pension Benefit

Guaranty Corporation, 1200 K Street

NW., Washington, DC 20005–4026.

(d) Filing date. For purposes of

paragraph (a) of this section, the notice

is not considered filed until all of the

information required by paragraph (e) of

this section has been submitted. Except

as provided in the next sentence, the

notice is considered filed on the date it

is received by the PBGC, unless it is

received after regular business hours, in

which event it is considered filed on the

next regular business day. The notice is

considered filed on the date of the

postmark stamped on the cover in

which the notice is mailed if—

(1) The postmark was made by the

United States Postal Service; and

(2) The notice was mailed postage

prepaid, properly packaged and

addressed to the PBGC.

(e) Information required. Each notice

shall contain the following information:

(1) For each plan involved in the

merger or transfer—

(i) The name of the plan;

(ii) The name, address and telephone

number of the plan sponsor and of the

plan sponsor’s duly authorized

representative, if any; and

(iii) The nine-digit employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Identification Number

(PIN) assigned by the plan sponsor to

the plan, and, if different, the EIN or

PIN last filed with the PBGC. If no EIN

or PIN has been assigned, the notice

shall so indicate.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34115

(2) The kind of transaction being

reported (merger, significant transfer or

non-significant transfer).

(3) The proposed effective date of the

merger or transfer.

(4) A copy of the plan provision

stating that no participant’s or

beneficiary’s accrued benefit will be

lower immediately after the merger or

transfer than the benefit immediately

before the transaction.

(5) One of the following statements,

certified by an enrolled actuary:

(i) A statement that the merger or

transfer is de minimis as defined in

§ 4231.7. A notice of a de minimis

merger or transfer is not required to

include the information described in

paragraph (e)(6) or (e)(7) of this section.

(ii) A statement that the merger or

transfer satisfies the applicable plan

solvency test set forth in § 4231.6,

indicating which is the applicable test.

(iii) A statement of the basis on which

the actuary has determined that benefits

under the plan are not reasonably

expected to be subject to suspension

under section 4245 of ERISA, including

the supporting data or calculations,

assumptions and methods.

(6) For mergers or transfers (other

than de minimis mergers or transfers), a

copy of the most recent actuarial

valuation report that satisfies the

requirements of § 4231.5.

(7) For a significant transfer, the

following information used in making

the plan solvency determination under

§ 4231.6(a):

(i) The present value of the accrued

benefits and fair market value of plan

assets under the valuation required by

§ 4231.5(b), allocable to each plan after

the transfer.

(ii) The fair market value of assets in

each plan after the transfer (determined

in accordance with § 4231.6(c)(4)).

(iii) The expected benefit payments

for each plan in the first plan year

beginning on or after the proposed

effective date of the transfer (determined

in accordance with § 4231.6(c)(3)).

(iv) The contribution rates in effect for

each plan for the first plan year

beginning on or after the proposed

effective date of the transfer.

(v) The expected contributions for

each plan in the first plan year

beginning on or after the proposed

effective date of the transfer (determined

in accordance with § 4231.6(c)(1)).

(f) Waiver of notice. PBGC may waive

the notice requirements of this section

and section 4231(b)(1) of ERISA if the

plan sponsor demonstrates to the

satisfaction of the PBGC that failure to

complete the merger or transfer in less

than 120 days after filing the notice will

cause harm to participants or

beneficiaries of the plans involved in

the transaction.

(Approved by the Office of Management and

Budget under control number 1212–0022)

§ 4231.9 Request for compliance

determination.

(a) General. A request for a

determination that a merger or transfer

complies with the requirements of

section 4231 of ERISA may be filed by

the plan sponsor or sponsors of one or

more plans involved in a merger or

transfer. The request shall contain the

information described in paragraph (b)

or (c) of this section, as applicable.

(1) The place of filing. The request

shall be delivered to the address set

forth in § 4231.8(c).

(2) Single request permitted for all de

minimis transactions. Because the plan

solvency test for de minimis mergers

and transfers is based on the most recent

valuation (without adjustment for

intervening de minimis transactions), a

plan sponsor may submit a single

request for a compliance determination

covering all de minimis mergers or

transfers that occur between one plan

valuation and the next. However, the

plan sponsor must still notify PBGC of

each de minimis merger or transfer

separately, in accordance with § 4231.8.

The single request for a compliance

determination may be filed concurrently

with any one of the notices of a de

minimis merger or transfer.

(b) Contents of request: merger or

transfer that is not de minimis. A

request for a compliance determination

concerning a merger or transfer that is

not de minimus shall contain—

(1) A copy of the merger or transfer

agreement;

(2) A summary of the required

calculations, including a complete

description of assumptions and

methods, on which the enrolled actuary

based the certification that the merger or

transfer satisfied a plan solvency test

described in § 4231.6; and

(3) For a significant transfer, copies of

all actuarial valuations performed

within the 5 years preceding the

proposed effective date of the transfer.

(c) Contents of request: De minimus

merger or transfer. A request for a

compliance determination concerning a

de minimis merger or transfer shall

contain one of the following statements,

certified by an enrolled actuary:

(1) A statement that the merger or

transfer satisfies one of the plan

solvency tests set forth in § 4231.6(b),

indicating which test is satisfied.

(2) A statement of the basis on which

the actuary has determined that benefits

under the plan are not reasonably

expected to be subject to suspension

under section 4245 of ERISA, including

supporting data or calculations,

assumptions and methods.

(Approved by the Office of Management and

Budget under control number 1212–0022)

§ 4231.10 Actuarial calculations and

assumptions.

(a) Most recent valuation. All

calculations required by this part shall

be based on the most recent actuarial

valuation as of the date of filing the

notice, updated to show any material

changes.

(b) Assumptions. All calculations

required by this part shall be based on

methods and assumptions that are

reasonable in the aggregate, based on

generally accepted actuarial principles.

(c) Updated calculations. If the actual

date of the merger or transfer is more

than one year after the date the notice

is filed with the PBGC, PBGC may

require the plans involved to provide

updated calculations and

representations based on the actual

effective date of the transaction.

(Approved by the Office of Management and

Budget under control number 1212–0022)

PART 4245—NOTICE OF INSOLVENCY

Sec.

4245.1 Purpose and scope.

4245.2 Definitions.

4245.3 Notice of insolvency.

4245.4 Contents of notice of insolvency.

4245.5 Notice of insolvency benefit level.

4245.6 Contents of notice of insolvency

benefit level.

4245.7 PBGC address.

Authority: 29 U.S.C. 1302(b)(3), 1426(e).

§ 4245.1 Purpose and scope.

(a) Purpose. The purpose of this part

is to prescribe notice requirements

pertaining to insolvent multiemployer

plans that are in reorganization.

(b) Scope. This part applies to

multiemployer plans in reorganization

covered by title IV of ERISA, other than

plans that have terminated by mass

withdrawal under section 4041A(a)(2) of

ERISA.

§ 4245.2 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: employer,

ERISA, IRS, multiemployer plan,

nonforfeitable benefit, PBGC, person,

plan, and plan year.

In addition, for purposes of this part:

Actuarial valuation means a report

submitted to the plan in connection

with a valuation of plan assets and

liabilities, which, in the case of a plan

covered by subparts C and D of part

4281, shall be performed in accordance

with subpart B of part 4281.
34116 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Available resources means, for a plan

year, available resources as described in

section 4245(b)(3) of ERISA.

Benefits subject to reduction means

those benefits accrued under plan

amendments (or plans) adopted after

March 26, 1980, or under collective

bargaining agreements entered into after

March 26, 1980, that are not eligible for

the PBGC’s guarantee under section

4022A(b) of ERISA.

Financial assistance means financial

assistance from the PBGC under section

4261 of ERISA.

Insolvency benefit level means the

greater of the resource benefit level or

the benefit level guaranteed by the

PBGC for each participant and

beneficiary in pay status.

Insolvency year means insolvency

year as described in section 4245(b)(4)

of ERISA.

Insolvent means that a plan is unable

to pay benefits when due during the

plan year. A plan terminated by mass

withdrawal is not insolvent unless it has

been amended to eliminate all benefits

that are subject to reduction under

section 4281(c) of ERISA, or, in the

absence of an amendment, no benefits

under the plan are subject to reduction

under section 4281(c) of ERISA.

Reasonably expected to enter pay

status means, with respect to plan

participants and beneficiaries, persons

(other than those in pay status) who,

according to plan records, are disabled,

have applied for benefits, or have

reached or will reach during the

applicable period the normal retirement

age under the plan, and any others

whom it is reasonable for the plan

sponsor to expect to enter pay status

during the applicable period.

Reorganization means reorganization

under section 4241(a) of ERISA.

Resource benefit level means resource

benefit level as described in section

4245(b)(2) of ERISA.

§ 4245.3 Notice of insolvency.

(a) Requirement of notice. A plan

sponsor of a multiemployer plan in

reorganization that determines under

section 4245 (b)(1), (d)(1) or (d)(2) of

ERISA that the plan’s available

resources are or may be insufficient to

pay benefits when due for a plan year

shall so notify the PBGC and the

interested parties, as defined in

paragraph (d) of this section. A single

notice may cover more than one plan

year. The notices shall be delivered in

the manner and within the time

prescribed in this section and shall

contain the information described in

§ 4245.4.

(b) When delivered. A plan sponsor

shall mail or otherwise deliver the

notices of insolvency no later than 30

days after it determines that the plan is

or may become insolvent, as described

in paragraph (a) of this section.

However, the notice to participants and

beneficiaries in pay status may be

delivered concurrently with the first

benefit payment made more than 30

days after the determination of

insolvency.

(c) Methods of delivery. The notice of

insolvency shall be delivered by mail or

by hand to the PBGC and the interested

parties described in paragraph (d) of this

section, other than participants and

beneficiaries who are not in pay status

when the notice is required to be

delivered. The notice to participants

and beneficiaries who are not in pay

status shall be provided in any manner

reasonably calculated to reach those

participants and beneficiaries.

Reasonable methods of notification

include, but are not limited to, posting

the notice at participants’ worksites or

publishing the notice in a union

newsletter or in a newspaper of general

circulation in the area or areas where

participants reside. Notice to a

participant shall be deemed notice to

that participant’s beneficiary or

beneficiaries.

(d) Interested parties. For purposes of

this part, the term ‘‘interested parties’’

means—

(1) Employers required to contribute

to the plan;

(2) Employee organizations that, for

collective bargaining purposes,

represent plan participants employed by

such employers; and

(3) Plan participants and

beneficiaries.

§ 4245.4 Contents of notice of insolvency.

(a) Notice to the PBGC. A notice of

insolvency required to be filed with the

PBGC pursuant to § 4245.3 shall contain

the information set forth below:

(1) The name of the plan.

(2) The name, address and telephone

number of the plan sponsor and of the

plan sponsor’s duly authorized

representative, if any.

(3) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Identification Number

(PIN) assigned by the plan sponsor to

the plan, and, if different, the EIN or

PIN last filed with the PBGC. If no EIN

or PIN has been assigned, the notice

shall so indicate.

(4) The IRS key district that has

jurisdiction over determination letters

with respect to the plan.

(5) The case number assigned to the

plan by the PBGC. If the plan has no

case number, the notice shall state

whether the plan has previously filed a

notice of insolvency with the PBGC and,

if so, the date on which the notice was

filed.

(6) The plan year or years for which

the plan sponsor has determined that

the plan is or may become insolvent.

(7) A copy of the plan document,

including the last restatement of the

plan and all subsequent amendments in

effect, or to become effective, during the

insolvency year or years. However, if a

copy of the plan document was

submitted to the PBGC with a previous

notice of insolvency or notice of

insolvency benefit level, only

subsequent plan amendments need be

submitted, and the notice shall state

when the copy of the plan document

was filed.

(8) A copy of the most recent actuarial

valuation for the plan and a copy of the

most recent Schedule B (Form 5500)

filed for the plan, if the Schedule B

contains more recent information than

the actuarial valuation. If the actuarial

valuation or Schedule B was previously

submitted to the PBGC, it may be

omitted, and the notice shall state the

date on which the document was filed

and that the information is still accurate

and complete.

(9) The estimated amount of annual

benefit payments under the plan

(determined without regard to the

insolvency) for each insolvency year.

(10) The estimated amount of the

plan’s available resources for each

insolvency year.

(11) A certification, signed by the plan

sponsor (or a duly authorized

representative), that notices of

insolvency have been given to all

interested parties in accordance with

the requirements of this part.

(b) Notices to interested parties. A

notice of insolvency required under

§ 4245.3 to be given to an interested

party, as defined in § 4245.3(d), shall

contain the information set forth below:

(1) The name of the plan.

(2) The plan year or years for which

the plan sponsor has determined that

the plan is or may become insolvent.

(3) The estimated amount of annual

benefit payment under the plan

(determined without regard to the

insolvency) for each insolvency year.

(4) The estimated amount of the

plan’s available resources for each

insolvency year.

(5) A statement that, during the

insolvency year, benefits above the

amount that can be paid from available

resources or the level guaranteed by the

PBGC, whichever is greater, will be

suspended, with a brief explanation of

which benefits are guaranteed by the

PBGC. The following statement may be
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34117

included as an explanation of PBGCguaranteed benefits:

Should the plan become insolvent,

each participant’s benefit guaranteed by

the Pension Benefit Guaranty

Corporation (PBGC) is determined as

follows. Each participant’s

nonforfeitable monthly benefit payable

under the plan at retirement is

computed. This benefit is then divided

by the participant’s years of credited

service under the plan. Of the resulting

figure (the accrual rate), the first $5 is

guaranteed at 100%. Any additional

amount (up to $15) is either 75% or

65% guaranteed, depending on the past

funding practices of the plan. Any

remaining amount that exceeds $20 is

not guaranteed. The PBGC guarantees

the payment of a monthly benefit equal

to this adjusted accrual rate times years

of credited service. The PBGC does not

guarantee benefits or benefit increases

that have been in effect for fewer than

60 months before the plan becomes

insolvent or is amended to reduce

accrued benefits.

(6) The name, address, and telephone

number of the plan administrator or

other person designated by the plan

sponsor to answer inquiries concerning

benefits during the plan’s insolvency.

§ 4245.5 Notice of insolvency benefit level.

(a) Requirement of notice. Except as

provided in paragraph (b) of this

section, for each insolvency year the

plan sponsor shall notify the PBGC and

the interested parties, as defined in

§ 4245.3(d), of the level of benefits

expected to be paid during the year (the

‘‘insolvency benefit level’’). These

notices shall be delivered in the manner

and within the time prescribed in this

section and shall contain the

information described in § 4245.6.

(b) Waiver of notice to certain

interested parties. The notice of

insolvency benefit level required under

this section need not be given to

interested parties, other than

participants and beneficiaries who are

in pay status or are reasonably expected

to enter pay status during the

insolvency year, for an insolvency year

immediately following the plan year in

which a notice of insolvency was

required to be delivered pursuant to

§ 4245.3, provided that the notice of

insolvency was in fact delivered.

(c) When delivered. The plan sponsor

shall mail or otherwise deliver the

required notices of insolvency benefit

level no later than 60 days before the

beginning of the insolvency year, except

that if the determination of insolvency

is made fewer than 120 days before the

beginning of the insolvency year, the

notices shall be delivered within 60

days after the date of the plan sponsor’s

determination.

(d) Methods of delivery. The notice of

insolvency benefit level shall be

delivered by mail or by hand to the

PBGC and to the interested parties

described in § 4245.3(d), other than

participants and beneficiaries who are

neither in pay status nor reasonably

expected to enter pay status during the

insolvency year for which the notice is

given. The notice to participants and

beneficiaries not in pay status, nor

reasonably expected to enter pay status

during the insolvency year, shall be

provided in any manner reasonably

calculated to reach those participants

and beneficiaries. Reasonable methods

of notification include, but are not

limited to, posting the notice at

participants’ worksites or publishing the

notice in a union newsletter or in a

newspaper of general circulation in the

area or areas where participants reside.

Notice to a participant shall be deemed

notice to that participant’s beneficiary

or beneficiaries.

§ 4245.6 Contents of notice of insolvency

benefit level.

(a) Notice to the PBGC. A notice of

insolvency benefit level required to be

filed with the PBGC pursuant to

§ 4245.5(a) shall contain the information

set forth below, except as provided in

the next sentence. The information

required in paragraphs (a)(7) to (a)(10)

need be submitted only if it is different

from the information submitted to the

PBGC with the notice of insolvency

filed for that insolvency year (see

§ 4245.4 (a)(7) to (a)(10)) or the notice of

insolvency benefit level filed for a prior

year. When any information is omitted

under this exception, the notice shall so

state and indicate when the notice of

insolvency or prior notice of insolvency

benefit level was filed.

(1) The name of the plan.

(2) The name, address and telephone

number of the plan sponsor and of the

plan sponsor’s authorized

representative, if any.

(3) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Identification Number

(PIN) assigned by the plan sponsor to

the plan, and, if different, the EIN or

PIN last filed with the PBGC. If no EIN

or PIN has been assigned, the notice

shall so indicate.

(4) The IRS key district that has

jurisdiction over determination letters

with respect to the plan.

(5) The case number assigned to the

plan by the PBGC.

(6) The plan year for which the notice

is filed.

(7) A copy of the plan document,

including any amendments, in effect

during the insolvency year.

(8) A copy of the most recent actuarial

valuation for the plan and a copy of the

most recent Schedule B (Form 5500)

filed for the plan, if the Schedule B

contains more recent information than

the actuarial valuation.

(9) The estimated amount of annual

benefit payments under the plan

(determined without regard to the

insolvency) for the insolvency year.

(10) The estimated amount of the

plan’s available resources for the

insolvency year.

(11) The estimated amount of the

annual benefit payments guaranteed by

the PBGC for the insolvency year.

(12) The amount of financial

assistance, if any, requested from the

PBGC.

(13) A certification, signed by the plan

sponsor (or a duly authorized

representative), that notices of

insolvency benefit level have been given

to all interested parties in accordance

with the requirements of this part.

When financial assistance is

requested, the PBGC may require the

plan sponsor to submit additional

information necessary to process the

request.

(b) Notices to interested parties other

than participants in or entering pay

status. A notice of insolvency benefit

level required by § 4245.5(a) to be

delivered to interested parties, as

defined in § 4245.3(d), other than a

notice to a participant or beneficiary

who is in pay status or is reasonably

expected to enter pay status during the

insolvency year, shall include the

information set forth below:

(1) The name of the plan.

(2) The plan year for which the notice

is issued.

(3) The estimated amount of annual

benefit payments under the plan

(determined without regard to the

insolvency) for the insolvency year.

(4) The estimated amount of the

plan’s available resources for the

insolvency year.

(5) The amount of financial

assistance, if any, requested from the

PBGC.

(c) Notices to participants and

beneficiaries in or entering pay status. A

notice of insolvency benefit level

required by § 4245.5(a) to be delivered

to participants and beneficiaries who

are in pay status or are reasonably

expected to enter pay status during the

insolvency year for which the notice is

given, shall include the following

information:

(1) The name of the plan.

(2) The plan year for which the notice

is issued.
34118 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(3) A statement of the monthly benefit

expected to be paid to the participant or

beneficiary during the insolvency year.

(4) A statement that in subsequent

plan years, depending on the plan’s

available resources, this benefit level

may be increased or decreased but will

not fall below the level guaranteed by

the PBGC, and that the participant or

beneficiary will be notified in advance

of the new benefit level if it is less than

his full nonforfeitable benefit under the

plan.

(5) The name, address, and telephone

number of the plan administrator or

other person designated by the plan

sponsor to answer inquiries concerning

benefits during the plan’s insolvency.

§ 4245.7 PBGC address.

All notices required to be filed with

the PBGC under this part shall be

addressed to Reports Processing,

Insurance Operations Department,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026.

(Approved by the Office of Management and

Budget under control number 1212–0033)

PART 4261—FINANCIAL ASSISTANCE

TO MULTIEMPLOYER PLANS

§ 4261.1 Cross-reference.

See § 4281.47 for procedures for

applying to the PBGC for financial

assistance under section 4261 of ERISA.

PART 4281—DUTIES OF PLAN

SPONSOR FOLLOWING MASS

WITHDRAWAL

Subpart A—General

Sec.

4281.1 Purpose and scope.

4281.2 Definitions.

4281.3 Submission of documents.

4281.4 Collection of information.

Subpart B—Valuation of Plan Benefits and

Plan Assets

4281.11 Valuation dates.

4281.12 Benefits to be valued.

4281.13 Benefit valuation methods—in

general.

4281.14 Mortality assumptions—in general.

4281.15 Mortality assumptions—lump

sums under trusteed plans.

4281.16 Benefit valuation methods—plans

closing out.

4281.17 Asset valuation methods—in

general.

4281.18 Outstanding claims for withdrawal

liability.

Subpart C—Benefit Reductions

4281.31 Plan amendment.

4281.32 Notices of benefit reductions.

4281.33 Restoration of benefits.

Subpart D—Benefit Suspensions

4281.41 Benefit suspensions.

4281.42 Retroactive payments.

4281.43 Notices of insolvency and annual

updates.

4281.44 Contents of notices of insolvency

and annual updates.

4281.45 Notices of insolvency benefit level.

4281.46 Contents of notices of insolvency

benefit level.

4281.47 Application for financial

assistance.

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

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

Subpart A—General Provisions

§ 4281.1 Purpose and scope.

(a) General.

(1) Purpose. When a multiemployer

plan terminates by mass withdrawal

under section 4041A(a)(2) of ERISA, the

plan’s assets and benefits must be

valued annually under section 4281(b)

of ERISA, and plan benefits may have to

be reduced or suspended to the extent

provided in section 4281 (c) or (d). This

part implements the provisions of

section 4281 and provides rules for

applying for financial assistance from

the PBGC under section 4261 of ERISA.

The plan valuation rules in this part

also apply to the determination of

reallocation liability under section

4219(c)(1)(D) of ERISA and subpart B of

part 4219 of this chapter for

multiemployer plans that undergo mass

withdrawal (with or without

termination).

(2) Scope. This part applies to

multiemployer plans covered by Title IV

of ERISA that have terminated by mass

withdrawal under section 4041A(a)(2) of

ERISA (including plans created by

partition pursuant to section 4233 of

ERISA). Subpart B of this part also

applies to covered multiemployer plans

that have undergone mass withdrawal

without terminating.

(b) Subpart B. Subpart B establishes

rules for determining the value of

multiemployer plan benefits and assets,

including outstanding claims for

withdrawal liability, for plans required

to perform annual valuations under

section 4281(b) of ERISA or allocate

unfunded vested benefits under section

4219(c)(1)(D) of ERISA.

(c) Subpart C. Subpart C sets forth

procedures under which the plan

sponsor of a terminated plan shall

amend the plan to reduce benefits

subject to reduction in accordance with

section 4281(c) of ERISA and

§ 4041A.24(b) of this chapter. Subpart C

applies to a plan for which the annual

valuation required by § 4041A.24(a)

indicates that the value of nonforfeitable

benefits under the plan exceeds the

value of the plan’s assets (including

claims for withdrawal liability) if, at the

end of the plan year for which that

valuation was done, the plan provided

any benefits subject to reduction.

Benefit reductions required to be made

under subpart C shall not apply to

accrued benefits under plans or plan

amendments adopted on or before

March 26, 1980, or under collective

bargaining agreements entered into on

or before March 26, 1980.

(d) Subpart D. Subpart D sets forth the

procedures under which the plan

sponsor of an insolvent plan must

suspend benefit payments and issue

insolvency notices in accordance with

section 4281(d) of ERISA and

§ 4041A.25 (c) and (d) of this chapter.

Subpart D applies to a plan that has

been amended under section 4281(c) of

ERISA and subpart C of this part to

eliminate all benefits subject to

reduction and to a plan that provided no

benefits subject to reduction as of the

date on which the plan terminated.

§ 4281.2 Definitions.

The following terms are defined in

section 4001.2 of this chapter: annuity,

employer, ERISA, fair market value, IRS,

insurer, irrevocable commitment, mass

withdrawal, multiemployer plan,

nonforfeitable benefit, normal

retirement age, PBGC, person, plan, plan

administrator, and plan year.

In addition, for purposes of this part:

Available resources means, for a plan

year, available resources as described in

section 4245(b)(3) of ERISA.

Benefits subject to reduction means

those benefits accrued under plan

amendments (or plans) adopted after

March 26, 1980, or under collective

bargaining agreements entered into after

March 26, 1980, that are not eligible for

the PBGC’s guarantee under section

4022A(b) of ERISA.

Financial assistance means financial

assistance from the PBGC under section

4261 of ERISA.

Insolvency benefit level means the

greater of the resource benefit level or

the benefit level guaranteed by the

PBGC for each participant and

beneficiary in pay status.

Insolvency year means insolvency

year as described in section 4245(b)(4)

of ERISA.

Insolvent means that a plan is unable

to pay benefits when due during the

plan year. A plan terminated by mass

withdrawal is not insolvent unless it has

been amended to eliminate all benefits

that are subject to reduction under

section 4281(c), or, in the absence of an

amendment, no benefits under the plan

are subject to reduction under section

4281(c) of ERISA.

Pro rata means that the required

benefit reduction or payment shall be

allocated among affected participants in

the same proportion that each such
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34119

participant’s nonforfeitable benefits

under the plan bear to all nonforfeitable

benefits of those participants under the

plan.

Reasonably expected to enter pay

status means, with respect to plan

participants and beneficiaries, persons

(other than those in pay status) who,

according to plan records, are disabled,

have applied for benefits, or have

reached or will reach during the

applicable period the normal retirement

age under the plan, and any others

whom it is reasonable for the plan

sponsor to expect to enter pay status

during the applicable period.

Resource benefit level means resource

benefit level as described in section

4245(b)(2) of ERISA.

Valuation date means the last day of

the plan year in which the plan

terminates and the last day of each plan

year thereafter.

§ 4281.3 Submission of documents.

(a) Filing date. Any notice, document

or information required to be filed with

the PBGC under this part shall be

considered filed on the date of the

United States postmark stamped on the

cover in which the document or

information is mailed, provided that the

postmark was made by the United States

Postal Service and the document was

mailed postage prepaid, properly

packaged and addressed to the PBGC. If

these conditions are not met, the

document shall be considered filed on

the date on which it was received by the

PBGC.

(b) Address. All notices, documents

and information required to be filed

with the PBGC under this part shall be

addressed to Reports Processing,

Insurance Operations Department,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026.

§ 4281.4 Collection of information.

The collection of information

requirements contained in this part have

been approved by the Office of

Management and Budget under control

number 1212–0032.

Subpart B—Valuation of Plan Benefits

and Plan Assets

§ 4281.11 Valuation dates.

(a) Annual valuations of masswithdrawal-terminated plans. The

valuation dates for the annual valuation

required under section 4281(b) of ERISA

shall be the last day of the plan year in

which the plan terminates and the last

day of each plan year thereafter.

(b) Valuations related to mass

withdrawal reallocation liability. The

valuation date for determining the value

of unfunded vested benefits (for

purposes of allocation) under section

4219(c)(1)(D) of ERISA shall be—

(1) If the plan terminates by mass

withdrawal, the last day of the plan year

in which the plan terminates; or

(2) If substantially all the employers

withdraw from the plan pursuant to an

agreement or arrangement to withdraw

from the plan, the last day of the plan

year as of which substantially all

employers have withdrawn from the

plan pursuant to the agreement or

arrangement.

§ 4281.12 Benefits to be valued.

(a) Form of benefit. The plan sponsor

shall determine the form of each benefit

to be valued, without regard to the form

of benefit valued in any prior year, in

accordance with the following rules:

(1) If a benefit is in pay status as of

the valuation date, the plan sponsor

shall value the form of benefit being

paid.

(2) If a benefit is not in pay status as

of the valuation date but a valid election

with respect to the form of benefit has

been made on or before the valuation

date, the plan sponsor shall value the

form of benefit so elected.

(3) If a benefit is not in pay status as

of the valuation date and no valid

election with respect to the form of

benefit has been made on or before the

valuation date, the plan sponsor shall

value the form of benefit that, under the

terms of the plan or applicable law, is

payable in the absence of a valid

election.

(b) Timing of benefit. The plan

sponsor shall value benefits whose

starting date is subject to election—

(1) By assuming that the starting date

of each benefit is the earliest date, not

preceding the valuation date, that could

be elected; or

(2) By using any other assumption

that the plan sponsor demonstrates to

the satisfaction of the PBGC is more

reasonable under the circumstances.

§ 4281.13 Benefit valuation methods—in

general.

(a) General rule. Except as otherwise

provided in paragraph (b) of this section

(regarding the valuation of benefits

payable as lump sums under trusteed

plans) and § 4281.16 (regarding plans

that are closing out), the plan sponsor

shall value benefits as of the valuation

date by—

(1) Using the interest assumptions

described in Table I of appendix B to

part 4044 of this chapter;

(2) Using the mortality assumptions

described in § 4281.14;

(3) Using interpolation methods,

where necessary, at least as accurate as

linear interpolation;

(4) Applying valuation formulas that

accord with generally accepted actuarial

principles and practices; and

(5) Adjusting the values to reflect the

loading for expenses in accordance with

appendix C to part 4044 of this chapter

(substituting the term ‘‘benefits’’ for the

term ‘‘benefit liabilities (as defined in 29

U.S.C. § 1301(a)(16))’’).

(b) Benefits payable as lump sums

under trusteed plans. If the PBGC is

trustee of a multiemployer plan, for

determining whether the value of a

benefit is $3,500 or less under

§ 4022.7(b)(1) and for calculating the

amount of a lump sum benefit, the

PBGC shall value benefits to be paid as

lump sums in the same manner as

benefits to be paid as annuities except

that the interest assumptions prescribed

by Table II of appendix B to part 4044

of this chapter and the mortality

assumptions prescribed by § 4281.15

shall apply, and there shall be no

adjustment to reflect the loading for

expenses.

§ 4281.14 Mortality assumptions—in

general.

(a) General rule. Except as otherwise

provided in § 4281.15 (regarding the

valuation of benefits payable as lump

sums under trusteed plans), and subject

to paragraph (b) of this section

(regarding certain death benefits), the

plan administrator shall use the

mortality factors prescribed in

paragraphs (c), (d), and (e) of this

section to value benefits under

§ 4281.13.

(b) Certain death benefits. If an

annuity for one person is in pay status

on the valuation date, and if the

payment of a death benefit after the

valuation date to another person, who

need not be identifiable on the valuation

date, depends in whole or in part on the

death of the pay status annuitant, then

the plan administrator shall value the

death benefit using—

(1) the mortality rates that are

applicable to the annuity in pay status

under this section to represent the

mortality of the pay status annuitant;

and

(2) the mortality rates applicable to

annuities not in pay status and to

deferred benefits other than annuities,

under paragraph (c) of this section, to

represent the mortality of the death

beneficiary.

(c) Mortality rates for healthy lives.

The mortality rates applicable to

annuities in pay status on the valuation

date that are not being received as

disability benefits, to annuities not in
34120 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

pay status on the valuation date, and to

deferred benefits other than annuities,

are,—

(1) For male participants, the rates in

Table 1 of appendix A to part 4044 of

this chapter, and

(2) For female participants, the rates

in Table 1 of appendix A to part 4044

of this chapter, set back 6 years.

(d) Mortality rates for disabled lives

(other than Social Security disability).

The mortality rates applicable to

annuities in pay status on the valuation

date that are being received as disability

benefits and for which neither eligibility

for, nor receipt of, Social Security

disability benefits is a prerequisite,

are,—

(1) For male participants, the rates in

Table 1 of appendix A to part 4044 of

this chapter, set forward 3 years, and

(2) For female participants, the rates

in Table 1 of appendix A to part 4044

of this chapter, set back 3 years.

(e) Mortality rates for disabled lives

(Social Security disability). The

mortality rates applicable to annuities in

pay status on the valuation date that are

being received as disability benefits and

for which either eligibility for, or receipt

of, Social Security disability benefits is

a prerequisite, are the rates in Tables 2–

M and 2–F of appendix A to part 4044

of this chapter.

§ 4281.15 Mortality assumptions—lump

sums under trusteed plans.

(a) General rule. If the PBGC is trustee

of a multiemployer plan, for

determining whether the value of a

benefit is $3,500 or less under

§ 4022.7(b)(1) and for calculating the

amount of a lump sum benefit, the

PBGC will use the mortality rates in

Table 3 of appendix A to part 4044 of

this chapter.

§ 4281.16 Benefit valuation methods—

plans closing out.

(a) Applicability. For purposes of the

annual valuation required by section

4281(b) of ERISA, the plan sponsor shall

value the plan’s benefits in accordance

with paragraph (b) of this section if,—

(1) Plans closed out before valuation.

Before the time when the valuation is

performed, the plan has satisfied in full

all liabilities for payment of

nonforfeitable benefits, in a manner

consistent with the terms of the plan

and applicable law, by the purchase of

one or more nonparticipating

irrevocable commitments from one or

more insurers, with respect to all

benefits payable as annuities, and by the

payment of single-sum cash

distributions, with respect to benefits

not payable as annuities; or

(2) Plans to be closed out after

valuation. As of the time when the

valuation is performed, the plan sponsor

reasonably expects that the plan will

close out before the next annual

valuation date and the plan sponsor has

a currently exercisable bid or bids to

provide the irrevocable commitment(s)

described in paragraph (a)(1) of this

section and the total cost of the

irrevocable commitment(s) under the

bid, plus the total amount of the singlesum cash distributions described in

paragraph (a)(1), does not exceed the

value of the plan’s assets, exclusive of

outstanding claims for withdrawal

liability, as determined under this

subpart.

(b) Valuation rule. The present value

of nonforfeitable benefits under this

section is the total amount of single-sum

cash distributions made or to be made

plus the cost of the irrevocable

commitment(s) purchased or to be

purchased in order to satisfy in full all

liabilities of the plan for nonforfeitable

benefits.

§ 4281.17 Asset valuation methods—in

general.

(a) General rule. The plan sponsor

shall value plan assets as of the

valuation date, using the valuation

methods prescribed by this section and

§ 4281.18 (regarding outstanding claims

for withdrawal liability), and deducting

administrative liabilities in accordance

with paragraph (c) of this section.

(b) Assets other than withdrawal

liability claims. The plan sponsor shall

value any plan asset (other than an

outstanding claim for withdrawal

liability) by such method or methods as

the plan sponsor reasonably believes

most accurately determine fair market

value.

(c) Adjustment for administrative

liabilities. In determining the total value

of plan assets, the plan sponsor shall

subtract all plan liabilities, other than

liabilities to pay benefits. For this

purpose, any obligation to repay

financial assistance received from the

PBGC under section 4261 of ERISA is a

plan liability other than a liability to

pay benefits. The obligation to repay

financial assistance shall be valued by

determining the value of the scheduled

payments in the same manner as

prescribed in § 4281.18(a) for valuing

claims for withdrawal liability.

§ 4281.18 Outstanding claims for

withdrawal liability.

(a) Value of claim. The plan sponsor

shall value an outstanding claim for

withdrawal liability owed by an

employer described in paragraph (b) of

this section in accordance with

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

section:

(1) If the schedule of withdrawal

liability payments provides for one or

more series of equal payments, the plan

sponsor shall value each series of

payments as an annuity certain in

accordance with the provisions of

§ 4281.13.

(2) If the schedule of withdrawal

liability payments provides for one or

more payments that are not part of a

series of equal payments as described in

paragraph (a)(1) of this section, the plan

sponsor shall value each such unequal

payment as a lump-sum payment in

accordance with the provisions of

§ 4281.13.

(b) Employers neither liquidated nor

in insolvency proceedings. The plan

sponsor shall value an outstanding

claim for withdrawal liability under

paragraph (a) of this section if, as of the

valuation date—

(1) The employer has not been

completely liquidated or dissolved; and

(2) The employer is not the subject of

any case or proceeding under title 11,

United States Code, or any case or

proceeding under similar provisions of

state insolvency laws; except that the

claim for withdrawal liability of an

employer that is the subject of a

proceeding described in this paragraph

(b)(2) shall be valued under paragraph

(a) of this section if the plan sponsor

determines that the employer is

reasonably expected to be able to pay its

withdrawal liability in full and on time.

(c) Claims against other employers.

The plan sponsor shall value at zero any

outstanding claim for withdrawal

liability owed by an employer that does

not meet the conditions set forth in

paragraph (b) of this section.

Subpart C—Benefit Reductions

§ 4281.31 Plan amendment.

The plan sponsor of a plan described

in § 4281.31 shall amend the plan to

eliminate those benefits subject to

reduction in excess of the value of

benefits that can be provided by plan

assets. Such reductions shall be effected

by a pro rata reduction of all benefits

subject to reduction or by elimination or

pro rata reduction of any category of

benefit. Benefit reductions required by

this section shall apply only

prospectively. An amendment required

under this section shall take effect no

later than six months after the end of the

plan year for which it is determined that

the value of nonforfeitable benefits

exceeds the value of the plan’s assets.

§ 4281.32 Notices of benefit reductions.

(a) Requirement of notices. A plan

sponsor of a multiemployer plan under

which a plan amendment reducing
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34121

benefits is adopted pursuant to section

4281(c) of ERISA shall so notify the

PBGC and plan participants and

beneficiaries whose benefits are reduced

by the amendment. The notices shall be

delivered in the manner and within the

time prescribed, and shall contain the

information described, in this section.

The notice required in this section shall

be filed in lieu of the notice described

in section 4244A(b)(2) of ERISA.

(b) When delivered. The plan sponsor

shall mail or otherwise deliver the

notices of benefit reduction no later

than the earlier of—

(1) 45 days after the amendment

reducing benefits is adopted; or

(2) The date of the first reduced

benefit payment.

(c) Method of delivery. The notices of

benefit reductions shall be delivered by

mail or by hand to the PBGC and to plan

participants and beneficiaries who are

in pay status when the notice is

required to be delivered or who are

reasonably expected to enter pay status

before the end of the plan year after the

plan year in which the amendment is

adopted. The notice to other

participants and beneficiaries whose

benefit is reduced by the amendment

shall be provided in any manner

reasonably calculated to reach those

participants and beneficiaries.

Reasonable methods of notification

include, but are not limited to, posting

the notice at participants’ worksites or

publishing the notice in a union

newsletter or newspaper of general

circulation in the area or areas where

participants reside. Notice to a

participant shall be deemed notice to

the participant’s beneficiary or

beneficiaries.

(d) Contents of notice to the PBGC. A

notice of benefit reduction required to

be filed with the PBGC pursuant to

paragraph (a) of this section shall

contain the following information:

(1) The name of the plan.

(2) The name, address, and telephone

number of the plan sponsor and of the

plan sponsor’s duly authorized

representative, if any.

(3) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Number (PN) assigned

by the plan sponsor to the plan, and, if

different, the EIN or PN last filed with

the PBGC. If no EIN or PN has been

assigned, the notice shall so state.

(4) The case number assigned by the

PBGC to the filing of the plan’s notice

of termination pursuant to part 4041A,

subpart B, of this chapter.

(5) A statement that a plan

amendment reducing benefits has been

adopted, listing the date of adoption and

the effective date of the amendment.

(6) A certification, signed by the plan

sponsor or its duly authorized

representative, that notice of the benefit

reductions has been given to all

participants and beneficiaries whose

benefits are reduced by the plan

amendment, in accordance with the

requirements of this section.

(e) Contents of notice to participants

and beneficiaries. A notice of benefit

reductions required under paragraph (a)

of this section to be given to plan

participants and beneficiaries whose

benefits are reduced by the amendment

shall contain the following information:

(1) The name of the plan.

(2) A statement that a plan

amendment reducing benefits has been

adopted, listing the date of adoption and

the effective date of the amendment.

(3) A summary of the amendment,

including a description of the effect of

the amendment on the benefits to which

it applies.

(4) The name, address, and telephone

number of the plan administrator or

other person designated by the plan

sponsor to answer inquiries concerning

benefits.

§ 4281.33 Restoration of benefits.

(a) General. The plan sponsor of a

plan that has been amended to reduce

benefits under this subpart shall amend

the plan to restore those benefits before

adopting any amendment increasing

benefits under the plan. A plan is not

required to make retroactive benefit

payments with respect to any benefit

that was reduced and subsequently

restored in accordance with this section.

(b) Notice to the PBGC. The plan

sponsor shall notify the PBGC in writing

of any restoration under this section.

The notice shall include the information

specified in § 4281.32 (d)(1) through

(d)(4); a statement that a plan

amendment restoring benefits has been

adopted, the date of adoption, and the

effective date of the amendment; and a

certification, signed by the plan sponsor

or its duly authorized representative,

that the amendment has been adopted

in accordance with this section.

Subpart D—Benefit Suspensions

§ 4281.41 Benefit suspensions.

If the plan sponsor determines that

the plan is or is expected to be insolvent

for a plan year, the plan sponsor shall

suspend benefits to the extent necessary

to reduce the benefits to the greater of

the resource benefit level or the level of

guaranteed benefits.

§ 4281.42 Retroactive payments.

(a) Erroneous resource benefit level. If,

by the end of a year in which benefits

were suspended under § 4281.41, the

plan sponsor determines in writing that

the plan’s available resources in that

year could have supported benefit

payments above the resource benefit

level determined for that year, the plan

sponsor may distribute the excess

resources to each affected participant

and beneficiary who received benefit

payments that year on a pro rata basis.

The amount distributed to each

participant under this paragraph may

not exceed the amount that, when

added to benefit payments already

made, brings the total benefit for the

plan year up to the total benefit

provided under the plan.

(b) Benefits paid below resource

benefit level. If, by the end of a plan year

in which benefits were suspended

under § 4281.41, any benefit has not

been paid at the resource benefit level,

amounts up to the resource benefit level

that were unpaid shall be distributed to

each affected participant and

beneficiary on a pro rata basis to the

extent possible, taking into account the

plan’s total available resources in that

year.

§ 4281.43 Notices of insolvency and

annual updates.

(a) Requirement of notices of

insolvency. A plan sponsor that

determines that the plan is, or is

expected to be, insolvent for a plan year

shall issue notices of insolvency to the

PBGC and to plan participants and

beneficiaries. Once notices of

insolvency have been issued to the

PBGC and to plan participants and

beneficiaries, no notice of insolvency

needs to be issued for subsequent

insolvency years. Notices shall be

delivered in the manner and within the

time prescribed in this section and shall

contain the information described in

§ 4281.44.

(b) Requirement of annual updates. A

plan sponsor that has issued notices of

insolvency to the PBGC and to plan

participants and beneficiaries shall

thereafter issue annual updates to the

PBGC and participants and beneficiaries

for each plan year beginning after the

plan year for which the notice of

insolvency was issued. However, the

plan sponsor need not issue an annual

update to plan participants and

beneficiaries who are issued notices of

insolvency benefit level in accordance

with § 4281.45 for the same insolvency

year. A plan sponsor that, after issuing

annual updates for a plan year,

determines under § 4041A.25(b) that the

plan is or may be insolvent for that plan
34122 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

year need not issue revised annual

updates. Annual updates shall be

delivered in the manner and within the

time prescribed in this section and shall

contain the information described in

§ 4281.44.

(c) Notices of insolvency—when

delivered. Except as provided in the

next sentence, the plan sponsor shall

mail or otherwise deliver the notices of

insolvency no later than 30 days after

the plan sponsor determines that the

plan is or may be insolvent. However,

the notice to plan participants and

beneficiaries in pay status may be

delivered concurrently with the first

benefit payment made after the

determination of insolvency.

(d) Annual updates—when delivered.

Except as provided in the next sentence,

the plan sponsor shall mail or otherwise

deliver annual updates no later than 60

days before the beginning of the plan

year for which the annual update is

issued. A plan sponsor that determines

under § 4041A.25(b) that the plan is or

may be insolvent for a plan year and

that has not at that time issued annual

updates for that year, shall mail or

otherwise deliver the annual updates by

the later of 60 days before the beginning

of the plan year or 30 days after the date

of the plan sponsor’s determination

under § 4041A.25(b).

(e) Notices of insolvency—method of

delivery. The notices of insolvency shall

be delivered by mail or by hand to the

PBGC and to plan participants and

beneficiaries in pay status when the

notice is required to be delivered.

Notice to participants and beneficiaries

not in pay status shall be provided in

any manner reasonably calculated to

reach those participants and

beneficiaries. Reasonable methods of

notification include, but are not limited

to, posting the notice at participants’

worksites or publishing the notice in a

union newsletter or newspaper of

general circulation in the area or areas

where participants reside. Notice to a

participant shall be deemed notice to

that participant’s beneficiary or

beneficiaries.

(f) Annual updates—method of

delivery. Each annual update shall be

delivered by mail or by hand to the

PBGC. Each annual update to plan

participants and beneficiaries shall be

provided in any manner reasonably

calculated to reach participants and

beneficiaries. Reasonable methods of

notification include, but are not limited

to, posting the notice at participants’

worksites and publishing the notice in

a union newsletter of general circulation

in the area or areas where participants

reside. Notice to a participant shall be

deemed notice to that participant’s

beneficiary or beneficiaries.

§ 4281.44 Contents of notices of

insolvency and annual updates.

(a) Notice of insolvency to the PBGC.

A notice of insolvency required under

§ 4281.43(a) to be filed with the PBGC

shall contain the following information:

(1) The name of the plan.

(2) The name, address, and telephone

number of the plan sponsor and of the

plan sponsor’s duly authorized

representative, if any.

(3) The nine-digit Employer

Identification Number (EIN) assigned by

the IRS to the plan sponsor and the

three-digit Plan Number (PN) assigned

by the plan sponsor to the plan, and, if

different, the EIN or PN last filed with

the PBGC. If no EIN or PN has been

assigned, the notice shall so state.

(4) The IRS Key District that has

jurisdiction over determination letters

with respect to the plan.

(5) The case number assigned by the

PBGC to the filing of the plan’s notice

of termination pursuant to part 4041A,

subparts A and B, of this chapter.

(6) The plan year for which the plan

sponsor has determined that the plan is

or may be insolvent.

(7) A copy of the plan document

currently in effect, i.e., a copy of the last

restatement of the plan and all

subsequent amendments. However, if a

copy of the plan document was

submitted to the PBGC with a previous

filing, only subsequent plan

amendments need be submitted, and the

notice shall state when the copy of the

plan document was filed.

(8) A copy of the most recent actuarial

valuation for the plan (i.e., the most

recent report submitted to the plan in

connection with a valuation of plan

assets and liabilities, which shall be

performed in accordance with subpart B

of this part). If the actuarial valuation

was previously submitted to the PBGC,

it may be omitted, and the notice shall

state the date on which the document

was filed and that the information is

still accurate and complete.

(9) The estimated amount of annual

benefit payments under the plan

(determined without regard to the

insolvency) for the insolvency year.

(10) The estimated amount of the

plan’s available resources for the

insolvency year.

(11) The estimated amount of the

annual benefits guaranteed by the PBGC

for the insolvency year.

(12) A statement indicating whether

the notice of insolvency is the result of

an insolvency determination under

§ 4041A.25 (a) or (b).

(13) A certification, signed by the plan

sponsor or its duly authorized

representative, that notices of

insolvency have been given to all plan

participants and beneficiaries in

accordance with this part.

(b) Notice of insolvency to

participants and beneficiaries. A notice

of insolvency required under

§ 4281.43(a) to be issued to plan

participants and beneficiaries shall

contain the following information:

(1) The name of the plan.

(2) A statement of the plan year for

which the plan sponsor has determined

that the plan is or may be insolvent.

(3) A statement that benefits above the

amount that can be paid from available

resources or the level guaranteed by the

PBGC, whichever is greater, will be

suspended during the insolvency year,

with a brief explanation of which

benefits are guaranteed by the PBGC.

(4) The name, address, and telephone

number of the plan administrator or

other person designated by the plan

sponsor to answer inquiries concerning

benefits.

(c) Annual update to the PBGC. Each

annual update required by § 4281.43(b)

to be filed with the PBGC shall contain

the following information:

(1) The case number assigned by the

PBGC to the filing of the plan’s notice

of termination pursuant to part 4041A,

subparts A and B, of this chapter.

(2) A copy of the annual update to

plan participants and beneficiaries, as

described in paragraph (d) of this

section, for the plan year.

(3) A statement indicating whether

the annual update is the result of an

insolvency determination under

§ 4041A.25(a) or (b).

(4) A certification, signed by the plan

sponsor or a duly authorized

representative, that the annual update

has been given to all plan participants

and beneficiaries in accordance with

this part.

(d) Annual updates to participants

and beneficiaries. Each annual update

required by § 4281.43(b) to be issued to

plan participants and beneficiaries shall

contain the following information:

(1) The name of the plan.

(2) The date the notice of insolvency

was issued and the insolvency year

identified in the notice.

(3) The plan year to which the annual

update pertains and the plan sponsor’s

determination whether the plan may be

insolvent in that year.

(4) If the plan may be insolvent for the

plan year, a statement that benefits

above the amount that can be paid from

available resources or the level

guaranteed by the PBGC, whichever is

greater, will be suspended during the

insolvency year, with a brief
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34123

explanation of which benefits are

guaranteed by the PBGC.

(5) If the plan will not be insolvent for

the plan year, a statement that full

nonforfeitable benefits under the plan

will be paid.

(6) The name, address, and telephone

number of the plan administrator or

other person designated by the plan

sponsor to answer inquiries concerning

benefits.

§ 4281.45 Notices of insolvency benefit

level.

(a) Requirement of notices. For each

insolvency year, the plan sponsor shall

issue a notice of insolvency benefit level

to the PBGC and to plan participants

and beneficiaries in pay status or

reasonably expected to enter pay status

during the insolvency year. The notices

shall be delivered in the manner and

within the time prescribed in this

section and shall contain the

information described in § 4281.46.

(b) When delivered. The plan sponsor

shall mail or otherwise deliver the

notices of insolvency benefit level no

later than 60 days before the beginning

of the insolvency year. A plan sponsor

that determines under § 4041A.25(b)

that the plan is or may be insolvent for

a plan year shall mail or otherwise

deliver the notices of insolvency benefit

level by the later of 60 days before the

beginning of the insolvency year or 60

days after the date of the plan sponsor’s

determination under § 4041A.25(b).

(c) Method of delivery. The notices of

insolvency benefit level shall be

delivered by mail or by hand to the

PBGC and to plan participants and

beneficiaries in pay status or reasonably

expected to enter pay status during the

insolvency year.

§ 4281.46 Contents of notices of

insolvency benefit level.

(a) Notice to the PBGC. A notice of

insolvency benefit level required by

§ 4281.45(a) to be filed with the PBGC

shall contain the information specified

in § 4281.44(a)(1) through (a)(5) and

(a)(7) through (a)(11) and:

(1) The insolvency year for which the

notice is being filed.

(2) The amount of financial

assistance, if any, requested from the

PBGC. (When financial assistance is

requested, the plan sponsor shall submit

an application in accordance with

§ 4281.47.)

(3) A statement indicating whether

the notice of insolvency benefit level is

the result of an insolvency

determination under § 4041A.25(a) or

(b).

(4) A certification, signed by the plan

sponsor or its duly authorized

representative, that a notice of

insolvency benefit level has been sent to

all plan participants and beneficiaries in

pay status or reasonably expected to

enter pay status during the insolvency

year, in accordance with this part.

(b) Notice to participants in or

entering pay status. A notice of

insolvency benefit level required by

§ 4281.45(a) to be delivered to plan

participants and beneficiaries in pay

status or reasonably expected to enter

pay status during the insolvency year

for which the notice is given, shall

contain the following information:

(1) The name of the plan.

(2) The insolvency year for which the

notice is being sent.

(3) The monthly benefit that the

participant or beneficiary may expect to

receive during the insolvency year.

(4) A statement that in subsequent

plan years, depending on the plan’s

available resources, this benefit level

may be increased or decreased but not

below the level guaranteed by the PBGC,

and that the participant or beneficiary

will be notified in advance of the new

benefit level if it is less than the

participant’s full nonforfeitable benefit

under the plan.

(5) The amount of the participant’s or

beneficiary’s monthly nonforfeitable

benefit under the plan.

(6) The amount of the participant’s or

beneficiary’s monthly benefit that is

guaranteed by the PBGC.

(7) The name, address, and telephone

number of the plan administrator or

other person designated by the plan

sponsor to answer inquiries concerning

benefits.

§ 4281.47 Application for financial

assistance.

(a) General. If the plan sponsor

determines that the plan’s resource

benefit level for an insolvency year is

below the level of benefits guaranteed

by PBGC or that the plan will be unable

to pay guaranteed benefits when due for

any month during the year, the plan

sponsor shall apply to the PBGC for

financial assistance pursuant to section

4261 of ERISA. The application shall be

filed within the time prescribed in

paragraph (b) of this section. When the

resource benefit level is below the

guarantee level, the application shall

contain the information set forth in

paragraph (c) of this section. When the

plan is unable to pay guaranteed

benefits for any month, the application

shall contain the information set forth in

paragraph (d) of this section.

(b) When to apply. When the plan

sponsor determines a resource benefit

level that is less than guaranteed

benefits, it shall apply for financial

assistance at the same time that it

submits its notice of insolvency benefit

level pursuant to § 4281.45. When the

plan sponsor determines an inability to

pay guaranteed benefits for any month,

it shall apply for financial assistance

within 15 days after making that

determination.

(c) Contents of application—resource

benefit level below level of guaranteed

benefits. A plan sponsor applying for

financial assistance because the plan’s

resource benefit level is below the level

of guaranteed benefits shall file an

application that includes the

information specified in § 4281.44 (a)(1)

through (a)(5) and:

(1) The insolvency year for which the

application is being filed.

(2) A participant data schedule

showing each participant and

beneficiary in pay status or reasonably

expected to enter pay status during the

year for which financial assistance is

requested, listing for each—

(i) Name;

(ii) Sex;

(iii) Date of birth;

(iv) Credited service;

(v) Vested accrued monthly benefit;

(vi) Monthly benefit guaranteed by

PBGC;

(vii) Benefit commencement date; and

(viii) Type of benefit.

(d) Contents of application—unable to

pay guaranteed benefits for any month.

A plan sponsor applying for financial

assistance because the plan is unable to

pay guaranteed benefits for any month

shall file an application that includes

the data described in § 4281.44 (a)(1)

through (a)(5), the month for which

financial assistance is requested, and

the plan’s available resources and

guaranteed benefits payable in that

month. The participant data schedule

described in paragraph (c)(2) of this

section shall be submitted upon the

request of the PBGC.

(e) Additional information. The PBGC

may request any additional information

that it needs to calculate or verify the

amount of financial assistance necessary

as part of the conditions of granting

financial assistance pursuant to section

4261 of ERISA.

PART 4901—EXAMINATION AND

COPYING OF PENSION BENEFIT

GUARANTY CORPORATION

RECORDS

Subpart A—General

Sec.

4901.1 Purpose and scope.

4901.2 Definitions.

4901.3 Disclosure facilities.

4901.4 Information maintained in public

reference room.

4901.5 Disclosure of other information.
34124 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Subpart B—Procedure for Formal Requests

4901.11 Submittal of requests for access to

records.

4901.12 Description of information

requested.

4901.13 Receipt by agency of request.

4901.14 Action on request.

4901.15 Appeals from denial of requests.

4901.16 Extensions of time.

4901.17 Exhaustion of administrative

remedies.

Subpart C—Restrictions on Disclosure

4901.21 Restrictions in general.

4901.22 Partial disclosure.

4901.23 Records of concern to more than

one agency.

4901.24 Special rules for trade secrets and

confidential commercial or financial

information submitted to the PBGC.

Subpart D—Fees

4901.31 Charges for services.

4901.32 Fee schedule.

4901.33 Payment of fees.

4901.34 Waiver or reduction of charges.

Authority: 5 U.S.C. 552; 29 U.S.C.

1302(b)(3); E.O. 12600, 52 FR 23781.

Subpart A—General

§ 4901.1 Purpose and scope.

This part contains the general rules of

the PBGC implementing the Freedom of

Information Act. This part sets forth

generally the categories of records

accessible to the public, the types of

records subject to prohibitions or

restrictions on disclosure, and the

procedure whereby members of the

public may obtain access to and inspect

and copy information from records in

the custody of the PBGC.

§ 4901.2 Definitions.

In addition to terminology in part

4001 of this chapter, as used in this

part—

Agency, person, party, rule,

rulemaking, order, and adjudication

have the meanings attributed to these

terms by the definitions in 5 U.S.C. 551,

except where the context demonstrates

that a different meaning is intended,

and except that for purposes of the

Freedom of Information Act the term

agency as defined in 5 U.S.C. 551

includes any executive department,

military department, Government

corporation, Government controlled

corporation, or other establishment in

the executive branch of the Government

(including the Executive Office of the

President) or any independent

regulatory agency.

Disclosure officer means the

designated official in the

Communications and Public Affairs

Department, PBGC.

FOIA means the Freedom of

Information Act, as amended (5 U.S.C.

552).

Working day means any weekday

excepting Federal holidays.

§ 4901.3 Disclosure facilities.

(a) Public reference room. The PBGC

will maintain a public reference room in

its offices located at 1200 K Street NW.,

Washington, DC 20005–4026, wherein

persons may inspect and copy all

records made available for such

purposes under this part.

(b) No withdrawal of records. No

person may remove any record made

available for inspection or copying

under this part from the place where it

is made available except with the

written consent of the General Counsel

of the PBGC.

§ 4901.4 Information maintained in public

reference room.

The PBGC shall make available in its

public reference room for inspection

and copying without formal request—

(a) Information published in the

Federal Register. Copies of Federal

Register documents published by the

PBGC, and copies of Federal Register

indexes;

(b) Information in PBGC publications.

Copies of informational material, such

as press releases, pamphlets, and other

material ordinarily made available to

the public without cost as part of a

public information program;

(c) Rulemaking proceedings. All

papers and documents made a part of

the official record in administrative

proceedings conducted by the PBGC in

connection with the issuance,

amendment, or revocation of rules and

regulations or determinations having

general applicability or legal effect with

respect to members of the public or a

class thereof (with a register being kept

to identify the persons who inspect the

records and the times at which they do

so);

(d) Except to the extent that deletion

of identifying details is required to

prevent a clearly unwarranted invasion

of personal privacy (in which case the

justification for the deletion shall be

fully explained in writing)—

(1) Adjudication proceedings. Final

opinions, orders, and (except to the

extent that an exemption provided by

FOIA must be asserted in the public

interest to prevent a clearly

unwarranted invasion of personal

privacy or violation of law or to ensure

the proper discharge of the functions of

the PBGC) other papers and documents

made a part of the official record in

adjudication proceedings conducted by

the PBGC,

(2) Policy statements and

interpretations. Statements of policy

and interpretations affecting a member

of the public which have been adopted

by the PBGC and which have not been

published in the Federal Register, and

(3) Staff manuals and instructions.

Administrative staff manuals and

instructions to staff issued by the PBGC

that affect any member of the public,

and

(e) Indexes to certain records. Current

indexes (updated at least quarterly)

identifying materials described in

paragraph (a)(2) of FOIA and paragraph

(d) of this section.

§ 4901.5 Disclosure of other information.

(a) In general. Upon the request of any

person submitted in accordance with

subpart B of this part, the disclosure

officer shall make any document (or

portion thereof) from the records of the

PBGC in the custody of any official of

the PBGC available for inspection and

copying unless exempt from disclosure

under the provisions of subsection (b) of

FOIA and subpart C of this part. The

subpart B procedures must be used for

records that are not made available in

the PBGC’s public reference room under

§ 4901.4 and may be used for records

that are available in the public reference

room. Records that could be produced

only by manipulation of existing

information (such as computer analyses

of existing data), thus creating

information not previously in being, are

not records of the PBGC and are not

required to be furnished under FOIA.

(b) Discretionary disclosure.

Notwithstanding the applicability of an

exemption under subsection (b) of FOIA

and subpart C of this part (other than an

exemption under paragraph (b)(1) or

(b)(3) of FOIA and § 4901.21 (a)(2) and

(a)(3)), the disclosure officer may

(subject to 18 U.S.C. 1905 and

§ 4901.21(a)(1)) make any document (or

portion thereof) from the records of the

PBGC available for inspection and

copying if the disclosure officer

determines that disclosure furthers the

public interest and does not impede the

discharge of any of the functions of the

PBGC.

Subpart B—Procedure for Formal

Requests

§ 4901.11 Submittal of requests for access

to records.

A request to inspect or copy any

record subject to this subpart shall be

submitted in writing to the Disclosure

Officer, Communications and Public

Affairs Department, Pension Benefit

Guaranty Corporation, 1200 K Street

NW., Washington, DC 20005–4026. To

expedite processing, the words ‘‘FOIA

request’’ should appear clearly on the

request and its envelope.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34125

§ 4901.12 Description of information

requested.

(a) In general. Each request should

reasonably describe the record or

records sought in sufficient detail to

permit identification and location with

a reasonable amount of effort. So far as

practicable, the request should specify

the subject matter of the record, the

place where and date or approximate

date when made, the person or office

that made it, and any other pertinent

identifying details.

(b) Deficient descriptions. If the

description is insufficient to enable a

professional employee familiar with the

subject area of the request to locate the

record with a reasonable amount of

effort, the disclosure officer will notify

the requester and, to the extent possible,

indicate the additional information

required. Every reasonable effort shall

be made to assist a requester in the

identification and location of the record

or records sought. Records will not be

withheld merely because it is difficult to

find them.

(c) Requests for categories of records.

Requests calling for all records falling

within a reasonably specific category

will be regarded as reasonably described

within the meaning of this section and

paragraph (a)(3) of FOIA if the PBGC is

reasonably able to determine which

records come within the request and to

search for and collect them without

unduly interfering with PBGC

operations. If PBGC operations would be

unduly disrupted, the disclosure officer

shall promptly notify the requester and

provide an opportunity to confer in an

attempt to reduce the request to

manageable proportions.

§ 4901.13 Receipt by agency of request.

The disclosure officer shall note the

date and time of receipt on each request

for access to records. A request shall be

deemed received and the period within

which action on the request shall be

taken, as set forth in § 4901.14 of this

part, shall begin on the next business

day following such date, except that a

request shall be deemed received only if

and when the PBGC receives—

(a) A sufficient description under

§ 4901.12;

(b) Payment or assurance of payment

if required under § 4901.33(b); and

(c) The requester’s consent to pay

substantial search, review, and/or

duplication charges under subpart D of

this part if the PBGC determines that

such charges may be substantial and so

notifies the requester. Consent may be

in the form of a statement that costs

under subpart D will be acceptable

either in any amount or up to a

specified amount. To avoid possible

delay, a requester may include such a

statement in a request.

§ 4901.14 Action on request.

(a) Time for action. Promptly and in

any event within 10 working days after

receipt of a disclosure request (subject

to extension under § 4901.16), the

disclosure officer shall take action with

respect to each requested item (or

portion of an item) under either

paragraph (b), (c), or (d) of this section.

(b) Request granted. If the disclosure

officer determines that the request

should be granted, the requester shall be

so advised and the records shall be

promptly made available to the

requester.

(c) Request denied. If the disclosure

officer determines that the request

should be denied, the requester shall be

so advised in writing with a brief

statement of the reasons for the denial,

including a reference to the specific

exemption(s) authorizing the denial and

an explanation of how each such

exemption applies to the matter

withheld. The denial shall also include

the name and title or position of the

person(s) responsible for the denial and

outline the appeal procedure available.

(d) Records not promptly located. As

to records that are not located in time

to make an informed determination, the

disclosure officer may deny the request

and so advise the requester in writing

with an explanation of the

circumstances. The denial shall also

include the name and title or position

of the person(s) responsible for the

denial, outline the appeal procedure

available, and advise the requester that

the search or examination will be

continued and that the denial may be

withdrawn, modified, or confirmed

when processing of the request is

completed.

§ 4901.15 Appeals from denial of requests.

(a) Submittal of appeals. If a

disclosure request is denied in whole or

in part by the disclosure officer, the

requester may file a written appeal

within 30 days from the date of the

denial or, if later (in the case of a partial

denial), 30 days from the date the

requester receives the disclosed

material. The appeal shall state the

grounds for appeal and any supporting

statements or arguments, and shall be

addressed to the General Counsel,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026. To expedite processing,

the words ‘‘FOIA appeal’’ should appear

clearly on the appeal and its envelope.

(b) Receipt and consideration of

appeal. The General Counsel shall note

the date and time of receipt on each

appeal and notify the requester thereof.

Promptly and in any event within 20

working days after receipt of an appeal

(subject to extension under § 4901.16),

the General Counsel shall issue a

decision on the appeal.

(1) The General Counsel may

determine de novo whether the denial

of disclosure was in accordance with

FOIA and this part.

(2) If the denial appealed from was

under § 4901.14(d), the General Counsel

shall consider any supplementary

determination by the disclosure officer

in deciding the appeal.

(3) Unless otherwise ordered by the

court, the General Counsel may act on

an appeal notwithstanding the

pendency of an action for judicial relief

in the same matter and, if no appeal has

been filed, may treat such an action as

the filing of an appeal.

(c) Decision on appeal. As to each

item (or portion of an item) whose

nondisclosure is appealed, the General

Counsel shall either—

(1) Grant the appeal and so advise the

requester in writing, in which case the

records with respect to which the

appeal is granted shall be promptly

made available to the requester; or

(2) Deny the appeal and so advise the

requester in writing with a brief

statement of the reasons for the denial,

including a reference to the specific

exemption(s) authorizing the denial, an

explanation of how each such

exemption applies to the matter

withheld, and notice of the provisions

for judicial review in paragraph (a)(4) of

FOIA. The General Counsel’s decision

shall be the final action of the PBGC

with respect to the request.

(d) Records of appeals. Copies of both

grants and denials of appeals shall be

collected in one file available in the

PBGC’s public reference room under

§ 4901.4(d)(1) and indexed under

§ 4901.4(e).

§ 4901.16 Extensions of time.

In unusual circumstances (as

described in subparagraph (a)(6)(B) of

FOIA), the time to respond to a

disclosure request under § 4901.14(a) or

an appeal under § 4901.15(b) may be

extended as reasonably necessary to

process the request or appeal. The

disclosure officer (with the prior

approval of the General Counsel) or the

General Counsel, as appropriate, shall

notify the requester in writing within

the original time period of the reasons

for the extension and the date when a

response is expected to be sent. The

maximum extension for responding to a

disclosure request shall be 10 working

days, and the maximum extension for

responding to an appeal shall be 10
34126 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

working days minus the amount of any

extension on the request to which the

appeal relates.

§ 4901.17 Exhaustion of administrative

remedies.

If the disclosure officer fails to make

a determination to grant or deny access

to requested records, or the General

Counsel does not make a decision on

appeal from a denial of access to PBGC

records, within the time prescribed

(including any extension) for making

such determination or decision, the

requester’s administrative remedies

shall be deemed exhausted and the

requester may apply for judicial relief

under FOIA. However, since a court

may allow the PBGC additional time to

act as provided in FOIA, processing of

the request or appeal shall continue and

the requester shall be so advised.

Subpart C—Restrictions on Disclosure

§ 4901.21 Restrictions in general.

(a) Records not disclosable. Records

shall not be disclosed to the extent

prohibited by—

(1) 18 U.S.C. 1905, dealing in general

with commercial and financial

information;

(2) Paragraph (b)(1) of FOIA, dealing

in general with matters of national

defense and foreign policy; or

(3) Paragraph (b)(3) of FOIA, dealing

in general with matters specifically

exempted from disclosure by statute,

including information or documentary

material submitted to the PBGC

pursuant to sections 4010 and 4043 of

ERISA.

(b) Records disclosure of which may

be refused. Records need not (but may,

as provided in § 4901.5(b)) be disclosed

to the extent provided by—

(1) Paragraph (b)(2) of FOIA, dealing

in general with internal agency

personnel rules and practices;

(2) Paragraph (b)(4) of FOIA, dealing

in general with trade secrets and

commercial and financial information;

(3) Paragraph (b)(5) of FOIA, dealing

in general with inter-agency and intraagency memoranda and letters;

(4) Paragraph (b)(6) of FOIA, dealing

in general with personnel, medical, and

similar files;

(5) Paragraph (b)(7) of FOIA, dealing

in general with records or information

compiled for law enforcement purposes;

(6) Paragraph (b)(8) of FOIA, dealing

in general with reports on financial

institutions; or

(7) Paragraph (b)(9) of FOIA, dealing

in general with information about wells.

§ 4901.22 Partial disclosure.

If an otherwise disclosable record

contains some material that is protected

from disclosure, the record shall not for

that reason be withheld from disclosure

if deletion of the protected material is

feasible. This principle shall be applied

in particular to identifying details the

disclosure of which would constitute an

unwarranted invasion of personal

privacy.

§ 4901.23 Record of concern to more than

one agency.

If the release of a record in the

custody of the PBGC would be of

concern not only to the PBGC but also

to another Federal agency, the record

will be made available by the PBGC

only if its interest in the record is the

primary interest and only after

coordination with the other interested

agency. If the interest of the PBGC in the

record is not primary, the request will

be transferred promptly to the agency

having the primary interest, and the

requester will be so notified.

§ 4901.24 Special rules for trade secrets

and confidential commercial or financial

information submitted to the PBGC.

(a) Application. To the extent

permitted by law, this section applies to

a request for disclosure of a record that

contains information that has been

designated by the submitter in good

faith in accordance with paragraph (b)

of this section or a record that the PBGC

has reason to believe contains such

information, unless—

(1) Access to the information is

denied;

(2) The information has been

published or officially made available to

the public;

(3) Disclosure of the information is

required by law other than FOIA; or

(4) The designation under paragraph

(b) of this section appears obviously

frivolous, except that in such a case the

PBGC will notify the submitter in

writing of a determination to disclose

the information within a reasonable

time before the disclosure date (which

shall be specified in the notice).

(b) Designation by submitter. To

designate information as being subject

to this section, the submitter shall, at

the time of submission or by a

reasonable time thereafter, assert that

information being submitted is

confidential business information and

designate, with appropriate markings,

the portion(s) of the submission to

which the assertion applies. Any

designation under this paragraph shall

expire 10 years after the date of

submission unless a longer designation

period is requested and reasonable

justification is provided therefor.

(c) Notification to submitter of

disclosure request. When disclosure of

information subject to this section may

be made, the disclosure officer or

(where disclosure may be made in

response to an appeal) the General

Counsel shall promptly notify the

submitter, describing (or providing a

copy of) the information that may be

disclosed, and afford the submitter a

reasonable period of time to object in

writing to the requested disclosure. (The

notification to the submitter may be oral

or written; if oral, it will be confirmed

in writing.) When a submitter is notified

under this paragraph, the requester shall

be notified that the submitter is being

afforded an opportunity to object to

disclosure.

(d) Objection of submitter. A

submitter’s statement objecting to

disclosure should specify all grounds

relied upon for opposing disclosure of

any portion(s) of the information under

subsection (b) of FOIA and, with respect

to the exemption in paragraph (b)(4) of

FOIA, demonstrate why the information

is a trade secret or is commercial or

financial information that is privileged

or confidential. Facts asserted should be

certified or otherwise supported.

(Information provided pursuant to this

paragraph may itself be subject to

disclosure under FOIA.) Any timely

objection of a submitter under this

paragraph shall be carefully considered

in determining whether to grant a

disclosure request or appeal.

(e) Notification to submitter of

decision to disclose. If the disclosure

officer or (where disclosure is in

response to an appeal) the General

Counsel decides to disclose information

subject to this section despite the

submitter’s objections, the disclosure

officer (or General Counsel) shall give

the submitter written notice, explaining

briefly why the information is to be

disclosed despite those objections,

describing the information to be

disclosed, and specifying the date when

the information will be disclosed to the

requester. The notification shall, to the

extent permitted by law, be provided a

reasonable number of days before the

disclosure date so specified, and a copy

shall be provided to the requester.

(f) Notification to submitter of action

to compel disclosure. The disclosure

officer or the General Counsel shall

promptly notify the submitter if a

requester brings suit seeking to compel

disclosure.

Subpart D—Fees

§ 4901.31 Charges for services.

(a) Generally. Pursuant to the

provisions of FOIA, as amended,

charges will be assessed to cover the

direct costs of searching for, reviewing,
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34127

and/or duplicating records requested

under FOIA from the PBGC, except

where the charges are limited or waived

under paragraph (b) or (d) of this

section, according to the fee schedule in

§ 4901.32 of this part. No charge will be

assessed if the costs of routine

collection and processing of the fee

would be equal to or greater than the fee

itself.

(1) ‘‘Direct costs’’ means those

expenditures which the PBGC actually

incurs in searching for and duplicating

(and in the case of commercial

requesters, reviewing) documents to

respond to a request under FOIA and

this part. Direct costs include, for

example, the salary of the employee

performing work (i.e., the basic rate of

pay plus benefits) or an established

average pay for a homogeneous class of

personnel (e.g., all administrative/

clerical or all professional/executive),

and the cost of operating duplicating

machinery. Not included in direct costs

are overhead expenses such as costs of

space, and heating or lighting the

facility in which the records are stored.

(2) ‘‘Search’’ means all time spent

looking for material that is responsive to

a request under FOIA and this part,

including page-by-page or line-by-line

identification of materials within a

document, if required, and may be done

manually or by computer using existing

programming. ‘‘Search’’ should be

distinguished from ‘‘review’’ which is

defined in paragraph (a)(3) of this

section.

(3) ‘‘Review’’ means the process of

examining documents located in

response to a request under FOIA and

this part to determine whether any

portion of any document located is

permitted or required to be withheld. It

also includes processing any documents

for disclosure, e.g., doing all that is

necessary to excise them and otherwise

prepare them for release. Review does

not include time spent resolving general

legal or policy issues regarding the

application of exemptions.

(4) ‘‘Duplication’’ means the process

of making a copy of a document

necessary to respond to a request under

FOIA and this part, in a form that is

reasonably usable by the requester.

Copies can take the form of paper copy,

microform, audio-visual materials, or

machine readable documentation (e.g.,

magnetic tape or disk), among others.

(b) Categories of requesters.

Requesters who seek access to records

under FOIA and this part are divided

into four categories: commercial use

requesters, educational and

noncommercial scientific institutions,

representatives of the news media, and

all other requesters. The PBGC will

determine the category of a requester

and charge fees according to the

following rules.

(1) Commercial use requesters. When

records are requested for commercial

use, the PBGC will assess charges, as

provided in this subpart, for the full

direct costs of searching for, reviewing

for release, and duplicating the records

sought. Fees for search and review may

be charged even if the record searched

for is not found or if, after it is found,

it is determined that the request to

inspect it may be denied under the

provisions of subsection (b) of FOIA and

this part.

(i) ‘‘Commercial use’’ request means a

request from or on behalf of one who

seeks information for a use or purpose

that furthers the commercial, trade, or

profit interests of the requester or the

person on whose behalf the request is

made.

(ii) In determining whether a request

properly belongs in this category, the

PBGC will look to the use to which a

requester will put the documents

requested. Moreover, where the PBGC

has reasonable cause to doubt the use to

which a requester will put the records

sought, or where that use is not clear

from the request itself, the PBGC will

require the requester to provide

clarification before assigning the request

to this category.

(2) Educational and noncommercial

scientific institution requesters. When

records are requested by an educational

or noncommercial scientific institution,

the PBGC will assess charges, as

provided in this subpart, for the full

direct cost of duplication only,

excluding charges for the first 100

pages.

(i) ‘‘Educational institution’’ means a

preschool, a public or private

elementary or secondary school, an

institution of graduate higher education,

an institution of undergraduate higher

education, an institution of professional

education, and an institution of

vocational education, which operates a

program or programs of scholarly

research.

(ii) ‘‘Noncommercial scientific

institution’’ means an institution that is

not operated on a ‘‘commercial’’ basis as

that term is defined in paragraph

(b)(1)(i) of this section, and which is

operated solely for the purpose of

conducting scientific research the

results of which are not intended to

promote any particular product or

industry.

(iii) To be eligible for inclusion in this

category, requesters must show that the

request is being made as authorized by

and under the auspices of a qualifying

institution and that the records are not

sought for a commercial use, but are

sought in furtherance of scholarly (if the

request is from an educational

institution) or scientific (if the request is

from a noncommercial scientific

institution) research.

(3) Requesters who are representatives

of the news media. When records are

requested by representatives of the news

media, the PBGC will assess charges, as

provided in this subpart, for the full

direct cost of duplication only,

excluding charges for the first 100

pages.

(i) ‘‘Representative of the news

media’’ means any person actively

gathering news for an entity that is

organized and operated to publish or

broadcast news to the public. The term

‘‘news’’ means information that is about

current events or that would be of

current interest to the public. Examples

of news media entities include

television or radio stations broadcasting

to the public at large, and publishers of

periodicals (but only in those instances

when they can qualify as disseminators

of ‘‘news’’) who make their products

available for purchase or subscription

by the general public. These examples

are not intended to be all-inclusive.

‘‘Freelance’’ journalists may be regarded

as working for a news organization if

they can demonstrate a solid basis for

expecting publication through that

organization, even though not actually

employed by it.

(ii) To be eligible for inclusion in this

category, the request must not be made

for a commercial use. A request for

records supporting the news

dissemination function of the requester

who is a representative of the news

media shall not be considered to be a

request that is for a commercial use.

(4) All other requesters. When records

are requested by requesters who do not

fit into any of the categories in

paragraphs (b)(1) through (b)(3) of this

section, the PBGC will assess charges, as

provided in this subpart, for the full

direct cost of searching for and

duplicating the records sought, with the

exceptions that there will be no charge

for the first 100 pages of duplication and

the first two hours of manual search

time (or its cost equivalent in computer

search time). Notwithstanding the

preceding sentence, there will be no

charge for search time in the event of

requests under the Privacy Act of 1974

from subjects of records filed in the

PBGC’s systems of records for the

disclosure of records about themselves.

Search fees, where applicable, may be

charged even if the record searched for

is not found.

(c) Aggregation of requests. If the

PBGC reasonably believes that a
34128 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

requester or group of requesters is

attempting to break a request down into

a series of requests for the purpose of

evading the assessment of fees, the

PBGC will aggregate any such requests

and charge accordingly. In no case will

the PBGC aggregate multiple requests on

unrelated subjects from one requester.

(d) Waiver or reduction of charges.

Circumstances under which searching,

review, and duplication facilities or

services may be made available to the

requester without charge or at a reduced

charge are set forth in § 4901.34 of this

part.

§ 4901.32 Fee schedule.

(a) Charges for searching and review

of records. Charges applicable under

this subpart to the search for and review

of records will be made according to the

following fee schedule:

(1) Search and review time. (i)

Ordinary search and review by custodial

or clerical personnel, $1.75 for each

one-quarter hour or fraction thereof of

employee worktime required to locate or

obtain the records to be searched and to

make the necessary review; and (ii)

search or review requiring services of

professional or supervisory personnel to

locate or review requested records,

$4.00 for each one-quarter hour or

fraction thereof of professional or

supervisory personnel worktime.

(2) Additional search costs. If the

search for a requested record requires

transportation of the searcher to the

location of the records or transportation

of the records to the searcher, at a cost

in excess of $5.00, actual transportation

costs will be added to the search time

cost.

(3) Search in computerized records.

Charges for information that is available

in whole or in part in computerized

form will include the cost of operating

the central processing unit (CPU) for

that portion of operating time that is

directly attributable to searching for

records responsive to the request,

personnel salaries apportionable to the

search, and tape or printout production

or an established agency-wide average

rate for CPU operating costs and

operator/programmer salaries involved

in FOIA searches. Charges will be

computed at the rates prescribed in

paragraphs (a) and (b) of this section.

(b) Charges for duplication of records.

Charges applicable under this subpart

for obtaining requested copies of records

made available for inspection will be

made according to the following fee

schedule and subject to the following

conditions.

(1) Standard copying fee. $0.15 for

each page of record copies furnished.

This standard fee is also applicable to

the furnishing of copies of available

computer printouts as stated in

paragraph (a)(3) of this section.

(2) Voluminous material. If the

volume of page copy desired by the

requester is such that the reproduction

charge at the standard page rate would

be in excess of $50, the person desiring

reproduction may request a special rate

quotation from the PBGC.

(3) Limit of service. Not more than 10

copies of any document will be

furnished.

(4) Manual copying by requester. No

charge will be made for manual copying

by the requesting party of any document

made available for inspection under the

provisions of this part. The PBGC shall

provide facilities for such copying

without charge at reasonable times

during normal working hours.

(5) Indexes. Pursuant to paragraph

(a)(2) of FOIA copies of indexes or

supplements thereto which are

maintained as therein provided but

which have not been published will be

provided on request at a cost not to

exceed the direct cost of duplication.

(c) Other charges. The scheduled fees,

set forth in paragraphs (a) and (b) of this

section, for furnishing records made

available for inspection and duplication

represent the direct costs of furnishing

the copies at the place of duplication.

Upon request, single copies of the

records will be mailed, postage prepaid,

free of charge. Actual costs of

transmitting records by special methods

such as registered, certified, or special

delivery mail or messenger, and of

special handling or packaging, if

required, will be charged in addition to

the scheduled fees.

§ 4901.33 Payment of fees.

(a) Medium of payment. Payment of

the applicable fees as provided in this

subsection shall be made in cash, by

U.S. postal money order, or by check

payable to the PBGC. Postage stamps

will not be accepted in lieu of cash,

checks, or money orders as payment for

fees specified in the schedule. Cash

should not be sent by mail.

(b) Advance payment or assurance of

payment. Payment or assurance of

payment before work is begun or

continued on a request may be required

under the following rules.

(1) Where the PBGC estimates or

determines that charges allowable under

the rules in this subpart are likely to

exceed $250, the PBGC may require

advance payment of the entire fee or

assurance of payment, as follows:

(i) Where the requester has a history

of prompt payment of fees under this

part, the PBGC will notify the requester

of the likely cost and obtain satisfactory

assurance of full payment; or

(ii) Where the requester has no history

of payment for requests made pursuant

to FOIA and this part, the PBGC may

require the requester to make an

advance payment of an amount up to

the full estimated charges.

(2) Where the requester has

previously failed to pay a fee charged in

a timely fashion (i.e., within 30 days of

the date of the billing), the PBGC may

require the requester to pay the full

amount owed plus any applicable

interest as provided in paragraph (c) of

this section (or demonstrate that he has,

in fact, paid the fee) and to make an

advance payment of the full amount of

the estimated fee.

(c) Late payment interest charges. The

PBGC may assess late payment interest

charges on any amounts unpaid by the

31st day after the date a bill is mailed

to a requester. Interest will be assessed

at the rate prescribed in 31 U.S.C. 3717

and will accrue from the date the bill is

mailed.

§ 4901.34 Waiver or reduction of charges.

(a) The disclosure officer may waive

or reduce fees otherwise applicable

under this subpart when disclosure of

the information is in the public interest

because it is likely to contribute

significantly to public understanding of

the operations or activities of the

government and is not primarily in the

commercial interest of the requester. A

fee waiver request shall set forth full

and complete information upon which

the request for waiver is based.

(b) The disclosure officer may reduce

or waive fees applicable under this

subpart when the requester has

demonstrated his inability to pay such

fees.

PART 4902—DISCLOSURE AND

AMENDMENT OF RECORDS

PERTAINING TO INDIVIDUALS UNDER

THE PRIVACY ACT

Sec.

4902.1 Purpose and scope.

4902.2 Definitions.

4902.3 Procedures for determining

existence of and requesting access to

records.

4902.4 Disclosure of record to an

individual.

4902.5 Procedures for requesting

amendment of a record.

4902.6 Action on request for amendment of

a record.

4902.7 Appeal of a denial of a request for

amendment of a record.

4902.8 Fees.

4902.9 Specific exemptions.

Authority: 5 U.S.C. 552a.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34129

§ 4902.1 Purpose and scope.

This part establishes procedures

whereby an individual can determine

whether the PBGC maintains any system

of records that contains a record

pertaining to the individual, procedures

to effect access to an individual’s record

upon his or her request, and procedures

for making requests to amend records,

for making the initial determinations on

such requests, and for appealing denials

of such requests. This part also

prescribes the fees for making copies of

an individual’s record. Finally, this part

sets forth those systems of records that

are exempted from certain disclosure

and other provisions of the Privacy Act

(5 U.S.C. 552a).

§ 4902.2 Definitions.

In addition to terminology in part

4001 of this chapter, as used in this part:

Disclosure officer means the

designated official in the

Communications and Public Affairs

Department, PBGC.

Record means any item, collection, or

grouping of information about an

individual that is maintained by an

agency, including, but not limited to,

his or her education, financial

transactions, medical history, and

criminal or employment history and

that contains his or her name, or the

identifying number, symbol, or other

identifying particular assigned to the

individual, such as a finger or voice

print or a photograph.

System of records means a group of

any records under the control of any

agency from which information is

retrieved by the name of the individual

or by some identifying number, symbol,

or other identifying particular assigned

to the individual.

Working day means any weekday

excepting Federal holidays.

§ 4902.3 Procedures for determining

existence of and requesting access to

records.

(a) Any individual may submit a

written request, either by mail to the

Disclosure Officer, Communications and

Public Affairs Department, Pension

Benefit Guaranty Corporation, 1200 K

Street NW., Washington, DC 20005–

4026, or in person between the hours of

9 a.m. and 4 p.m. on any working day

in Suite 240 at the above address, for the

purpose of—

(1) Learning whether a system of

records maintained by the PBGC

contains any record pertaining to the

requester, or

(2) Obtaining access to such a record.

(b) Each request submitted pursuant

to paragraph (a) of this section shall

include the name of the system of

records to which the request pertains

and the requester’s full name, home

address and date of birth, and shall

clearly state on the envelope and on the

request ‘‘Privacy Act Request.’’ If this

information is insufficient to enable the

PBGC to identify the record in question,

the disclosure officer shall request such

further identifying data as the disclosure

officer deems necessary to locate the

record.

(c) Unless the request is only for

notification of the existence of a record

and such notification is required under

the Freedom of Information Act (5

U.S.C. 552), the requester shall be

required to provide verification of his or

her identity to the PBGC as set forth in

paragraph (c) (1) or (2) of this section,

as appropriate.

(1) If the request is made by mail, the

requester shall submit a notarized

statement establishing his or her

identity.

(2) If the request is made in person,

the requester shall show identification

satisfactory to the disclosure officer,

such as a driver’s license, employee

identification, annuitant identification

or Medicare card.

(d) The disclosure officer shall

respond to the request in writing within

10 working days after receipt of the

request or of such additional

information as may be required under

paragraph (b) of this section. If a request

for access to a record is granted, the

response shall state when the record

will be made available.

§ 4902.4 Disclosure of record to an

individual.

(a) When the disclosure officer grants

a request for access to records under

§ 4902.3, such records shall be made

available when the requester is advised

of the determination or as promptly

thereafter as possible. At the requester’s

option, the record will be made

available for the requester’s inspection

and copying at the Communications and

Public Affairs Department, Pension

Benefit Guaranty Corporation, 1200 K

Street NW., Washington, DC 20005–

4026, between the hours of 9 a.m. and

4 p.m. on any working day, or a copy

of the record will be mailed to the

requester.

(b) If the requester desires to be

accompanied by another individual

during the inspection and/or copying of

the record, the requester shall, either

when the record is made available or at

any earlier time, submit to the

disclosure officer a signed statement

identifying such other individual and

authorizing such other individual to be

present during the inspection and/or

copying of the record.

§ 4902.5 Procedures for requesting

amendment of a record.

(a) Any individual about whom the

PBGC maintains a record contained in a

system of records may request that the

record be amended. Such a request shall

be submitted in the same manner

described in § 4902.3(a).

(b) Each request submitted under

paragraph (a) of this section shall

include the information described in

§ 4902.3(b) and a statement specifying

the changes to be made in the record

and the justification therefor. The

disclosure officer may request further

identifying data as described in

§ 4902.3(b).

(c) An individual who desires

assistance in the preparation of a

request for amendment of a record shall

submit such request for assistance in

writing to the Deputy General Counsel,

Pension Benefit Guaranty Corporation,

1200 K Street NW., Washington, DC

20005–4026. The Deputy General

Counsel shall respond to such request as

promptly as possible.

§ 4902.6 Action on request for amendment

of a record.

(a) Within 20 working days after

receipt by the PBGC of a request for

amendment of a record under § 4902.5,

unless for good cause shown the

Executive Director of the PBGC extends

such 20-day period, the disclosure

officer shall notify the requester in

writing whether and to what extent the

request shall be granted. To the extent

that the request is granted, the

disclosure officer shall cause the

requested amendment to be made

promptly.

(b) When a request for amendment of

a record is denied in whole or in part,

the denial shall include a statement of

the reasons therefor, the procedures for

appealing such denial, and a notice that

the requester has a right to assistance in

preparing an appeal of the denial.

(c) An individual who desires

assistance in preparing an appeal of a

denial under this section shall submit a

request in writing to the Deputy General

Counsel, Pension Benefit Guaranty

Corporation, 1200 K Street NW.,

Washington, DC 20005–4026. The

Deputy General Counsel shall respond

to the request as promptly as possible,

but in no event more than 30 days after

receipt.

§ 4902.7 Appeal of a denial of a request for

amendment of a record.

(a) An appeal from a denial of a

request for amendment of a record

under § 4902.6 shall be submitted,

within 45 days of receipt of the denial,

to the General Counsel, Pension Benefit
34130 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

Guaranty Corporation, 1200 K Street

NW., Washington, DC 20005–4026,

unless the record subject to such request

is one maintained by the Office of the

General Counsel, in which event the

appeal shall be submitted to the Deputy

Executive Director at the same address.

The appeal shall state in detail the basis

on which it is made and both the

envelope and the appeal shall clearly

state ‘‘Privacy Act Request’’.

(b) Within 30 working days after the

receipt of the appeal, unless for good

cause shown the Executive Director of

the PBGC extends such 30-day period,

the General Counsel or, where

appropriate, the Deputy Executive

Director, shall issue a decision in

writing granting or denying the appeal

in whole or in part. To the extent that

the appeal is granted, the General

Counsel or, where appropriate, the

Deputy Executive Director, shall cause

the requested amendment to be made

promptly. To the extent that the appeal

is denied, the decision shall include the

reasons for the denial and a notice of the

requester’s right to submit a brief

statement setting forth reasons for

disputing the denial of appeal, to seek

judicial review of the denial pursuant to

5 U.S.C. 552a(g)(1)(A), and to obtain

further information concerning the

provisions for judicial review under that

section.

(c) An individual whose appeal has

been denied in whole or in part may

submit a brief summary statement

setting forth reasons for disputing such

denial. Such statement shall be

submitted within 30 days of receipt of

the denial of the appeal to the

Disclosure Officer. Any such statement

shall be made available by the PBGC to

anyone to whom the record is

subsequently furnished and may also be

accompanied, at the discretion of the

PBGC, by a brief statement summarizing

the PBGC’s reasons for refusing to

amend the record. The PBGC shall also

provide copies of the individual’s

statement of dispute to all prior

recipients of the record with respect to

whom an accounting of the disclosure of

the record was maintained pursuant to

5 U.S.C. 552a(c)(1).

(d) To request further information

concerning the provisions for judicial

review, an individual shall submit such

request in writing to the Deputy General

Counsel, who shall respond to such

request as promptly as possible.

§ 4902.8 Fees.

When an individual requests a copy

of his or her record under § 4902.4,

charges for the copying shall be made

according to the following fee schedule:

(a) Standard copying fee. There shall

be a charge of $0.15 per page of record

copies furnished. Where the copying fee

is less than $1.50, it shall not be

assessed.

(b) Voluminous material. If the

volume of page copy desired by the

requester is such that the reproduction

charge at the standard page rate would

be in excess of $50, the individual

desiring reproduction may request a

special rate quotation from the PBGC.

(c) Manual copying by requester. No

charge will be made for manual copying

by the requester of any document made

available for inspection under § 4902.4.

The PBGC shall provide facilities for

such copying without charge between

the hours of 9 a.m. and 4 p.m. on any

working day.

§ 4902.9 Specific exemptions.

(a) Under the authority granted by 5

U.S.C. 552a(k)(5), the PBGC hereby

exempts the system of records entitled

‘‘Personnel Security Investigation

Records—PBGC’’ from the provisions of

5 U.S.C. §§ 552a (c)(3), (d), (e)(1), (e)(4)

(G), (H), and (I), and (f), to the extent

that the disclosure of such material

would reveal the identity of a source

who furnished information to PBGC

under an express promise of

confidentiality or, before September 27,

1975, under an implied promise of

confidentiality.

(b) The reasons for asserting this

exemption are to insure the gaining of

information essential to determining

suitability and fitness for PBGC

employment, access to information, and

security clearances, to insure that full

and candid disclosures are obtained in

making such determinations, to prevent

subjects of such determinations from

thwarting the completion of such

determinations, and to avoid revealing

the identities of persons who furnish

information to the PBGC in confidence.

PART 4903—DEBT COLLECTION

Subpart A—General

Sec.

4903.1 Purpose and scope.

4903.2 General.

4903.3 Definitions.

Subpart B—Administrative Offset

4903.21 Application of Federal Claims

Collection Standards.

4903.22 Administrative offset procedures.

4903.23 PBGC requests for offset by other

agencies.

4903.24 Requests for offset from other

agencies.

Subpart C—Tax Refund Offset

4903.31 Eligibility of debt for tax refund

offset.

4903.32 Tax refund offset procedures.

4903.33 Referral of debt for tax refund

offset.

Subpart D—Salary Offset [Reserved]

Authority: 29 U.S.C. 1302(b); 31 U.S.C.

3701, 3711(f), 3720A; 4 CFR part 102; 26 CFR

301.6402—6.

Subpart A—General

§ 4903.1 Purpose and scope.

(a) Subpart A. Subpart A of this part

contains definitions and general

provisions applicable to debt collection

generally.

(b) Subpart B. Subpart B of this part

prescribes procedures for debt

collection by administrative offset, as

authorized by the Federal Claims

Collection Act (31 U.S.C. 3716), and

consistent with applicable provisions of

the Federal Claims Collection

Standards. These procedures apply

when the PBGC determines that

collection by administrative offset of a

claim that is liquidated or certain in

amount is feasible and not otherwise

prohibited or when another agency

seeks administrative offset against a

payment to be made by the PBGC.

(c) Subpart C. Subpart C of this part

prescribes procedures for debt

collection by tax refund offset, as

authorized by section 3720A of

subchapter II, chapter 37 of title 31 of

the United States Code (31 U.S.C.

3720A) and in accordance with

applicable IRS regulations (26 CFR 301–

6402.6), including a related procedure

for disclosure to a consumer reporting

agency. These procedures apply to

determinations that a debt of at least $25

is past-due and legally enforceable, to

referrals by the PBGC of past-due,

legally enforceable debts to the IRS for

offset, and to any subsequent

corrections of information contained in

such referrals.

§ 4903.2 General.

(a) Certain PBGC efforts to obtain

payment of debts arising out of activities

under ERISA are authorized by and

subject to requirements prescribed

under other federal statutes. When, and

to the extent, such requirements apply

to collection of a debt by the PBGC,

PBGC activities will be consistent with

such requirements, as well as with any

other applicable requirements (see, e.g.,

parts 4003, 4007, and 4062 of this

chapter).

(b)(1) The Executive Director of the

PBGC has delegated to the Director of

the Financial Operations Department

primary responsibility for PBGC debt

collection activities. This delegation

includes responsibility for procedures

implementing requirements prescribed

under federal statutes other than ERISA,
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34131

and for coordinating the activities of

other PBGC departments with

functional responsibilities for different

types of claims.

(2) PBGC departments are responsible

for ascertaining indebtedness and other

aspects of agency collection activities

within their areas of functional

responsibility.

§ 4903.3 Definitions.

The following terms are defined in

§ 4001.2 of this chapter: IRS, PBGC, and

person. In addition, for purposes of this

part:

Administrative offset has the meaning

set forth in 31 U.S.C. 3701(a)(1).

Agency means an executive or

legislative agency (within the meaning

of 31 U.S.C. 3701(a)(4)).

Claim and debt, as defined in the

Federal Claims Collection Standards (4

CFR 101.2(a)), are used synonymously

and interchangeably to refer to an

amount of money or property which has

been determined by an appropriate

agency official to be owed to the United

States from any person, organization, or

entity, except another Federal agency.

Consumer reporting agency has the

meaning set forth in 31 U.S.C.

3701(a)(3).

Federal Claims Collection Act means

the Federal Claims Collection Act of

1966, as amended (31 U.S.C. 3701 et

seq.).

Federal Claims Collection Standards

means 4 CFR parts 101 through 105,

which are regulations issued jointly by

the Comptroller General of the United

States and the Attorney General of the

United States that implement the

Federal Claims Collection Act.

Repayment agreement means a

written agreement by a debtor to repay

a debt to the PBGC.

Tax refund offset means the reduction

by the IRS of a tax overpayment payable

to a taxpayer by the amount of past-due,

legally enforceable debt owed by that

taxpayer to a federal agency that has

entered into an agreement with the IRS

with regard to its participation in the tax

refund offset program, pursuant to IRS

regulations (26 CFR 301.6402–6).

Subpart B—Administrative Offset

§ 4903.21 Application of Federal Claims

Collection Standards.

The PBGC will determine the

feasibility of collection by

administrative offset, whether to accept

a repayment agreement in lieu of offset,

and how to apply amounts collected by

administrative offset on multiple debts

as provided in the Federal Claims

Collection Standards (4 CFR 102.3).

(a) Feasibility. The PBGC will

determine whether collection by

administrative offset is feasible on a

case-by-case basis in the exercise of

sound discretion. In making such

determinations, the PBGC will consider:

(1) Whether administrative offset can

be accomplished, both practically and

legally;

(2) Whether administrative offset is

best suited to further and protect all

governmental interests;

(3) In appropriate circumstances, the

debtor’s financial condition; and

(4) Whether offset would tend to

interfere substantially with or defeat the

purposes of the program authorizing the

payments against which offset is

contemplated.

(b) Repayment agreements. The PBGC

will exercise its discretion in

determining whether to accept a

repayment agreement in lieu of offset,

balancing the Government’s interest in

collecting the debt against fairness to

the debtor. If the debt is delinquent

(within the meaning of 4 CFR 101.2(b))

and the debtor has not disputed its

existence or amount, the PBGC will

accept a repayment agreement in lieu of

offset only if the debtor is able to

establish that offset would result in

undue financial hardship or would be

against equity and good conscience.

(c) Multiple debts. When the PBGC

collects multiple debts by

administrative offset, it will apply the

recovered amounts to those debts in

accordance with the best interests of the

United States, as determined by the

facts and circumstances of the particular

case, paying special attention to

applicable statutes of limitations.

§ 4903.22 Administrative offset

procedures.

(a) General. Except as otherwise

required by law or as provided in

paragraph (e) of this section, the PBGC

will not effect administrative offset

against a payment to be made to a

debtor prior to the completion of the

procedures specified in paragraphs (b)

and (c) of this section. However, the

PBGC will not duplicate any notice or

other procedural protection it

previously provided in connection with

the same debt under some other

statutory or regulatory authority, such as

part 4003 of this chapter.

(b) Notice. The PBGC will provide

written notice informing the debtor of

the following:

(1) The nature and amount of the

debt, and the PBGC’s intention to collect

by offset;

(2) That the debtor may inspect and

copy PBGC records pertaining to the

debt in accordance with part 4901 or

part 4902 of this chapter, as applicable

(access under the Freedom of

Information Act (5 U.S.C. 552) or the

Privacy Act (5 U.S.C. 552a),

respectively);

(3) How and from whom the debtor

may obtain administrative review of a

determination of indebtedness;

(4) The facts and circumstances that

the PBGC will consider in determining

whether to accept a repayment

agreement in lieu of offset; and

(5) If the PBGC has not previously

demanded payment of the debt, the date

by which payment must be made to

avoid further collection action.

(c) Administrative review. (1) A debtor

may obtain review within the PBGC of

a determination of indebtedness by

submitting a written request for review,

designated as such, to the PBGC official

specified in the notice of indebtedness.

Unless another regulation in this

chapter specifies a different period of

time, such a request must be submitted

within 30 days after the date of a PBGC

notice under paragraph (b) of this

section.

(2) A request for review must:

(i) State the ground(s) on which the

debtor disputes the debt; and

(ii) Reference all pertinent

information already in the possession of

the PBGC and include any additional

information believed to be relevant.

(3) The PBGC will review a

determination of indebtedness, when

requested to do so in a timely manner.

The PBGC will issue a written decision,

based on the written record, and will

notify the debtor of its decision.

(i) The review will be conducted by

an official of at least the same level of

authority as the person who made the

determination of indebtedness.

(ii) The notice of the PBGC’s decision

on review will include a brief statement

of the reason(s) why the determination

of indebtedness has or has not been

changed.

(4) Upon receipt of a request for

administrative review, the PBGC may,

in its discretion, temporarily suspend

transactions in any of the debtor’s

accounts maintained by the PBGC. If the

PBGC resolves the dispute in the

debtor’s favor, it will lift the suspension

immediately.

(d) Repayment agreement in lieu of

offset. (1) The PBGC will not consider

entering a repayment agreement in lieu

of offset unless a debtor submits a copy

of the debtor’s most recent audited (or

if not available, unaudited) financial

statement (with balance sheets, income

statements, and statements of changes in

financial position), to the extent such

documents have been prepared, and

other information regarding the debtor’s

financial condition (e.g., the types of

information on assets, liabilities,
34132 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

earnings, and other factors specified in

paragraphs (b)(3) through (b)(7) of

§ 4062.6 of this chapter).

(2) The PBGC may require appropriate

security as a condition of accepting a

repayment agreement in lieu of offset.

(e) Exception. (1) The PBGC may

effect administrative offset against a

payment to be made to the debtor prior

to completing the procedures specified

in paragraphs (b) and (c) of this section

if:

(i) Failure to take the offset would

substantially prejudice the government’s

ability to collect the debt; and

(ii) The time before the payment is to

be made does not reasonably permit the

completion of those procedures.

(2) The PBGC has determined that a

case in which it applies the special rule

in § 4068.3(c) of this chapter meets the

criteria in paragraph (e)(1) of this

section.

(3) If the PBGC effects administrative

offset against a payment to be made to

a debtor prior to completing the

procedures specified in paragraphs (b)

and (c) of this section, the PBGC—

(i) Will promptly complete those

procedures; and

(ii) Will promptly refund any amounts

recovered by offset but later found not

to be owed to the Government.

§ 4903.23 PBGC requests for offset by

other agencies.

(a) General. The PBGC may request

that funds payable to its debtor by

another agency be administratively

offset to collect a debt owed to the PBGC

by the debtor. A PBGC request for

administrative offset against amounts

due and payable from the Civil Service

Retirement and Disability Fund will be

made in accordance with 5 CFR part

831, subpart R (Agency Requests to

OPM for Recovery of a Debt from the

Civil Service Retirement and Disability

Fund).

(b) Certification. In requesting

administrative offset, the Director of the

Financial Operations Department (or a

department official designated by the

Director) will certify in writing to the

agency holding funds of the debtor—

(1) That the debtor owes the debt

(including the amount) and that the

PBGC has fully complied with the

provisions of 4 CFR 102.3; and

(2) In a request for administrative

offset against amounts due and payable

from the Civil Service Retirement and

Disability Fund, that the PBGC has

complied with applicable statutes and

the regulations and procedures of the

Office of Personnel Management.

§ 4903.24 Requests for offset from other

agencies.

(a) General. As provided in the

Federal Claims Collections Standards (4

CFR 102.3(d)), the PBGC generally will

comply with requests from other

agencies to initiate administrative offset

to collect debts owed to the United

States unless the requesting agency has

not complied with the applicable

provisions of the Federal Claims

Collection Standards or the offset would

be otherwise contrary to law.

(b) Submission of requests. (1) Any

agency may request that funds payable

to its debtor by the PBGC be

administratively offset to collect a debt

owed to such agency by the debtor by

submitting the certification described in

paragraph (c) of this section.

(2) All such requests should be

directed to the Director, Financial

Operations Department, Pension Benefit

Guaranty Corporation, 1200 K Street,

NW., Washington, DC 20005–4026.

(c) Certification required. The PBGC

will not initiate administrative offset in

response to a request from another

agency until it receives written

certification from the requesting agency,

signed by an appropriate agency official,

that the debtor owes the debt (including

the amount) and that the requesting

agency has fully complied with the

provisions of 4 CFR 102.3 (with a

citation to the agency’s own

administrative offset regulations).

Subpart C—Tax Refund Offset

§ 4903.31 Eligibility of debt for tax refund

offset.

The PBGC will determine whether a

debt is eligible for tax refund offset in

accordance with IRS regulations (26

CFR 301.6402–6 (c) and (d)). The PBGC

may refer a past-due, legally enforceable

debt to the IRS for offset if:

(a) The debt is a judgment debt, or the

PBGC’s right of action accrued not more

than 10 years earlier (unless the debt is

specifically exempt from this

requirement);

(b) The PBGC cannot currently collect

the debt by salary offset (pursuant to 5

U.S.C. 5514(a)(1));

(c) The debt is ineligible for

administrative offset (by reason of 31

U.S.C. 3716(c)(2)), or the PBGC cannot

currently collect the debt by

administrative offset (under 31 U.S.C.

3716 and subpart B of this part) against

amounts payable by the debtor to the

PBGC;

(d) The PBGC has notified, or

attempted to notify, the debtor of its

intent to refer the debt, given the debtor

an opportunity to present evidence that

all or part of the debt is not past-due or

not legally enforceable, considered any

evidence presented by the debtor in

accordance with § 4903.32, and

determined that the debt is past-due and

legally enforceable;

(e) If the debt is a consumer debt and

exceeds $100, the PBGC has disclosed

the debt to a consumer reporting agency

(as authorized by 31 U.S.C. 3711(f) and

provided in § 4903.32), unless a

consumer reporting agency would be

prohibited from reporting information

concerning the debt (by reason of 15

U.S.C. 1681c); and

(f) The debt is at least $25.

§ 4903.32 Tax refund offset procedures.

(a) General. Before referring a debt for

tax refund offset, the PBGC will

complete the procedures specified in

paragraph (b) and, if applicable,

paragraph (c) of this section. The PBGC

may satisfy these requirements in

conjunction with any other procedures

that apply to the same debt, such as

those prescribed in § 4903.22 or part

4003 of this chapter.

(b) Notice, opportunity to present

evidence, and determination of

indebtedness.

(1) The PBGC will notify, or make a

reasonable attempt to notify, a person

owing a debt (a ‘‘debtor’’) that a debt is

past-due and if not repaid within 60

days, the PBGC will refer the debt to the

IRS for offset against any overpayment

of tax. For this purpose, compliance

with IRS procedures (26 CFR 301.6402–

6(d)(1)) constitutes a reasonable attempt

to notify a debtor.

(2) A debtor will have at least 60 days

to present evidence, for consideration

by the PBGC, that all or part of a debt

is not past-due or not legally

enforceable.

(3) If evidence that all or part of a debt

is not past-due or not legally enforceable

is considered by an agent or person

other than a PBGC employee acting on

behalf of the PBGC, a debtor will have

at least 30 days from the date of the

determination on the debt to request

review by the Director of the Financial

Operations Department (or a department

official designated by the Director).

(4) The PBGC will notify a debtor of

its determination as to whether all or

part of a debt is past-due and legally

enforceable.

(c) Consumer reporting agency

disclosure.

(1)(i) If a consumer debt exceeds $100,

the Director of the Financial Operations

Department (or a department official

designated by the Director), after

verifying the validity and overdue status

of the debt and that section 605 of the

Consumer Credit Protection Act (15

U.S.C. 1681c) does not prohibit a
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34133

consumer reporting agency from

reporting information concerning the

debt because it is obsolete, will send the

individual who owes the debt a written

notice—

(A) That the debt is past-due;

(B) That the PBGC intends to disclose

to a consumer reporting agency that the

individual is responsible for the debt

and the specific information to be

disclosed; and

(C) How the individual may obtain an

explanation of the debt, dispute the

information in PBGC’s records, and

obtain administrative review of the debt.

(ii) If the PBGC does not have a

current address for an individual, the

Director of the Financial Operations

Department (or a department official

designated by the Director) will take

reasonable action to locate the

individual.

(2) The Director of the Financial

Operations Department (or a department

official designated by the Director) will

disclose the debt if, within 60 days (or,

at his or her discretion, more than 60

days) after sending the notice described

in paragraph (c)(1) of this section, the

individual has not repaid the debt, or

agreed to repay the debt under a written

agreement, or requested administrative

review of the debt.

§ 4903.33 Referral of debt for tax refund

offset.

The Director of the Financial

Operations Department (or a department

official designated by the Director) will

refer debts to the IRS for refund offset,

and will correct referrals, in accordance

with IRS regulations (26 CFR 301.6402–

6(e) and (f)).

Subpart D—Salary Offset [Reserved]

PART 4904—ETHICAL CONDUCT OF

EMPLOYEES

Sec.

4904.1 Outside employment and other

activity.

Authority: 29 U.S.C. 1302(b); E.O. 11222,

30 FR 6469; 5 CFR 735.104.

§ 4904.1 Outside employment and other

activity.

(a)–(c) [Reserved].

(d) An employee who is engaged in or

is planning to engage in outside

employment, business, professional or

other such activities for pay shall obtain

clearance:

(1) When such activities raise a

question of conflict with this subpart or

any applicable laws, orders, regulations

or standards, or

(2) When applicable laws, orders or

regulations require clearance of such

activities.

(e) A request for clearance shall be in

writing and shall include a statement of

the nature of and the amount of time to

be devoted to the activity. The heads of

offices shall receive and review requests

for clearance submitted by members of

their staff. The Executive Director or his

designee shall receive and review

requests for clearance submitted by the

heads of offices and special Government

employees. The employee reviewing the

request for clearance may require the

employee making the request to furnish

such other information as may be

appropriate in considering the request

and shall consult with the Corporation’s

Ethics Counselor where appropriate.

The request may be granted only if such

activity would be consistent with

applicable laws, orders and regulations.

If the request for clearance is not

granted, the employee making the

request shall not commence or continue

in the activity unless the Executive

Director or his designee, upon written

request of the employee, determines that

such activity would be consistent with

applicable laws, orders and regulations.

PART 4905—APPEARANCES IN

CERTAIN PROCEEDINGS

Sec.

4905.1 Purpose and scope.

4905.2 Definitions.

4905.3 General.

4905.4 Appearances by PBGC employees.

4905.5 Requests for authenticated copies of

PBGC records.

4905.6 Penalty.

Authority: 29 U.S.C. 1302(b); E.O. 11222,

30 FR 6469; 5 CFR 735.104.

§ 4905.1 Purpose and scope.

(a) Purpose. This part sets forth the

rules and procedures to be followed

when a PBGC employee or former

employee is requested or served with

compulsory process to appear as a

witness or produce documents in a

proceeding in which the PBGC is not a

party, if such appearance arises out of,

or is related to, his or her employment

with the PBGC. It provides a centralized

decisionmaking mechanism for

responding to such requests and

compulsory process.

(b) Scope. (1) This part applies when,

in a judicial, administrative, legislative,

or other proceeding, a PBGC employee

or former employee is requested or

served with compulsory process to

provide testimony concerning

information acquired in the course of

performing official duties or because of

official status and/or to produce

material acquired in the course of

performing official duties or contained

in PBGC files.

(2) This part does not apply to:

(i) Proceedings in which the PBGC is

a party;

(ii) Congressional requests or

subpoenas for testimony or documents;

or

(iii) Appearances by PBGC employees

in proceedings that do not arise out of,

or relate to, their employment with

PBGC (e.g., outside activities that are

engaged in consistent with applicable

standards of ethical conduct).

§ 4905.2 Definitions.

For purposes of this part:

Appearance means testimony or

production of documents or other

material, including an affidavit,

deposition, interrogatory, declaration, or

other required written submission.

Compulsory Process means any

subpoena, order, or other demand of a

court or other authority (e.g., an

administrative agency or a state or local

legislative body) for the appearance of a

PBGC employee or former employee.

Employee means any officer or

employee of the PBGC, including a

special government employee.

Proceeding means any proceeding

before any federal, state, or local court;

federal, state, or local agency; state or

local legislature; or other authority

responsible for administering regulatory

requirements or adjudicating disputes or

controversies, including arbitration,

mediation, and other similar

proceedings.

Special government employee means

an employee of the PBGC who is

retained, designated, appointed or

employed to perform, with or without

compensation, for not to exceed one

hundred and thirty days during any

three hundred and sixty-five

consecutive days, temporary duties

either on a full-time or intermittent

basis (18 U.S.C. 202).

§ 4905.3 General.

No PBGC employee or former

employee may appear in any proceeding

to which this part applies to testify and/

or produce documents or other material

unless authorized under this part.

§ 4905.4 Appearances by PBGC

employees.

(a) Whenever a PBGC employee or

former employee is requested or served

with compulsory process to appear in a

proceeding to which this part applies,

he or she will promptly notify the

General Counsel.

(b) The General Counsel or his or her

designee will authorize an appearance

by a PBGC employee or former

employee if, and to the extent, he or she

determines that such appearance is in

the interest of the PBGC.
34134 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(1) In determining whether an

appearance is in the interest of the

PBGC, the General Counsel or his or her

designee will consider relevant factors,

including:

(i) What, if any, objective of the PBGC

(and, where relevant, any federal

agency, if the United States is a party)

would be promoted by the appearance;

(ii) Whether the appearance would

unnecessarily interfere with the

employee’s official duties;

(iii) Whether the appearance would

result in the appearance of improperly

favoring one litigant over another; and

(iv) Whether the appearance is

appropriate under applicable

substantive and procedural rules.

(2) If the General Counsel or his or her

designee concludes that compulsory

process is essentially a request for PBGC

record information, it will be treated as

a request under the Freedom of

Information Act, as amended, in

accordance with part 4901 of this

chapter, except to the extent that the

Privacy Act of 1974, as amended, and

part 4902 of this chapter govern

disclosure of a record maintained on an

individual.

(c) If, in response to compulsory

process in a proceeding to which this

part applies, the General Counsel or his

or her designee has not authorized an

appearance by the return date, the

employee or former employee shall

appear at the stated time and place

(unless advised by the General Counsel

or his or her designee that process either

was not validly issued or served or has

been withdrawn), accompanied by a

PBGC attorney, produce a copy of this

part of the regulations, and respectfully

decline to provide any testimony or

produce any documents or other

material. When the demand is under

consideration, the employee shall

respectfully request that the court or

other authority stay the demand

pending the employee’s receipt of

instructions from the General Counsel.

§ 4905.5 Requests for authenticated

copies of PBGC records.

The PBGC will grant requests for

authenticated copies of PBGC records,

for purposes of admissibility under 28

U.S.C. 1733 and Rule 44 of the Federal

Rules of Civil Procedure, for records

that are to be disclosed pursuant to this

part or part 4901 of this chapter.

Appropriate fees will be charged for

providing authenticated copies of PBGC

records, in accordance with part 4901,

subpart D, of this chapter.

§ 4905.6 Penalty.

A PBGC employee who testifies or

produces documents or other material

in violation of a provision of this part

of the regulations shall be subject to

disciplinary action.

PART 4907—ENFORCEMENT OF

NONDISCRIMINATION ON THE BASIS

OF HANDICAP IN PROGRAMS OR

ACTIVITIES CONDUCTED BY THE

PENSION BENEFIT GUARANTY

CORPORATION

Sec.

4907.101 Purpose.

4907.102 Application.

4907.103 Definitions.

4907.104–4907.109 [Reserved]

4907.110 Self-evaluation.

4907.111 Notice.

4907.112–4907.129 [Reserved]

4907.130 General prohibitions against

discrimination.

4907.131–4907.139 [Reserved]

4907.140 Employment.

4907.141–4907.148 [Reserved]

4907.149 Program accessibility:

Discrimination prohibited.

4907.150 Program accessibility: Existing

facilities.

4907.151 Program accessibility: New

construction and alterations.

4907.152–4907.159 [Reserved]

4907.160 Communications.

4907.161–4907.169 [Reserved]

4907.170 Compliance procedures.

4907.171–4907.999 [Reserved]

Authority: 29 U.S.C. 794, 1302(b)(3).

§ 4907.101 Purpose.

This part effectuates section 119 of

the Rehabilitation, Comprehensive

Services, and Developmental

Disabilities Amendments of 1978,

which amended section 504 of the

Rehabilitation Act of 1973 to prohibit

discrimination on the basis of handicap

in programs or activities conducted by

Executive agencies or the United States

Postal Service.

§ 4907.102 Application.

This part applies to all programs or

activities conducted by the agency.

§ 4907.103 Definitions.

For purposes of this part, the term—

Assistant Attorney General means the

Assistant Attorney General, Civil Rights

Division, United States Department of

Justice.

Auxiliary aids means services or

devices that enable persons with

impaired sensory, manual, or speaking

skills to have an equal opportunity to

participate in, and enjoy the benefits of,

programs or activities conducted by the

agency. For example, auxiliary aids

useful for persons with impaired vision

include readers, brailled materials,

audio recordings, telecommunications

devices and other similar services and

devices. Auxiliary aids useful for

persons with impaired hearing include

telephone handset amplifiers,

telephones compatible with hearing

aids, telecommunication devices for

deaf persons (TDD’s), interpreters,

notetakers, written materials, and other

similar services and devices.

Complete complaint means a written

statement that contains the

complainant’s name and address and

describes the agency’s alleged

discriminatory action in sufficient detail

to inform the agency of the nature and

date of the alleged violation of section

504. It shall be signed by the

complainant or by someone authorized

to do so on his or her behalf. Complaints

filed on behalf of classes or third parties

shall describe or identify (by name, if

possible) the alleged victims of

discrimination.

Facility means all or any portion of

buildings, structures, equipment, roads,

walks, parking lots, rolling stock or

other conveyances, or other real or

personal property.

Handicapped person means any

person who has a physical or mental

impairment that substantially limits one

or more major life activities, has a

record of such an impairment, or is

regarded as having such an impairment.

As used in this definition, the phrase:

(1) Physical or mental impairment

includes—

(i) Any physiological disorder or

condition, cosmetic disfigurement, or

anatomical loss affecting one or more of

the following body systems:

Neurological; musculoskeletal; special

sense organs; respiratory, including

speech organs; cardiovascular;

reproductive; digestive; genitourinary;

hemic and lymphatic; skin; and

endocrine; or

(ii) Any mental or psychological

disorder, such as mental retardation,

organic brain syndrome, emotional or

mental illness, and specific learning

disabilities. The term ‘‘physical or

mental impairment’’ includes, but is not

limited to, such diseases and conditions

as orthopedic, visual, speech, and

hearing impairments, cerebral palsy,

epilepsy, muscular dystrophy, multiple

sclerosis, cancer, heart disease, diabetes,

mental retardation, emotional illness,

and drug addiction and alcoholism.

(2) Major life activities includes

functions such as caring for one’s self,

performing manual tasks, walking,

seeing, hearing, speaking, breathing,

learning, and working.

(3) Has a record of such an

impairment means has a history of, or

has been misclassified as having, a

mental or physical impairment that

substantially limits one or more major

life activities.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34135

(4) Is regarded as having an

impairment means—

(i) Has a physical or mental

impairment that does not substantially

limit major life activities but is treated

by the agency as constituting such a

limitation;

(ii) Has a physical or mental

impairment that substantially limits

major life activities only as a result of

the attitudes of others toward such

impairment; or

(iii) Has none of the impairments

defined in subparagraph (1) of this

definition but is treated by the agency

as having such an impairment.

Historic preservation programs means

programs conducted by the agency that

have preservation of historic properties

as a primary purpose.

Historic properties means those

properties that are listed or eligible for

listing in the National Register of

Historic Places or properties designated

as historic under a statute of the

appropriate State or local government

body.

Qualified handicapped person

means—

(1) With respect to preschool,

elementary, or secondary education

services provided by the agency, a

handicapped person who is a member of

a class of persons otherwise entitled by

statute, regulation, or agency policy to

receive education services from the

agency.

(2) With respect to any other agency

program or activity under which a

person is required to perform services or

to achieve a level of accomplishment, a

handicapped person who meets the

essential eligibility requirements and

who can achieve the purpose of the

program or activity without

modifications in the program or activity

that the agency can demonstrate would

result in a fundamental alteration in its

nature;

(3) With respect to any other program

or activity, a handicapped person who

meets the essential eligibility

requirements for participation in, or

receipt of benefits from, that program or

activity; and

(4) Qualified handicapped person is

defined for purposes of employment in

29 CFR 1613.702(f), which is made

applicable to this part by § 4907.140.

Section 504 means section 504 of the

Rehabilitation Act of 1973 (Pub. L. 93–

112, 87 Stat. 394 (29 U.S.C. 794)), as

amended by the Rehabilitation Act

Amendments of 1974 (Pub. L. 93–516,

88 Stat. 1617), and the Rehabilitation,

Comprehensive Services, and

Developmental Disabilities

Amendments of 1978 (Pub. L. 95–602,

92 Stat. 2955). As used in this part,

section 504 applies only to programs or

activities conducted by Executive

agencies and not to federally assisted

programs.

Substantial impairment means a

significant loss of the integrity of

finished materials, design quality, or

special character resulting from a

permanent alteration.

§§ 4907.104–4907.109 [Reserved]

§ 4907.110 Self-evaluation.

(a) The agency shall, by August 24,

1987, evaluate its current policies and

practices, and the effects thereof, that do

not or may not meet the requirements of

this part, and, to the extent modification

of any such policies and practices is

required, the agency shall proceed to

make the necessary modifications.

(b) The agency shall provide an

opportunity to interested persons,

including handicapped persons or

organizations representing handicapped

persons, to participate in the selfevaluation process by submitting

comments (both oral and written).

(c) The agency shall, until three years

following the completion of the selfevaluation, maintain on file and make

available for public inspection:

(1) a description of areas examined

and any problems identified, and

(2) a description of any modifications

made.

§ 4907.111 Notice.

The agency shall make available to

employees, applicants, participants,

beneficiaries, and other interested

persons such information regarding the

provisions of this part and its

applicability to the programs or

activities conducted by the agency, and

make such information available to

them in such manner as the head of the

agency finds necessary to apprise such

persons of the protections against

discrimination assured them by section

504 and this regulation.

§§ 4907.112–4907.129 [Reserved]

§ 4907.130 General prohibitions against

discrimination.

(a) No qualified handicapped person

shall, on the basis of handicap, be

excluded from participation in, be

denied the benefits of, or otherwise be

subjected to discrimination under any

program or activity conducted by the

agency.

(b)(1) The agency, in providing any

aid, benefit, or service, may not, directly

or through contractual, licensing, or

other arrangements, on the basis of

handicap—

(i) Deny a qualified handicapped

person the opportunity to participate in

or benefit from the aid, benefit, or

service;

(ii) Afford a qualified handicapped

person an opportunity to participate in

or benefit from the aid, benefit, or

service that is not equal to that afforded

others;

(iii) Provide a qualified handicapped

person with an aid, benefit, or service

that is not as effective in affording equal

opportunity to obtain the same result, to

gain the same benefit, or to reach the

same level of achievement as that

provided to others;

(iv) Provide different or separate aid,

benefits, or services to handicapped

persons or to any class of handicapped

persons than is provided to others

unless such action is necessary to

provide qualified handicapped persons

with aid, benefits, or services that are as

effective as those provided to others;

(v) Deny a qualified handicapped

person the opportunity to participate as

a member of planning or advisory

boards; or

(vi) Otherwise limit a qualified

handicapped person in the enjoyment of

any right, privilege, advantage, or

opportunity enjoyed by others receiving

the aid, benefit, or service.

(2) The agency may not deny a

qualified handicapped person the

opportunity to participate in programs

or activities that are not separate or

different, despite the existence of

permissibly separate or different

programs or activities.

(3) The agency may not, directly or

through contractual or other

arrangements, utilize criteria or methods

of administration the purpose or effect

of which would—

(i) Subject qualified handicapped

persons to discrimination on the basis of

handicap; or

(ii) Defeat or substantially impair

accomplishment of the objectives of a

program or activity with respect to

handicapped persons.

(4) The agency may not, in

determining the site or location of a

facility, make selections the purpose or

effect of which would—

(i) Exclude handicapped persons

from, deny them the benefits of, or

otherwise subject them to

discrimination under any program or

activity conducted by the agency; or

(ii) Defeat or substantially impair the

accomplishment of the objectives of a

program or activity with respect to

handicapped persons.

(5) The agency, in the selection of

procurement contractors, may not use

criteria that subject qualified

handicapped persons to discrimination

on the basis of handicap.
34136 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(6) The agency may not administer a

licensing or certification program in a

manner that subjects qualified

handicapped persons to discrimination

on the basis of handicap, nor may the

agency establish requirements for the

programs or activities of licensees or

certified entities that subject qualified

handicapped persons to discrimination

on the basis of handicap. However, the

programs or activities of entities that are

licensed or certified by the agency are

not, themselves, covered by this part.

(c) The exclusion of nonhandicapped

persons from the benefits of a program

limited by Federal statute or Executive

Order to handicapped persons or the

exclusion of a specific class of

handicapped persons from a program

limited by Federal statute or Executive

Order to a different class of

handicapped persons is not prohibited

by this part.

(d) The agency shall administer

programs and activities in the most

integrated setting appropriate to the

needs of qualified handicapped persons.

§§ 4907.131–4907.139 [Reserved]

§ 4907.140 Employment.

No qualified handicapped person

shall, on the basis of handicap, be

subjected to discrimination in

employment under any program or

activity conducted by the agency. The

definitions, requirements, and

procedures of section 501 of the

Rehabilitation Act of 1973 (29 U.S.C.

791), as established by the Equal

Employment Opportunity Commission

in 29 CFR part 1613, shall apply to

employment in federally-conducted

programs or activities.

§§ 4907.141–4907.148 [Reserved]

§ 4907.149 Program accessibility:

Discrimination prohibited.

Except as otherwise provided in

§ 4907.150, no qualified handicapped

person shall, because the agency’s

facilities are inaccessible to or unusable

by handicapped persons, be denied the

benefits of, be excluded from

participation in, or otherwise be

subjected to discrimination under any

program or activity conducted by the

agency.

§ 4907.150 Program accessibility: Existing

facilities.

(a) General. The agency shall operate

each program or activity so that the

program or activity, when viewed in its

entirety, is readily accessible to and

usable by handicapped persons. This

paragraph does not—

(1) Necessarily require the agency to

make each of its existing facilities

accessible to and usable by handicapped

persons;

(2) In the case of historic preservation

programs, require the agency to take any

action that would result in a substantial

impairment of significant historic

features of an historic property; or

(3) Require the agency to take any

action that it can demonstrate would

result in a fundamental alteration in the

nature of a program or activity or in

undue financial and administrative

burdens. In those circumstances where

agency personnel believe that the

proposed action would fundamentally

alter the program or activity or would

result in undue financial and

administrative burdens, the agency has

the burden of proving that compliance

with § 4907.150(a) would result in such

alteration or burdens. The decision that

compliance would result in such

alteration or burdens must be made by

the agency head or his or her designee

after considering all agency resources

available for use in the funding and

operation of the conducted program or

activity, and must be accompanied by a

written statement of the reasons for

reaching that conclusion. If an action

would result in such an alteration or

such burdens, the agency shall take any

other action that would not result in

such an alteration or such burdens but

would nevertheless ensure that

handicapped persons receive the

benefits and services of the program or

activity.

(b) Methods—

(1) General. The agency may comply

with the requirements of this section

through such means as redesign of

equipment, reassignment of services to

accessible buildings, assignment of

aides to beneficiaries, home visits,

delivery of services at alternate

accessible sites, alteration of existing

facilities and construction of new

facilities, use of accessible rolling stock,

or any other methods that result in

making its programs or activities readily

accessible to and usable by handicapped

persons. The agency is not required to

make structural changes in existing

facilities where other methods are

effective in achieving compliance with

this section. The agency, in making

alterations to existing buildings, shall

meet accessibility requirements to the

extent compelled by the Architectural

Barriers Act of 1968, as amended (42

U.S.C. 4151–4157), and any regulations

implementing it. In choosing among

available methods for meeting the

requirements of this section, the agency

shall give priority to those methods that

offer programs and activities to qualified

handicapped persons in the most

integrated setting appropriate.

(2) Historic preservation programs. In

meeting the requirements of

§ 4907.150(a) in historic preservation

programs, the agency shall give priority

to methods that provide physical access

to handicapped persons. In cases where

a physical alteration to an historic

property is not required because of

§ 4907.150 (a)(2) or (a)(3), alternative

methods of achieving program

accessibility include—

(i) Using audio-visual materials and

devices to depict those portions of an

historic property that cannot otherwise

be made accessible;

(ii) Assigning persons to guide

handicapped persons into or through

portions of historic properties that

cannot otherwise be made accessible; or

(iii) Adopting other innovative

methods.

(c) Time period for compliance. The

agency shall comply with the

obligations established under this

section by October 21, 1986, except that

where structural changes in facilities are

undertaken, such changes shall be made

by August 22, 1989, but in any event as

expeditiously as possible.

(d) Transition plan. In the event that

structural changes to facilities will be

undertaken to achieve program

accessibility, the agency shall develop,

by February 23, 1987 a transition plan

setting forth the steps necessary to

complete such changes. The agency

shall provide an opportunity to

interested persons, including

handicapped persons or organizations

representing handicapped persons, to

participate in the development of the

transition plan by submitting comments

(both oral and written). A copy of the

transition plan shall be made available

for public inspection. The plan shall, at

a minimum—

(1) Identify physical obstacles in the

agency’s facilities that limit the

accessibility of its programs or activities

to handicapped persons;

(2) Describe in detail the methods that

will be used to make the facilities

accessible;

(3) Specify the schedule for taking the

steps necessary to achieve compliance

with this section and, if the time period

of the transition plan is longer than one

year, identify steps that will be taken

during each year of the transition

period; and

(4) Indicate the official responsible for

implementation of the plan.

§ 4907.151 Program accessibility: New

construction and alterations.

Each building or part of a building

that is constructed or altered by, on

behalf of, or for the use of the agency

shall be designed, constructed, or
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 34137

altered so as to be readily accessible to

and usable by handicapped persons.

The definitions, requirements, and

standards of the Architectural Barriers

Act (42 U.S.C. 4151–4157), as

established in 41 CFR 101–19.600 to

101–19.607, apply to buildings covered

by this section.

§§ 4907.152–4907.159 [Reserved]

§ 4907.160 Communications.

(a) The agency shall take appropriate

steps to ensure effective communication

with applicants, participants, personnel

of other Federal entities, and members

of the public.

(1) The agency shall furnish

appropriate auxiliary aids where

necessary to afford a handicapped

person an equal opportunity to

participate in, and enjoy the benefits of,

a program or activity conducted by the

agency.

(i) In determining what type of

auxiliary aid is necessary, the agency

shall give primary consideration to the

requests of the handicapped person.

(ii) The agency need not provide

individually prescribed devices, readers

for personal use or study, or other

devices of a personal nature.

(2) Where the agency communicates

with applicants and beneficiaries by

telephone, telecommunication devices

for deaf person (TDD’s) or equally

effective telecommunication systems

shall be used.

(b) The agency shall ensure that

interested persons, including persons

with impaired vision or hearing, can

obtain information as to the existence

and location of accessible services,

activities, and facilities.

(c) The agency shall provide signage

at a primary entrance to each of its

inaccessible facilities, directing users to

a location at which they can obtain

information about accessible facilities.

The international symbol for

accessibility shall be used at each

primary entrance of an accessible

facility.

(d) This section does not require the

agency to take any action that it can

demonstrate would result in a

fundamental alteration in the nature of

a program or activity or in undue

financial and administrative burdens. In

those circumstances where agency

personnel believe that the proposed

action would fundamentally alter the

program or activity or would result in

undue financial and administrative

burdens, the agency has the burden of

proving that compliance with

§ 4907.160 would result in such

alteration or burdens. The decision that

compliance would result in such

alteration or burdens must be made by

the agency head or his or her designee

after considering all agency resources

available for use in the funding and

operation of the conducted program or

activity, and must be accompanied by a

written statement of the reasons for

reaching that conclusion. If an action

required to comply with this section

would result in such an alteration or

such burdens, the agency shall take any

other action that would not result in

such an alteration or such burdens but

would nevertheless ensure that, to the

maximum extent possible, handicapped

persons receive the benefits and services

of the program or activity.

§§ 4907.161–4907.169 [Reserved]

§ 4907.170 Compliance procedures.

(a) Except as provided in paragraph

(b) of this section, this section applies

to all allegations of discrimination on

the basis of handicap in programs or

activities conducted by the agency.

(b) The agency shall process

complaints alleging violations of section

504 with respect to employment

according to the procedures established

by the Equal Employment Opportunity

Commission in 29 CFR part 1613

pursuant to section 501 of the

Rehabilitation Act of 1973 (29 U.S.C.

791).

(c) The Equal Opportunity Manager

shall be responsible for coordinating

implementation of this section.

Complaints may be sent to Equal

Opportunity Manager, Human

Resources Department, Pension Benefit

Guaranty Corporation, 1200 K Street

NW., Washington, DC 20005–4026.

(d) The agency shall accept and

investigate all complete complaints for

which it has jurisdiction. All complete

complaints must be filed within 180

days of the alleged act of discrimination.

The agency may extend this time period

for good cause.

(e) If the agency receives a complaint

over which it does not have jurisdiction,

it shall promptly notify the complainant

and shall make reasonable efforts to

refer the complaint to the appropriate

government entity.

(f) The agency shall notify the

Architectural and Transportation

Barriers Compliance Board upon receipt

of any complaint alleging that a building

or facility that is subject to the

Architectural Barriers Act of 1968, as

amended (42 U.S.C. 4151–4157), or

section 502 of the Rehabilitation Act of

1973, as amended (29 U.S.C. 792), is not

readily accessible to and usable by

handicapped persons.

(g) Within 180 days of the receipt of

a complete complaint for which it has

jurisdiction, the agency shall notify the

complainant of the results of the

investigation in a letter containing—

(1) Findings of fact and conclusions of

law;

(2) A description of a remedy for each

violation found; and

(3) A notice of the right to appeal.

(h) Appeals of the findings of fact and

conclusions of law or remedies must be

filed by the complainant within 90 days

of receipt from the agency of the letter

required by § 4907.170(g). The agency

may extend this time for good cause.

(i) Timely appeals shall be accepted

and processed by the head of the

agency.

(j) The head of the agency shall notify

the complainant of the results of the

appeal within 60 days of the receipt of

the request. If the head of the agency

determines that additional information

is needed from the complainant, he or

she shall have 60 days from the date of

receipt of the additional information to

make his or her determination on the

appeal.

(k) The time limits cited in paragraphs

(g) and (j) of this section may be

extended with the permission of the

Assistant Attorney General.

(l) The agency may delegate its

authority for conducting complaint

investigations to other Federal agencies,

except that the authority for making the

final determination may not be

delegated to another agency.

§§ 4907.171–4907.999 [Reserved]

[FR Doc. 96–16398 Filed 6–28–96; 8:45 am]

BILLING CODE 7708–01–P