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Proposed Rule2023-17521

Valuation Assumptions and Methods

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Published

August 18, 2023

Issuing agencies

Pension Benefit Guaranty Corporation

Abstract

This proposed rule would update the interest, mortality, and expense assumptions used to determine the present value of benefits for a single-employer pension plan under subpart B of the Pension Benefit Guaranty Corporation's regulation on Allocation of Assets in Single- Employer Plans, to determine components of mass withdrawal liability for a multiemployer pension plan, and for other purposes.

Full Text

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<title>Federal Register, Volume 88 Issue 159 (Friday, August 18, 2023)</title>
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[Federal Register Volume 88, Number 159 (Friday, August 18, 2023)]
[Proposed Rules]
[Pages 56563-56579]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-17521]

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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4022, 4044, 4050, 4262 and 4281

RIN 1212-AA55

Valuation Assumptions and Methods

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the interest, mortality, and
expense assumptions used to determine the present value of benefits for
a single-employer pension plan under subpart B of the Pension Benefit
Guaranty Corporation's regulation on Allocation of Assets in Single-
Employer Plans, to determine components of mass withdrawal liability
for a multiemployer pension plan, and for other purposes.

DATES: Comments must be submitted on or before October 17, 2023 to be
assured of consideration.

ADDRESSES: Comments may be submitted by any of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions for sending comments.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#6a180f0d44090507070f041e192a1a080d09440d051c"><span class="__cf_email__" data-cfemail="83f1e6e4ade0eceeeee6edf7f0c3f3e1e4e0ade4ecf5">[email&#160;protected]</span></a>. Refer to RIN 1212-AA55 in
the subject line.
<bullet> Mail or Hand Delivery: Regulatory Affairs Division, Office
of the General Counsel, Pension Benefit Guaranty Corporation, 445 12th
Street SW, Washington, DC 20024-2101.
Commenters are strongly encouraged to submit comments
electronically. Commenters who submit comments on paper by mail should
allow sufficient time for mailed comments to be received before the
close of the comment period. All submissions must include the agency's
name (Pension Benefit Guaranty Corporation or PBGC), the title for this
rulemaking (Valuation Assumptions and Methods), and the Regulation
Identifier Number for this rulemaking (RIN 1212-AA55). Comments
received will be posted without change to PBGC's website, <a href="http://www.pbgc.gov">www.pbgc.gov</a>,
including any personal information provided. Do not submit comments
that include any personally identifiable information or confidential
business information.
Copies of comments may also be obtained by writing to Disclosure
Division, Office of the General Counsel, Pension Benefit Guaranty
Corporation, 445 12th Street SW, Washington, DC 20024-2101, or calling
202-326-4040 during normal business hours. If you are deaf or hard of
hearing, or have a speech disability, please dial 7-1-1 to access
telecommunications relay services.

FOR FURTHER INFORMATION CONTACT: Gregory M. Katz
(<a href="/cdn-cgi/l/email-protection#a7ccc6d3dd89c0d5c2c0c8d5dee7d7c5c0c489c0c8d1"><span class="__cf_email__" data-cfemail="751e14010f5b120710121a070c35051712165b121a03">[email&#160;protected]</span></a>), Attorney, Regulatory Affairs Division, Office
of the General Counsel, Pension Benefit Guaranty Corporation, 445 12th
Street SW, Washington, DC 20024-2101; 202-229-3829. If you are deaf or
hard of hearing, or have a speech disability, please dial 7-1-1 to
access telecommunications relay services.

SUPPLEMENTARY INFORMATION:

Executive Summary

Purpose and Authority

This proposed rule would update the actuarial assumptions used to
determine the present value of a single-employer plan's benefits when
it terminates in a distress or involuntary termination, to determine
the present value of multiemployer plan benefits in certain withdrawal
liability calculations, and for other purposes.
Legal authority for this action comes from section 4002(b)(3) of
the Employee Retirement Income Security Act of 1974 (ERISA), which
authorizes the Pension Benefit Guaranty Corporation (PBGC) to issue
regulations to carry out the purposes of title IV of ERISA; section
4044 of ERISA (Allocation of Assets); section 4010 of ERISA (Authority
to Require Certain Information); section 4022 of ERISA (Single-Employer
Plan Benefits Guaranteed); section 4041 of ERISA (Termination of
Single-Employer Plans); section 4041A of ERISA (Termination of
Multiemployer Plans); section 4043 of ERISA (Reportable Events);
section 4062 of ERISA (Liability for Termination of Single-Employer
Plans Under a Distress Termination or a Termination by Corporation);
section 4050 of ERISA (Missing Participants); section 4219 of ERISA
(Notice, Collection, Etc., of Withdrawal Liability); section 4262 of
ERISA (Special Financial Assistance by the Corporation); and section
4281 of ERISA (Benefits Under Certain Terminated Plans).

Major Provisions

This proposed rule would modify the interest, mortality, and
expense assumptions for valuing benefits under subpart B to PBGC's
regulation on Allocation of Assets in Single-Employer Plans (``benefits
valuation regulation'') (29 CFR part 4044) to:
<bullet> Modernize the interest assumption structure by adopting a
yield curve approach;
<bullet> Enable the use of market interest rates as of the date of
liability measurement (i.e., the valuation date) as the basis for the
interest assumption;
<bullet> Increase transparency by using a procedure based on
publicly available yield curves as of the valuation date;
<bullet> Adopt a more recent mortality table along with a
generational mortality improvement projection; and
<bullet> Simplify the expense assumption.
Because the assumptions for valuing benefits are incorporated by
reference in other regulations, the changes to these assumptions would
affect PBGC's regulations on Notice, Collection, and Redetermination of
Withdrawal Liability (29 CFR part 4219); Special Financial Assistance
by PBGC (29 CFR part 4262); Duties of Plan Sponsor Following Mass
Withdrawal (29 CFR part 4281); Annual Financial and Actuarial
Information Reporting (29 CFR part 4010); Missing Participants (29 CFR
part 4050); and other regulations.

Background

The Pension Benefit Guaranty Corporation (PBGC) administers two

[[Page 56564]]

insurance programs for private-sector defined benefit pension plans
under title IV of the Employee Retirement Income Security Act of 1974
(ERISA): a single-employer plan termination insurance program and a
multiemployer plan insolvency insurance program. In addition, PBGC
administers a special financial assistance program for certain
financially distressed multiemployer plans.
Under the single-employer plan termination insurance program,
covered plans that are underfunded may terminate either in a distress
termination under section 4041(c) of ERISA or in an involuntary
termination (one initiated by PBGC) under section 4042 of ERISA. When
such a plan terminates, PBGC typically is appointed statutory trustee
of the plan, and becomes responsible for paying benefits in accordance
with the provisions of title IV.
Under the multiemployer insurance program, PBGC provides financial
assistance under section 4261 of ERISA to plans that are insolvent and
thus unable to pay benefits at the guaranteed level. This financial
assistance is primarily in the form of financial assistance loans, paid
to the plans periodically so that they are able to pay plan benefits
when due. Additionally, under the special financial assistance program
under section 4262 of ERISA, PBGC provides funding to eligible
financially troubled multiemployer plans upon approval of an
application. This proposed rule applies to both the single-employer
program and the multiemployer program.
PBGC has identified these proposed amendments as part of its
ongoing review of its regulations to ensure that PBGC provides clear
and helpful guidance and modernizes outdated methodologies.

Purpose of the Assumptions Described in the Benefits Valuation
Regulation

Under the single-employer insurance program, if a pension plan
terminates without enough assets to provide for all benefits either in
a distress termination under section 4041(c) of ERISA or in a plan
termination initiated by PBGC under section 4042 of ERISA, PBGC
typically is appointed statutory trustee of the plan and becomes
responsible for paying benefits in accordance with the provisions of
title IV of ERISA. When this happens, PBGC must determine (1) the
extent to which participants' benefits are funded under the benefits
valuation rules, (2) whether a terminated plan has sufficient assets to
pay guaranteed benefits, and (3) how much a plan sponsor and its
controlled group owe PBGC because of the termination under section 4062
of ERISA. The assumptions described in the benefits valuation
regulation are used to value a plan's benefit liabilities for these
purposes.
In setting the assumptions under the benefits valuation regulation,
PBGC's long-standing policy is to set assumptions that produce
valuations similar to the premium that a private-sector insurance
company would charge for a group annuity contract covering the same
plan benefits.\1\ This policy ensures that for a plan entering PBGC
trusteeship, the plan's benefit liabilities are measured consistent
with annuity market pricing.
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\1\ Because plan terms, plan demographics, and annuity
providers' methods vary, no single set of assumptions could exactly
match the value private-sector annuity providers would assign to
benefits for all terminating plans. Instead, the assumptions are
intended to produce reasonable valuation results on average for the
range of plans terminating in distress or involuntary terminations,
rather than for any particular plan or plan type. See 70 FR 72205,
72205 (Dec. 2, 2005).
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These assumptions are also used in other situations where it is
appropriate for liabilities to be in-line with private-sector group
annuity prices. For example, PBGC's regulations on Notice, Collection,
and Redetermination of Withdrawal Liability (29 CFR part 4219) and
Duties of Plan Sponsor Following Mass Withdrawal (29 CFR part 4281)
provide that these assumptions are used to value liabilities for
purposes of determining withdrawn employers' reallocation liability \2\
in the event of a mass withdrawal from a multiemployer plan.
Multiemployer plans that receive special financial assistance under the
regulation on Special Financial Assistance by PBGC (29 CFR part 4262)
must, as a condition of receiving special financial assistance, use the
interest assumptions to determine withdrawal liability for a prescribed
period. Additionally, plan sponsors are required to use these
assumptions for certain purposes (e.g., reporting benefit liabilities
in filings required under PBGC's regulation on Annual Financial and
Actuarial Information Reporting (29 CFR part 4010), determining certain
amounts to transfer to PBGC's Missing Participants Program on behalf of
a missing participant of a terminating defined benefit plan under
PBGC's regulation on Missing Participants (29 CFR part 4050)), and may
use them for other purposes (e.g., to ensure that plan spinoffs comply
with section 414(l) of the Internal Revenue Code (the Code)).\3\
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\2\ When a multiemployer plan terminates in a mass withdrawal,
section 4219 of ERISA requires that unfunded vested benefits be
fully allocated among withdrawing employers. The liability assessed
in this process is called reallocation liability.
\3\ The assumptions are deemed reasonable for use in determining
the value of ``benefits on a termination basis'' after a merger or
spinoff under Internal Revenue Service regulations at 26 CFR
1.414(l)-1.
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Interest Assumption

Current Assumption

The benefits valuation regulation contains an interest assumption
for determining the present value of future payments (4044 interest
assumption). Since November 1993, the 4044 interest assumption has been
expressed in a two-component structure known as ``select and ultimate''
in which one interest factor is assumed to be in effect for the first
20 or 25 years from the valuation date, and the other interest factor
is assumed to be in effect thereafter.
To align valuations with the group annuity market, the American
Council of Life Insurers conducts periodic surveys \4\ of private-
sector single-premium nonparticipating group annuity prices for PBGC.
These surveys ask insurers for sample market pricing information
(exclusive of loads for administrative expenses). The select and
ultimate rates are determined such that in combination with the
mortality assumption provided under the benefits valuation regulation,
the resulting liabilities are in line with group annuity prices from
the survey.\5\
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\4\ Survey approved under OMB Control Number 1212-0030 (expires
July 31, 2024).
\5\ See 41 FR 48484, 48485 (Nov. 3, 1976). ``PBGC's interest
assumptions have been designed so that, when coupled with the
mortality assumptions found in the regulation, the benefit values
obtained . . . are in line with the industry annuity prices.''
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PBGC publishes the interest assumption in appendix B to part 4044
each quarter, for use in the subsequent quarter. Therefore, the
interest rates used have not been rates observed on the valuation date.

Reasons for Change

This proposal would improve upon current methodology in several
ways. Actuarial practice, with the help of technology, has moved toward
a bond yield curve approach where future benefits are discounted to the
valuation date using yields for which the time to maturity equates to
the length of the discounting period. By associating an interest rate
with each specific benefit payment time horizon, using a yield curve
for discounting better represents the present value of future benefits.
As a result, the select and ultimate structure of PBGC's interest
assumption under the benefits valuation regulation

[[Page 56565]]

has become increasingly obsolete. A yield curve approach also better
reflects the term structure of the fixed income investments that
underlie the price of group annuities.
In addition, PBGC seeks to improve the methodology by eliminating
the lag between when data used to set PBGC's interest assumption are
observed and the interest rate environment on the valuation date.
Eliminating the lag is desirable because the interest rate environment
on the valuation date also impacts the value of the assets that pension
funds invest in, including fixed income investments, equity, and real
estate.
Lastly, PBGC seeks to increase transparency with respect to its
process for setting the 4044 interest assumption. The public
availability of month-end bond yield data now makes it possible to
adopt a methodology that would increase transparency and, in almost all
situations, eliminate the lag entirely.\6\
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\6\ In the uncommon situation of a mid-month valuation date, the
lag would be reduced significantly, but not completely eliminated.
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For these reasons, PBGC is proposing to structure the 4044 interest
assumption as a yield curve, more closely replicating the actual yields
on the investments backing group annuities, and better reflecting
today's actuarial practice. In addition, the proposal would incorporate
publicly available bond yield data into the methodology used to
determine the 4044 interest assumption to increase transparency, and to
base the interest assumption on bond yields as of the valuation date,
or as close as practical for valuations that are not as of a month-end.

Proposed 4044 Interest Assumption

Under the proposal, the 4044 interest assumption would be based on
a blend of two publicly available yield curves (the ``blended market
yield curve'') and would be adjusted to the extent necessary so that
the resulting liabilities align with group annuity prices. The adjusted
blended market yield curve would consist of interest rates at maturity
points from 0.5 to 30.0 years in half-year increments. The interest
rate for the maturity point at year 30.0 would be used to discount
benefits expected to be paid more than 30 years after the valuation
date.
The blended market yield curve (prior to adjustment) would be
determined as follows:
<bullet> Step 1--Obtain rates for maturities 0.5 through 30.0 on
Treasury securities from the Department of the Treasury (Treasury
Department) Nominal Coupon Issues Spot Rates, End of Month yield curve
(TNC Yield Curve).\7\
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\7\ Available at <a href="https://home.treasury.gov/data/treasury-coupon-issues-and-corporate-bond-yield-curves/treasury-coupon-issues">https://home.treasury.gov/data/treasury-coupon-issues-and-corporate-bond-yield-curves/treasury-coupon-issues</a>.
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<bullet> Step 2--Obtain rates on corporate bonds for maturities 0.5
through 30.0 from the Treasury Department's High Quality Market
Corporate Bond Yield Curve Spot Rates, End of Month yield curve (HQM
Bond Yield Curve).\8\
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\8\ Available at <a href="https://home.treasury.gov/data/treasury-coupon-issues-and-corporate-bond-yield-curve/corporate-bond-yield-curve">https://home.treasury.gov/data/treasury-coupon-issues-and-corporate-bond-yield-curve/corporate-bond-yield-curve</a>.
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<bullet> Step 3--Combine the rates obtained in steps 1 and 2
weighting each corporate bond rate at two-thirds and each Treasury rate
at one-third.\9\
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\9\ The proposal primarily uses yields on investment-grade
corporate bonds when setting its assumptions because such yields are
the most important driver of group annuity prices. A white paper
describing, among other things, additional details about this
weighting is available on PBGC's website, <a href="http://www.pbgc.gov">www.pbgc.gov</a>.
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The yield curves used to develop the blended market yield curve are
based on yields as of the end of each month. In PBGC's experience, most
calculations that use 4044 assumptions use valuation dates as of last
day of a month, and for such calculations, the applicable blended
market yield curve would be determined using the published TNC and HQM
curves as of the valuation date. To accommodate other valuation dates,
the proposal includes a ``lookback'' rule for valuation dates that are
not as of the end of the month. Under the lookback rule, if the
valuation date is not on the last day of a month, the applicable
blended market yield curve as of the last day of the prior month would
be used. For example, if the valuation date is February 15, 2023, the
applicable blended market yield curve is the blended market yield curve
as of January 31, 2023.
PBGC considered other possible rules for determining the blended
market yield curve for valuation dates that are not the last day of the
month, so that its interest assumption might better reflect the bond
market on the actual valuation date (e.g., a blend of the current and
prior month's blended market yield curves, a requirement to use the
blended market yield curve for the end of the month closest to the
valuation date). However, because most plan terminations occur on the
last day of a month, PBGC concluded that the benefits did not outweigh
the additional complexity. PBGC requests comments on this issue.
As noted above, once the blended market yield curve is determined,
it would be adjusted so that the resulting present values align with
group annuity prices. The term ``4044 yield curve'' would be used to
describe the blended market yield curve after reflecting such
adjustments.
The adjustments, or ``spreads,'' would be in the format of a curve
(i.e., a list of spreads through year 30, each of which applies to a
specific point in the blended market yield curve). PBGC would determine
the spreads quarterly based on survey data on pricing of private-sector
group annuities. More specifically, PBGC would determine a yield curve
that best fits data from those surveys, given an assumed mortality
table. Next, PBGC would calculate the differences (``spreads'') between
this curve and the blended market yield curve as of the survey date. To
smooth random variation and seasonality effects before publishing, PBGC
would average the calculated spreads with spreads from prior periods.
PBGC would publish the spreads (by amending its regulation) shortly
before each quarter begins.\10\
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\10\ The previously mentioned white paper would describe the
methodology used to determine the spreads.
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The spreads for any quarter would be used to adjust the month-end
blended market yield curves in that quarter. For example, the first
quarter spreads would be used to adjust the blended market yield curves
as of January 31, February 28,\11\ and March 31. Because of the
lookback rule, the first quarter spreads would apply to valuation dates
occurring April 1 through April 29 because for such dates, the
applicable blended market yield curve is the curve as of March 31.
Similarly, the fourth quarter spreads would be used to adjust the
blended market yield curves as of October 31, November 30, and December
31. Because of the lookback rule, the fourth quarter spreads would
apply to valuation dates occurring January 1 through January 30, which
use the blended market yield curve rate determined as of December 31
from the prior year.
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\11\ February 29 in a leap year.
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The following example illustrates how the 4044 yield curve would
have been developed for a valuation date on June 30, 2022, had the
proposal been in effect at that time and assuming the second quarter
spreads for 2022 were as shown in column D below:

[[Page 56566]]

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June 30, 2022, Blended market
nominal TNC June 30, 2022, HQM yield curve \1/ Second quarter Applicable 4044
Maturity treasury yield bond yield curve 3\(A) + \2/3\(B) 2022 spreads (%) yield curve * (C)
curve (%) (%) (%) + (D) (%)
(A) (B) (C) (D) (E)
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0.5................................................. 2.91 2.84 2.86 0.27 3.13
1.0................................................. 2.90 3.17 3.08 0.27 3.35
1.5................................................. 2.90 3.45 3.27 0.26 3.53
2.0................................................. 2.92 3.65 3.41 0.26 3.67
28.5................................................ 3.18 4.84 4.29 -0.02 4.27
29.0................................................ 3.17 4.84 4.28 -0.02 4.26
29.5................................................ 3.17 4.83 4.28 -0.03 4.25
30.0................................................ 3.18 4.83 4.28 -0.03 ** 4.25
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* Because of the lookback rule, valuation dates from July 1, 2022, through July 30, 2022, would also use the June 30, 2022, blended market yield curve
which means they would also use the second quarter spreads. Thus, the 4044 yield curve in column (E) would also be used for those valuation dates.
** The 4.25% rate would be used for benefits expected to be paid 30 or more years after the valuation date.

Because the yield curves used to develop the blended market yield
curve are not published until a week or two after the end of the month,
in most situations (e.g., month-end valuation dates), the 4044 yield
curve would not be available in advance of the valuation date. Given
the typical situations where practitioners use 4044 interest
assumptions (e.g., Annual Financial and Actuarial Information Reporting
(4010 reporting)), PBGC does not anticipate that this would create a
timing problem.
This proposal would amend the benefits valuation regulation to
prescribe the use of the 4044 yield curve and the process to determine
it. It would also amend part 4044 to replace the select and ultimate
interest factor table with a table showing spread adjustments for
blended market yield curves. For each quarter, the table would show 60
spread adjustments.
Given the proposed methodology, practitioners would be able to
determine the 4044 yield curve as of the end of any month as soon as
the Treasury Department publishes the two yield curves underlying the
development of the blended market yield curve. (The applicable spreads
would be specified in the regulation before the blended market yield
curves are available.) In addition, to reduce administrative burden on
practitioners, PBGC would post the 4044 yield curve on its website at
<a href="http://www.pbgc.gov">www.pbgc.gov</a> each month shortly after its underlying data become
available.

Mortality Assumption

Current Assumptions

The mortality assumptions prescribed by the benefits valuation
regulation relate to the probabilities that a participant (or
beneficiary) will survive to each expected benefit payment date. The
regulation currently prescribes six sets of mortality tables: tables
for male and female individuals not receiving a disability benefit
(healthy lives); tables for male and female participants who are
disabled under a plan provision that does not require eligibility for
Social Security disability benefits (non-Social Security disabled); and
tables for male and female participants who are disabled under a plan
provision requiring eligibility for Social Security disability benefits
(Social Security disabled).
For healthy lives, the mortality tables are based on the GAM-94
Basic Table with mortality improvements projected forward to the year
of valuation plus 10 years using the mortality improvement Scale AA, a
static mortality improvement projection. A static mortality projection
``project[s] the [base mortality] table for a specified number of years
and use[s] the resulting table without further projection.'' \12\ For
Social Security disabled participants, the regulation uses the
Mortality Tables for Disabilities Occurring in Plan Years Beginning
After December 31, 1994, from IRS Rev. Rul. 96-7 (1996-1 C.B. 59). For
non-Social Security disabled participants, the benefits valuation
regulation uses the healthy lives mortality rates for an individual 3
years older (i.e., the table is set forward by 3 years). In addition,
to prevent the rates at older ages from exceeding the rates for Social
Security disabled participants, the mortality rates for non-Social
Security disabled participants are capped at the corresponding rates
for Social Security disabled participants. These assumptions are
described in appendix A to part 4044.
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\12\ 70 FR 72205 at 72206 (Dec. 2, 2005).
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Reasons for Change

PBGC seeks to ensure that the assumptions described in the benefits
valuation regulation, in the aggregate, produce annuity valuations
similar to those produced by private-sector insurers. To do so, PBGC
attempts to keep its ``assumptions in line with those of private-sector
insurers, and to modify its mortality assumptions whenever it is
necessary to do so to achieve consistency with the private insurer
assumptions.'' \13\ PBGC has determined that it could better achieve
consistency with insurers' mortality assumptions by updating the
mortality assumptions under the benefits valuation regulation.
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\13\ See 70 FR 72205, 72206 (Dec. 2, 2005) (quoting 58 FR 5128,
5129 (Jan. 19, 1993)).
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PBGC's review of insurance industry practice indicates that
insurers use fully generational mortality tables rather than the
simpler static mortality tables used in the current regulation.
Generational mortality tables are a series of mortality tables, one for
each year of birth, each of which fully reflects projected trends in
mortality rates. In addition to achieving better consistency with
insurers' assumptions, over the past decade, generational mortality
tables have become widely accepted as best practice in the actuarial
community. With such projections, actuaries can ``theoretically more
accurately replicate the anticipated pattern of improvement in
mortality rates.'' \14\
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\14\ See Pension Comm, American Academy of Actuaries, Selecting
and Documenting Mortality Assumptions for Pensions 16 (2015),
<a href="https://actuary.org/files/Mortality_PN_060515_0.pdf">https://actuary.org/files/Mortality_PN_060515_0.pdf</a>.
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PBGC's review also indicates that insurers typically use more
recent base mortality tables than the GAM-94 Basic Table. Similarly, it
has also become clear that the industry recognizes and distinguishes
between mortality for annuitants (i.e., individuals receiving benefits)
and non-annuitants (i.e., terminated vested and active participants).

[[Page 56567]]

The Internal Revenue Service (IRS) and the Treasury Department
reached the same conclusions regarding trends in mortality assumptions.
On April 28, 2022, the Treasury Department and the IRS issued a
proposed rule \15\ (``IRS proposal'') that would amend their mortality
assumptions regulations under section 430(h)(3) of the Code to provide
a more recent base mortality table with different rates for annuitants
and non-annuitants. Their proposal also provides that, with limited
exception, future mortality improvements would be reflected using
generational mortality. The preamble discussion and operative
regulatory provisions on the mortality assumptions for healthy lives in
this proposal are derived from the IRS proposal.
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\15\ 87 FR 25161.
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Proposed Updated Healthy Lives Mortality Assumption--Base Mortality
Tables

The base mortality tables PBGC is proposing are the same as those
proposed by IRS and the Treasury Department for purposes of section 430
of the Code. As explained in the preamble to the IRS proposal, those
tables are derived from the tables set forth in the Pri-2012 Private
Retirement Plans Mortality Tables Report published by the Retirement
Plan Experience Committee (RPEC) of the Society of Actuaries (SOA) in
2019 (``Pri-2012 Report'').\16\ PBGC agrees with IRS and the Treasury
Department that the Pri-2012 Report is the best available study of the
actual mortality experience of pension plan participants (other than
disabled individuals).\17\
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\16\ This report is available at <a href="https://www.soa.org/49c106/globalassets/assets/files/resources/experience-studies/2019/pri-2012-mortality-tables-report.pdf">https://www.soa.org/49c106/globalassets/assets/files/resources/experience-studies/2019/pri-2012-mortality-tables-report.pdf</a>.
\17\ 87 FR 25163.
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The tables in the Pri-2012 Report are gender-distinct and provide
separate non-annuitant and annuitant mortality rates.\18\ Unlike the
Pri-2012 Report, but consistent with the IRS proposal, this proposed
rule does not provide separate tables for annuitants who are retirees
and annuitants who are contingent beneficiaries. Rather, it provides
annuitant mortality tables that combine the mortality experience of
retirees and contingent beneficiaries. The annuitant mortality tables
would be applied to determine the present value of benefits for an
annuitant. For a non-annuitant, the non-annuitant mortality tables
would be applied for the periods before the participant is projected to
commence receiving benefits, and the annuitant mortality tables would
be used for later periods. For a beneficiary of a participant, the
annuitant mortality tables would apply for the period beginning with
each assumed commencement of benefits for the participant. If the
participant has died (or to the extent the participant is assumed to
die before commencing benefits), the annuitant mortality tables apply
for the beneficiary for the period beginning with each assumed
commencement of benefits for the beneficiary.
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\18\ The Pri-2012 Report refers to non-annuitant rates as
``employee'' rates. However, because those rates also apply to
former employees prior to benefit commencement, for purposes of this
proposal, the term ``non-annuitant'' is used.
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These base tables generally have the same mortality rates as the
employee and non-disabled annuitant mortality rates that were released
by RPEC in connection with the Pri-2012 Report. However, the base
tables provided in this proposal also include rates for certain
situations that were not included in the base tables in the Pri-2012
report (i.e., non-annuitant mortality rates for ages below age 18 and
above age 80 and annuitant mortality rates for ages below age 50). The
preamble to the IRS proposal describes the methodology that was used to
develop those additional rates.\19\
---------------------------------------------------------------------------

\19\ See 87 FR 25163.
---------------------------------------------------------------------------

Proposed Updated Healthy Lives Mortality Assumption--Mortality
Improvements

The base tables described above have a base year of 2012 (the
central year of the experience study used to develop the mortality
tables in the Pri-2012 Report). Like the IRS proposal, under this
proposal, those tables would be used to develop the mortality tables
for future years using Scale MP-2021 Rates (the mortality improvement
scale in the Mortality Improvement Scale MP-2021 Report,\20\ which was
published by the RPEC in October 2021). That mortality improvement
scale was developed using the same underlying methodology used to
develop RPEC's earlier mortality improvement scales but reflects
historical population data through 2019 and the change to the RPEC-
selected assumptions for the long-term rate of mortality improvement
that was first incorporated in the Mortality Improvement Scale MP-2020
Report.
---------------------------------------------------------------------------

\20\ Report available at <a href="https://www.soa.org/4a9de4/globalassets/assets/files/resources/experience-studies/2021/2021-mp-scale-report.pdf">https://www.soa.org/4a9de4/globalassets/assets/files/resources/experience-studies/2021/2021-mp-scale-report.pdf</a>.
---------------------------------------------------------------------------

RPEC typically issues updated mortality improvement rates that
reflect new data for mortality improvement trends for the general
population on an annual basis.\21\ PBGC plans to amend its regulation
periodically to take into account updated mortality improvement rates
as they become available.
---------------------------------------------------------------------------

\21\ RPEC did not issue an updated scale for 2022. See <a href="https://www.soa.org/resources/research-reports/2022/rpec-mortality-improvement/">https://www.soa.org/resources/research-reports/2022/rpec-mortality-improvement/</a>.
---------------------------------------------------------------------------

The proposed healthy lives mortality assumptions would closely
align with the mortality assumptions used by private-sector insurers.
The software needed to use generational mortality tables has become
widely used and is often used for other business needs such as
financial accounting. Using modern actuarial software, the new
assumptions should be no more difficult to apply.

Proposed Updated Disabled Lives Mortality Assumption

This proposal would provide that the healthy lives mortality
assumptions (base table and improvement projections) be used for
disabled individuals that are not eligible for Social Security
disability benefits. However, for individuals that are eligible for
Social Security disability benefits, the proposal would update the
mortality assumptions to reflect more recent mortality experience by
using tables published in the Social Security Disability Insurance
Program Disabled Worker Experience Actuarial Study 125, a study
providing ``extensive information on recent actual [Social Security
Disability Insurance] disabled worker experience.'' \22\ The proposed
mortality rates comprise two tables: Table 12 for Social Security
disabled participants age 75 and younger, and Table 7C for Social
Security disabled participants age 76 and older. As with the current
mortality assumptions for individuals that are eligible for Social
Security disability benefits, the updated assumptions would not include
a mortality improvement scale.
---------------------------------------------------------------------------

\22\ Nettie J. Barrick-Funk, Soc. Sec. Admin., Social Security
Disability Insurance Program Disabled Worker Experience Actuarial
Study 125, at ix (2020), <a href="https://www.ssa.gov/OACT/NOTES/pdf_studies/study125.pdf">https://www.ssa.gov/OACT/NOTES/pdf_studies/study125.pdf</a>.
---------------------------------------------------------------------------

For the reasons discussed above, this proposal would amend PBGC's
benefits valuation regulation to replace mortality tables for healthy
lives with mortality tables from Pri-2012. It would also replace tables
relating to mortality improvement for healthy lives with references to
generational mortality improvement projections from the Mortality
Improvement Scale MP-2021 and prescribe their use. It would further
amend PBGC's benefits valuation regulation to replace tables relating
to mortality for Social Security disabled participants with tables
derived from Social Security Actuarial Study 125.

[[Page 56568]]

Finally, it would amend the regulation so that the provisions
specifying assumptions for non-Social Security disabled lives refer to
the healthy lives mortality assumptions.

Expense Assumption

Current Assumptions

Certain administrative expenses are incurred by insurers in
connection with the payment of benefits. These expenses include
establishing plan files, reviewing plan provisions to determine benefit
entitlements, setting up and updating records, processing pension
applications, remitting benefits, and others. Insurers use assumptions
about these expenses to price annuities. To account for this component
of private-sector annuity pricing, the benefits valuation regulation
specifies expense assumptions.\23\
---------------------------------------------------------------------------

\23\ Expense assumptions are sometimes described as loading
assumptions or expense loading assumptions.
---------------------------------------------------------------------------

Currently, these expense assumptions are based in part on the total
present value of plan benefits. They are intended to recognize that the
computation of benefit valuations entails certain expenses that are
roughly proportional to the number of participants in a plan, and that
private insurers' expenses, expressed as a percentage of liabilities,
are somewhat lower for larger plans. For the expenses proportional to
the number of plan participants, the benefits valuation regulation
assumes a cost of $200 per participant. In addition, a percent of
liabilities is added to the assumed expense amount for all plans in a
way that accounts for the efficiency advantage of larger plans. That
percentage is 5 percent of liabilities up to $200,000, plus a smaller,
variable percent of liabilities above $200,000.

Reasons for Change and Proposed Updated Expense Assumptions

As discussed above, PBGC attempts to set its assumptions to match
the private-sector annuity market. PBGC has determined that simple per-
participant loads are the most common structure for explicitly charging
for administrative expenses and that insurers' expense assumptions
account for a very small portion of the total cost of a group annuity.
PBGC's current multi-tiered expense assumptions are too complicated
given expense assumptions' small share of annuity pricing and the
simple structure insurers typically use. Thus, PBGC proposes to
simplify the expense assumptions. PBGC is proposing to set the expense
load assumption at $400 per participant for the first 100 participants
and $250 for each participant over 100. PBGC concluded these amounts
were reasonable based on a review of per-participant charges included
in group annuity contracts for terminating plans provided to PBGC as
part of the standard termination process. These amounts would be
updated for inflation using the Consumer Price Index (CPI-U) each year.
The proposal would amend PBGC's benefits valuation regulation to
prescribe these updated expense assumptions.

Conforming Changes to the Missing Participants Regulation

Interest Assumption

PBGC's Missing Participants regulation (29 CFR part 4050) provides
that the interest assumption used to determine certain amounts to be
transferred on behalf of a missing participant from a terminating
defined benefit plan \24\ to PBGC's Missing Participants Program is the
interest assumption under PBGC's benefits valuation regulation
applicable to valuations occurring in January of the calendar year in
which the benefit determination date occurs.\25\ Under the current
benefits valuation regulation, the same interest assumption is used for
any valuation date in January. However, under the proposal, two
different interest assumptions would apply to valuation dates in
January (i.e., the 4044 yield curve as of December 31 applies for
valuation dates occurring January 1 through January 30 and the 4044
yield curve as of January 31 applies for a January 31 valuation date).
If the Missing Participants regulation was left unchanged, it would be
unclear which 4044 yield curve should be used for benefit determination
dates occurring in a particular calendar year. Thus, PBGC is proposing
to amend the Missing Participant regulation to prescribe the use of the
4044 yield curve applicable to valuations occurring on December 31 of
the year preceding the calendar year in which the benefit determination
date occurs.
---------------------------------------------------------------------------

\24\ The terminating defined benefit plans covered by PBGC's
Missing Participants Program are single-employer and multiemployer
pension plans covered by title IV of ERISA, and small professional
service employer plans not covered by title IV of ERISA. See 29 CFR
4050.101, Sec. 4050.301, and Sec. 4050.401.
\25\ See definition of ``PBGC missing participants assumptions''
in Sec. 4050.102, Sec. 4050.302, and Sec. 4050.402.
---------------------------------------------------------------------------

Mortality Assumption

PBGC's Missing Participants regulation prescribes use of a unisex
version of the benefit valuation regulation's mortality assumption for
healthy lives (i.e., a 50/50 blend of the male and female mortality
tables) to determine certain amounts to be transferred on behalf of a
missing participant from a terminating defined benefit plan to PBGC's
Missing Participants Program. Doing the required calculation based on
the current mortality assumption is relatively straightforward.
However, because the proposal provides that future mortality
improvements would be reflected using generational mortality, if the
Missing Participants regulation was left unchanged, practitioners would
need to create, and use, a unisex version of a generational mortality
table, which would be somewhat cumbersome and complicated. To alleviate
the complication, PBGC is proposing that the Missing Participants
regulation would provide that a unisex, static version of the proposed
mortality table be used for this purpose. More specifically, PBGC is
proposing to amend the portion of the definition of ``PBGC missing
participants assumptions'' related to mortality to use a 50/50 blend of
static male and female mortality combined tables reflecting non-
annuitant and annuitant mortality rates. These male and female tables
used for this purpose would be identical to the static mortality tables
provided in the IRS proposal as an alternative for plans with 500 or
fewer participants. As with the IRS proposal, PBGC intends to update
the static mortality tables for years after 2023.

Other Housekeeping Changes

As previously discussed, the interest, mortality, and expense
assumptions are specified in appendixes to part 4044. To better align
with Office of the Federal Register guidance, this proposal would
specify the updated assumptions within the codified text of part 4044
instead. The expected retirement age assumptions, which are also used
in present value of benefit calculations under part 4044 (but not
modified by this proposal), would be moved to codified text as well.
This proposal would retain the current interest assumptions in appendix
B for reference (redesignating them as historical rates), but the other
three appendixes would be removed. The proposal would update cross-
references to the appendixes in parts 4022, 4044, 4050, 4262, and 4281
so that they refer to the codified text.

Applicability

These amendments would apply to calculations where the valuation
date is

[[Page 56569]]

on or after the effective date of the final rule.

Incorporation by Reference

Section 4044.53(c)(1)(iii) of the proposed regulation provides that
the mortality improvement rates used to construct the generational
mortality tables to be used are the Scale MP-2021 Rates which are
included in the Mortality Improvement Scale MP-2021 Report. The Office
of the Federal Register (OFR) has regulations concerning incorporation
by reference. 1 CFR part 51. These regulations require that agencies
must discuss in the preamble to a rule or proposed rule the way in
which materials that the agency incorporates by reference are
reasonably available to interested persons, and how interested parties
can obtain the materials. 1 CFR 51.5(b).
The Scale MP-2021 Rates and the Mortality Improvement Scale MP-2021
Report are described in this preamble under the heading ``Proposed
updated healthy lives mortality assumption-- mortality improvements''
in the ``Mortality Assumption'' section of this preamble. The Mortality
Improvement Scale MP-2021 Report was issued by the Retirement Plans
Experience Committee of the Society of Actuaries in October of 2021 and
is available to the public for free viewing online on the Society of
Actuary's website at <a href="https://www.soa.org/resources/experience-studies/2021/mortality-improvement-scale-mp-2021">https://www.soa.org/resources/experience-studies/2021/mortality-improvement-scale-mp-2021</a>. The Scale MP-2021 Rates
consist of tables of mortality improvement rates by age, sex, and year
that are used to project future mortality improvements on the base
mortality table.

Executive Orders 12866 and 13563

The Office of Management and Budget (OMB) has determined that this
rule is not a ``significant regulatory action'' under Executive Order
12866. Accordingly, OMB has not reviewed the proposed rule under
Executive Order 12866.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity).
Although this is not a significant regulatory action under
Executive Order 12866, PBGC has examined the economic implications of
this proposed rule and has concluded that the proposed changes would
have a minimal impact on liabilities determined under PBGC's
regulations.
The proposed updates to the assumptions under the benefits
valuation regulation would, on average, produce benefit liabilities
that are very close to the valuations produced by the current
assumptions. The results for any particular benefit valuation, however,
could be different as a result of adopting an interest rate methodology
based on market rates (i.e., eliminating the lag between when data used
to set the interest assumption are observed and the interest rate
environment on the valuation date).
The impact on liabilities resulting from eliminating the above-
noted lag would not be biased in favor of higher or lower benefit
liabilities. Also, the impact should be fairly small (i.e., within a
few percentage points) unless market rates on the valuation date are
significantly different from what PBGC would have used to determine the
4044 interest assumption absent this change (i.e., had the lag not been
eliminated).
PBGC's analysis indicates that, ignoring the impact of the interest
rate timing difference described in the prior paragraph, the impact
would also be relatively small in situations where the updated 4044
interest assumption is used, but not the updated 4044 mortality
assumption. For example, this might be the case with respect to certain
withdrawal liability calculations.\26\ For plans using the 4044
interest assumption but not the 4044 mortality assumption to determine
withdrawal liability, the updated assumptions will generally result in
lower benefit liabilities but should be within a few percentage points
of the liability measurement using the current methodology, which would
result in only a minor change in withdrawal liability.
---------------------------------------------------------------------------

\26\ Section 4262.16(g) of PBGC's regulation on special
financial assistance (29 CFR part 4262) requires, as a condition of
receiving special financial assistance, that the 4044 interest
assumption be used to determine unfunded vested benefits for
purposes of determining withdrawal liability. For other ongoing
plans determining withdrawal liability, use of the 4044 interest
assumption, either as a standalone assumption or combined with
funding interest assumptions, represents a valid approach to
selecting an interest assumption to determine withdrawal liability
in all circumstances. (See PBGC's proposed rule, Actuarial
Assumptions for Determining an Employer's Withdrawal Liability, 87
FR 62316.)
---------------------------------------------------------------------------

The proposed changes to generational mortality tables and to a
yield-curve based interest assumption would impose a small and not
significant administrative burden on plans and practitioners that do
calculations using the assumptions.
Section 6 of Executive Order 13563 requires agencies to rethink
existing regulations by periodically reviewing their regulatory
programs for rules that ``may be outmoded, ineffective, insufficient,
or excessively burdensome.'' These rules should be modified,
streamlined, expanded, or repealed as appropriate. PBGC proposes to
update certain outmoded assumptions in its benefits valuation
regulation consistent with the principles for review under E.O. 13563.

Regulatory Flexibility Act

The Regulatory Flexibility Act \27\ imposes certain requirements
respecting rules that are subject to the notice-and-comment
requirements of section 553(b) of the Administrative Procedure Act, or
any other law,\28\ and that are likely to have a significant economic
impact on a substantial number of small entities. Unless an agency
certifies that a proposed rule will not, if promulgated, have a
significant economic impact on a substantial number of small entities,
section 603 of the Regulatory Flexibility Act requires that the agency
present an initial regulatory flexibility analysis at the time of the
publication of the proposed rule describing the impact of the rule on
small entities and seek public comment on such impact. Small entities
include small businesses, organizations, and governmental
jurisdictions.\29\
---------------------------------------------------------------------------

\27\ 5 U.S.C. 601 et seq.
\28\ The applicable definition of ``rule'' is found in section
601 of the Regulatory Flexibility Act. See 5 U.S.C. 601(2).
\29\ The applicable definitions of ``small business,'' ``small
organization,'' and ``small governmental jurisdiction'' are found in
section 601 of the Regulatory Flexibility Act. See 5 U.S.C. 601.
---------------------------------------------------------------------------

For purposes of the Regulatory Flexibility Act requirements with
respect to this proposed rule, PBGC considers a small entity to be a
plan with fewer than 100 participants.\30\ This is substantially the
same criterion PBGC uses in other regulations \31\ and is consistent
with certain requirements in title I of ERISA \32\ and the Code,\33\ as
well as the definition of a small entity that PBGC and DOL have used
for

[[Page 56570]]

purposes of the Regulatory Flexibility Act.\34\
---------------------------------------------------------------------------

\30\ PBGC consulted with the Small Business Administration's
Office of Advocacy before making this determination. Memorandum
received from the U.S. Small Business Administration, Office of
Advocacy on March 9, 2021.
\31\ See, e.g., special rules for small plans under part 4007
(Payment of Premiums).
\32\ See, e.g., section 104(a)(2) of ERISA, which permits the
Secretary of Labor to prescribe simplified annual reports for
pension plans that cover fewer than 100 participants.
\33\ See, e.g., section 430(g)(2)(B) of the Code, which permits
plans with 100 or fewer participants to use valuation dates other
than the first day of the plan year.
\34\ See, e.g., PBGC's proposed rule on Reportable Events and
Certain Other Notification Requirements, 78 FR 20039, 20057 (April
3, 2013) and DOL's final rule on Prohibited Transaction Exemption
Procedures, 76 FR 66637, 66644 (Oct. 27, 2011).
---------------------------------------------------------------------------

Further, while some large employers operate small plans along with
larger ones, in general, most small plans are maintained by small
employers. Thus, PBGC believes that assessing the impact of the
proposed rule on small plans is an appropriate substitute for
evaluating the effect on small entities. The definition of small entity
considered appropriate for this purpose differs, however, from a
definition of small business based on size standards promulgated by the
Small Business Administration \35\ under the Small Business Act. PBGC
therefore requests comments on the appropriateness of the size standard
used in evaluating the impact of its proposed rule on small entities.
---------------------------------------------------------------------------

\35\ See, 13 CFR 121.201.
---------------------------------------------------------------------------

Based on its proposed definition of small entity, PBGC certifies
under Section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.) that the amendments in this proposed rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities. As explained earlier in this preamble, the
assumptions will continue to produce valuations that align with group
annuity prices. Because of this, PBGC does not expect the proposed
assumptions to have a significant economic impact on a substantial
number of entities of any size. Similarly, because technology
improvements allow even small plans (and their service providers) to
apply the more complicated interest and mortality assumptions of this
proposal without additional administrative burden, this proposed rule
would not increase administrative costs on these entities. Accordingly,
as provided in Section 605 of the Regulatory Flexibility Act, sections
603 and 604 do not apply.

List of Subjects

29 CFR Part 4022

Employee benefit plans, Pension insurance, Pensions, Reporting and
recordkeeping requirements.

29 CFR Part 4044

Employee benefit plans, Incorporation by reference, Pension
insurance, Pensions.

29 CFR Part 4050

Employee benefit plans, Pension insurance, Pensions, Reporting and
recordkeeping requirements.

29 CFR Part 4262

Employee benefit plans, Pension insurance, Pensions, Reporting and
recordkeeping requirements.

29 CFR Part 4281

Employee benefit plans, Pension insurance, Reporting and
recordkeeping requirements.

For the reasons stated in the preamble, PBGC proposes to amend 29
CFR parts 4022, 4044, 4050, 4262, and 4281 as follows:

PART 4022--BENEFITS PAYABLE IN TERMINATED SINGLE-EMPLOYER PLANS

0
1. The authority citation for part 4022 continues to read as follows:

Authority: 29 U.S.C. 1302, 1322, 1322b, 1341(c)(3)(D), and
1344.

Sec. 4022.63 [Amended]

0
2. In Sec. 4022.63 removing the words ``the PBGC'' and adding in their
place the word ``PBGC'' wherever they appear.
0
3. Amend Sec. 4022.63 by revising paragraph (b)(1) to read as follows:

Sec. 4022.63 Estimated asset-funded benefit.

* * * * *
(b) * * *
(1) An actuarial valuation of the plan has been performed for a
plan year beginning not more than eighteen months before the proposed
termination date. If the interest rate used to value plan liabilities
in this valuation exceeded the applicable valuation interest rates and
factors under Sec. 4044.54 of this chapter in effect on the proposed
termination date, the value of benefits in pay status and the value of
vested benefits not in pay status on the valuation date must be
converted to PBGC's valuation rates and factors.
* * * * *

PART 4044--ALLOCATION OF ASSETS IN SINGLE-EMPLOYER PLANS

0
4. The authority citation for part 4044 continues to read as follows:

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

0
5. Amend Sec. 4044.52 by revising paragraphs (a) and (d) to read as
follows:

Sec. 4044.52 Valuation of benefits.

* * * * *
(a) Using the mortality assumptions prescribed by Sec. 4044.53 and
the interest assumptions prescribed by Sec. 4044.54;
* * * * *
(d) Adding an expense loading charge determined in accordance with
this paragraph (d) to the total value of benefits.
(1) Expense Loading charge. The expense loading charge equals the
applicable inflation multiplier determined in accordance with paragraph
(d)(2) of this section multiplied by the sum of--
(i) $400 multiplied by the lesser of the applicable participant
count and 100, and
(ii) $250 multiplied by the excess, if any, of the applicable
participant count over 100.
(2) Applicable inflation multiplier. Except as provided in the next
sentence, the applicable inflation multiplier equals the value of the
CPI-U for September of the year preceding the year containing the
valuation date divided by 296.808 (the value of the CPI-U for September
of 2022), but not less than 1. However, for a valuation date on any day
in January except the 31st, the applicable inflation multiplier is
determined as if the valuation date were December 31 of the year
preceding the year containing the valuation date. The term ``CPI-U''
means the Consumer Price Index for All Urban Consumers, not seasonally
adjusted as published by the Bureau of Labor Statistics of the
Department of Labor.
(3) Rounding. Any expense loading charge determined in accordance
with this paragraph (d) which is not a multiple of $1.00 is rounded to
the nearest dollar.
0
6. Amend Sec. 4044.53 by revising paragraphs (c), (d), and (e) and
adding new paragraph (h) to read as follows:

Sec. 4044.53 Mortality assumptions.

* * * * *
(c) Healthy lives--(1) In general. If the individual is not
disabled under paragraph (f) of this section, the plan administrator
must value the benefit using generational mortality tables described in
this paragraph (c).
(i) Construction of generational mortality tables. The generational
mortality tables in this paragraph (c) are constructed from the base
mortality tables described in paragraph (c)(1)(ii) of this section and
the mortality improvement rates described in paragraph (c)(1)(iii) of
this section.
(ii) Base mortality tables. The base mortality tables are set forth
in paragraph (c)(5) of this section. The base year for those tables is
2012.

[[Page 56571]]

(iii) Mortality improvement rates. The mortality improvement rates
are the Scale MP-2021 Rates.
(iv) Incorporation by reference. The Scale MP-2021 Rates, Mortality
Improvement Scale MP-2021 Report, October 2021, Retirement Plans
Experience Committee of the Society of Actuaries, is incorporated by
reference into this section with the approval of the Director of the
Federal Register under 5 U.S.C. 552(a) and 1 CFR part 51. This
incorporation by reference (IBR) material is available for inspection
at PBGC and at the National Archives and Records Administration (NARA).
Contact PBGC at: Disclosure Division, Office of the General Counsel,
Pension Benefit Guaranty Corporation; 445 12th Street SW, Washington,
DC 20024; 202-326-4040. For information on the availability of this
material at NARA, visit <a href="http://www.archives.gov/federal-register/cfr/ibr-locations.html">www.archives.gov/federal-register/cfr/ibr-locations.html</a> or email <a href="/cdn-cgi/l/email-protection#84e2f6aaedeaf7f4e1e7f0edebeac4eae5f6e5aae3ebf2"><span class="__cf_email__" data-cfemail="6b0d19450205181b0e081f0204052b050a190a450c041d">[email&#160;protected]</span></a>. The material may be
obtained from the Society of Actuaries at: Society of Actuaries, 475 N.
Martingale Rd., Suite 600, Schaumburg, IL 60173; (847) 706-3500;
<a href="https://www.soa.org/resources/experience-studies/2021/mortality-improvement-scale-mp-2021">https://www.soa.org/resources/experience-studies/2021/mortality-improvement-scale-mp-2021</a>.
(2) Application of mortality improvement rates--
(i) In general. Under the generational mortality tables described
in this paragraph (c), the probability of an individual's death at a
particular age in the future is determined as the individual's base
mortality rate that applies at that age (that is, the applicable
mortality rate from the tables set forth in paragraph (c)(5) of this
section for that age, gender, and status as an annuitant or a non-
annuitant) multiplied by the cumulative mortality improvement factor
for the individual's gender and for that age for the period from 2012
through the calendar year in which the individual is projected to reach
the particular age. Paragraph (c)(3) of this section provides an
example that illustrates how the base mortality tables in paragraph
(c)(5) of this section and the Scale MP-2021 mortality improvement
rates are combined to determine projected mortality rates.
(ii) Cumulative mortality improvement factor. The cumulative
mortality improvement factor for an age and gender for a period is the
product of the annual mortality improvement factors for that age and
gender for each year within that period.
(iii) Annual mortality improvement factor. The annual mortality
improvement factor for an age and gender for a year is 1 minus the
mortality improvement rate that applies for that age and gender for
that year. If that annual mortality improvement rate is greater than 1
(corresponding to a negative mortality improvement rate), then the
projected mortality rate for that age and gender for that year is
greater than the projected mortality rate for the same age and gender
for the preceding year.
(3) Example of calculation using Scale MP-2021 Rates--
(i) Calculation of mortality rate. The mortality rate that is
applied to male annuitants who are age 67 in 2023 is equal to the
product of the mortality rate for 2012 that applied to male annuitants
who were age 67 in 2012 (0.01288) and the cumulative mortality
improvement factor for age 67 males from 2012 to 2023. The cumulative
mortality improvement factor for age 67 males for the period from 2012
to 2023 is 0.9919, and the mortality rate for 2023 for male annuitants
who are age 67 in that year would be 0.01278, as shown in the following
table.

Table 1 to Paragraph (c)(3)(i)--Example Mortality Rate Calculation
----------------------------------------------------------------------------------------------------------------
Annual
mortality
Scale MP-2021 improvement Cumulative
Calendar year mortality factor (1- mortality Mortality rate
improvement mortality improvement
rate improvement factor
rate)
----------------------------------------------------------------------------------------------------------------
2012............................................ n/a n/a n/a 0.01288
2013............................................ 0.0052 0.9948 0.9948 ..............
2014............................................ 0.0027 0.9973 0.9921 ..............
2015............................................ 0.0009 0.9991 0.9912 ..............
2016............................................ (0.0003) 1.0003 0.9915 ..............
2017............................................ (0.0010) 1.0010 0.9925 ..............
2018............................................ (0.0016) 1.0016 0.9941 ..............
2019............................................ (0.0016) 1.0016 0.9957 ..............
2020............................................ (0.0010) 1.0010 0.9967 ..............
2021............................................ 0.0000 1.0000 0.9967 ..............
2022............................................ 0.0015 0.9985 0.9952 ..............
2023............................................ 0.0033 0.9967 0.9919 0.01278
----------------------------------------------------------------------------------------------------------------

(ii) Probability of survival for an individual. After the projected
mortality rates are derived for each age for each year, the rates are
used to calculate the present value of a benefit stream that depends on
the probability of survival year-by-year. For example, using the Scale
MP-2021 rates, for purposes of calculating the present value of future
payments in a benefit stream payable for a male annuitant who is age 67
in 2023, the probability of survival for the annuitant is based on the
mortality rate for a male annuitant who is age 67 in 2023 (0.01278),
and the projected mortality rate for a male annuitant who will be age
68 in 2024 (0.01378), age 69 in 2025 (0.01489), and so on.
(4) Use of the tables--
(i) Separate tables for annuitants and non-annuitants. Separate
mortality tables are provided for use for annuitants and non-
annuitants. The non-annuitant mortality tables are applied to determine
the probability of survival for a non-annuitant for the period before
the non-annuitant is projected to commence receiving benefits. The
annuitant mortality tables are applied to determine the present value
of benefits for each annuitant. In addition, the annuitant mortality
tables are applied for each non-annuitant with respect to each assumed
commencement of benefits for the period beginning with that assumed
commencement. For purposes of this section, an annuitant means a plan
participant who has commenced receiving benefits and a non-annuitant
means a plan participant who has not yet commenced receiving benefits
(for example, an active

[[Page 56572]]

employee or a terminated vested participant). A participant whose
benefit has partially commenced is treated as an annuitant for the
portion of the benefit that has commenced and treated as a non-
annuitant for the balance of the benefit. In addition, for a
beneficiary of a participant, the annuitant mortality tables apply for
the period beginning with each assumed commencement of benefits for the
participant. If the participant has died (or to the extent the
participant is assumed to die before commencing benefits), the
annuitant mortality tables apply with respect to the beneficiary for
the period beginning with each assumed commencement of benefits for the
beneficiary.
(ii) Examples of calculation using separate non-annuitant and
annuitant tables. For a 45-year-old active participant who is projected
to commence receiving an annuity at age 55, benefit liabilities are
determined using the non-annuitant mortality tables for the period
before the participant attains age 55 and using the annuitant mortality
tables for the period ages 55 and above. Similarly, for a 45-year-old
terminated vested participant who is projected to commence an annuity
at age 65, benefit liabilities are determined using the non-annuitant
mortality tables for the period before the participant attains age 65
and using the annuitant mortality tables for ages 65 and above.
(5) Base mortality tables. The following are the base mortality
tables. The base year for these tables is 2012.

Table 2 to Paragraph (c)(5)--Healthy Lives Base Mortality Table
----------------------------------------------------------------------------------------------------------------
Males Females
Age ---------------------------------------------------------------
Non-annuitant Annuitant Non-annuitant Annuitant
----------------------------------------------------------------------------------------------------------------
0............................................... 0.00650 0.00650 0.00544 0.00544
1............................................... 0.00045 0.00045 0.00038 0.00038
2............................................... 0.00030 0.00030 0.00023 0.00023
3............................................... 0.00022 0.00022 0.00018 0.00018
4............................................... 0.00019 0.00019 0.00013 0.00013
5............................................... 0.00016 0.00016 0.00012 0.00012
6............................................... 0.00014 0.00014 0.00011 0.00011
7............................................... 0.00013 0.00013 0.00010 0.00010
8............................................... 0.00011 0.00011 0.00009 0.00009
9............................................... 0.00009 0.00009 0.00009 0.00009
10.............................................. 0.00008 0.00008 0.00009 0.00009
11.............................................. 0.00009 0.00009 0.00009 0.00009
12.............................................. 0.00013 0.00013 0.00010 0.00010
13.............................................. 0.00017 0.00017 0.00012 0.00012
14.............................................. 0.00022 0.00022 0.00013 0.00013
15.............................................. 0.00028 0.00028 0.00013 0.00013
16.............................................. 0.00034 0.00034 0.00014 0.00014
17.............................................. 0.00040 0.00040 0.00015 0.00015
18.............................................. 0.00046 0.00046 0.00015 0.00015
19.............................................. 0.00053 0.00053 0.00015 0.00015
20.............................................. 0.00056 0.00056 0.00015 0.00015
21.............................................. 0.00056 0.00056 0.00015 0.00015
22.............................................. 0.00056 0.00056 0.00016 0.00016
23.............................................. 0.00055 0.00055 0.00018 0.00018
24.............................................. 0.00055 0.00055 0.00019 0.00019
25.............................................. 0.00054 0.00054 0.00019 0.00019
26.............................................. 0.00054 0.00054 0.00019 0.00019
27.............................................. 0.00054 0.00054 0.00020 0.00020
28.............................................. 0.00054 0.00054 0.00020 0.00020
29.............................................. 0.00054 0.00054 0.00020 0.00020
30.............................................. 0.00055 0.00055 0.00021 0.00021
31.............................................. 0.00055 0.00055 0.00022 0.00022
32.............................................. 0.00056 0.00056 0.00023 0.00023
33.............................................. 0.00058 0.00058 0.00025 0.00025
34.............................................. 0.00059 0.00059 0.00026 0.00026
35.............................................. 0.00061 0.00061 0.00028 0.00028
36.............................................. 0.00063 0.00063 0.00031 0.00031
37.............................................. 0.00065 0.00065 0.00034 0.00034
38.............................................. 0.00068 0.00068 0.00036 0.00036
39.............................................. 0.00071 0.00071 0.00040 0.00040
40.............................................. 0.00074 0.00074 0.00043 0.00043
41.............................................. 0.00077 0.00082 0.00047 0.00049
42.............................................. 0.00081 0.00099 0.00051 0.00061
43.............................................. 0.00086 0.00124 0.00055 0.00078
44.............................................. 0.00091 0.00158 0.00060 0.00101
45.............................................. 0.00097 0.00200 0.00065 0.00130
46.............................................. 0.00105 0.00251 0.00071 0.00165
47.............................................. 0.00113 0.00310 0.00077 0.00206
48.............................................. 0.00123 0.00378 0.00083 0.00252
49.............................................. 0.00134 0.00454 0.00090 0.00304
50.............................................. 0.00147 0.00539 0.00098 0.00362
51.............................................. 0.00161 0.00544 0.00107 0.00426
52.............................................. 0.00177 0.00565 0.00116 0.00495
53.............................................. 0.00194 0.00588 0.00126 0.00500

[[Page 56573]]

54.............................................. 0.00213 0.00616 0.00137 0.00512
55.............................................. 0.00234 0.00647 0.00148 0.00517
56.............................................. 0.00257 0.00686 0.00161 0.00522
57.............................................. 0.00281 0.00728 0.00175 0.00528
58.............................................. 0.00308 0.00770 0.00190 0.00561
59.............................................. 0.00338 0.00811 0.00206 0.00601
60.............................................. 0.00369 0.00848 0.00224 0.00643
61.............................................. 0.00403 0.00882 0.00243 0.00690
62.............................................. 0.00441 0.00918 0.00264 0.00743
63.............................................. 0.00481 0.00960 0.00287 0.00796
64.............................................. 0.00525 0.01014 0.00312 0.00859
65.............................................. 0.00573 0.01087 0.00339 0.00928
66.............................................. 0.00636 0.01178 0.00380 0.01003
67.............................................. 0.00706 0.01288 0.00427 0.01089
68.............................................. 0.00784 0.01418 0.00480 0.01192
69.............................................. 0.00870 0.01564 0.00540 0.01309
70.............................................. 0.00967 0.01729 0.00606 0.01444
71.............................................. 0.01073 0.01914 0.00681 0.01597
72.............................................. 0.01192 0.02121 0.00765 0.01770
73.............................................. 0.01323 0.02354 0.00860 0.01967
74.............................................. 0.01469 0.02613 0.00966 0.02192
75.............................................. 0.01632 0.02905 0.01085 0.02445
76.............................................. 0.01812 0.03233 0.01219 0.02727
77.............................................. 0.02012 0.03604 0.01370 0.03042
78.............................................. 0.02234 0.04026 0.01539 0.03391
79.............................................. 0.02480 0.04504 0.01729 0.03775
80.............................................. 0.02754 0.05046 0.01943 0.04198
81.............................................. 0.02989 0.05657 0.02134 0.04663
82.............................................. 0.03460 0.06343 0.02516 0.05178
83.............................................. 0.04166 0.07114 0.03089 0.05754
84.............................................. 0.05108 0.07977 0.03853 0.06401
85.............................................. 0.06285 0.08946 0.04808 0.07132
86.............................................. 0.07698 0.10032 0.05955 0.07954
87.............................................. 0.09346 0.11248 0.07293 0.08879
88.............................................. 0.11229 0.12600 0.08822 0.09936
89.............................................. 0.13348 0.14088 0.10542 0.11124
90.............................................. 0.15703 0.15703 0.12453 0.12453
91.............................................. 0.17401 0.17401 0.13818 0.13818
92.............................................. 0.19151 0.19151 0.15250 0.15250
93.............................................. 0.20936 0.20936 0.16737 0.16737
94.............................................. 0.22742 0.22742 0.18274 0.18274
95.............................................. 0.24569 0.24569 0.19863 0.19863
96.............................................. 0.26415 0.26415 0.21509 0.21509
97.............................................. 0.28281 0.28281 0.23214 0.23214
98.............................................. 0.30169 0.30169 0.24983 0.24983
99.............................................. 0.32077 0.32077 0.26814 0.26814
100............................................. 0.33996 0.33996 0.28698 0.28698
101............................................. 0.35910 0.35910 0.30619 0.30619
102............................................. 0.37794 0.37794 0.32549 0.32549
103............................................. 0.39633 0.39633 0.34472 0.34472
104............................................. 0.41415 0.41415 0.36375 0.36375
105............................................. 0.43131 0.43131 0.38243 0.38243
106............................................. 0.44771 0.44771 0.40065 0.40065
107............................................. 0.46329 0.46329 0.41828 0.41828
108............................................. 0.47800 0.47800 0.43522 0.43522
109............................................. 0.49181 0.49181 0.45139 0.45139
110............................................. 0.50000 0.50000 0.46673 0.46673
111............................................. 0.50000 0.50000 0.48120 0.48120
112............................................. 0.50000 0.50000 0.49477 0.49477
113............................................. 0.50000 0.50000 0.50000 0.50000
114............................................. 0.50000 0.50000 0.50000 0.50000
115............................................. 0.50000 0.50000 0.50000 0.50000
116............................................. 0.50000 0.50000 0.50000 0.50000
117............................................. 0.50000 0.50000 0.50000 0.50000
118............................................. 0.50000 0.50000 0.50000 0.50000
119............................................. 0.50000 0.50000 0.50000 0.50000
120............................................. 1.00000 1.00000 1.00000 1.00000
----------------------------------------------------------------------------------------------------------------

[[Page 56574]]

(d) Social Security disabled lives. If the individual is Social
Security disabled under paragraph (f)(1) of this section, the plan
administrator will value the benefit using the following table.

Table 3 to Paragraph (d)--Social Security Disabled Lives Mortality Table
------------------------------------------------------------------------
Age Male Female
------------------------------------------------------------------------
16............................................ 0.012544 0.004759
17............................................ 0.007102 0.006541
18............................................ 0.005859 0.008035
19............................................ 0.009998 0.008369
20............................................ 0.008926 0.009224
21............................................ 0.008533 0.008144
22............................................ 0.008158 0.008616
23............................................ 0.008970 0.008127
24............................................ 0.008433 0.008318
25............................................ 0.008696 0.008851
26............................................ 0.009211 0.008002
27............................................ 0.009362 0.008694
28............................................ 0.009780 0.009477
29............................................ 0.010049 0.009664
30............................................ 0.011093 0.009417
31............................................ 0.011075 0.009985
32............................................ 0.010931 0.010524
33............................................ 0.011890 0.010648
34............................................ 0.012529 0.011252
35............................................ 0.012418 0.011450
36............................................ 0.013234 0.011448
37............................................ 0.013832 0.012135
38............................................ 0.014457 0.012579
39............................................ 0.015830 0.012619
40............................................ 0.016153 0.013578
41............................................ 0.016859 0.014243
42............................................ 0.017464 0.014520
43............................................ 0.018302 0.014773
44............................................ 0.019127 0.015630
45............................................ 0.020380 0.016131
46............................................ 0.021607 0.016874
47............................................ 0.023407 0.017547
48............................................ 0.023956 0.018198
49............................................ 0.025631 0.019281
50............................................ 0.026384 0.019413
51............................................ 0.027277 0.020343
52............................................ 0.028582 0.020488
53............................................ 0.030164 0.021316
54............................................ 0.031262 0.021960
55............................................ 0.031728 0.021969
56............................................ 0.033067 0.022897
57............................................ 0.034230 0.023556
58............................................ 0.035474 0.024159
59............................................ 0.036790 0.024958
60............................................ 0.037772 0.025905
61............................................ 0.039297 0.027414
62............................................ 0.039954 0.028394
63............................................ 0.041069 0.029795
64............................................ 0.042280 0.030776
65............................................ 0.039144 0.028230
66............................................ 0.043862 0.031667
67............................................ 0.046182 0.033318
68............................................ 0.048624 0.034728
69............................................ 0.052077 0.037341
70............................................ 0.055284 0.039491
71............................................ 0.058951 0.042134
72............................................ 0.062301 0.044962
73............................................ 0.067099 0.047548
74............................................ 0.071469 0.051148
75............................................ 0.075068 0.055271
76............................................ 0.080425 0.059382
77............................................ 0.085531 0.063489
78............................................ 0.091585 0.068675
79............................................ 0.098383 0.074929
80............................................ 0.104788 0.080536
81............................................ 0.113110 0.088455
82............................................ 0.122062 0.094573
83............................................ 0.131697 0.103589
84............................................ 0.140430 0.111345
85............................................ 0.151890 0.122160
86............................................ 0.165777 0.130844
87............................................ 0.176875 0.142631
88............................................ 0.188397 0.156112
89............................................ 0.206651 0.166591
90............................................ 0.223252 0.182064
91............................................ 0.235073 0.197059
92............................................ 0.249318 0.205768
93............................................ 0.267740 0.225325
94............................................ 0.277033 0.240441
95............................................ 0.284003 0.260724
96............................................ 0.298740 0.281817
97............................................ 0.313086 0.293156
98............................................ 0.328740 0.308400
99............................................ 0.345177 0.324436
100........................................... 0.362436 0.341307
101........................................... 0.380558 0.359055
102........................................... 0.399586 0.377726
103........................................... 0.419565 0.397368
104........................................... 0.440543 0.418031
105........................................... 0.462571 0.439768
106........................................... 0.485699 0.462636
107........................................... 0.509984 0.486693
108........................................... 0.535483 0.512001
109........................................... 0.562257 0.538626
110........................................... 0.590370 0.566634
111+.......................................... 1.000000 1.000000
------------------------------------------------------------------------

(e) Non-Social Security disabled lives. If the individual is non-
Social Security disabled under paragraph (f)(2) of this section, the
plan administrator will value the benefit using generational mortality
tables described in paragraph (c) of this section.
* * * * *
(h) Missing participants mortality. The following mortality table
is used to value benefits using ``PBGC missing participants
assumptions'' under part 4050, subparts A, C, and D of this chapter.

Table 4 to Paragraph (h)--Missing Participants Mortality Table for Determination Dates in 2023
----------------------------------------------------------------------------------------------------------------
Unisex Unisex
Age mortality Age mortality
----------------------------------------------------------------------------------------------------------------
0............................................ 0.00210 61.............................. 0.00375
1............................................ 0.00015 62.............................. 0.00447
2............................................ 0.00010 63.............................. 0.00521
3............................................ 0.00008 64.............................. 0.00585
4............................................ 0.00006 65.............................. 0.00667
5............................................ 0.00006 66.............................. 0.00757
6............................................ 0.00005 67.............................. 0.00845
7............................................ 0.00005 68.............................. 0.00940
8............................................ 0.00004 69.............................. 0.01047
9............................................ 0.00004 70.............................. 0.01170
10........................................... 0.00004 71.............................. 0.01310
11........................................... 0.00004 72.............................. 0.01470
12........................................... 0.00005 73.............................. 0.01650
13........................................... 0.00006 74.............................. 0.01859
14........................................... 0.00008 75.............................. 0.02097
15........................................... 0.00009 76.............................. 0.02372
16........................................... 0.00011 77.............................. 0.02686
17........................................... 0.00012 78.............................. 0.03045
18........................................... 0.00014 79.............................. 0.03451
19........................................... 0.00016 80.............................. 0.03935
20........................................... 0.00017 81.............................. 0.04434
21........................................... 0.00017 82.............................. 0.05001
22........................................... 0.00018 83.............................. 0.05641

[[Page 56575]]

23........................................... 0.00018 84.............................. 0.06367
24........................................... 0.00019 85.............................. 0.07192
25........................................... 0.00020 86.............................. 0.08122
26........................................... 0.00021 87.............................. 0.09169
27........................................... 0.00022 88.............................. 0.10352
28........................................... 0.00023 89.............................. 0.11666
29........................................... 0.00024 90.............................. 0.13111
30........................................... 0.00026 91.............................. 0.14617
31........................................... 0.00027 92.............................. 0.16169
32........................................... 0.00028 93.............................. 0.17758
33........................................... 0.00031 94.............................. 0.19361
34........................................... 0.00032 95.............................. 0.20972
35........................................... 0.00034 96.............................. 0.22694
36........................................... 0.00037 97.............................. 0.24460
37........................................... 0.00039 98.............................. 0.26269
38........................................... 0.00041 99.............................. 0.28131
39........................................... 0.00043 100............................. 0.30036
40........................................... 0.00044 101............................. 0.31968
41........................................... 0.00046 102............................. 0.33909
42........................................... 0.00048 103............................. 0.35847
43........................................... 0.00050 104............................. 0.37762
44........................................... 0.00052 105............................. 0.39610
45........................................... 0.00054 106............................. 0.41412
46........................................... 0.00058 107............................. 0.43160
47........................................... 0.00062 108............................. 0.44820
48........................................... 0.00066 109............................. 0.46409
49........................................... 0.00071 110............................. 0.47687
50........................................... 0.00078 111............................. 0.48520
51........................................... 0.00086 112............................. 0.49310
52........................................... 0.00096 113............................. 0.49699
53........................................... 0.00108 114............................. 0.49818
54........................................... 0.00121 115............................. 0.49940
55........................................... 0.00145 116............................. 0.49968
56........................................... 0.00179 117............................. 0.49983
57........................................... 0.00208 118............................. 0.49998
58........................................... 0.00242 119............................. 0.50000
59........................................... 0.00280 120............................. 1.00000
60........................................... 0.00325 ................................ ..............
----------------------------------------------------------------------------------------------------------------

0
7. Revise Sec. 4044.54 to read as follows:

Sec. 4044.54 Interest assumptions.

(a) General rule. The plan administrator must use the interest
rates prescribed in this section to value benefits under Sec. 4044.52.
(b) Interest rate. The interest rate used to discount an expected
benefit payment is the interest rate from the applicable 4044 yield
curve determined under paragraph (c) of this section for the maturity
point that corresponds to the period of time from the valuation date to
the date the benefit is expected to be paid unless that period of time
exceeds 30 years. In that case, the interest rate used is the interest
rate that corresponds to the maturity point at year 30.0. To address
the timing of benefit payments during a year, reasonable approximations
may be used to value benefit payments that are expected to be made
during a plan year.
(c) 4044 yield curve. A 4044 yield curve consists of interest rates
(as percentages) that correspond to mid-year and whole-year maturity
points for 30.0 years. The applicable 4044 yield curve is the
applicable blended market yield curve determined under paragraphs
(d)(1) and (2) of this section adjusted in accordance with paragraph
(e)(2) of this section by the applicable spreads determined under
paragraph (e)(1) of this section.
(d) Blended market yield curves. A blended market yield curve
consists of interest rates (as percentages), determined as of the last
day of a month, that correspond to mid-year and whole-year maturity
points for 30.0 years.
(1) Applicable blended market yield curve. The applicable blended
market yield curve is the blended market yield curve as of the
valuation date if the valuation date is the last day of a month,
otherwise it is the blended market yield curve as of the last day of
the month before the month containing the valuation date.
(2) Determination of blended market yield curve. The blended market
yield curve is determined by combining the Department of the Treasury's
TNC Treasury Yield Curve Spot Rates, End of Month yield curve (TNC
Yield Curve) with the Department of the Treasury's HQM Corporate Bond
Yield Curve Spot Rates, End of Month yield curve (HQM Bond Yield Curve)
in accordance with this paragraph (d)(2). To determine the blended
market yield curve as of the last day of a month--
(i) Obtain the rate for each maturity point from 0.5 to 30.0 from
the TNC Yield Curve for the end of the month published by the
Department of the Treasury.
(ii) Obtain the rate for each maturity point from 0.5 to 30.0 from
the HQM Bond Yield Curve for the end of the month published by the
Department of the Treasury.
(iii) Determine the interest rate for each maturity point from 0.5
to 30.0 on the blended market yield curve by

[[Page 56576]]

multiplying the rate determined in paragraph (d)(2)(i) of this section
by one-third, multiplying the rate determined in (d)(2)(ii) of this
section at the year by two-thirds, and adding the products.
(e) Spreads. (1) Applicable spreads. The applicable spreads for a
blended market yield curve are the spreads set forth in table 1 to
paragraph (e) of this section for the calendar quarter containing the
date of the blended market yield curve.
(2) Using spreads to adjust a blended market yield curve. To adjust
a blended market yield curve (to determine a 4044 yield curve described
in paragraph (c) of this section), add the interest rate for each
maturity point on the blended market yield curve to the spread
corresponding to that maturity point from the applicable spreads.
(3) Examples. The following examples illustrate how to determine
the applicable blended market yield curve and applicable spreads for a
given valuation date:
(i) Example 1--June 30, 2024, valuation date. Because the valuation
date is the last day of a month, the applicable blended market yield
curve determined under paragraph (d)(1) of this section is the blended
market yield curve as of that date. Because June 30, 2024, is in the
second calendar quarter of 2024, the applicable spreads determined
under paragraph (e)(1) of this section are the spreads for the second
calendar quarter of 2024.
(ii) Example 2--October 15, 2024, valuation date. Because the
valuation date is not the last day of a month, the applicable blended
market yield curve determined under paragraph (d)(1) of this section is
the blended market yield curve as of the last day of the month before
the month containing the valuation date, September 30, 2024. Because
September 30, 2024, is in the third calendar quarter of 2024, the
applicable spreads determined under paragraph (e)(1) of this section
are the spreads for the third calendar quarter of 2024.

Table 1 To Paragraph (e)--First Quarter 2023 Spreads (Sample Rates)
----------------------------------------------------------------------------------------------------------------
Spread Spread Spread
Maturity point (percent) Maturity point (percent) Maturity point (percent)
----------------------------------------------------------------------------------------------------------------
0.5............................. 0.27 10.5 0.19 20.5 0.04
1.0............................. 0.27 11.0 0.19 21.0 0.04
1.5............................. 0.26 11.5 0.17 21.5 0.03
2.0............................. 0.26 12.0 0.17 22.0 0.03
2.5............................. 0.26 12.5 0.16 22.5 0.02
3.0............................. 0.26 13.0 0.16 23.0 0.02
3.5............................. 0.26 13.5 0.14 23.5 0.01
4.0............................. 0.26 14.0 0.14 24.0 0.01
4.5............................. 0.25 14.5 0.13 24.5 0.00
5.0............................. 0.25 15.0 0.13 25.0 0.00
5.5............................. 0.24 15.5 0.11 25.5 -0.01
6.0............................. 0.24 16.0 0.11 26.0 -0.01
6.5............................. 0.23 16.5 0.10 26.5 -0.02
7.0............................. 0.23 17.0 0.10 27.0 -0.02
7.5............................. 0.22 17.5 0.08 27.5 -0.02
8.0............................. 0.22 18.0 0.08 28.0 -0.02
8.5............................. 0.21 18.5 0.07 28.5 -0.02
9.0............................. 0.21 19.0 0.07 29.0 -0.02
9.5............................. 0.20 19.5 0.05 29.5 -0.03
10.0............................ 0.20 20.0 0.05 30.0 -0.03
----------------------------------------------------------------------------------------------------------------

0
8. Amend Sec. 4044.55 by revising paragraph (c)(1) to read as follows:

Sec. 4044.55 XRA when a participant must retire to receive a
benefit.

* * * * *
(c) Procedure. (1) The plan administrator shall determine whether a
participant is in the high, medium, or low retirement rate category
using the applicable Selection of Retirement Rate Category Table in
Sec. 4044.58 of this part, based on the participant's benefit
determined under paragraph (b)(1) of this section and the year in which
the participant reaches URA.
* * * * *
0
9. Amend Sec. 4044.56 by revising paragraph (c) to read as follows:

Sec. 4044.56 XRA when a participant need not retire to receive a
benefit.

* * * * *
(c) Procedure. Participants in this case are always assigned to the
high retirement rate category and therefore the plan administrator
shall use Table II-C (Expected Retirement Ages for Individuals in the
High Category) in Sec. 4044.58 of this part to determine the XRA. The
plan administrator shall determine the XRA from Table II-C by using the
participant's URA and earliest retirement age at termination date.
0
10. Add Sec. 4044.58 to subpart B to read as follows:

Sec. 4044.58 Tables used to determine expected retirement age

The following tables are used for determining expected retirement
age under Sec. Sec. 4044.55 through 4044.57 of this part.
Table 1 to Sec. 4044.58.

[[Page 56577]]

Table I-23--Selection of Retirement Rate Category
[For valuation dates in 2023\1\]
----------------------------------------------------------------------------------------------------------------
Participant's retirement rate category is--
------------------------------------------------ High \4\ if
Low \2\ if Medium \3\ if monthly benefit monthly
If participant reaches URA in year-- monthly at URA is-- benefit at URA
benefit at URA -------------------------------- is greater
is less than-- From-- To-- than--
----------------------------------------------------------------------------------------------------------------
2024............................................ 745 745 3,146 3,146
2025............................................ 762 762 3,218 3,218
2026............................................ 779 779 3,292 3,292
2027............................................ 797 797 3,368 3,368
2028............................................ 816 816 3,445 3,445
2029............................................ 834 834 3,524 3,524
2030............................................ 854 854 3,605 3,605
2031............................................ 873 873 3,688 3,688
2032............................................ 893 893 3,773 3,773
2033 or later................................... 914 914 3,860 3,860
----------------------------------------------------------------------------------------------------------------
\1\ Applicable tables for valuation dates before 2023 are available on PBGC's website (<a href="http://www.pbgc.gov">www.pbgc.gov</a>).
\2\ Table II-A.
\3\ Table II-B.
\4\ Table II-C.

Table 2 to Sec. 4044.58.

Table II-A--Expected Retirement Ages for Individuals in the Low Category
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unreduced retirement age
Participant's earliest retirement age at valuation date ---------------------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
--------------------------------------------------------------------------------------------------------------------------------------------------------
42.............................................................. 53 53 53 54 54 54 54 54 54 54 54
43.............................................................. 53 54 54 54 55 55 55 55 55 55 55
44.............................................................. 54 54 55 55 55 55 55 56 56 56 56
45.............................................................. 54 55 55 56 56 56 56 56 56 56 56
46.............................................................. 55 55 56 56 56 57 57 57 57 57 57
47.............................................................. 56 56 56 57 57 57 57 57 57 57 57
48.............................................................. 56 57 57 57 58 58 58 58 58 58 58
49.............................................................. 56 57 58 58 58 58 59 59 59 59 59
50.............................................................. 57 57 58 58 59 59 59 59 59 59 59
51.............................................................. 57 58 58 59 59 60 60 60 60 60 60
52.............................................................. 58 58 59 59 60 60 60 60 60 60 60
53.............................................................. 58 59 59 60 60 61 61 61 61 61 61
54.............................................................. 58 59 60 60 61 61 61 61 61 61 61
55.............................................................. 59 59 60 61 61 61 62 62 62 62 62
56.............................................................. 59 60 60 61 61 62 62 62 62 62 62
57.............................................................. 59 60 61 61 62 62 62 62 62 62 62
58.............................................................. 59 60 61 61 62 62 63 63 63 63 63
59.............................................................. 59 60 61 62 62 63 63 63 63 63 63
60.............................................................. 60 60 61 62 62 63 63 63 63 63 63
61.............................................................. 61 61 62 63 63 63 63 64 64 64
62.............................................................. 62 62 63 63 63 64 64 64 64
63.............................................................. 63 63 64 64 65 65 65 65
64.............................................................. 64 64 65 65 65 65 65
65.............................................................. 65 65 65 65 65 65
66.............................................................. 66 66 66 66 66
67.............................................................. 67 67 67 67
68.............................................................. 68 68 68
69.............................................................. 69 69
70.............................................................. 70
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 3 to Sec. 4044.58.

Table II-B--Expected Retirement Ages for Individuals in the Medium Category
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unreduced retirement age
Participant's earliest retirement age at valuation date ---------------------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
--------------------------------------------------------------------------------------------------------------------------------------------------------
60.............................................................. 61 62 63 64 65 66 67 68 69 70
42.............................................................. 49 49 49 49 49 49 49 49 49 49 49
43.............................................................. 50 50 50 50 50 50 50 50 50 50 50
44.............................................................. 50 51 51 51 51 51 51 51 51 51 51
45.............................................................. 51 51 52 52 52 52 52 52 52 52 52
46.............................................................. 52 52 52 53 53 53 53 53 53 53 53

[[Page 56578]]

47.............................................................. 53 53 53 53 53 54 54 54 54 54 54
48.............................................................. 54 54 54 54 54 54 54 54 54 54 54
49.............................................................. 54 55 55 55 55 55 55 55 55 55 55
50.............................................................. 55 55 56 56 56 56 56 56 56 56 56
51.............................................................. 56 56 56 57 57 57 57 57 57 57 57
52.............................................................. 56 57 57 57 57 58 58 58 58 58 58
53.............................................................. 57 57 58 58 58 58 58 58 58 58 58
54.............................................................. 57 58 58 59 59 59 59 59 59 59 59
55.............................................................. 58 58 59 59 59 60 60 60 60 60 60
56.............................................................. 58 59 59 60 60 60 60 60 60 60 60
57.............................................................. 59 59 60 60 61 61 61 61 61 61 61
58.............................................................. 59 60 60 61 61 61 61 61 61 61 61
59.............................................................. 59 60 61 61 62 62 62 62 62 62 62
60.............................................................. 60 60 61 62 62 62 62 62 62 62 62
61.............................................................. 61 61 62 62 63 63 63 63 63 63
62.............................................................. 62 62 62 63 63 63 63 63 63
63.............................................................. 63 63 64 64 64 64 64 64
64.............................................................. 64 64 64 64 64 64 64
65.............................................................. 65 65 65 65 65 65
66.............................................................. 66 66 66 66 66
67.............................................................. 67 67 67 67
68.............................................................. 68 68 68
69.............................................................. 69 69
70.............................................................. 70
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 4 to Sec. 4044.58.

Table II-C--Expected Retirement Ages for Individuals in the High Category
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unreduced retirement age
Participant's earliest retirement age at valuation date ---------------------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
--------------------------------------------------------------------------------------------------------------------------------------------------------
42.............................................................. 46 46 46 46 46 47 47 47 47 47 47
43.............................................................. 47 47 47 47 47 47 47 47 47 47 47
44.............................................................. 48 48 48 48 48 48 48 48 48 48 48
45.............................................................. 49 49 49 49 49 49 49 49 49 49 49
46.............................................................. 50 50 50 50 50 50 50 50 50 50 50
47.............................................................. 51 51 51 51 51 51 51 51 51 51 51
48.............................................................. 52 52 52 52 52 52 52 52 52 52 52
49.............................................................. 53 53 53 53 53 53 53 53 53 53 53
50.............................................................. 54 54 54 54 54 54 54 54 54 54 54
51.............................................................. 54 55 55 55 55 55 55 55 55 55 55
52.............................................................. 55 55 56 56 56 56 56 56 56 56 56
53.............................................................. 56 56 56 57 57 57 57 57 57 57 57
54.............................................................. 57 57 57 57 57 58 58 58 58 58 58
55.............................................................. 57 58 58 58 58 58 58 58 58 58 58
56.............................................................. 58 58 59 59 59 59 59 59 59 59 59
57.............................................................. 58 59 59 60 60 60 60 60 60 60 60
58.............................................................. 59 59 60 60 60 60 61 61 61 61 61
59.............................................................. 59 60 60 61 61 61 61 61 61 61 61
60.............................................................. 60 60 61 61 61 62 62 62 62 62 62
61.............................................................. 61 61 62 62 62 62 62 62 62 62
62.............................................................. 62 62 62 62 62 62 62 62 62
63.............................................................. 63 63 63 64 64 64 64 64
64.............................................................. 64 64 64 64 64 64 64
65.............................................................. 65 65 65 65 65 65
66.............................................................. 66 66 66 66 66
67.............................................................. 67 67 67 67
68.............................................................. 68 68 68
69.............................................................. 69 69
70.............................................................. 70
--------------------------------------------------------------------------------------------------------------------------------------------------------

Appendix A to Part 4044--[Removed and reserved]

0
11. Remove and reserve Appendix A.

Appendix B to Part 4044--[Amended]

0
12. Amend Appendix B to part 4044 by revising the heading to read
``Appendix B to Part 4044--Historical Interest Rates Used to Value
Benefits''.

Appendix C to Part 4044--[Removed]

0
13. Remove Appendix C.

Appendix D to Part 4044--[Removed]

0
14. Remove Appendix D.

PART 4050--MISSING PARTICIPANTS

0
15. The authority citation for part 4050 continues to read as follows:

Authority: 29 U.S.C. 1302(b)(3), 1350.

0
16. Amend Sec. 4050.102 by revising paragraphs (2), (4), and (7)(i) of
the definition of ``PBGC missing participants assumptions'' to read as
follows:

Sec. 4050.102 Definitions.

* * * * *

[[Page 56579]]

PBGC missing participants assumptions means the actuarial
assumptions prescribed in Sec. Sec. 4044.51 through 4044.57 of this
chapter with the following modifications:
* * * * *
(2) The mortality assumption is the mortality table in Sec.
4044.53(h) of this chapter.
* * * * *
(4) The interest assumption is the assumption for valuing benefits
under Sec. 4044.54 of this chapter applicable to valuations occurring
on December 31 of the calendar year preceding the calendar year in
which the benefit determination date occurs.
* * * * *
(7) * * *
(i) In the case of a participant who is not in pay status and whose
normal retirement date is on or after the benefit determination date,
benefits are assumed to commence at the XRA, determined using the high
retirement rate category under Table II-C (Expected Retirement Ages for
Individuals in the High Category) in Sec. 4044.58 of this chapter;
* * * * *
0
17. Amend Sec. 4050.302 by revising paragraphs (2), (4), and (7)(i) of
the definition of ``PBGC missing participants assumptions'' to read as
follows:

Sec. 4050.302 Definitions.

* * * * *
PBGC missing participants assumptions means the actuarial
assumptions prescribed in Sec. Sec. 4044.51 through 4044.57 of this
chapter with the following modifications:
* * * * *
(2) The mortality assumption is the mortality table in Sec.
4044.53(h) of this chapter.
* * * * *
(4) The interest assumption is the assumption for valuing benefits
under Sec. 4044.54 of this chapter applicable to valuations occurring
on December 31 of the calendar year preceding the calendar year in
which the benefit determination date occurs.
* * * * *
(7) * * *
(i) In the case of a participant who is not in pay status and whose
normal retirement date is on or after the benefit determination date,
benefits are assumed to commence at the XRA, determined using the high
retirement rate category under Table II-C (Expected Retirement Ages for
Individuals in the High Category) in Sec. 4044.58 of this chapter;
* * * * *
0
18. Amend Sec. 4050.402 by revising paragraphs (2), (4), and (7)(i) of
the definition of ``PBGC missing participants assumptions'' to read as
follows:

Sec. 4050.402 Definitions.

PART 4262--SPECIAL FINANCIAL ASSISTANCE BY PBGC

0
19. The authority citation for part 4262 continues to read as follows:

Authority: 29 U.S.C. 1302(b)(3), 1432.

Sec. 4262.16 [Amended]

0
20. Amend Sec. 4262.16 by removing the words ``in Appendix B to part
4044'' wherever it appears and adding in its place the words ``under
Sec. 4044.54''.

PART 4281--DUTIES OF PLAN SPONSOR FOLLOWING MASS WITHDRAWAL

0
21. The authority citation for part 4281 continues to read as follows:

Authority: 29 U.S.C. 1302(b)(3), 1341(a), 1399(c)(1)(D), 1431,
and 1441.

0
22. Amend Sec. 4281.13 by revising paragraphs (a) and (e) to read as
follows:

Sec. 4281.13 Benefit valuation methods--in general.

* * * * *
(a) Using the interest assumptions under Sec. 4044.54 of this
chapter;
* * * * *
(e) Adjusting the values to reflect the loading for expenses in
accordance with Sec. 4044.52(d) of this chapter (substituting the term
``benefits'' for the term ``benefit liabilities (as defined in 29
U.S.C. 1301(a)(16))'').
* * * * *

Signed in Washington, DC.
Gordon Hartogensis,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2023-17521 Filed 8-17-23; 8:45 am]
BILLING CODE 7709-02-P

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