Allocation of Assets in Single-Employer Plans; Valuation of Benefits and Assets; Expected Retirement Age

Federal Register, Volume 79 Issue 230 (Monday, December 1, 2014)

Federal Register Volume 79, Number 230 (Monday, December 1, 2014)

Rules and Regulations

Pages 71019-71020

From the Federal Register Online via the Government Printing Office www.gpo.gov

FR Doc No: 2014-28216

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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4044

Allocation of Assets in Single-Employer Plans; Valuation of Benefits and Assets; Expected Retirement Age

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This rule amends the Pension Benefit Guaranty Corporation's regulation on Allocation of Assets in Single-Employer Plans by substituting a new table for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2015. This table is needed in order to compute the value of early retirement benefits and, thus, the total value of benefits under a plan.

DATES: Effective Date: January 1, 2015.

FOR FURTHER INFORMATION CONTACT: Catherine B. Klion (Klion.Catherine@pbgc.gov), Assistant General Counsel for Regulatory Affairs, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005, 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: The Pension Benefit Guaranty Corporation (PBGC) administers the pension plan termination insurance program under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA). PBGC's regulation on Allocation of Assets in Single-Employer Plans (29 CFR part 4044) sets forth (in subpart B) the methods for valuing plan benefits of terminating single-employer plans covered under Title IV. Guaranteed benefits and benefit liabilities under a plan that is undergoing a distress termination must be valued in accordance with subpart B of part 4044. In addition, when PBGC terminates an underfunded plan involuntarily pursuant to ERISA section 4042(a), it uses the subpart B valuation rules to determine the amount of the plan's underfunding.

Under Sec. 4044.51(b) of the asset allocation regulation, early retirement benefits are valued based on the annuity starting date, if a retirement date has been selected, or the expected retirement age, if the annuity starting date is not known on the valuation date. Sections 4044.55 through 4044.57 set forth rules for determining the expected retirement ages for plan participants entitled to early retirement benefits. Appendix D of part 4044 contains tables to be used in determining the expected early retirement ages.

Table I in appendix D (Selection of Retirement Rate Category) is used to determine whether a participant has a low, medium, or high probability of retiring early. The determination is based on the year a participant would reach ``unreduced retirement age'' (i.e., the earlier of the normal retirement age or the age at which an unreduced benefit is first payable) and the participant's monthly benefit at unreduced retirement age. The table applies only to plans with valuation dates in the current year and is updated annually by the PBGC to reflect changes in the cost of living, etc.

Tables II-A, II-B, and II-C (Expected Retirement Ages for Individuals in the Low, Medium, and High Categories respectively) are used to determine the expected retirement age after the probability of early retirement has been determined using Table I. These tables establish, by probability category, the expected retirement age based on both the earliest age a participant could retire under the plan and the unreduced retirement age. This expected retirement age is used to compute the value of the early retirement benefit and, thus, the total value of benefits under the plan.

This document amends appendix D to replace Table I-14 with Table I-

15 in order to provide an updated correlation, appropriate for calendar year 2015, between the amount of a participant's benefit and the probability that the participant will elect early retirement. Table I-

15 will be used to value benefits in plans with valuation dates during calendar year 2015.

PBGC has determined that notice of, and public comment on, this rule are impracticable and contrary to the public interest. Plan administrators need to be able to estimate accurately the value of plan benefits as early as possible before initiating the termination process. For that purpose, if a plan has a valuation date in 2015, the plan administrator needs the updated table being promulgated in this rule. Accordingly, the public interest is best served by issuing this table expeditiously, without an opportunity for notice and comment, to allow as much time as possible to estimate the value of plan benefits with the proper table for plans with valuation dates in early 2015.

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 regulation, the Regulatory Flexibility Act of 1980 does not apply (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--ALLOCATION OF ASSETS IN SINGLE-EMPLOYER PLANS

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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.

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2. Appendix D to part 4044 is amended by removing Table I-14 and adding in its place Table I-15 to read as follows:

   Appendix D to Part 4044--Tables Used to Determine Expected Retirement Age

   Table I-15--Selection of Retirement Rate Category

   For Plans with valuation dates after December 31, 2014, and before January 1, 2016

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   Participant's retirement rate category is--

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   Low \1\ if Medium \2\ if monthly benefit High \3\ if

   If participant reaches URA in year-- monthly at URA is-- monthly

   benefit at URA -------------------------------- benefit at URA

   is less than-- is greater

   From-- To-- than--

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2016. 618 618 2,610 2,610

      Page 71020

2017. 631 631 2,667 2,667

2018. 646 646 2,728 2,728

2019. 661 661 2,791 2,791

2020. 676 676 2,855 2,855

2021. 691 691 2,921 2,921

2022. 707 707 2,988 2,988

2023. 724 724 3,057 3,057

2024. 740 740 3,127 3,127

      2025 or later................................... 757 757 3,199 3,199

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      \1\ Table II-A.

      \2\ Table II-B.

      \3\ Table II-C.

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      Issued in Washington, DC, this 24th day of November, 2014.

      Judith Starr,

      General Counsel, Pension Benefit Guaranty Corporation.

      FR Doc. 2014-28216 Filed 11-28-14; 8:45 am

      BILLING CODE 7709-02-P