[Federal Register: December 14, 2006 (Volume 71, Number 240)]
[Rules and Regulations]
[Page 75115-75117]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de06-7]
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PENSION BENEFIT GUARANTY CORPORATION
29 CFR Parts 4050 and 4281
RIN 1212-AB08
Mortality Assumptions
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Direct final rule.
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SUMMARY: This document makes changes to the mortality assumptions under
parts 4050 (Missing Participants) and 4281 (Duties of Plan Sponsor
Following Mass Withdrawal) of PBGC's regulations. In a final rule
published in the Federal Register on December 2, 2005, PBGC amended
part 4044 (Allocation of Assets in Single-employer Plans) of its
regulations to update mortality tables used for certain valuations for
single-employer plans. Because of the dependence of certain valuations
under part 4050 on part 4044, amendments updating the mortality
assumptions under part 4050 are needed. This rule also makes a minor
conforming amendment to the mortality assumptions in part 4281.
DATES: Effective February 27, 2007, without further notice, unless PBGC
receives significant adverse comment by January 16, 2007. For a
discussion of applicability of this rule, see SUPPLEMENTARY
INFORMATION.
ADDRESSES: Comments, identified by RIN number 1212-AB08, may be
submitted by any of the following methods:
[[Page 75116]]
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the Web site instructions for submitting comments.
E-mail: reg.comments@pbgc.gov.
Fax: 202-326-4224.
Mail or Hand Delivery: Legislative and Regulatory
Department, Pension Benefit Guaranty Corporation, 1200 K Street, NW.,
Washington, DC 20005-4026.
All submissions must include the Regulatory Information Number for this
rulemaking (RIN number 1212-AB08). Comments received, including
personal information provided, will be posted to http://www.pbgc.gov. Copies
of comments may also be obtained by writing to Disclosure Division,
Office of the General Counsel, Pension Benefit Guaranty Corp., 1200 K
Street, NW., Washington, DC 20005-4026 or calling 202-326-4040 during
normal business hours. (TTY and TDD users may call the Federal relay
service toll-free at 1-800-877-8339 and ask to be connected to 202-326-
4040.)
FOR FURTHER INFORMATION CONTACT: Catherine B. Klion, Manager, or James
L. Beller, Jr., Attorney, Regulatory and Policy Division, Legislative
and Regulatory Department, Pension Benefit Guaranty Corp., 1200 K
Street, NW., Suite 1200, Washington, DC 20005-4026; 202-326-4024. (TTY/
TDD users may call the Federal relay service toll-free at 1-800-877-
8339 and ask to be connected to 202-326-4024.)
SUPPLEMENTARY INFORMATION: PBGC is publishing this rule without prior
proposal because we view it as a non-controversial amendment and expect
no significant adverse comment. The rule is expected to have minimal
economic impact on plans and participants. Unless we receive
significant adverse comment by January 16, 2007, this rule will be
effective on February 27, 2007 without further notice.
For the reasons stated herein, PBGC for good cause finds that prior
proposal and opportunity for public comment are unnecessary. However,
in the ``Proposed Rules'' section of today's Federal Register, we are
publishing a separate document that will serve as a notice of proposal
to amend parts 4050 and 4281 as described in this direct final rule in
case we receive significant adverse comment. If that happens, PBGC will
publish, in a timely manner, a document in the Rules category of the
Federal Register withdrawing the direct final rule. We will then
address public comments in a subsequent final rule based on the
proposed rule. We will not institute a second comment period on this
rule. Any parties interested in commenting must do so at this time.
Part 4050--Missing Participants
Under part 4050 (Missing Participants), a plan terminating in a
standard termination (or a sufficient distress termination) may pay a
``designated benefit'' to PBGC on behalf of a missing participant. For
participants with non-de minimis benefits, the designated benefit is
equal to or based on the participant's most valuable annuity benefit
determined using the ``missing participant annuity assumptions'' as
defined in Sec. 4050.2.
The term ``missing participant annuity assumptions'' is defined
with reference to valuation assumptions under part 4044 (Allocation of
Assets in Single-Employer Plans), including part 4044 interest
assumptions, but the use of a different mortality table is required
(i.e., a unisex rather than a sex-distinct mortality table). For this
purpose, the current regulation specifies the use of the mortality
table prescribed by the Internal Revenue Service under Revenue Ruling
95-6 (the ``95-6 Mortality Table'').
On December 2, 2005, at 70 FR 72205, PBGC published a final rule
modifying part 4044 of its regulations to update the mortality tables
in Appendix A. PBGC uses these updated mortality tables to derive the
interest factors it prescribes under part 4044. In deriving these
interest factors, PBGC attempts to match market annuity prices. The new
mortality tables result in interest factors that are higher than they
would have been using the old tables.
Before the part 4044 mortality tables were updated, the 95-6
Mortality Table reasonably approximated a unisex blend of the part 4044
healthy-life mortality tables and, when combined with the part 4044
interest factors (as is required under part 4050), produced values that
reasonably matched the market prices of annuities. However, the 95-6
Mortality Table no longer approximates a unisex blend of the part 4044
mortality tables and, when combined with the part 4044 interest
factors, will tend to produce values that are lower than market annuity
prices.
Therefore, PBGC is amending part 4050 to update the mortality rates
used to value annuity benefits. The updated rates will be a fixed blend
of 50 percent of the healthy male mortality rates under part 4044 and
50 percent of the healthy female mortality rates under part 4044.
This amendment is applicable to plans terminating on or after the
effective date of this amendment.
In addition, PBGC is correcting the cross-reference in paragraph
(4) of the definition of ``missing participant annuity assumptions.''
The current reference to Sec. 4044.52(e) should be to Sec.
4044.52(d).
Part 4281--Duties of Plan Sponsor Following Mass Withdrawal
PBGC is amending Sec. 4281.14 by adding a new paragraph (f), which
provides that, for valuing deferred annuities, the mortality of the
contingent annuitant during the deferral period is disregarded. This is
because a contingent annuitant who dies during the deferral period may
be replaced with a different contingent annuitant. This amendment
conforms to the assumptions used for single-employer plans. This
amendment is applicable to valuations with valuation dates on or after
the effective date of this rule.
On July 12, 2006, at 71 FR 39205, PBGC published a Technical
Amendment to part 4281 making conforming changes to paragraphs (c),
(d), and (e) of Sec. 4281.14 that were inadvertently omitted from the
final rule amending part 4044, published on December 2, 2005, at 70 FR
72205. PBGC is restating Sec. 4281.14 in its entirety to incorporate
those technical amendments into this rulemaking.
Compliance With Rulemaking Guidelines
PBGC has determined, in consultation with the Office of Management
and Budget, that this rule is a not a ``significant regulatory action''
under Executive Order 12866, and, therefore, is not subject to OMB
review.
PBGC certifies under section 605(b) of the Regulatory Flexibility
Act that this rule will not have a significant economic impact on a
substantial number of small entities. The economic impact on a
particular plan of these amendments is expected to be minimal. The
adjustment for each benefit valuation will generally be small. In
addition, the change to part 4050 will affect only a small number of
participants (i.e., missing participants). The change to 4281 also will
affect only a small number of participants (i.e., deferred annuitants
in multiemployer plans experiencing mass withdrawal). Therefore, this
rule is not expected to have a significant economic impact on a
substantial number of entities of any size. Accordingly, sections 603
and 604 of the Regulatory Flexibility Act do not apply.
[[Page 75117]]
List of Subjects for 29 CFR Parts 4050 and 4281
Employee benefit plans, Pension insurance, Reporting and
recordkeeping requirements.
0
For the reasons set forth above, PBGC amends parts 4050 and 4281 of 29
CFR chapter XL as follows:
PART 4050--MISSING PARTICIPANTS
0
1. The authority citation for part 4050 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1350.
0
2. Amend Sec. 4050.2, by revising paragraphs (2) and (4) of the
definition of Missing participant annuity assumptions to read as
follows:
Sec. 4050.2 Definitions.
* * * * *
Missing participant annuity assumptions means the interest rate
assumptions and actuarial methods for valuing benefits under Sec.
4044.52 of this chapter, applied--
(1) * * *
(2) Using mortality rates that are a fixed blend of 50 percent of
the healthy male mortality rates in Sec. 4044.53(c)(1) of this chapter
and 50 percent of the healthy female mortality rates in Sec.
4044.53(c)(2) of this chapter;
(3) * * *
(4) Without making the adjustment for expenses provided for in
Sec. 4044.52(d) of this chapter; and
* * * * *
PART 4281--DUTIES OF PLAN SPONSOR FOLLOWING MASS WITHDRAWAL
0
3. The authority citation for part 4281 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1341a, 1399(c)(1)(D), and 1441.
0
4. Revise Sec. 4281.14 to read as follows:
Sec. 4281.14 Mortality assumptions.
(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), (e), and (f)
of this section to value benefits under Sec. 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 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 projected from 1994 to the calendar year in
which the valuation date occurs plus 10 years using Scale AA from Table
2 of Appendix A to part 4044 of this chapter; and
(2) For female participants, the rates in Table 3 of Appendix A to
part 4044 of this chapter projected from 1994 to the calendar year in
which the valuation date occurs plus 10 years using Scale AA from Table
4 of Appendix A to part 4044 of this chapter.
(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 lesser of--
(i) The rate determined from Table 1 of Appendix A to part 4044 of
this chapter projected from 1994 to the calendar year in which the
valuation date occurs plus 10 years using Scale AA from Table 2 of
Appendix A to part 4044 of this chapter and setting the resulting table
forward three years, or
(ii) The rate in Table 5 of Appendix A to part 4044 of this
chapter.
(2) For female participants, the lesser of--
(i) The rate determined from Table 3 of Appendix A to part 4044 of
this chapter projected from 1994 to the calendar year in which the
valuation date occurs plus 10 years using Scale AA from Table 4 of
Appendix A to part 4044 of this chapter and setting the resulting table
forward three years, or
(ii) The rate in Table 6 of Appendix A to part 4044 of this
chapter.
(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--
(1) For male participants, the rates in Table 5 of Appendix A to
part 4044 of this chapter; and
(2) For female participants, the rates in Table 6 of Appendix A to
part 4044 of this chapter.
(f) Contingent annuitant mortality during deferral period. If a
participant's joint and survivor benefit is valued as a deferred
annuity, the mortality of the contingent annuitant during the deferral
period will be disregarded.
Issued in Washington, DC, this 8th day of December, 2006.
Elaine L. Chao,
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.
Judith R. Starr,
Secretary, Board of Directors, Pension Benefit Guaranty Corporation.
[FR Doc. E6-21280 Filed 12-13-06; 8:45 am]
BILLING CODE 7709-01-P