Premium Rates; Payment of Premiums; Variable-Rate Premium; Pension Protection Act of 2006, 15065-15078 [E8-5712]

Agencies

• Pension Benefit Guaranty Corporation

[Federal Register Volume 73, Number 56 (Friday, March 21, 2008)]
[Rules and Regulations]
[Pages 15065-15078]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-5712]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4006 and 4007

RIN 1212-AB11


Premium Rates; Payment of Premiums; Variable-Rate Premium; 
Pension Protection Act of 2006

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This is a final rule to amend PBGC's regulations on Premium 
Rates and Payment of Premiums. The amendments implement provisions of 
the Pension Protection Act of 2006 (Pub. L. 109-280) that change the 
variable-rate premium for plan years beginning on or after January 1, 
2008, and make other changes to the regulations. (Other provisions of 
the Pension Protection Act of 2006 that deal with PBGC premiums are the 
subject of separate rulemaking proceedings.)

DATES: Effective April 21, 2008. (For information about applicability 
of the amendments made by this rule, see Applicability in the 
SUPPLEMENTARY INFORMATION.)

FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director, Legislative 
and Regulatory Department; or Catherine B. Klion, Manager, or Deborah 
C. Murphy, Attorney, Regulatory and Policy Division, Legislative and 
Regulatory Department, Pension Benefit Guaranty Corporation, 1200 K 
Street, NW., Washington, DC 20005-4026; 202-326-4024. (TTY/TDD users 
may call the Federal relay service toll-free at 1-800-877-8339 and ask 
to be connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION:

Background

    Pension Benefit Guaranty Corporation (PBGC) administers the pension 
plan termination insurance program under Title IV of the Employee 
Retirement Income Security Act of 1974 (ERISA).

[[Page 15066]]

Pension plans covered by Title IV must pay premiums to PBGC. The flat-
rate premium applies to all covered plans; the variable-rate premium 
applies only to single-employer plans. Section 4006 of ERISA deals with 
premium rates, including the computation of premiums. Section 4007 of 
ERISA deals with the payment of premiums, including premium due dates 
and interest and penalties on premiums not timely paid, and with 
recordkeeping and audits.
    On August 17, 2006, the President signed into law the Pension 
Protection Act of 2006, Pub. L. 109-280 (PPA 2006). PPA 2006 makes 
changes to the funding rules in Title I of ERISA and in the Internal 
Revenue Code of 1986 (Code) on which the variable-rate premium is 
based. Section 401(a) of PPA 2006 amends the variable-rate premium 
provisions of section 4006 of ERISA to conform to those changes in the 
funding rules and to eliminate the full-funding limit exemption from 
the variable-rate premium.
    On May 31, 2007 (at 72 FR 30308), PBGC published in the Federal 
Register a proposed rule to amend PBGC's regulations on Premium Rates 
(29 CFR part 4006) and Payment of Premiums (29 CFR part 4007) to 
implement the amendment to ERISA section 4006 made by PPA 2006. (PPA 
2006 also includes other provisions affecting PBGC premiums that were 
not addressed in the proposed rule, including provisions that cap the 
variable-rate premium for certain plans of small employers, make 
permanent the new ``termination premium'' (created by the Deficit 
Reduction Act of 2005) that is payable in connection with certain 
distress and involuntary plan terminations, and authorize PBGC's 
payment of interest on refunds of overpaid premiums. Those provisions 
are or will be the subject of other rulemaking actions. See, for 
example, PBGC's final rule published December 17, 2007 (at 72 FR 
71222).) PBGC received comments on the proposed rule from two 
commenters--an actuary and an organization representing plan sponsors 
and service providers. The comments are discussed below with the topics 
they relate to.
    The final rule is nearly the same as the proposed rule. In addition 
to changes prompted by public comments, PBGC has added two definitional 
cross-references, clarified the definition of ``new plan,'' eliminated 
unnecessary verbiage from one of the due date rules, clarified the 
relationship between the funding interest rate transition rule and the 
premium funding target, extended the small-plan deadline for making 
certain elections, clarified how participants are counted for purposes 
of determining plan size, provided illustrations of the provision on 
vesting, and clarified the provision dealing with plans to which 
special funding rules apply. These changes are discussed below. There 
are also a few merely editorial refinements in the proposed rule's 
regulatory language.

Overview of Regulatory Amendments

    For purposes of determining a plan's variable-rate premium (VRP) 
for a premium payment year beginning after 2007, the rule requires 
unfunded vested benefits (UVBs) to be measured as of the funding 
valuation date for the premium payment year. The asset measure 
underlying the UVB calculation is to be determined for premium purposes 
the same way it is determined for funding purposes, except that any 
averaging method adopted for funding purposes is disregarded. The 
liability measure underlying the UVB calculation is to be determined 
for premium purposes the same way it is determined for funding 
purposes, except that only vested benefits are included and a special 
premium discount rate structure is used. Filers may make an election 
(irrevocable for five years) to use funding discount rates for premium 
purposes instead of the special premium discount rates.
    The rule revises the premium due date and penalty structure of the 
existing regulation to give some plans more time to file and others the 
ability to make VRP filings based on estimated liabilities and then 
follow up with amended filings to adjust the VRP without penalty. Three 
special relief rules for VRP filers are eliminated as no longer 
appropriate or necessary, and two new relief rules are added.
    The rule also explains when certain benefits are considered 
``vested'' and makes some other changes unrelated to PPA 2006. For 
example, the rule provides explicitly that (in the absence of an 
exemption) a premium filing made on paper or in any other manner other 
than the prescribed electronic filing method (applicable to all plans 
for plan years beginning after 2006) does not satisfy the requirement 
to file. It also clarifies and strengthens recordkeeping and audit 
provisions.
    A more detailed discussion follows.

Variable-Rate Premium Determination Dates

    Under ERISA section 4006(a)(3)(E)(i) and (ii), a plan's per-
participant VRP for a plan year is generally--

$9.00 for each $1,000 (or fraction thereof) of unfunded vested 
benefits [''UVBs''] under the plan as of the close of the preceding 
plan year.

divided by the plan's participant count as of the close of the 
preceding plan year. (Under ERISA section 4006(a)(3)(H), added by 
section 405 of PPA 2006, the per-participant VRP is capped at $5 times 
the participant count as of the close of the prior plan year for 
certain plans of small employers. The cap provision is the subject of 
another rulemaking.) Under ERISA section 4006(a)(3)(A)(i), the per-
participant VRP is multiplied by the number of participants ``in [the] 
plan during the plan year'' to yield the total VRP. The existing 
premium rates regulation treats all of these provisions as referring to 
a single determination date. In most cases, this is the last day of the 
prior plan year; it is the first day of the premium payment year (the 
plan year for which the premium is being paid) for two categories of 
plans: new and newly covered plans (which are not in existence as 
covered plans on the last day of the prior plan year) and certain plans 
involved in plan spinoffs and mergers as of the beginning of the 
premium payment year (which otherwise would double-count or not count 
certain participants and UVBs for premium purposes).
    The term ``unfunded vested benefits'' (``UVBs'') is defined in 
ERISA section 4006(a)(3)(E)(iii). In section 4006(a)(3)(E)(iii) before 
amendment by PPA 2006, ``UVBs'' is defined as unfunded current 
liability (a term found in the funding provisions of the Code and Title 
I of ERISA) determined by counting only vested benefits and using a 
special interest rate and (under certain circumstances) a special 
measure of plan assets. PPA 2006 changes the funding rules for single-
employer plans, eliminating the concept of current liability for plan 
years beginning after 2007. (As discussed below, certain plans will not 
use the new funding rules until a later date.) To conform to this 
change, PPA 2006 changes the definition of UVBs in ERISA section 
4006(a)(3)(E)(iii). As amended by PPA 2006, for plan years beginning 
after 2007, section 4006(a)(3)(E)(iii) provides that ``UVBs''--

means, for a plan year, the excess (if any) of * * * the funding 
target of the plan as determined under [ERISA] section 303(d) 
[corresponding to Code section 430(d)] for the plan year by only 
taking into account vested benefits and by using the interest rate 
described in [ERISA section 4006(a)(3)(E)(iv)], over * * * the fair 
market value of plan assets for the plan year which are held by the 
plan on the valuation date.

    New ERISA section 303(g) says that with certain exceptions not 
relevant here, ``all determinations under this section [which includes 
the definition

[[Page 15067]]

of ``funding target'' in section 303(d)(1)] for a plan year shall be 
made as of the valuation date of the plan for such plan year.'' Thus 
PBGC concludes that the ``valuation date'' for plan assets referred to 
in new section 4006(a)(3)(E)(iii) is the valuation date determined 
under section 303(g)(2). In general (under section 303(g)(2)(A)), the 
valuation date for a plan year is the first day of the plan year, but 
certain small plans may designate a different valuation date (under 
section 303(g)(2)(B)), which may be any day in the plan year.
    The change in the definition of UVBs thus creates ambiguity about 
the date as of which UVBs are to be measured. Section 
4006(a)(3)(E)(ii), which was not changed by PPA 2006, refers to two 
plan years--the ``plan year'' for which the VRP is being paid (the 
premium payment year) and the ``preceding plan year,'' at the close of 
which UVBs are to be measured. New section 4006(a)(3)(E)(iii) refers 
only to the ``plan year'' in defining UVBs. And a plan's funding target 
and assets--the elements of UVBs--are to be measured as of the 
valuation date, which need not be the close of the plan year and which 
for many plans (those not small enough to elect otherwise) must be the 
beginning of the plan year.
    To resolve the statutory ambiguity, PBGC is adopting a rule 
regarding the date as of which UVBs are to be measured. In view of the 
following considerations, PBGC is requiring that UVBs be measured as of 
the valuation date in the premium payment year rather than a date in 
the prior plan year.
    Historical data indicate that most premium filers use beginning-of-
the-plan-year valuation dates for funding purposes; under PPA 2006 many 
of them will be required to do so. Although funding valuations don't 
themselves produce UVB numbers that can be used for VRP purposes, they 
involve the gathering of the same basic data for analysis, and the 
valuations are done in the same way, simply using different 
assumptions. It would be burdensome and impractical to require plans 
that must do funding valuations as of the first day of a plan year to 
do separate valuations as of the last day for VRP purposes.
    Requiring a funding valuation done as of the first day of the prior 
plan year to be ``rolled forward'' to the last day of the prior plan 
year is likewise burdensome and impractical. Instructions for ``roll-
forwards'' would necessarily be complex, especially in light of the new 
``segment rate'' interest assumption under ERISA sections 303(h)(2)(C) 
and 4006(a)(3)(E)(iv) as amended by PPA 2006. And ``rolled-forward'' 
valuations would tend to be inaccurate because correcting for the many 
changes in circumstances that can occur during the course of a year 
involves a significant element of estimation.
    Furthermore, basing the VRP on a valuation done in the premium 
payment year reflects a plan's current funding status much better than 
basing it on a valuation done in the prior year, especially a valuation 
done as of the first day of the prior year. And with some changes 
(discussed below) in PBGC's premium due date and penalty rules, there 
will be adequate time for plans to compute premiums based on a premium 
payment year valuation.
    Accordingly, this rule requires that UVBs be measured as of the 
valuation date for the premium payment year (referred to as the ``UVB 
valuation date'') and adjusts premium due dates and penalty rules to 
accommodate the fact that this UVB valuation date is later (by at least 
a day and in some cases perhaps as much as a year) than ``the close of 
the preceding plan year,'' the date used under section 4006(a)(3)(E) 
before amendment by PPA 2006. (No change is made in the date as of 
which participants are counted, which the regulations as amended by 
this final rule refer to as the ``participant count date.'')

Variable-Rate Premium Computation

    As noted above, UVBs under PPA 2006 are based on a plan's funding 
target and the market value of its assets. Under new ERISA section 
303(d)(1), as set forth in section 102 of PPA 2006, ``the funding 
target of a plan for a plan year is the present value of all benefits 
accrued or earned under the plan as of the beginning of the plan 
year.'' But new ERISA section 303(g) makes clear that the funding 
target is to be determined as of the valuation date, which for small 
plans may not be the beginning of the plan year. PBGC thus believes 
that what ERISA section 303(d)(1) requires is that the benefits to be 
valued as of the valuation date are those accrued as of the beginning 
of the plan year. If the valuation date is later than the first day of 
the plan year, accruals after the beginning of the plan year are to be 
ignored.
    The situation regarding assets is similar. New ERISA section 
4006(a)(3)(E)(iii)(II) refers to ``the fair market value of plan assets 
for the plan year which are held by the plan on the valuation date.'' 
Under new ERISA section 303(g)(4)(B), however, plan assets as of a 
valuation date later than the first day of the plan year do not include 
contributions for the plan year made during the plan year but before 
the valuation date or interest thereon. PBGC interprets section 
4006(a)(3)(E)(iii)(II) as incorporating this rule, as well as the 
corresponding rule for prior-year contributions in section 
303(g)(4)(A). Thus for a valuation date later than the first day of the 
plan year, UVBs are to reflect neither accruals nor contributions for 
the plan year.
    In general, a plan's funding target and the value of its assets are 
to be determined for premium purposes the same way they are for funding 
purposes except as new ERISA section 4006(a)(3)(E)(iii) and (iv) 
provides otherwise. In order to distinguish the funding target used for 
premium purposes from that used for funding purposes, the rule 
introduces the term ``premium funding target.'' In general, this means 
the funding target determined by taking only vested benefits into 
account and by using the special segment rates described in new ERISA 
section 4006(a)(3)(E)(iv) (the ``standard premium funding target''). 
Those special segment rates are ``spot rates'' (based on bond yields 
for a single recent month), as opposed to the 24-month average segment 
rates used for funding purposes.
    But in certain circumstances (described below), PBGC is permitting 
filers to use an ``alternative premium funding target'' that may be 
less burdensome to use than the standard premium funding target. A 
plan's alternative premium funding target is the vested portion of the 
plan's funding target under ERISA section 303(d)(1) that is used to 
determine the plan's minimum contribution under ERISA section 303 for 
the premium payment year--that is, an amount calculated using the same 
assumptions as are used to calculate the plan's funding target under 
ERISA section 303(d)(1), but based only on vested benefits, rather than 
all benefits.
    Although instructions for annual reports on Form 5500 series for 
plan years beginning after 2007 are not final, PBGC expects plans to be 
required to compute the vested portion of the funding target (broken 
down by participant category) for Form 5500 filings. PBGC also expects 
that the final instructions will permit or require benefits to be 
categorized as vested or non-vested in a manner consistent with the 
provisions of this rule (discussed below) that explain when certain 
benefits are considered vested for premium purposes. The advantage to a 
filer of using the alternative premium funding target will be that, if 
the plan determines the vested portion of its funding target for 
purposes of the annual report (Form 5500 series) in a

[[Page 15068]]

manner consistent with PBGC's rules, it can use the same number for 
premium purposes and thus avoid having to do a second calculation for 
premium purposes alone.
    Under the rule, the alternative premium funding target may be used 
where the plan makes an election to do so that is irrevocable for a 
period of five years. As financial markets fluctuate, the averaged 
rates used for the alternative premium funding target will fluctuate 
above and below the spot rates used for the standard premium funding 
target. Locking in the election for five years will keep plans from 
calculating the premium funding target both ways each year and using 
the smaller number; the reason for permitting use of the alternative 
premium funding target is to reduce not premiums but the burden of 
computing premiums. PBGC expects that normal interest rate fluctuations 
will make premiums computed with the alternative premium funding 
target--on average, over time--approximately equal to premiums 
calculated with the standard premium funding target. Requiring a five-
year commitment to the use of the alternative premium funding target 
will give this averaging process time to work. If a plan administrator 
concludes that the averaging process has not had enough time to work by 
the end of the minimum five-year election period, the election may be 
left in place to give the averaging process more time to work.
    The proposed rule required that an election (or revocation of an 
election) to use the alternative premium funding target be made by the 
end of the first plan year to which it would apply. The final rule 
changes the election/revocation deadline to the VRP due date for the 
first plan year to which the election or revocation would apply. This 
will allow an election or revocation to be made at the same time as a 
plan's VRP filing for the first plan year to which it applies, even if 
the plan year ends before the due date (such as for a small plan (as 
discussed below) or a short plan year). And since the VRP depends on 
whether an available election or revocation is made, there is no need 
for the election/revocation deadline to be later than the VRP due date 
if the VRP due date occurs before the end of the plan year. PBGC plans 
to provide for such elections and revocations in its electronic premium 
filing application.
    The proposed rule did not explicitly address the applicability of 
the transition rule in ERISA section 303(h)(2)(G) to the calculation of 
the premium funding target. Section 303(h)(2)(G) calls for a two-year 
transition from the current liability interest rate to the new segment 
rates for purposes of determining the funding target. However, in 
describing the interest rate to be used in determining the standard 
premium funding target, ERISA section 4006(a)(3)(E)(iv) (as added by 
PPA 2006) refers only to subparagraphs (C) and (D) of ERISA section 
303(h)(2), not to the funding interest assumption as a whole. Thus, the 
fact that there is a transition rule for funding purposes does not mean 
that there is a transition rule for premium purposes.
    Furthermore, since the current liability interest rate is not the 
interest assumption that has heretofore been used to determine UVBs, a 
literal application of the section 303(h)(2)(G) transition rule would 
lead to illogical results. The only reasonable way the transition rule 
could be applied to the calculation of the standard premium funding 
target would be by reading into section 303(h)(2)(G) (for premium 
purposes) a reference to the required interest rate heretofore used to 
determine UVBs, rather than the current liability interest rate that 
section 303(h)(2)(G) actually refers to. Accordingly, the proposed rule 
did not provide for the applicability of the transition rule to the 
determination of the standard premium funding target, and the premium 
filing instructions that PBGC submitted for approval by the Office of 
Management and Budget when the proposed rule was published reflected 
this. Section 4006.4(b)(2)(ii) of the premium rates regulation, as 
amended by the final rule, makes this point explicit.
    The alternative premium funding target, on the other hand, is based 
directly on the funding target under ERISA section 303(d)(1), which 
will be calculated using the transition rule (unless elected out of 
under ERISA section 303(h)(2)(G)(iv)). Thus the alternative premium 
funding target will clearly reflect the provisions of section 
303(h)(2)(G), just as it will reflect the provisions of section 
303(h)(2)(D)(ii) (election to use the full yield curve instead of 
segment rates) or section 303(h)(2)(E) (election of ``applicable 
month'' for determining the yield curve). PBGC believes that this point 
is clearly implicit in the language of the proposed rule, and has not 
changed that language for the final rule.
    Since new ERISA section 4006(a)(3)(E)(iii)(II) speaks explicitly of 
the ``fair market value'' of assets, PBGC concludes that it would be 
inconsistent with the statute to permit or require the use of the 
averaging process described in new ERISA section 303(g)(3)(B) or the 
reduction of assets by the prefunding and funding standard carryover 
balances described in new ERISA section 303(f)(4). (The existing 
premium rates regulation also provides that credit balances do not 
reduce assets for premium purposes.)
    As noted above, however, PBGC believes that adjustments must be 
made for contributions as described in new ERISA section 303(g)(4). 
Similar adjustments are required under the current premium rates 
regulation. For simplicity, PBGC is providing that the adjustments are 
to be made using the effective interest rates determined for funding 
purposes, rather than effective interest rates computed on the basis of 
the premium segment rates. This will mean that the adjustments do not 
have to be calculated twice (once for funding purposes and again for 
premium purposes), and plans can use for premium purposes a figure for 
the value of assets that they are expected to be entering in the annual 
report (Form 5500 series). PBGC anticipates that the differences 
between funding and premium rates and the periods of time over which 
these rates are applied for this purpose will be small enough to 
justify this simplification. And as funding rates fluctuate above and 
below premium rates, the differences in each direction should cancel 
out over time.
    This rule does not include an ``alternative calculation method'' 
for rolling forward prior year values to the current year. The 
alternative calculation method (ACM) in Sec.  4006.4(c) of the current 
premium rates regulation was instituted when much actuarial valuation 
work was done using hand calculators and tables of factors. High-speed, 
high-memory computers are now the norm for handling both data and 
mathematical computations. Actuarial valuations are thus much faster 
now. Furthermore, the segment rate methodology for valuing benefits 
does not lend itself to the kind of formulaic transformation process 
exemplified by the existing ACM. PBGC accordingly believes that an 
alternative calculation method is both unnecessary and impracticable 
under PPA 2006.
    Noting that the proposed rule ignored premium payment year accruals 
in determining the premium funding target for plans with UVB valuation 
dates after the beginning of the year, one commenter urged that benefit 
increase amendments adopted after the UVB valuation date but 
implemented retroactively to the beginning of the premium payment year 
be ignored for premium purposes. PBGC is not adopting any express 
provision on this subject. The premium funding target is

[[Page 15069]]

based on the funding target under ERISA section 303(d); whether a 
benefit increase (even if retroactive) is taken into account for 
premium purposes depends on whether it is taken into account for 
funding purposes, an issue not addressed in this rule.

Due Dates and Penalty Rules

    PBGC expects that most plans that are required (or choose) to do 
funding valuations as of the beginning of the plan year (and whose UVB 
valuation date is thus the first day of the premium payment year) will 
be able to determine their UVBs by the VRP due date currently provided 
for in PBGC's premium payment regulation (generally, the middle of the 
tenth full calendar month after the beginning of the plan year). But 
there are some circumstances that can make timely determination of the 
VRP difficult or impossible: for example, use of a valuation date after 
the beginning of the plan year (applicable to small plans only) or 
difficulty in collecting data (e.g., because of the occurrence of 
unusual events during the preceding year). To deal with such 
circumstances, PBGC is revising its premium due date and penalty 
structure to give smaller plans more time to file and larger plans the 
ability to make VRP filings based on estimated liabilities and then 
correct them without penalty. The following detailed discussion of the 
due date and penalty structure is followed by a summary table.
    PBGC's current due date structure for flat- and variable-rate 
premiums is based on two categories of plans: those that owed premiums 
for 500 or more participants for the plan year preceding the premium 
payment year (``large'' plans) and those that did not. The new 
structure is based on three categories. The large-plan category remains 
the same. A new ``mid-size'' category consists of plans that owed 
premiums for 100 or more, but fewer than 500, participants for the plan 
year preceding the premium payment year. A category of ``small'' plans 
includes all other plans. The participant count for this purpose will 
continue to be the prior year's count; the rule provides uniform 
language for determining both single- and multiemployer plans' 
participant counts for determining due dates, eliminating a slight 
language difference in the existing regulation.
    The final rule makes clear that the number of participants used for 
determining plan size is the participant count used for purposes of the 
flat-rate premium (not the number of participants whose benefits are 
taken into account in computing the VRP). Since both flat-rate and 
variable-rate premium due dates are based on plan size, plan size must 
be determinable for plans (such as multiemployer plans) that do not 
compute the VRP. Furthermore, the VRP does not reflect the number of 
participants directly except for certain plans of small employers that 
are subject to a VRP cap based on the number of participants (in which 
case it is the flat-rate participant count that is used). Tying plan 
size to the flat-rate premium participant count is consistent with the 
existing regulation.
    The 100-participant break-point between the small and mid-size 
categories approximates the break-point in the PPA 2006 funding rules 
between plans that are required to use beginning-of-the-year valuation 
dates under ERISA section 303(g)(2)(A) and those permitted to use 
another date under ERISA section 303(g)(2)(B). The correspondence with 
the valuation date provision is only approximate. Under the valuation 
date provision, PPA 2006 counts participants on each day of a plan year 
and aggregates plans within controlled groups; under the premium due 
date rules, participants are counted in one plan on one day. 
Furthermore, PPA 2006 funding rules look back to the plan year 
preceding the valuation year; the PBGC participant count for the plan 
year preceding the premium payment year is typically as of the last day 
of the plan year before that. Accordingly, there may be plans that are 
eligible to elect valuation dates other than the first day of the plan 
year but that do not fall into PBGC's new small-plan category. But most 
plans that use valuation dates other than the first day of the plan 
year are expected to be ``small'' under the new due date structure, and 
there is enough flexibility in the due date rules for large and mid-
size plans to make premium filing manageable in most cases even for 
plans with valuation dates after the beginning of the plan year. In 
unusual cases, where a plan with a valuation date late in the year 
finds itself in the large or mid-size category, PBGC has authority to 
waive late premium penalties.

Small Plans

    For plans in the ``small'' category, all premiums will be due on 
the last day of the sixteenth full calendar month that begins on or 
after the first day of the premium payment year (for calendar-year 
plans, April 30 of the year following the premium payment year). This 
will give any small plan at least four months to determine UVBs.
    The same due date will apply to both variable- and flat-rate 
premiums. While there is no reason these small plans cannot determine 
the flat-rate premium by the current due date (the 15th day of the 
tenth full calendar month that begins on or after the first day of the 
premium payment year), PBGC wants to avoid requiring them to make two 
filings per year. And for simplicity, PBGC is making no distinction for 
due date purposes between single-employer plans that pay the VRP and 
single-employer (and multiemployer) plans that do not. Small single-
employer plans that qualify for an exemption from the VRP and small 
multiemployer plans (which are not subject to the VRP) will have the 
same deferred due date as small single-employer plans that owe a VRP.

Mid-Size Plans

    For mid-size plans, the rule retains the current premium due date--
the 15th day of the tenth full calendar month that begins on or after 
the first day of the premium payment year (October 15th for calendar-
year plans)--for both flat- and variable-rate premiums. With rare 
exceptions, these plans will perform valuations as of the first day of 
the premium payment year, and in most cases should be able to calculate 
UVBs by the current due date. However, in recognition of the 
possibility that circumstances might make a final UVB determination by 
the due date difficult or impossible, the rule permits VRP filings to 
be made based on estimated liabilities and provides a penalty-free 
``true-up'' period to correct a VRP based on an erroneous estimate.
    Under this provision, the VRP penalty is waived for a period of 
time after the VRP due date if, by the VRP due date, the plan 
administrator submits an estimate of the VRP that meets certain 
requirements and pays the estimated amount. The waiver of the penalty 
covers the period from the VRP due date until the small-plan due date 
or, if earlier, the filing of the final VRP. Interest is not suspended; 
if the VRP estimate falls short of the correct amount, interest will 
accrue on the amount of the underpayment from the date when the payment 
was due to the date the shortfall was paid, just as with the existing 
``safe harbor'' rule for large plans' flat-rate premium payments.
    The requirements for the VRP estimate are that it be based on (1) a 
final determination of the market value of the plan's assets and (2) a 
reasonable estimate of the plan's premium funding target for the 
premium payment year that takes into account the most current data 
available to the plan's enrolled actuary and is determined in 
accordance with generally accepted actuarial

[[Page 15070]]

principles and practices. The estimate of the premium funding target 
must be certified by the enrolled actuary and, like other premium 
information filed with PBGC, is subject to audit. PBGC needs a good 
estimate of its VRP income for inclusion in its annual report, which is 
prepared during October (because its fiscal year ends September 30), 
when most plans (those with calendar plan years) submit VRP filings. 
Thus, it is important to have assurance that the estimate of the 
premium funding target has been prepared in good faith.
    Since this penalty relief is based on the plan's reporting a final 
figure for the value of assets by the VRP due date, the relief is lost 
if there is a mistake in the assets figure so reported, whether the 
mistaken figure is lower or higher than the true figure. PBGC will 
consider a request for an appropriate penalty waiver in such a 
situation and in acting on the request will consider such facts and 
circumstances as the reason for the mistake, whether assets were over- 
or understated, and, if assets were overstated, the extent of the 
overstatement.
    Since the provision of a period for ``truing up'' the VRP without 
penalty, after a filing based on an estimate, is not an extension of 
the VRP due date, it does not provide additional time to make an 
alternative premium funding target election.

Large Plans

    The due date and penalty structure for ``large'' plans is the same 
as for ``mid-size'' plans except that the early due date for the flat-
rate premium under the existing regulation is retained, along with the 
related ``safe harbor'' penalty rules. However, there is a change in 
the ``safe harbor'' rules to accommodate the unlikely event that a plan 
might be in the small-plan category for one year but in the large-plan 
category for the next year. Under Sec. Sec.  4007.8(f) and (g)(2)(ii) 
of the existing premium payment regulation, a plan may be entitled to 
safe harbor relief if its flat-rate filing is consistent with its 
reported participant count for the prior plan year, even if the 
reported count is later determined to be wrong. But under the new 
rules, a plan that is small for one year and large for the next year 
will not have to report its participant count for the first year until 
after the flat-rate due date for the second year. Thus, to get the 
benefit of these special safe-harbor rules, a plan in such 
circumstances would have to make its final filing for the first year 
two months before it was due. To alleviate this problem, the rule 
provides safe-harbor relief for any plan whose flat-rate due date for 
the plan year preceding the premium payment year is later than the 
large-plan flat-rate due date for the premium payment year.

Due Date Table

    The following table shows the relevant premium due dates for small, 
mid-size, and large calendar year plans (as described above) for the 
2008 premium payment year:

----------------------------------------------------------------------------------------------------------------
                                     Small plans (under 100    Mid-size plans (100-499  Large plans (500 or more
                                         participants)              participants)             participants)
----------------------------------------------------------------------------------------------------------------
Flat-rate premium due............  April 30, 2009...........  October 15, 2008........  February 29, 2008. See
                                                                                         flat-rate premium safe
                                                                                         harbor rules.
Flat-rate premium reconciliation   N/A......................  N/A.....................  October 15, 2008.
 due.
Variable-rate premium due........  April 30, 2009...........  October 15, 2008.         October 15, 2008.
                                                               Estimate may be filed     Estimate may be filed
                                                               and paid. See rules on    and paid. See rules on
                                                               correcting VRP without    correcting VRP without
                                                               penalty.                  penalty.
Latest VRP penalty starting date.  N/A......................  April 30, 2009..........  April 30, 2009.
 If certain conditions are met,
 penalty is waived until this
 date or, if earlier, the date
 the final VRP is filed.
----------------------------------------------------------------------------------------------------------------

Special Variable-Rate Premium Rules

    The existing premium rates regulation includes a number of special 
``exemption'' or ``relief'' rules for VRP filers. One of these--the 
full-funding limit exemption, which was created by statute--has been 
eliminated by PPA 2006. Three others--created by PBGC regulation in 
1988--have lost their justification, as explained below, and PBGC is 
eliminating them as well. PBGC is also introducing two new ``relief'' 
rules.
    The three regulatory special rules that are eliminated are (1) the 
rule that a plan with fewer than 500 participants for the premium 
payment year is exempt from reporting its VRP information if the plan 
has no UVBs (the ``small well-funded plan rule''), (2) the rule that a 
plan with 500 or more participants may report (and compute its VRP on 
the basis of) accrued rather than vested benefits (the ``large plan 
accrued benefit rule''), and (3) the rule that a plan may value 
benefits using the funding interest rate rather than the variable-rate 
premium interest rate if the funding rate is less than the premium rate 
(the ``funding interest rate rule''). All three represent compromises 
between the need for accuracy in the determination of the VRP and the 
reporting of VRP data on the one hand and the need to reduce the burden 
of compliance on the other.
    PBGC needs accurate data about UVBs and assets--now as in 1988--to 
verify the correctness of the reported VRP and for financial 
projections. But whereas the cost of determining this information 20 
years ago could be very significant, because much actuarial valuation 
work was done using hand calculators and tables of factors, valuations 
are now computerized and thus cost less. PBGC's need for accurate data 
now outweighs the burden of determining and reporting the data. The 
elimination of these three special rules reflects that change in the 
balance between need and burden. Furthermore, both the ``large plan 
accrued benefit rule'' and the ``funding interest rate rule'' overstate 
UVBs and are used by very few plans--fewer than three dozen plans used 
each of these two special rules for the 2004 filing year (the last year 
for which data are available).
    In addition, one of the two new ``relief'' rules that PBGC is 
introducing--the new alternative premium funding target provision 
discussed above--provides relief for filers that might otherwise have 
used any of these three special rules. The alternative premium funding 
target provision permits the use of funding rates for premium purposes 
(like the ``funding interest rate rule'') without the need for a 
comparison of rates (albeit with a requirement for a five-year 
commitment). And by using the alternative premium funding target 
provision, plans that might have used the ``large plan accrued benefit 
rule'' or the ``small well-funded plan rule'' may be able to base 
premium reporting on

[[Page 15071]]

figures that are computed for and included in the annual report (Form 
5500 series).
    PBGC's second new ``relief'' rule--in addition to the alternative 
premium funding target provision--is a reporting relief provision for 
certain small-employer plans. Section 405 of PPA 2006 caps the VRP for 
certain plans of small employers, a provision that is the subject of 
another PBGC rulemaking proceeding. This rule exempts plans that 
qualify for the VRP cap and pay the full amount of the cap from 
determining or reporting UVBs.

Meaning of ``Vested''

    As discussed above, the determination of UVBs--both before and 
after the PPA 2006 amendments--requires that only vested benefits be 
taken into account. PBGC believes that there is some uncertainty among 
pension practitioners as to the meaning of the term ``vested'' as used 
in ERISA section 4006(a)(3)(E). With a view to reducing uncertainty and 
promoting consistency in the VRP determination process, Sec.  4006.4(d) 
of the premium rates regulation, as amended by this final rule, 
explains--for premium purposes only--when certain benefits are 
considered vested.
    The proposed rule specified two circumstances that would not 
prevent a participant's benefit from being vested for premium purposes. 
One circumstance is that the benefit is not protected under Code 
section 411(d)(6) and thus may be eliminated or reduced by the adoption 
of a plan amendment or by the occurrence of a condition or event (such 
as a change in marital status). PBGC considers such a benefit to be 
vested (if the other conditions of entitlement have been met) so long 
as the benefit has not actually been eliminated or reduced. The other 
circumstance--applicable to certain benefits payable upon a 
participant's death--is that the participant is living. The benefits to 
which this would apply are (1) a qualified pre-retirement survivor 
annuity, (2) a post-retirement survivor annuity such as the annuity 
paid after a participant's death under a joint and survivor or certain 
and continuous option, and (3) a benefit that returns a participant's 
accumulated mandatory employee contributions. PBGC considers such 
benefits to be vested (if the other conditions of entitlement have been 
met) notwithstanding that the participant is alive. The final rule 
includes two illustrative examples.
    There was a public comment that the vesting provision in the 
proposed rule did not address two types of benefits as to which 
guidance was needed: Pre-retirement lump sum death benefits and 
disability benefits. PBGC does not intend new Sec.  4006.4(d) (the 
vesting provision) to be an exhaustive treatment of the subject; the 
provision is meant merely to provide clarification for the specific 
cases it mentions. In response to this comment, however, PBGC is 
expanding Sec.  4006.4(d) to provide that a pre-retirement lump sum 
death benefit (other than one that returns mandatory employee 
contributions) is not considered vested for premium purposes where the 
participant is living and that a disability benefit is not considered 
vested for premium purposes where the participant is not disabled.
    Another commenter stated that many practitioners have not been 
treating as vested the benefits that PBGC would consider vested under 
the proposed rule and that PBGC's vesting provision is at odds with the 
standards (currently under revision) of the American Academy of 
Actuaries. The commenter expressed a preference that PBGC not adopt the 
proposed vesting provision and urged that the provision be applied 
prospectively only. PBGC acknowledges that some actuaries may not be 
using the interpretation of vesting prescribed by this rule but 
believes that many are doing so; it is precisely to promote consistency 
in this regard that the vesting provision--applicable for premium 
purposes only--is included in the rule.
    For plans that have been computing UVBs without counting benefits 
that are considered vested under PBGC's rule, adoption of the rule may 
increase UVBs. As stated in Applicability below, the rule is effective 
for plan years beginning after 2007. Although PBGC has made no 
determination as to the position it may take regarding the interpretive 
issue for prior periods, PBGC currently has no plans to focus on this 
issue in audits of premium filings for plan years beginning before 
2008.

Recordkeeping and Audits

    The rule clarifies and strengthens the provisions of the premium 
payment regulation dealing with recordkeeping and audits. Most of the 
changes simply reflect existing recordkeeping and audit practices.
    In describing the premium records to be kept, the current premium 
payment regulation mentions explicitly only those prepared by enrolled 
actuaries and insurance carriers. The rule broadens this to include 
plan sponsors and employers required to contribute to a plan for their 
employees and clarifies, with a list of examples of relevant records, 
that PBGC interprets the term ``records'' broadly. Similarly, the rule 
refers explicitly to records supporting the amount of premiums that 
were required to be paid and the premium-related information that was 
required to be reported (rather than just what was actually paid or 
reported). Where a premium or premium-related information is determined 
through the use of a manual or automated system or process, the rule 
allows PBGC to require that the operation of the system or process be 
demonstrated so that its effectiveness, and the reliability of the 
results produced, can be assessed. In addition, in situations where 
plan records are deficient, the rule broadens the categories of data on 
which PBGC may rely to establish the amount of premiums due to include 
not just participant count data but UVB data.
    The rule also makes clear that the 45 days permitted for producing 
records under Sec.  4007.10(c) applies to records sent to PBGC, not to 
records audited on-site (which PBGC expects to be produced much more 
promptly). And the rule broadens the circumstances in which PBGC can 
require faster submission of records. The existing regulation limits 
such circumstances to those where collection of money may be 
jeopardized. This is changed to authorize shorter response times where 
the interests of PBGC may be prejudiced by delay--such as where PBGC 
has reason to suspect that records might be destroyed or manipulated.

Miscellaneous Provisions

Plans Subject to Special Funding Rules

    Sections 104, 105, and 106 of PPA 2006 defer the effective date of 
the funding amendments for certain plans described in those sections, 
which in general deal with plans of cooperatives, plans affected by 
settlement agreements with PBGC, and plans of government contractors. 
Section 402 of PPA 2006 (amended by section 6615 of the U.S. Troop 
Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007, Pub. L. 110-28) applies special funding rules 
to certain plans of commercial passenger airlines and airline caterers. 
None of these provisions affects the applicability of the amendments to 
ERISA section 4006 regarding the determination of the VRP. The rule 
provides explicitly that plans in this small group must determine UVBs 
in the same manner as all other plans. The language of this provision 
has been revised in the final rule to make this point clearer (in 
light, particularly, of the amendment to

[[Page 15072]]

section 402 of PPA 2006, which was made after the proposed rule was 
cleared for publication in the Federal Register).

New and Newly Covered Plans

    The rule eliminates confusing language in the existing regulations 
that raised questions about the determination of due dates, participant 
count dates, and premium proration for new and newly covered plans in 
certain circumstances. The new language makes clear that the first day 
of a new plan's first plan year for premium purposes is the effective 
date of the plan. The final rule goes beyond the proposed rule in this 
regard by revising the definition of ``new plan'' to eliminate wording 
that might suggest that a new plan could become effective after the 
beginning of its first premium payment year. These changes will obviate 
the need for plan administrators to choose between the effective date 
and the adoption date as the first day of the plan year for premium 
filing.
    In addition, the final rule eliminates one of the alternative due 
date computation rules for new and newly covered plans (in new Sec.  
4007.11(c)). The proposed rule included an alternative under which the 
due date would be not earlier than 90 days after the plan's coverage 
date. This alternative is not necessary. The coverage date must fall 
within the premium payment year in order for premiums to be due at all, 
and the due date cannot be earlier than sixteen months after the 
beginning of that year. Thus, the due date will be at least four months 
(i.e. more than 90 days) after the date on which the plan became 
covered. Accordingly, an alternative due date that is 90 days after the 
coverage date would never come into play and can be eliminated from the 
regulation.

Electronic Filing Requirement

    Effective July 1, 2006, PBGC amended its regulations to require 
that annual premium filings be made electronically (71 FR 31077, June 
1, 2006). (Exemptions from the e-filing requirement may be granted for 
good cause in appropriate circumstances.) For PBGC's premium processing 
systems to work effectively and efficiently, information must be 
received in an electronic format compatible with those systems; the 
burden of reformatting information received on paper or in other 
incompatible formats is significant, and the reformatting process gives 
rise to data errors. The premium payment regulation as amended by this 
rule therefore provides explicitly that, in the absence of an 
exemption, premium filing on paper or in any other manner other than 
the prescribed electronic filing method does not satisfy the 
requirement to file. Thus, a penalty under ERISA section 4071 may be 
assessed for the period from the due date of the premium filing until 
it is made electronically, even if a timely paper filing is made.

Billing ``Grace Period'' for Interest

    The rule consolidates paragraphs (b) and (c) of Sec.  4007.7, both 
of which deal with the ``grace period'' for interest on premium 
underpayments where a bill is paid within 30 days. No substantive 
change is intended.

VRP Rate

    ERISA section 4006(a)(3)(E)(ii) sets the variable-rate premium at 
$9 for each $1,000 (or fraction thereof) of UVBs. Section 4006.3(b) of 
the existing premium rates regulation omits the phrase ``(or fraction 
thereof).'' The requirement is made clear in PBGC's premium 
instructions; the rule adds this phrase to the regulatory text.

Pre-1996 Penalty Accrual Rules

    The rule eliminates the pre-1996 penalty accrual rules as 
anachronistic.

Definitional Cross-Reference

    The definition of ``participant'' in Sec.  4006.6 uses the term 
``benefit liabilities,'' which is defined in Sec.  4001.2 of PBGC's 
regulation on Terminology. Existing Sec.  4006.2 (dealing with defined 
terms used in the premium rates regulation) does not include a cross-
reference to the definition of ``benefit liabilities'' in Sec.  4001.2. 
This final rule corrects that omission (which was not corrected in the 
proposed rule).

Other Changes

    The rule includes a number of clarifying and editorial changes.

Applicability

    The regulatory changes made by this rule, like the statutory 
changes to the VRP, apply to plan years beginning after 2007.

Compliance With Rulemaking Guidelines

E.O. 12866

    PBGC has determined, in consultation with the Office of Management 
and Budget, that this rule is a ``significant regulatory action'' under 
Executive Order 12866. The Office of Management and Budget has 
therefore reviewed the rule under E.O. 12866. Pursuant to section 
1(b)(1) of E.O. 12866 (as amended by E.O. 13422), PBGC identifies the 
following specific problems that warrant this agency action:
     There is ambiguity in ERISA section 4006(a)(3)(E) 
regarding the date as of which UVBs are to be measured. This problem is 
significant because, unless the statutory ambiguity is resolved, it 
will be unclear what date UVBs are to be measured as of.
     The statute lacks clarity and specificity in describing 
how UVBs are calculated. This problem is significant because, unless 
clarity and specificity are provided, it will be unclear how to compute 
UVBs.
     The statute does not expressly provide for an alternative 
premium funding target as described above. This problem is significant 
because the standard premium funding target provided for in the statute 
is more burdensome to use than the alternative premium funding target 
described above without generating significantly different premium 
revenue than the less burdensome alternative premium funding target.
     PBGC's existing premium due date and penalty rules do not 
accord well with the new rules for the date as of which and manner in 
which UVBs are to be determined. This problem is significant because, 
without changes in the due date and penalty rules, some plans may 
experience difficulties in paying premiums timely and without late 
payment penalties.
     Some existing PBGC VRP relief rules are anachronistic and 
some new relief provisions are warranted by statutory changes. This 
problem is significant because the outmoded relief rules detract from 
accuracy in determining the VRP and deprive PBGC of VRP data without 
significantly reducing burden, while statutory changes have made it 
possible to grant new relief without significant adverse consequences 
for the PBGC insurance program.
     There is uncertainty as to the meaning of the term 
``vested'' that is used in the statute to describe benefits taken into 
account in determining the VRP. This problem is significant because, 
without improved clarity in the meaning of ``vested'' as applied to VRP 
determinations, those determinations may be inconsistent.
     PBGC's current recordkeeping and audit rules do not match 
current recordkeeping and audit practices in scope and specificity, and 
provide relatively narrow circumstances in which PBGC may require 
expedited submission of records. This problem is significant because 
inadequate recordkeeping and audit rules could compromise PBGC's 
ability to enforce

[[Page 15073]]

the premium rules in the statute and PBGC's regulations thereunder.
     PBGC's existing premium payment regulation does not 
provide explicitly that, in the absence of an exemption, premium filing 
on paper or in any other manner other than the prescribed electronic 
filing method does not satisfy the requirement to file. This problem is 
significant because, in the absence of an explicit statement, filers 
might believe they had a basis for taking the position that penalties 
for late filing would not apply if they timely filed on paper or in 
some other non-approved manner.

Regulatory Flexibility Act

    PBGC certifies under section 605(b) of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.) that the amendments in this final rule will 
not have a significant economic impact on a substantial number of small 
entities. Accordingly, as provided in section 605 of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), sections 603 and 604 do not 
apply.
    Most of the amendments implement statutory changes made by 
Congress. They provide procedures for calculating, substantiating, and 
paying the premiums prescribed by statute and impose no significant 
burden beyond the burden imposed by statute. To the extent that this 
rule makes changes that are outside the explicit scope of the statute, 
they affect primarily the requirement to perform and manner of 
performing VRP calculations. When the VRP provisions were added to 
PBGC's regulations nearly 20 years ago, these calculations were mostly 
done using actuarial tables and hand calculators. Today they are almost 
universally done using high-memory, high-speed computers. The VRP 
calculations parallel funding calculations that must be done 
independently of PBGC premium requirements. Thus, the VRP calculations 
can be done for the most part by plugging in different parameters (such 
as interest rates) to computer programs that are used for funding 
purposes. The incremental cost of such calculations for entities of any 
size is insignificant. Not including a computation option like the 
existing alternative computation method (ACM) in the new rules does not 
significantly affect compliance costs because such an option would 
itself be complex and thus burdensome to use and because a simplified 
computation method is no longer needed in the current environment of 
computerized actuarial computations.
    Changes that would tend to increase compliance costs (e.g., 
elimination of the VRP exemption for well-funded small plans) are 
offset by changes tending to reduce compliance costs (e.g., the 
introduction of the reporting exemption for plans of small employers 
paying the maximum capped VRP).
    The shift from prior-year to current-year data and the deferral of 
the due date for small plans (those with fewer than 100 participants) 
should not affect the cost of compliance. Under existing rules, UVBs 
are determined as of the end of the prior year (or in some cases the 
beginning of the current year) and the VRP is due 9\1/2\ months later. 
Under the new rules, UVBs will be determined as of the UVB valuation 
date, which for most small plans may be any day in the current year. 
For plans that choose a valuation date at the beginning of the year, 
the VRP is now due 16 months later. For those that choose a valuation 
date at the end of the year, the VRP is now due 4 months later. For a 
plan that chooses a mid-year valuation date, the VRP is due 10 months 
later, providing about the same time for data-gathering and 
computations as under the existing rules. But even a 4-month period 
between the valuation date and the due date should be adequate for the 
data-gathering and UVB computations of small plans, and the change in 
timing should not affect the cost of compliance.
    PBGC believes that the changes to the recordkeeping requirements in 
general simply codify existing practices. The changes to the audit 
rules will not affect a significant number of plans of any size.

Paperwork Reduction Act

    The information collection requirements under this rule have been 
approved by the Office of Management and Budget under the Paperwork 
Reduction Act (OMB control number 1212-0009; expires 02/28/2011). An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid OMB control number.
    PBGC needs premium-related information to identify the plan for 
which premiums are paid to PBGC, to verify the determination of the 
premium, and to help the PBGC determine the magnitude of its exposure 
in the event of plan termination.
    The information collection requirements under the premium rates and 
premium payment regulations that OMB approved included the following 
changes from those previously approved:
     Filers will be required to include in the addresses of the 
plan sponsor and plan administrator the countries where the addresses 
are located (if other than the United States).
     Filers will no longer be required to report coverage 
status.
     Filers will be required to provide the plan contact's e-
mail address (if any).
     Filers will no longer be required to provide information 
on participant notices under ERISA section 4011 (that requirement 
having been eliminated by PPA 2006).
     Filers will be required to report if they qualify for 
premium proration (for a short plan year) and if so, to report the 
number of months in the proration period. Proration will be reported 
separately from credits. (This change will not apply to 2008 estimated 
flat-rate premium filings.)
     Filers will be required to report plan size (small, mid-
size, or large) based on the prior year's participant count (or report 
that the plan is filing for the first time).
     Filers will have an opportunity to make alternative 
premium funding target elections as part of the premium filing.
     Filers will be required to report the participant count 
date.
     Most existing VRP information items will be eliminated in 
connection with the implementation of the new VRP rules. Items retained 
will be the identification of any applicable VRP exemption and the 
amount of UVBs.
     New VRP data required will be qualification for the VRP 
cap for certain plans of small employers, the UVB valuation date, the 
premium funding target as of the UVB valuation date, the premium 
funding target method (standard or alternative), whether the reported 
premium funding target is an estimate, the segment rates used to 
compute the premium funding target (or indication that the full yield 
curve was used), the market value of assets as of the UVB valuation 
date, the (unprorated) VRP cap (for plans eligible for the cap), and 
the (unprorated) uncapped VRP (for plans not eligible for the cap).
     For a final filing, filers will be required to report the 
date and type of event that results in the cessation of the filing 
obligation.
     The existing item on transfers from disappearing plans 
will be replaced by two new items: information about transfers from 
other plans (whether disappearing or not) and information about 
transfers to other plans. (This change will not apply to 2008 estimated 
flat-rate premium filings.)
     For frozen plans, filers will be required to identify the 
type of freeze and its effective date.

[[Page 15074]]

     For amended filings, filers will be required to report any 
change in the beginning and ending dates of the plan year being 
reported and any change in the plan identifying numbers being reported 
from those in the original filing.

List of Subjects

29 CFR Part 4006

    Pension insurance, Pensions.

29 CFR Part 4007

    Penalties, Pension insurance, Pensions, Reporting and recordkeeping 
requirements.

0
For the reasons given above, 29 CFR parts 4006 and 4007 are amended as 
follows.

PART 4006--PREMIUM RATES

0
1. The authority citation for part 4006 continues to read as follows:

    Authority: 29 U.S.C. 1302(b)(3), 1306, 1307.

0
2. In Sec.  4006.2:
0
a. The introductory text is amended by removing the words ``chapter: 
Code'' and adding in their place the words ``chapter: benefit 
liabilities, Code''; and by removing the words ``irrevocable 
commitment, multiemployer plan'' and adding in their place the words 
``irrevocable commitment, mandatory employee contributions, 
multiemployer plan''.
0
b. The definition of ``new plan'' is amended by removing the words 
``became effective within'' and adding in their place the words ``did 
not exist before''.
0
c. The definition of ``short plan year'' is revised, and four new 
definitions are added, to read as follows:


Sec.  4006.2  Definitions.

* * * * *
    Participant count of a plan for a plan year means the number of 
participants in the plan on the participant count date of the plan for 
the plan year.
    Participant count date of a plan for a plan year means the date 
provided for in Sec.  4006.5(c), (d), or (e) as applicable.
    Premium funding target has the meaning described in Sec.  
4006.4(b)(1).
* * * * *
    Short plan year means a plan year of coverage that is shorter than 
a normal plan year.
    UVB valuation date of a plan for a plan year means the plan's 
funding valuation date for the plan year determined in accordance with 
ERISA section 303(g)(2).

0
3. In Sec.  4006.3:
0
a. Paragraph (a) is amended by removing the words ``last day of the 
plan year preceding the premium payment year,'' and adding in their 
place the words ``participant count date''.
0
b. Paragraph (b)(1) is amended by removing the words ``$1,000 of a 
single-employer plan's unfunded vested benefits'' and adding in their 
place the words ``$1,000 (or fraction thereof) of a single-employer 
plan's unfunded vested benefits for the premium payment year''.

0
4. Section 4006.4 is revised to read as follows:


Sec.  4006.4  Determination of unfunded vested benefits.

    (a) In general. Except as provided in the exemptions and special 
rules under Sec.  4006.5, the amount of a plan's unfunded vested 
benefits for the premium payment year is the excess (if any) of the 
plan's premium funding target for