Allocation of Assets in Single-Employer Plans; Interest Assumptions for Valuing Benefits

Summary

The Pension Benefit Guaranty Corporation's regulation on Allocation of Assets in Single-Employer Plans prescribes interest assumptions for valuing benefits under terminating single-employer plans. This final rule amends the regulation to adopt interest assumptions for plans with valuation dates in April 1997.

Full text

SUMMARY: The Pension Benefit Guaranty Corporation's regulation on 
Allocation of Assets in Single-Employer Plans prescribes interest 
assumptions for valuing benefits under terminating single-employer 
plans. This final rule amends the regulation to adopt interest 
assumptions for plans with valuation dates in April 1997.

EFFECTIVE DATE: April 1, 1997.

FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General 
Counsel, Office of the General Counsel, Pension Benefit Guaranty 
Corporation, 1200 K Street, NW., Washington, DC 20005, 202-326-4024 
(202-326-4179 for TTY and TDD).

SUPPLEMENTARY INFORMATION: The PBGC's regulation on Allocation of 
Assets in Single-Employer Plans (29 CFR part 4044) prescribes actuarial 
assumptions for valuing plan benefits of terminating single-employer 
plans covered by title IV of the Employee Retirement Income Security 
Act of 1974.
    Among the actuarial assumptions prescribed in part 4044 are 
interest assumptions. These interest assumptions are intended to 
reflect current conditions in the financial and annuity markets.
    Two sets of interest assumptions are prescribed, one set for the 
valuation of benefits to be paid as annuities and one set for the 
valuation of benefits to be paid as lump sums. This amendment adds to 
appendix B to part 4044 the annuity and lump sum interest assumptions 
for valuing benefits in plans with valuation dates during April 1997.
    For annuity benefits, the interest assumptions will be 6.10 percent 
for the first 25 years following the valuation date and 5.00 percent 
thereafter. The annuity interest assumptions represent a decrease (from 
those in effect for March 1997) of 0.10 percent for the first 25 years 
following the valuation date and are otherwise unchanged. For benefits 
to be paid as lump sums, the interest assumptions to be used by the 
PBGC will be 4.75 percent for the period during which a benefit is in 
pay status and 4.00 percent during any years preceding the benefit's 
placement in pay status. The lump sum interest assumptions represent a 
decrease (from those in effect for March 1997) of 0.25 percent for the 
period during which a benefit is in pay status and for the seven years 
directly preceding that period; they are otherwise unchanged.
    The PBGC has determined that notice and public comment on this 
amendment are impracticable and contrary to the public interest. This 
finding is based on the need to determine and issue new interest 
assumptions promptly so that the assumptions can reflect, as accurately 
as possible, current market conditions.
    Because of the need to provide immediate guidance for the valuation 
of benefits in plans with valuation dates during April 1997, the PBGC 
finds that good cause exists for making the assumptions set forth in 
this amendment effective less than 30 days after publication.
    The PBGC has determined that this action is not a ``significant 
regulatory action'' under the criteria set forth in Executive Order 
12866.
    Because no general notice of proposed rulemaking is required for 
this amendment, the Regulatory Flexibility Act of 1980 does not apply. 
See 5 U.S.C. 601(2).

List of Subjects in 29 CFR Part 4044

    Pension insurance, Pensions.
    In consideration of the foregoing, 29 CFR part 4044 is amended as 
follows:

PART 4044--[AMENDED]

    1. The authority citation for part 4044 continues to read as 
follows:

    Authority: 29 U.S.C. 1301(a), 1302(b)(3), 1341, 1344, 1362.

    2. In appendix B, a new entry is added to Table I, and Rate Set 42 
is added to Table II, as set forth below. The introductory text of each 
table is republished for the convenience of the reader and remains 
unchanged.

Appendix B to Part 4044--Interest Rates Used to Value Annuities and 
Lump Sums

                                          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.]              
----------------------------------------------------------------------------------------------------------------
                                                                            The values of it are:               
       For valuation dates occurring in the month--        -----------------------------------------------------
                                                               it    for t =     it    for t =     it    for t =
----------------------------------------------------------------------------------------------------------------
                                                                                                                
*                  *                  *                  *                  *                  *                
                                                        *                                                       
April 1997................................................    .0610     1-25    .0500      >25      N/A      N/A
----------------------------------------------------------------------------------------------------------------


                                         Table II.--Lump Sum Valuations                                         
 [In using this table: (1) For benefits for which the participant or beneficiary is entitled to be in pay status
on the valuation date, the immediate annuity rate shall apply; (2) For benefits for which the deferral period is
 y years (where y is an integer and 0 < y  n1), interest rate i1 shall apply from the valuation date 
 for a period of y years, and thereafter the immediate annuity rate shall apply; (3) For benefits for which the 
 deferral period is y years (where y is an integer and n1< y  n1 + n2), interest rate i2 shall apply 
from the valuation date for a period of y-n1 years, interest rate i1 shall apply for the following n1 years, and
  thereafter the immediate annuity rate shall apply; (4) For benefits for which the deferral period is y years  
(where y is an integer and y > n1 + n2), interest rate i3 shall apply from the valuation date for a period of y-
   n1-n2 years, interest rate i2 shall apply for the following n2 years, interest rate i1 shall apply for the   
                   following n1 years, and thereafter the immediate annuity rate shall apply.]                  
----------------------------------------------------------------------------------------------------------------
                                              For plans with a                    Deferred annuities (percent)  
                                               valuation date       Immediate ----------------------------------
                 Rate set                 ------------------------   annuity                                    
                                              On or                   rate       i1     i2     i3     n1     n2 
                                              after      Before     (percent)                                   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
*                  *                  *                  *                  *                  *                
                                                        *                                                       
42.......................................     04-1-97     05-1-97        4.75   4.00   4.00   4.00      7      8
---------------------------------------------------------------------------------------------------------------- Issued in Washington, D.C., on this 10th day of March 1997.
John Seal,
Acting Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 97-6487 Filed 3-13-97; 8:45 am]
BILLING CODE 7708-01-P  

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