[Federal Register Volume 60, Number 164 (Thursday, August 24, 1995)] [Proposed Rules] [Pages 44158-44179] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 95-21065] [[Page 44157]] _______________________________________________________________________ Part VI Pension Benefit Guaranty Corporation _______________________________________________________________________ 29 CFR Part 2606, et al. Missing Participants; Proposed Rule Federal Register / Vol. 60, No. 164 / Thursday, August 24, 1995 / Proposed Rules [[Page 44158]] PENSION BENEFIT GUARANTY CORPORATION 29 CFR Parts 2606, 2616, 2617, and 2629 RIN 1212-AA81 Missing Participants AGENCY: Pension Benefit Guaranty Corporation. ACTION: Proposed rule. ----------------------------------------------------------------------- SUMMARY: The Pension Benefit Guaranty Corporation is proposing a regulation to implement the new missing participants program under section 4050 of the Employee Retirement Income Security Act of 1974. Section 4050 applies to single-employer defined benefit plans distributing benefits in accordance with the standard termination procedures of Title IV. DATES: Comments must be received by October 10, 1995. ADDRESSES: Comments should be mailed to the Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026, or delivered to suite 340 at that address. Written comments will be available for public inspection at the PBGC's Communications and Public Affairs Department, suite 240 at the same address. FOR FURTHER INFORMATION CONTACT: Harold J. Ashner, Assistant General Counsel, or Deborah C. Murphy, Attorney, Office of the General Counsel, suite 340, Pension Benefit Guaranty Corporation, 1200 K Street NW., Washington, DC 20005-4026; 202-326-4024 (202-326-4179 for TTY and TDD). SUPPLEMENTARY INFORMATION: When a fully-funded single-employer defined benefit pension plan terminates, the plan administrator must provide each participant and beneficiary with his or her benefit by purchasing an annuity from an insurer or paying a lump sum. Although in most cases the plan administrator can find all participants and beneficiaries, the plan administrator sometimes cannot do so. Plan administrators provide benefits to persons who cannot be located by purchasing annuities from insurers or, in some limited cases, depositing funds in financial institutions. In certain instances, an insurer may not provide an annuity, or a financial institution may decline to accept the funds. A person who later comes forward may have difficulty locating his or her benefit. Section 4050, which applies after final regulations go into effect, requires the plan administrator to distribute the benefits of a person who cannot be located by purchasing an annuity from an insurance company or paying funds to the PBGC. The PBGC will search for participants and beneficiaries for whom funds are paid to the PBGC, and pay benefits to those who are located (or their survivors). Participants and beneficiaries may also contact the PBGC to get the name of the insurance company from which an annuity was purchased or to obtain their benefits from the PBGC. This proposed rule implementing section 4050 applies to plans undergoing standard terminations and to plans undergoing distress terminations that are sufficient for guaranteed benefits and close out under the standard termination rules. The Administration has proposed extending the missing participants program to terminating defined contribution plans and to terminating defined benefit plans not covered by Title IV. This proposed rule addresses only the enacted program for terminating defined benefit plans covered by Title IV. Diligent Search A plan administrator must conduct a ``diligent search'' for a missing participant before paying the benefit to the PBGC. (The term ``missing participant'' includes beneficiaries as well as participants, and may include alternate payees under a qualified domestic relations order.) A search is a diligent search only if:The plan administrator asks any known beneficiaries of the missing participant for the missing participant's address; and The plan administrator uses a commercial locator service. The plan administrator must undertake the search at or after the beginning of the plan termination process, and in a manner reasonably expected to permit timely distributions to located participants and beneficiaries. A plan administrator may use additional search methods, such as the Internal Revenue Service's letter forwarding program for those attempting to locate missing individuals, or mailing correspondence to the missing participant's last known address with a request to the post office for an address correction. Payments to the PBGC (Designated Benefit) Amount A plan administrator that does not purchase an annuity for a missing participant must pay to the PBGC an amount (the ``designated benefit'') representing the value of the missing participant's plan benefit. The method for determining the amount to be paid depends mainly on the plan's provisions. If under the plan the missing participant would be paid a mandatory lump sum distribution--e.g., because the single sum value does not exceed $3,500--the plan administrator pays the amount of the mandatory lump sum to the PBGC. If the missing participant would not receive a mandatory lump sum under the plan, but the value of the missing participant's benefit is de minimis (i.e., the benefit has a value of $3,500 or less) under the ``missing participant lump sum assumptions'', the plan administrator pays that value. For the remaining missing participants, the plan administrator determines whether the missing participant can elect an immediate lump sum under the plan as of the ``deemed distribution date'' selected by the plan administrator (generally between the distribution date for non-missing participants and the end of the permitted distribution period). If not, the plan administrator pays the value of the missing participant's benefit calculated under the ``missing participant annuity assumptions.'' If the missing participant can elect a lump sum, the plan administrator pays an amount equal to the greater of the lump sum using plan assumptions or the value of the benefit using the missing participant annuity assumptions. PBGC Assumptions and Calculation Methods Certain relevant information, such as the future marital status of a missing participant or whether the missing participant is still alive, is not available to the plan administrator. The PBGC has developed a number of simplifying assumptions to deal with these and other issues under the missing participants program. These assumptions take into account the value of the various benefits the missing participant (or his or her beneficiary) could receive under the plan. The PBGC invites public comment on these assumptions. The actuarial assumptions used under the missing participants program are based on the lump sum and annuity assumptions in the PBGC's single-employer valuation regulation (29 CFR Part 2619). (The PBGC intends to propose new assumptions for valuing lump sums and the final missing [[Page 44159]] participant regulations may reflect those changes.) However, the mortality tables and loading charges in the valuation regulation are modified and the ``most valuable benefit'' is used instead of the benefit at the expected retirement age. For a missing participant whose benefit is in pay status, the most valuable benefit is the benefit in pay status. For a participant whose benefit is not in pay status, the plan administrator assumes the participant is married to a spouse the same age, and the participant's qualified joint and survivor annuity under the plan is valued at each age between the participant's earliest early retirement age and the participant's normal retirement age to find the most valuable benefit. For a beneficiary whose benefit is not in pay status, the plan administrator assumes the beneficiary is not married, and the beneficiary's automatic form of benefit under the plan is valued at each age between the deceased participant's earliest early retirement age and the participant's normal retirement age to find the most valuable benefit. Several special rules apply, including rules for when there are employee contributions to the plan or distributions of residual assets to missing participants. Benefit Payments by the PBGC If a plan administrator pays an amount to the PBGC for a missing participant, and the missing participant (or his or her beneficiary or estate) later contacts the PBGC or is located through the PBGC search process, the PBGC provides benefits as described below. (If a plan administrator purchases an annuity for a missing participant, and the missing participant (or his or her beneficiary or estate) later contacts the PBGC, the PBGC advises the person of the identity of the insurance company that issued the annuity.) Automatic Lump Sums The PBGC pays a lump sum to a located missing participant if the plan would have paid the missing participant a mandatory lump sum. The lump sum equals the amount paid to the PBGC plus interest. If, unknown to the plan administrator, the missing participant died before the deemed distribution date, and if the plan so provides, the PBGC pays the lump sum to the missing participant's beneficiary or estate. If the missing participant dies on or after the deemed distribution date, the PBGC pays the lump sum to the missing participant's estate. Similar rules apply when, although a mandatory lump sum would not be paid to the missing participant under the plan, the PBGC could pay a de minimis lump sum under the guaranteed benefit program because the value of the benefit was $3,500 or less under the missing participant lump sum assumptions. In this case, however, the participant or beneficiary may decline the de minimis lump sum and elect to receive an equivalent annuity to the extent that participants and beneficiaries in the PBGC's guaranteed benefits program have that option. Annuities In other cases the PBGC pays the benefit in the forms available under the guaranteed benefits program. If the missing participant is a participant and is alive, the form is typically a qualified joint and survivor annuity or, for unmarried participants, a single life annuity. A living missing participant's annuity equals the annuity that can be purchased with the amount the plan administrator paid to the PBGC (minus the loading charge) using the missing participant annuity assumptions in effect at the deemed distribution date. A missing participant whose benefit was in pay status before becoming missing receives back payments and continuation of the original benefit. A missing participant who could have received an immediate lump sum as of the deemed distribution date under the plan may elect a lump sum payment from the PBGC (after obtaining any required spousal consent). The lump sum equals the amount paid to the PBGC plus interest. If the missing participant is a participant and dies before receiving benefits from the PBGC, the PBGC pays the missing participant's surviving spouse (unless the spouse has properly waived the benefit) a preretirement survivor annuity, based on a joint and 50 percent survivor annuity that is the actuarial equivalent of the amount paid to the PBGC (minus the loading charge). A beneficiary of such a deceased missing participant who was in pay status receives the benefit the beneficiary would have received under the plan, including, where appropriate, back payments. A beneficiary of a missing participant who died before the deemed distribution date may establish that he or she is the proper beneficiary under the plan, or that he or she would have received benefits in a different form, at a different time, or in a different amount. If the beneficiary establishes this to the PBGC's satisfaction, the beneficiary will receive the revised benefit. However, the total actuarial value as of the deemed distribution date of all benefits payable will be limited to the designated benefit. A spouse or other beneficiary of a deceased missing participant may elect a lump sum equivalent of the survivor annuity if the missing participant could have elected a lump sum under the plan. Guaranteed Benefit If a missing participant or his or her beneficiary establishes, to the PBGC's satisfaction, that the designated benefit paid to the PBGC was less than the amount that should have been paid as a designated benefit, the PBGC will increase the benefit to reflect the correct designated benefit or, if less, the value of the guaranteed benefit. Procedural Requirements The plan administrator pays the designated benefits to the PBGC by the time the post-distribution certification (PDC) required under the PBGC's plan termination regulation is due. (Interest is assessed if the payment is late.) At the same time, the plan administrator must give the PBGC certifications and information about all missing participants, as required by new Schedule MP and its instructions, which are set forth as an addendum to this proposed rule document. Special rules are provided for missing participants who are discovered to be missing shortly before the deemed distribution date (``recently-missing participants'') and for participants who are located late in the process (``late-discovered participants''). The PBGC has discretion to return to the plan administrator the designated benefit of a missing participant found within 30 days after the PBGC receives the designated benefit. The plan administrator will then distribute the benefit under the plan to that individual. The PBGC will review compliance with the missing participant program as part of its standard termination audits. The six-year recordkeeping requirement that applies generally to plan records associated with the termination process (Secs. 2616.9 and 2617.10) applies to missing participant records. Paperwork Reduction Act The collection of information requirements contained in the proposed regulation on missing participants, and the forms and instructions to be used under the missing participants program, have been submitted to the Office of Management and Budget for review under section 3504(h) of the Paperwork Reduction Act of 1980. The PBGC needs the information submitted by plan [[Page 44160]] administrators of terminating single-employer plans to identify, for missing participants whose benefits are annuitized, the insurance companies that are to provide their benefits; to attempt to locate missing participants for whom benefits are paid to the PBGC and to pay their benefits; and to monitor and audit compliance with all applicable requirements. The PBGC estimates that it will take an average of 2.46 hours to comply with the collection of information requirements under the proposed regulation and, based on its experience with trusteed plans, that about 500 plans will be required to comply each year. Accordingly, the estimated burden of the collection of information is 1,230 hours. Copies of the proposed forms and instructions are set forth as an addendum to this proposed rule document. Comments on the paperwork provisions of the proposed rule and on the forms and instructions should be mailed to the Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for the Pension Benefit Guaranty Corporation, Washington, DC 20503. Comments may address (among other things)-- Whether the proposed collection of information is needed for the proper performance of the PBGC's functions and will have practical utility; The accuracy of the PBGC's estimate of the burden of the proposed collection of information; Enhancement of the quality, utility, and clarity of the information to be collected; and Minimizing the burden of the collection of information on respondents through the use of automated collection techniques (or other forms of information technology) or in other ways. In particular, the PBGC invites suggestions regarding procedures for submitting some or all of the required information electronically. Compliance With Rulemaking Guidelines The PBGC has determined that this action is not a ``significant regulatory action'' under the criteria set forth in Executive Order 12866 because the rule will not have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in Executive Order 12866. The PBGC certifies under section 605(b) of the Regulatory Flexibility Act that this regulation will not have a significant economic impact on a substantial number of small entities. Pension plans with fewer than 100 participants have traditionally been treated as small plans. Plan administrators of terminating plans of all sizes already have a duty to determine the amounts of all benefits, to attempt to locate all persons entitled to benefits, and to annuitize or provide cash accounts for those who cannot be found. The primary effect of this regulation is to substitute a formal procedure involving the PBGC for the informal procedures already being followed. The PBGC does not expect the standardization of these procedures to have a significant effect on plan administrators' burdens. Accordingly, sections 603 and 604 of the Regulatory Flexibility Act do not apply. List of Subjects 29 CFR Part 2606 Employee benefit plans, Pension insurance, Pensions, Administrative practice and procedure. 29 CFR Parts 2616, 2617, and 2629 Employee benefit plans, Pension insurance, Pensions, Reporting and recordkeeping requirements. In consideration of the foregoing, the PBGC proposes to amend 29 CFR chapter XXVI as follows. 1. Part 2629 is added to subchapter C to read as follows: PART 2629--MISSING PARTICIPANTS Sec. 2629.1 Purpose and scope. 2629.2 Definitions. 2629.3 Method of distribution for missing participants. 2629.4 Diligent search. 2629.5 Designated benefit. 2629.6 Payment and required documentation. 2629.7 Benefits of missing participants--in general. 2629.8 Automatic lump sum. 2629.9 Annuity or elective lump sum--living missing participant. 2629.10 Annuity or elective lump sum--deceased missing participant. 2629.11 Limitations. 2629.12 Special rules. Appendix A--Examples of designated benefit determinations for missing participants under Sec. 2629.5. Appendix B--Examples of benefit payments for missing participants under Sec. 2629.8 through Sec. 2629.10. Authority: 29 U.S.C. 1302(b)(3), 1350. Sec. 2629.1 Purpose and scope. (a) Purpose. This part prescribes rules for distributing benefits under a terminating plan to any individual whom the plan administrator has not located when distributing benefits under Sec. 2617.28(c) of this chapter. (b) Scope. This part applies to a plan if the plan's deemed distribution date (or the date of other payments made in accordance with Sec. 2629.12) is in a plan year beginning on or after the effective date of this part. Sec. 2629.2 Definitions. For purposes of this part: (a) Act means the Employee Retirement Income Security Act of 1974, as amended. (b) Code means the Internal Revenue Code of 1986, as amended. (c) Deemed distribution date means the date 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 missing participants whose designated benefits are paid to the PBGC, but not later than the last day of the period in which distribution may be made under Sec. 2616.29(a) or 2617.28(a) of this chapter (whichever applies). (d) Designated benefit means the amount payable to the PBGC for a missing participant pursuant to Sec. 2629.5. (e) Designated benefit interest rate means the rate of interest applicable to underpayments of guaranteed benefits by the PBGC under Sec. 2623.11(d) of this chapter. (f) 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 parts 2613 and 2621 of this chapter (treating the deemed distribution date as the date of plan termination for this purpose). (g) 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. [[Page 44161]] (h) 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. (i) Missing participant annuity assumptions means the interest rate assumptions and actuarial methods (using the interest rates for annuity valuation in Appendix B to part 2619 of this chapter) for valuing a benefit to be paid by the PBGC as an annuity under part 2619 of this chapter, applied-- (1) As if the deemed distribution date were the date of plan termination; (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, 1995-4 IRB 22, January 23, 1995 (Internal Revenue Bulletins are available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402); (3) Without using the expected retirement age assumptions in Subpart D to part 2619 of this chapter; and (4) By adding $300 for each missing participant as an adjustment (loading) for expenses (instead of the adjustment for expenses provided for in Sec. 2619.49(a)(4) of this chapter). (j) Missing participant forms and instructions means PBGC Forms 501 and 602, Schedule MP thereto, and related forms, and their instructions. (k) Missing participant lump sum assumptions means the interest rate assumptions and actuarial methods (using the interest rates for lump sum valuations in Appendix B to part 2619 of this chapter) for valuing a benefit to be paid by the PBGC as a lump sum under part 2619 of this chapter, applied-- (1) As if the deemed distribution date were the date of plan termination; (2) Using mortality assumptions for healthy lives only (from Table I of Appendix A to part 2619 of this chapter, substituting x+1 for x); and (3) Without using the expected retirement age assumptions in Subpart D to part 2619 of this chapter. (l) Pay status means, with respect to a benefit, that, as of the deemed distribution date, one or more benefit payments have been made or would have been made except for administrative delay or a waiting period. (m) Post-distribution certification means the post-distribution certification required by Sec. 2616.29(b) or 2617.28(h) of this chapter. (n) Plan administrator means the administrator as defined in section 4001(a)(1) of the Act. (o) Recently-missing participant means a participant or beneficiary entitled to a distribution under a terminating plan whom the plan administrator discovers to be missing on or after the 90th day before the deemed distribution date. (p) Unloaded designated benefit means the designated benefit reduced by $300. Sec. 2629.3 Method of distribution for missing participants. The plan administrator of a terminating plan shall distribute benefits for each missing participant by-- (a) Purchasing an irrevocable commitment from an insurer in accordance with Sec. 2617.28(c) or Sec. 2616.29(a)(1) of this chapter (whichever is applicable); or (b) Paying the PBGC a designated benefit in accordance with Secs. 2629.4 through 2629.6 (subject to the special rules in Sec. 2629.12). Sec. 2629.4 Diligent search. (a) Search required. A plan administrator shall make a diligent search for each missing participant whose designated benefit 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 plan administrator-- (1) Begins the search at or after the time when notices of intent to terminate are issued and carries on the search 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) Makes inquiry of any plan beneficiaries and alternate payees of the missing participant whose names and addresses are known to the plan administrator; and (3) Engages a commercial locator service to search for the missing participant. Sec. 2629.5 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 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 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, the most valuable benefit is the benefit in pay status. For a missing participant whose benefit is not in pay status, 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 [[Page 44162]] 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, 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, the form and beneficiary of the participant's benefit are the form of benefit and beneficiary of the benefit in pay status. (3) Beneficiary. A missing participant who is a beneficiary, and whose benefit is not in pay status, 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, the form and beneficiary of the beneficiary's benefit are the form of benefit and beneficiary of the benefit in pay status. (4) Examples. See Appendix A 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 Sec. 2629.6 and shall be deemed made on the deemed distribution date. Sec. 2629.6 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 post-distribution certification is due (determined in accordance with Secs. 2616.7(a) and 2617.8(a) 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. In the case of a recently- missing participant, the plan administrator shall pay the designated benefit 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 the diligent search is not complete when the plan administrator submits the filing described in paragraph (a)(1) of this section, the plan administrator shall indicate this in that filing and submit an amended filing (including an amended post-distribution certification) within 120 days after the deemed distribution date. (3) Late-discovered participants. When it is impracticable for the plan administrator to include complete and accurate final information on a late-discovered participant in a timely post-distribution certification, the plan administrator shall submit an amended post- distribution certification within 120 days after the deemed distribution date 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 Sec. 2610.7 of this chapter. (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 and determining benefits to be paid by the PBGC under this part. (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. Sec. 2629.7 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 for whom a plan administrator paid a designated benefit to the PBGC (or his or her beneficiary or estate), the PBGC will pay benefits in accordance with Secs. 2629.8 through 2629.10 (subject to the limitations and special rules in Secs. 2629.11 and 2629.12). (c) Examples. See Appendix B for examples illustrating the provisions of Secs. 2629.8 through 2629.10. Sec. 2629.8 Automatic lump sum. This section applies to a missing participant whose designated benefit was determined under Sec. 2629.5(a)(1) (mandatory lump sum) or Sec. 2629.5(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 Sec. 2629.5(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 [[Page 44163]] elected by the missing participant (or the beneficiary), but not 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 monthly (or other periodic) benefit paid will be actuarially equivalent to the designated benefit, i.e., each 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. Sec. 2629.9 Annuity or elective lump sum--living missing participant. This section applies to a missing participant whose designated benefit was determined under Sec. 2629.5(a)(3) (no lump sum) or Sec. 2629.5(a)(4) (elective lump sum) and who is living on the date as of which benefits commence. (a) Missing participant whose benefit is not in pay status. The PBGC will pay the benefit of a missing participant whose benefit is not in pay status 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 (but not 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 monthly (or other periodic) benefit that is actuarially equivalent to the unloaded designated benefit, i.e., each 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 is in pay status. The PBGC will pay the benefit of a missing participant whose benefit is in pay status as follows. (1) Time and form of benefit. The PBGC will pay the benefit in the form that was in effect, beginning when the missing participant is located. (2) Amount of benefit. The PBGC will pay the monthly (or other periodic) amount of the benefit that was in pay status, plus a lump sum equal to the payments the missing participant would have 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 Sec. 2629.5(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 the Act). 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. Sec. 2629.10 Annuity or elective lump sum--deceased missing participant. This section applies to a beneficiary of a deceased missing participant whose designated benefit was determined under Sec. 2629.5(a)(3) (no lump sum) or Sec. 2629.5(a)(4) (elective lump sum) and whose benefit is not payable under Sec. 2629.9. (a) If missing participant died with benefit not in pay status. (1) General rule. (i) Beneficiary. The PBGC will pay a benefit to the surviving spouse of a missing participant who is a participant and whose benefit is not in pay status (unless the surviving spouse has properly waived a benefit in accordance with section 205 of the Act). (ii) Form and amount of benefit. The PBGC will pay the survivor benefit in the form of a single life annuity. Each 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% survivor annuity in the form described in Sec. 2619.49(f)(1) of this chapter beginning on the annuity starting date. (iii) Time of benefit. The PBGC will pay the survivor benefit beginning at the time elected by the surviving spouse (but not 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 Sec. 2629.5(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 missing participant died with benefit in pay status. (1) Beneficiary. The PBGC will pay benefits to the beneficiary (if any) of the benefit that was in pay status. (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 as of which the benefit is paid under paragraph (b)(4) of this section. 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 [[Page 44164]] lump sum payment, the PBGC will pay the lump sum to such beneficiary. (4) Time of benefit. The PBGC will pay the survivor benefit when the beneficiary is located. Sec. 2629.11 Limitations. (a) Exclusive benefit. The benefits provided for under Secs. 2629.8 through 2629.10 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 Secs. 2629.8 through 2629.10, 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 Secs. 2629.8 through 2629.10 (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 parts 2613 and 2621 of this chapter (treating the deemed distribution date as the date of plan termination for this purpose); or (2) The benefit based on the designated benefit that should have been paid under Sec. 2629.5. (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 located. Sec. 2629.12 Special rules. (a) Late-discovered participants. The plan administrator of a plan that terminates with one or more late-discovered participants shall (after issuing notices to each such participant in accordance with Secs. 2616.22 and 2616.27 or 2617.22 and 2617.23 of this chapter (whichever apply)), distribute each such late-discovered participant's benefit within the period described in Sec. 2616.29(a) or 2617.28(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. (b) Missing participants located quickly. Notwithstanding the provisions of Secs. 2629.8 through 2629.10, 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 the Act 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 Sec. 2629.5(b). (d) Employee contributions. (1) Mandatory employee contributions. Notwithstanding the provisions of Sec. 2629.5, if a missing participant's contributions were mandatory (within the meaning of section 4044(a)(2) of the Act), 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 the Act (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 the Act) 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 Sec. 2629.6. 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 Secs. 2629.8 through 2629.10, 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 Sec. 2629.8 (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 the Act, 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. 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 for 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 the Act) that is sufficient for at least all guaranteed benefits and that distributes its assets in the manner described in section 4041(b)(3) of the Act, the benefit assumed to be payable by the plan for purposes of determining the amount of the designated benefit under Sec. 2629.5 shall be limited to the Title IV benefit (as defined in Sec. 2616.2 of this chapter). (g) Similar rules for later payments. If the PBGC determines, upon audit of a plan termination, that one or more persons should receive benefits (which may be in addition to benefits already provided) in order for a termination to be valid, 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 the Act, how the provisions of this part shall apply to such benefits. Appendix A--Examples of Designated Benefit Determinations for Missing Participants Under Sec. 2629.5 The calculation of the designated benefit under Sec. 2629.5 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 Sec. 2629.5(a)(1), the plan [[Page 44165]] 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 Sec. 2629.5(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 Sec. 2629.5(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 Sec. 2629.5(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 x (1-.16)) to $630 at age 60 (the earliest retirement age) ($1,000 x (1-5 x (.05)) x (1-.16)). (3) Under Sec. 2629.5(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 the definition of ``missing participant annuity assumptions'' in Sec. 2629.2(i)(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. (In accordance with Sec. 2619.49(d)(5), 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 x $630 x 5.4307). The designated benefit is equal to this value plus an expense adjustment of $300, or a total of $41,356. Appendix B--Examples of Benefit Payments for Missing Participants Under Secs. 2629.8 Through 2629.10 The provisions of Secs. 2629.8 through 2629.10 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 x 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 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. 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 Sec. 2629.2(i)(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 x 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 2606--RULES FOR ADMINISTRATIVE REVIEW OF AGENCY DECISIONS 2. The authority citation for part 2606 continues to read as follows: Authority: 29 U.S.C. 1302(b)(3). 3. In Sec. 2606.1, paragraph (b)(8) is amended by removing the word ``and''; paragraph (b)(9) is amended by removing the period at the end of the paragraph and adding in its place ``; and''; and a new paragraph (b)(10) is added to read as follows: Sec. 2606.1 Purpose and scope. * * * * * (b) Scope. * * * * * * * * (10) Determinations-- (i) That the amount of a participant's or beneficiary's benefit under section 4050(a)(3) of the Act has been correctly computed based on the designated benefit paid to the PBGC under section 4050(b)(2) of the Act, 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. * * * * * Sec. 2606.51 [Amended] 4. Section 2606.51 is amended by removing the words ``Sec. 2606.1(b)(5) through (9)'' and adding in their place the words ``Sec. 2606.1(b)(5) through (10)''. PART 2616--DISTRESS TERMINATIONS OF SINGLE-EMPLOYER PLANS PART 2617--STANDARD TERMINATIONS OF SINGLE-EMPLOYER PLANS 5. The authority citations for parts 2616 and 2617 are revised to read as follows: Authority: 29 U.S.C. 1302(b)(3), 1341, 1344, 1350. Sec. 2616.2, Sec. 2617.2 [Amended] 6. In Secs. 2616.2 and 2617.2, the definition of date of distribution is amended by removing the period at the end of paragraph (2); adding in its place a semicolon; and adding after the semicolon the words ``except that date of distribution means the deemed distribution date in the case of a designated benefit paid to the PBGC, or a benefit provided after the deemed distribution date to a late- discovered participant, in accordance with part 2629 of this chapter (dealing with missing participants).'' Sec. 2616.7, Sec. 2617.8 [Amended] 7. In Secs. 2616.7 and 2617.8, paragraph (b) is amended by removing the words ``Any document'' and adding in their place the words ``Except as may otherwise be provided in applicable forms and instructions, any document''. [[Page 44166]] Sec. 2616.29, Sec. 2617.28 [Amended] 8. Paragraph (b) of Sec. 2616.29 and paragraph (h) of Sec. 2617.28 are amended by adding at the end of Sec. 2616.29(b) and Sec. 2617.28(h) the words ``The plan administrator shall be considered to have satisfied this requirement if, in accordance with Sec. 2629.11 of this chapter, the plan administrator timely files an amended post- distribution certification that otherwise satisfies all applicable requirements.'' 9. In Sec. 2617.28, paragraph (c) is amended by adding at the end a new sentence to read as follows: Sec. 2617.28 Closeout of plan. * * * * * (c) Method of distribution. * * * The plan administrator shall comply with part 2629 of this chapter (dealing with missing participants), if applicable. * * * * * Issued in Washington, DC, this 21st day of August, 1995. Martin Slate, Executive Director, Pension Benefit Guaranty Corporation. Addendum (Draft forms and instructions for Part 2629) (Note: A draft of the missing participant forms and instructions follows. These forms and instructions will not appear in the Code of Federal Regulations.) BILLING CODE 7708-01-P [[Page 44167]] [GRAPHIC][TIFF OMITTED]TP24AU95.000 [[Page 44168]] [GRAPHIC][TIFF OMITTED]TP24AU95.001 [[Page 44169]] [GRAPHIC][TIFF OMITTED]TP24AU95.002 [[Page 44170]] [GRAPHIC][TIFF OMITTED]TP24AU95.003 [[Page 44171]] [GRAPHIC][TIFF OMITTED]TP24AU95.004 [[Page 44172]] [GRAPHIC][TIFF OMITTED]TP24AU95.005 [[Page 44173]] [GRAPHIC][TIFF OMITTED]TP24AU95.006 [[Page 44174]] [GRAPHIC][TIFF OMITTED]TP24AU95.007 [[Page 44175]] [GRAPHIC][TIFF OMITTED]TP24AU95.008 [[Page 44176]] [GRAPHIC][TIFF OMITTED]TP24AU95.009 [[Page 44177]] [GRAPHIC][TIFF OMITTED]TP24AU95.010 [[Page 44178]] [GRAPHIC][TIFF OMITTED]TP24AU95.011 [[Page 44179]] [GRAPHIC][TIFF OMITTED]TP24AU95.012 [FR Doc. 95-21065 Filed 8-23-95; 8:45 am] BILLING CODE 7708-01-C