PART 4006—PREMIUM RATES Authority: 29 U.S.C. 1302(b)(3), 1306, 1307. Source: 61 FR 34016, July 1, 1996, unless otherwise noted. § 4006.1 Purpose and scope. This part, which applies to all plans covered by title IV of ERISA, provides rules for computing the premiums imposed by sections 4006 and 4007 of ERISA. (See part 4007 of this chapter for rules for the payment of premiums, including due dates and late payment charges.) § 4006.2 Definitions. The following terms are defined in § 4001.2 of this chapter: benefit liabilities, Code, contributing sponsor, ERISA, fair market value, insurer, irrevocable commitment, mandatory employee contributions, multiemployer plan, notice of intent to terminate, PBGC, plan administrator, plan, plan year, single-employer plan, and termination date. In addition, for purposes of this part: Continuation plan de minimis l CSEC plan New plan Newly covered plan Participant Participant count Participant count date Premium funding target Premium payment year Short plan year Small plan (1) Whose participant count is not more than 100, or (2) Whose funding valuation date for the premium payment year, determined in accordance with ERISA section 303(g)(2), is not the first day of the premium payment year. UVB valuation date UVB valuation year (1) In general,— (i) The plan year preceding the premium payment year, if the plan is a small plan other than a continuation plan, or (ii) The premium payment year, in any other case; or (2) For a small plan that so opts subject to PBGC premium instructions, the premium payment year. [61 FR 34016, July 1, 1996, as amended at 65 FR 75163, Dec. 1, 2000; 73 FR 15074, Mar. 21, 2008; 79 FR 13559, Mar. 11, 2014; 90 FR 39327, Aug. 15, 2025] § 4006.3 Premium rate. Subject to the provisions of § 4006.5 (dealing with exemptions and special rules) and § 4006.7 (dealing with premiums for certain terminated single-employer plans), the premium paid for basic benefits guaranteed under section 4022(a) or section 4022A(a) of ERISA shall equal the flat-rate premium under paragraph (a) of this section plus, in the case of a single-employer plan, the variable-rate premium under paragraph (b) of this section. Premium rates (and the MAP-21 cap rate referred to in paragraph (b)(2) of this section) are subject to change each year under inflation indexing provisions in section 4006 of ERISA. (a) Flat-rate premium. (1) Section 4006(a)(3)(A) and (G) of ERISA for a single-employer plan, or (2) Section 4006(a)(3)(A) and (J) of ERISA for a multiemployer plan. (b) Variable-rate premium In general. (2) MAP-21 cap. (3) Small-employer cap In general. 2 (ii) Plans eligible for cap. (iii) Meaning of “employee.” [61 FR 34016, July 1, 1996, as amended at 72 FR 71228, Dec. 17, 2007; 73 FR 15074, Mar. 21, 2008; 79 FR 13559, Mar. 11, 2014; 88 FR 76664, Nov. 7, 2023] § 4006.4 Determination of unfunded vested benefits. (a) In general. (b) Premium funding target In general. (i) If the plan is not a CSEC plan and an election to use the alternative premium funding target under § 4006.5(g) is in effect, its premium funding target is its alternative premium funding target under § 4006.5(g), and; (ii) If the plan is a CSEC plan, its premium funding target is determined under § 4006.5(h). (2) Standard premium funding target. (i) Only vested benefits are taken into account, and (ii) The interest rates to be used are the segment rates for the month preceding the month in which the UVB valuation year begins that are determined in accordance with ERISA section 4006(a)(3)(E)(iv). These are the rates that would be determined under ERISA section 303(h)(2)(C) if ERISA section 303(h)(2)(D) were applied by using the monthly yields for the month preceding the month in which the UVB valuation year begins on investment grade corporate bonds with varying maturities and in the top 3 quality levels rather than the average of such yields for a 24-month period. For this purpose, the transition rule in ERISA section 303(h)(2)(G) is inapplicable. (3) “At-risk” plans; transition rules; loading factor. (i) Per-participant portion of loading factor. (ii) Four percent portion of loading factor. (c) Value of assets. (d) “ Vested. (1) A participant's benefit that is otherwise vested does not fail to be vested merely because of the circumstance that the participant is living, in the case of the following death benefits: (i) A qualified pre-retirement survivor annuity (as described in ERISA section 205(e)), (ii) A post-retirement survivor annuity that pays some or all of the participant's benefit amount for a fixed or contingent period (such as a joint and survivor annuity or a certain and continuous annuity), and (iii) A benefit that returns the participant's accumulated mandatory employee contributions (as described in ERISA section 204(c)(2)(C)). (2) A benefit otherwise vested does not fail to be vested merely because of the circumstance that the benefit 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). (3) A participant's pre-retirement lump-sum death benefit (other than a benefit described in paragraph (d)(1)(iii) of this section) is not vested if the participant is living. (4) A participant's disability benefit is not vested if the participant is not disabled. (e) Illustration of vesting principles. The vesting principles set forth in paragraph (d) of this section are illustrated by the following examples: (1) Example 1. (2) Example 2. (f) Plans to which special funding rules apply. (1) Section 402(b) of the Pension Protection Act of 2006, Public Law 109-280, dealing with certain frozen plans of commercial passenger airlines and airline caterers. (2) Section 303(m) of ERISA and section 430(m) of the Code, dealing with defined benefit pension plans maintained by certain community newspapers. [73 FR 15074, Mar. 21, 2008, as amended at 79 FR 13560, Mar. 11, 2014; 85 FR 6058, Feb. 4, 2020; 90 FR 39327, Aug. 15, 2025] § 4006.5 Exemptions and special rules. (a) Variable-rate premium exemptions. (1) Plans without vested participants. (2) Section 412(e)(3) plans. (3) Certain plans completing a standard termination. (i) Makes a final distribution of assets in a standard termination during the premium payment year, and (ii) Did not engage in a spinoff during the premium payment year, unless the spinoff is de minimis pursuant to the regulations under section 414(l) of the Code. (4) Certain plans in the process of completing a standard termination initiated in a prior year. (i) The plan administrator has issued notices of intent to terminate the plan in a standard termination in accordance with section 4041(a)(2) of ERISA; (ii) The proposed termination date set forth in the notice of intent to terminate is before the beginning of the premium payment year; and (iii) The plan ultimately makes a final distribution of plan assets in conjunction with the plan termination. (5) Certain small new and newly covered plans. (i) It is a small plan other than a continuation plan, and (ii) It is a new plan or a newly covered plan. (b) Reporting exemption for plans paying capped variable-rate premium. (c) Participant count date; in general. (d) Participant count date; new and newly covered plans. (e) Participant count date; certain transactions. (2) With respect to a transaction where some, but not all, of the assets and liabilities of one plan (the “transferor plan”) are transferred into another plan (the “transferee plan”)— (i) The transferor plan if the spinoff is not de minimis and is effective at the beginning of the transferor plan's premium payment year; and (ii) The transferee plan if the transferor plan meets the criteria in paragraph (e)(2)(i) of this section and the transfer occurs at the beginning of the transferee plan's premium payment year. (3) With respect to a merger effective at the beginning of the premium payment year, the transferee plan if— (i) The merger is not de minimis; or (ii) The assets of the transferee plan immediately before the merger are less than the total assets transferred to the transferee plan in the merger. (4) For purposes of this paragraph (e), “de minimis” has the meaning described in regulations under section 414(l) of the Code (for single-employer plans) or in part 4231 of this chapter (for multiemployer plans). (f) Proration for certain short plan years. (1) New or newly covered plan. (2) Change in plan year. (3) Distribution of assets. (4) Appointment of trustee. (g) Alternative premium funding target. (1) An election under this paragraph (g) to use the alternative premium funding target for a plan must specify the premium payment year to which it first applies and must be filed by the plan's variable-rate premium due date for that premium payment year. The premium payment year to which the election first applies must begin at least five years after the beginning of the premium payment year to which a revocation of a prior election first applied. The election will be effective— (i) For the premium payment year for which made and for all plan years that begin less than five years thereafter, and (ii) For all succeeding plan years until the premium payment year to which a revocation of the election first applies. (2) A revocation of an election under this paragraph (g) to use the alternative premium funding target for a plan must specify the premium payment year to which it first applies and must be filed by the plan's variable-rate premium due date for that premium payment year. The premium payment year to which the revocation first applies must begin at least five years after the beginning of the premium payment year to which the election first applied. (h) CSEC plan premium funding target. [61 FR 34016, July 1, 1996, as amended at 62 FR 60428, Nov. 7, 1997; 65 FR 75163, Dec. 1, 2000; 71 FR 31081, June 1, 2005; 73 FR 15075, Mar. 21, 2008; 79 FR 13560, Mar. 11, 2014; 85 FR 6058, Feb. 4, 2020; 88 FR 76664, Nov. 7, 2023; 90 FR 39327, Aug. 15, 2025] § 4006.6 Definition of “participant.” (a) General rule. (b) Loss or distribution of benefit. (1) In the case of an individual with no vested accrued benefit, after— (i) The individual incurs a one-year break in service under the terms of the plan, (ii) The individual's entire “zero-dollar” vested accrued benefit is deemed distributed under the terms of the plan, or (iii) The individual dies; and (2) In the case of a living individual whose accrued benefit is fully or partially vested, or a deceased individual whose accrued benefit was fully or partially vested at the time of death, after— (i) An insurer makes an irrevocable commitment to pay all benefit liabilities with respect to the individual, or (ii) All benefit liabilities with respect to the individual are otherwise distributed. (c) Examples. Example 1. Participation under a calendar-year plan begins upon commencement of employment, and the only benefit provided by the plan is an accrued benefit (expressed as a life annuity beginning at age 65) of $30 per month times full years of service. The plan credits a ratable portion of a full year of service for service of at least 1,000 hours but less than 2,000 hours in a service computation period that begins on the date when the participant commences employment and each anniversary of that date. John and Mary both commence employment on July 1, 2008. On December 31, 2008 (the participant count date for the plan's 2009 premium), John has credit for 988 hours of service and Mary has credit for 1,006 hours of service. For purposes of this section, Mary is considered to have an accrued benefit, and John is considered not to have an accrued benefit. Thus, the plan is considered to have benefit liabilities with respect to Mary, but not John, on December 31, 2008; and Mary, but not John, must be counted as a participant for purposes of computing the plan's 2009 premium. Example 2. The plan also provides that a participant becomes vested five years after commencing employment and defines a one-year break in service as a service computation period in which less than 500 hours of service is performed. On February 1, 2010, John has an accrued benefit of $18 per month beginning at age 65 based on credit for 1,200 hours of service in the service computation period that began July 1, 2008. However, John has credit for only 492 hours of service in the service computation period that began July 1, 2009. On February 1, 2010, John terminates his employment. On December 31, 2010 (the participant count date for the 2011 premium), John has incurred a one-year break in service, and thus is not counted as a participant for purposes of computing the plan's 2011 premium. Example 3. On January 1, 2012, the plan is amended to provide that if a vested participant whose accrued benefit has a present value of $5,000 or less leaves employment, the benefit will be immediately cashed out. On December 30, 2013, Jane, who has a vested benefit with a present value of less than $5,000, leaves employment. Because of reasonable administrative delay in determining the amount of the benefit to be paid, the plan does not pay Jane the value of her benefit until January 9, 2014. Under the provisions of this section, Jane is treated as not having an accrued benefit on December 31, 2013 (the participant count date for the 2014 premium), because Jane's benefit is treated as having been paid on December 30, 2013. Thus, Jane is not counted as a participant for purposes of computing the plan's 2014 premium. Example 4. If the plan amendment had instead provided for cashouts as of the first of the month following termination of employment, and the plan paid Jane the value of her benefit on January 1, 2014, Jane would be treated under the provisions of this section as having an accrued benefit on December 31, 2013, and would thus be counted as a participant for purposes of computing the plan's 2014 premium. [65 FR 75163, Dec. 1, 2000, as amended at 73 FR 15076, Mar. 21, 2008] § 4006.7 Premium rate for certain terminated single-employer plans. (a) The premium under this section (“termination premium”) applies to a DRA 2005 termination described in § 4007.13 of this chapter. (b) The amount of the premium under this section that is payable with respect to each applicable 12-month period (as described in § 4007.13 of this chapter) is the number of participants in the plan, determined as of the day before the termination date, multiplied by the termination premium rate. In general, the termination premium rate is $1,250. However, the termination premium rate is $2,500 for an “eligible plan” under section 402(c)(1) of the Pension Protection Act of 2006 (dealing with certain plans of commercial passenger airlines and airline catering services) while an election under section 402(a)(1) of the Pension Protection Act of 2006 (dealing with alternative funding schedules) is in effect for the plan if the plan terminates during the five-year period beginning on the first day of the first applicable plan year (as defined in section 402(c)(2) of that Act) with respect to the plan, unless the Secretary of Labor determines that the plan terminated as a result of extraordinary circumstances such as a terrorist attack or other similar event. (c) The premium under this section is in addition to any other premium under this part. (d) See § 4007.13 of this chapter for further rules about termination premiums. [72 FR 71229, Dec. 17, 2007, as amended at 79 FR 13561, Mar. 11, 2014]