[Federal Register Volume 60, Number 231 (Friday, December 1, 1995)]
[Rules and Regulations]
[Pages 61740-61747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29120]
[[Page 61739]]
_______________________________________________________________________
Part II
Pension Benefit Guaranty Corporation
_______________________________________________________________________
29 CFR Part 2606, et al.
Missing Participants; Final Rule
Federal Register / Vol. 60, No. 231 / Friday, December 1, 1995 /
Rules and Regulations
[[Page 61740]]
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Parts 2606, 2616, 2617, and 2629
RIN 1212-AA81
Missing Participants
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Final rule.
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SUMMARY: The Pension Benefit Guaranty Corporation is amending its
regulations 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.
EFFECTIVE DATE: January 1, 1996. The missing participants program is
effective for distributions in plan years beginning on or after January
1, 1996.
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: On August 24, 1995, the PBGC published in
the Federal Register (60 FR 44158) a proposed rule to implement section
4050 of ERISA.
When a participant or beneficiary cannot be located in a standard
termination a plan administrator can either purchase an annuity or pay
funds to the PBGC. If funds are paid to the PBGC, the PBGC will search
for the participant or beneficiary and pay benefits to those who are
located.
The missing participants regulation describes the ``diligent
search'' that must be made for a missing participant before funds are
paid to the PBGC. (The term ``missing participant'' includes
beneficiaries as well as participants, and thus may include alternate
payees under qualified domestic relations orders.) It also sets forth
rules on how to determine the amount to be paid to the PBGC (the
``designated benefit''), how to pay funds and submit information to the
PBGC, and how the PBGC will pay benefits when missing participants (or
their survivors) are found.
There were five statements commenting on the rule.
Diligent Search
A plan administrator must conduct a diligent search before paying a
missing participant's benefit to the PBGC. Commenters suggested that
the PBGC should not require plan administrators to use a commercial
locator service. They suggested that it should be sufficient if the
plan administrator uses the Internal Revenue Service or Social Security
Administration letter-forwarding programs, or simply uses the search
methods required by the prudence requirements of Title I of ERISA. One
commenter suggested that the PBGC should allow searches to be conducted
by persons other than the plan administrator and to start before the
plan begins the termination process.
The PBGC searches for participants in plans that the PBGC trustees.
It is the PBGC's experience that commercial locator services are cost-
effective, timely, and thorough. The IRS and SSA programs simply
forward letters, and a missing participant who receives a letter may or
may not contact the plan. Furthermore, IRS and SSA letter forwarding
times may vary, and the forwarding area may in some cases be limited to
one region of the country.
The diligent search requirement is independent of the prudence
requirement of ERISA. The diligent search requirement is intended to
ensure that plan administrators make every effort to search out a
missing participant before turning the effort over to the government.
The PBGC is changing the regulation to allow a search by someone
other than the plan administrator, as long as the plan administrator
certifies on the missing participant forms that a diligent search was
made, and to allow searches to commence up to six months before the
termination process begins. The final regulation also makes clear that
missing participants cannot be charged, nor their benefits reduced, to
pay search costs.
Payments to the PBGC (Designated Benefit)
One commenter questioned the assumptions used for calculating the
designated benefit. The commenter felt that the $300 administrative
load was inappropriate, especially for small benefits, that the
designated benefit should not be based on the ``most valuable''
benefit, and that, in most cases, the plan administrator should be able
to use plan assumptions.
The regulations include an explicit $300 per participant
administrative load that the plan administrator must pay when valuing
the participant's benefit using the missing participant annuity
assumptions. This load is a simplified version of the administrative
load that must be paid under the PBGC's single-employer annuity
valuation regulation. (The ``missing participant lump sum assumptions''
include an implicit load; insurance company annuity rates include
similar loads.) The final regulation provides that the $300 load will
not apply to benefits whose value is $3,500 or less.
The final regulation retains the proposed structure of the
designated benefit determination rules. Use of the most valuable
benefit is consistent with insurance company annuity pricing practices.
Use of the PBGC annuity assumptions is consistent with section
4050(b)(2)(C), which makes the designated benefit equal to the greater
of the lump sum (under plan assumptions) or the value of the annuity
(under PBGC assumptions).
Benefit Payments by the PBGC
The PBGC received no comments on provisions regarding its payment
of benefits, but is making clarifications in those provisions.
Procedural Requirements
One commenter stated that the PBGC's standard termination process
already had sufficient procedural deadlines and that the PBGC should
not add additional deadlines for the missing participants program. The
commenter also felt that the six-year recordkeeping requirement was too
long.
The regulation coordinates the missing participant filing
requirements with the termination requirements. The proposed
regulation's changes from the standard termination deadlines provide
relief from situations where, late in the termination process, the plan
administrator located a missing participant (``late-discovered
participant'') or discovered that a participant was missing
(``recently-missing participant''). The final regulation provides
further relief for these situations by allowing the PBGC in its sole
discretion, where there are unusual circumstances, to grant additional
extensions.
The final regulation leaves the recordkeeping requirement as six
years. This parallels the recordkeeping period for the rest of the
termination program and also the recordkeeping provisions of section
107 of ERISA.
Finally, in response to a commenter's question, the PBGC reminds
plan administrators that ERISA section 4071 prescribes penalties for
failure to provide certain material information timely, including
information under the missing participants regulation.
[[Page 61741]]
Forms and Instructions
One commenter claimed that the PBGC does not need the information
in items 3, 4, and 5 of Attachment B to Schedule MP. This is minimal
and simple information that tells the PBGC what benefit to pay and when
to pay it. The information is essential to the proper functioning of
the missing participants program.
In response to a comment, the PBGC has revised the instructions for
Schedule MP to clarify that unavailable or inapplicable information
need not be submitted. The PBGC has also made other minor modifications
to the missing participant forms and instructions.
The PBGC has implemented the revisions to Forms 501 and 602 and
their instructions that were published with the proposed missing
participants regulation. The termination forms booklets, which will
include Schedule MP (with attachments and instructions), can be
obtained from the PBGC's Standard Termination Compliance Division, 1200
K Street, N.W., Suite 930, Washington, DC 20005-4026, or by calling
202-326-4000 (202-326-4179 for hearing-impaired persons).
Compliance With Rulemaking and Paperwork Guidelines
The PBGC has determined that this action is not a ``significant
regulatory action'' under the criteria 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
additional economic impact on a substantial number of small entities,
given existing procedures. 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.
The collections of information contained in this part, and the
forms and instructions to be used under the missing participants
program, have been approved by the Office of Management and Budget
under OMB control number 1212-0036. An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a currently valid OMB control number.
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, 29 CFR chapter XXVI is amended
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--beneficiary of deceased
missing participant.
2629.11 Limitations.
2629.12 Special rules.
2629.13 OMB control number.
Appendix A to Part 2629--Examples of designated benefit determinations
for missing participants under Sec. 2629.5.
Appendix B to Part 2629--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 for 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 a payment made in accordance with
Sec. 2629.12) is in a plan year beginning on or after January 1, 1996.
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 (determined without regard to the
provisions of this part) 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.
(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;
[[Page 61742]]
(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
Subpart D to part 2619 of this chapter;
(4) Without making the adjustment for expenses provided for in
Sec. 2619.49(a)(4) 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.
(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 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.
(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
whom the plan administrator discovers to be a missing participant on or
after the 90th day before the deemed distribution date.
(p) 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
(i)(5) of this section.
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 from an insurer an irrevocable commitment that
satisfies the requirements of 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 diligent search shall be made for each
missing participant whose designated benefit (or voluntary employee
contributions under Sec. 2629.12(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).
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 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.
[[Page 61743]]
(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 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 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 Sec. 2629.12(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 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 (subject to extension under Sec. 2629.12(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
Sec. 2610.7 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.
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 (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 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 to this part 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
[[Page 61744]]
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.
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 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 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--beneficiary of 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 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 the Act).
(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% 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 (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
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 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
[[Page 61745]]
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.
Sec. 2629.11 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
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
notified of his or her right to a benefit.
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 (determined without regard to the provisions
of this part) 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 (subject to extension under Sec. 2629.12(h)).
(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 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
Sec. 2629.5(b).
(d) Employee contributions--(1) Mandatory employee contributions.
Notwithstanding the provisions of Sec. 2629.5, if a missing participant
made mandatory contributions (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. 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.
[[Page 61746]]
(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) plus any benefit to which funds under section 4022(c) of
the Act 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 the Act,
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 Sec. 2629.6(a) (2)(ii) and
(3) and the 90-day distribution period 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
Sec. 2629.12(b), or
(3) In other unusual circumstances.
(i) Payments beginning after age 70\1/2\. If the PBGC begins paying
an annuity under Sec. 2629.9(a) or 2629.10(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 70\1/2\, 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.)
Sec. 2629.13 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.
Appendix A to Part 2629--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 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 to Part 2629--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 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 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
[[Page 61747]]
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.
Secs. 2616.2, 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. 2617.3 [Amended]
7. In Sec. 2617.3, paragraph (b)(5) is amended by removing the
words ``and (f), in satisfaction'' and adding in their place the words
``and (f) (or, where applicable, within the time prescribed in part
2629 of this chapter), in satisfaction''.
Sec. 2616.6 [Amended]
Sec. 2617.6 [Amended]
8. In Secs. 2616.6 and 2617.6, paragraph (a) is amended by removing
the words ``this section, when a plan'' and adding in their place the
words ``this section (or, where applicable, in part 2629 of this
chapter), when a plan''.
Secs. 2616.7, 2617.8 [Amended]
9. 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''; and by removing the words ``Case Operations and Compliance
Department'' and adding in their place the words ``Standard Termination
Compliance Division, Insurance Operations Department''.
Sec. 2617.25 [Amended]
10. In Sec. 2617.25, paragraph (b)(2)(i) is amended by removing the
words ``Case Operations and Compliance Department'' and adding in their
place the words ``Standard Termination Compliance Division, Insurance
Operations Department''.
Sec. 2616.29 [Amended]
11. Paragraph (a)(1) of Sec. 2616.29 is amended by adding before
the period at the end of the first sentence the words ``or, where
applicable, within the time prescribed in part 2629 of this chapter''.
Sec. 2617.28 [Amended]
12. Paragraph (a)(1) of Sec. 2617.28 is amended by adding
parentheses around the words ``or, if applicable, the date on which the
PBGC revokes the notice of noncompliance'' and by adding before the
period at the end of the paragraph the words ``or, where applicable,
within the time prescribed in part 2629 of this chapter''.
Secs. 2616.29, 2617.28 [Amended]
13. 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. 2629.6(a) of
this chapter, the plan administrator timely files an amended post-
distribution certification that otherwise satisfies all applicable
requirements.''
14. 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, D.C., this 22nd day of November, 1995.
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.
[FR Doc. 95-29120 Filed 11-30-95; 8:45 am]
BILLING CODE 7708-01-P