1256 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

1Section 305(g) of ERISA and section 432(g) of 

the Internal Revenue Code (Code) are parallel 

provisions in ERISA and the Code. 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9941] 

RIN 1545–BO68 and 1545–BO78 

Taxable Year of Income Inclusion 

Under an Accrual Method of 

Accounting and Advance Payments for 

Goods, Services, and Other Items 

Correction 

In rule document 2020–28563 

beginning on page 810 in the issue of 

Wednesday, January 6, 2021, make the 

following correction: 

On page 810, in the DATES section, in 

the second line beneath the heading, 

‘‘December 31, 2021’’ should read 

‘‘December 31, 2020’’. 

[FR Doc. C1–2020–28653 Filed 1–6–21; 1:15 pm] 

BILLING CODE 1301–00–D 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4001, 4204, 4206, 4207, 

4211, 4219 

RIN 1212–AB36 

Methods for Computing Withdrawal 

Liability, Multiemployer Pension 

Reform Act of 2014 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Final rule. 

SUMMARY: The Pension Benefit Guaranty 

Corporation is amending its regulations 

on Allocating Unfunded Vested Benefits 

to Withdrawing Employers and Notice, 

Collection, and Redetermination of 

Withdrawal Liability. The amendments 

implement statutory provisions affecting 

the determination of a withdrawing 

employer’s liability under a 

multiemployer plan and annual 

withdrawal liability payment amount 

when the plan has had benefit 

reductions, benefit suspensions, 

surcharges, or contribution increases 

that must be disregarded. The 

amendments also provide simplified 

withdrawal liability calculation 

methods. 

DATES: Effective date: This rule is 

effective February 8, 2021. 

Applicability date: This rule applies 

to employer withdrawals from 

multiemployer plans that occur in plan 

years beginning on or after February 8, 

2021. 

FOR FURTHER INFORMATION CONTACT: 

Hilary Duke (duke.hilary@pbgc.gov), 

Assistant General Counsel for 

Regulatory Affairs, Office of the General 

Counsel, 202–229–3839. (TTY users 

may call the Federal relay service tollfree at 800–877–8339 and ask to be 

connected to 202–229–3839.) 

SUPPLEMENTARY INFORMATION: 

Executive Summary 

Purpose of Regulatory Action 

This rulemaking is needed to 

implement statutory changes affecting 

the determination of an employer’s 

withdrawal liability and annual 

withdrawal liability payment amount 

when the employer withdraws from a 

multiemployer plan. The final 

regulation provides simplified methods 

for determining withdrawal liability and 

annual payment amounts, which a 

multiemployer plan sponsor can adopt 

to satisfy the statutory requirements and 

to reduce administrative burden. In this 

final rule, PBGC adopts its proposed 

changes implementing statutory changes 

and providing simplified methods, with 

some modifications in response to 

public comments. 

PBGC’s legal authority for this action 

is based on section 4002(b)(3) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA), which authorizes 

PBGC to issue regulations to carry out 

the purposes of title IV of ERISA; 

section 305(g) 1 of ERISA, which 

provides the statutory requirements for 

changes to withdrawal liability; section 

4001 of ERISA (Definitions); section 

4204 of ERISA (Sale of Assets); section 

4206 of ERISA (Adjustment for Partial 

Withdrawal); section 4207 (Reduction or 

Waiver of Complete Withdrawal 

Liability); section 4211 of ERISA 

(Methods for Computing Withdrawal 

Liability); and section 4219 of ERISA 

(Notice, Collection, Etc., of Withdrawal 

Liability). Section 305(g)(5) of ERISA 

directs PBGC to provide simplified 

methods for multiemployer plan 

sponsors to use in determining 

withdrawal liability and annual 

payment amounts. 

Major Provisions of the Regulatory 

Action 

This final regulation amends PBGC’s 

regulations on Allocating Unfunded 

Vested Benefits to Withdrawing 

Employers (29 CFR part 4211) and 

Notice, Collection, and Redetermination 

of Withdrawal Liability (29 CFR part 

4219). The changes implement statutory 

changes affecting the determination of 

an employer’s withdrawal liability and 

annual withdrawal liability payment 

amount and provide simplified methods 

for a plan sponsor to— 

• Disregard reductions and 

suspensions of nonforfeitable benefits in 

determining the plan’s unfunded vested 

benefits for purposes of calculating 

withdrawal liability. 

• Disregard certain contribution 

increases if the plan is using the 

presumptive, modified presumptive, or 

rolling-5 method for purposes of 

determining the allocation of unfunded 

vested benefits to an employer. 

• Disregard certain contribution 

increases for purposes of determining an 

employer’s annual withdrawal liability 

payment. 

Table of Contents 

I. Background 

II. Discussion of Final Regulation and Public 

Comments 

III. Regulatory Changes To Reflect Benefit 

Decreases 

A. Requirement To Disregard Adjustable 

Benefit Reductions and Benefit 

Suspensions (§ 4211.6) 

B. Simplified Methods for Disregarding 

Adjustable Benefit Reductions and 

Benefit Suspensions (§ 4211.16) 

1. Employer’s Proportional Share of the 

Value of an Adjustable Benefit Reduction 

2. Employer’s Proportional Share of the 

Value of a Benefit Suspension 

3. Chart of Simplified Methods To 

Determine Employer’s Proportional 

Share of the Value of a Benefit 

Suspension and an Adjustable Benefit 

Reduction 

IV. Regulatory Changes To Reflect Surcharges 

and Contribution Increases 

A. Requirement to Disregard Surcharges 

and Certain Contribution Increases in 

Determining the Allocation of Unfunded 

Vested Benefits to an Employer 

(§ 4211.4) and the Annual Withdrawal 

Liability Payment Amount (§ 4219.3) 

B. Simplified Methods for Disregarding 

Certain Contribution Increases in the 

Allocation Fraction (§ 4211.14) 

1. Determining the Numerator Using the 

Employer’s Plan Year 2014 Contribution 

Rate 

2. Determining the Denominator Using 

Each Employer’s Plan Year 2014 

Contribution Rate 

3. Determining the Denominator Using the 

Proxy Group Method 

C. Simplified Methods After Plan Is No 

Longer in Endangered or Critical Status 

1. Including Contribution Increases in 

Determining the Allocation of Unfunded 

Vested Benefits (§ 4211.15) 

2. Continuing to Disregard Contribution 

Increases in Determining the Highest 

Contribution Rate (§ 4219.3) 

V. Compliance With Rulemaking Guidelines 

I. Background 

The Pension Benefit Guaranty 

Corporation (PBGC) administers two 

insurance programs for private-sector 

defined benefit pension plans under 

title IV of the Employee Retirement 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1257 

2Under ERISA sections 4211(b) and (c), the 

presumptive method provides for 20 distinct yearby-year liability pools (each pool represents the 

year in which the unfunded liability arose), the 

modified presumptive method provides for two 

liability pools, and the rolling-5 method provides 

for a single liability pool computed as of the end 

of the plan year preceding the plan year when the 

withdrawal occurs. 

Income Security Act of 1974 (ERISA): A 

single-employer plan termination 

insurance program and a multiemployer 

plan insolvency insurance program. In 

general, a multiemployer pension plan 

is a collectively bargained plan 

involving two or more unrelated 

employers. This final rule deals with 

multiemployer plans. 

Under sections 4201 through 4225 of 

ERISA, when a contributing employer 

withdraws from an underfunded 

multiemployer plan, the plan sponsor 

assesses withdrawal liability against the 

employer. Withdrawal liability 

represents a withdrawing employer’s 

proportionate share of the plan’s 

unfunded benefit obligations. To assess 

withdrawal liability, the plan sponsor 

must determine the withdrawing 

employer’s: (1) Allocable share of the 

plan’s unfunded vested benefits (the 

value of nonforfeitable benefits that 

exceeds the value of plan assets) as 

provided under section 4211, and (2) 

annual withdrawal liability payment as 

provided under section 4219. 

There are four statutory allocation 

methods for determining a withdrawing 

employer’s allocable share of the plan’s 

unfunded vested benefits under section 

4211 of ERISA: The presumptive 

method, the modified presumptive 

method, the rolling-5 method, and the 

direct attribution method. Under the 

first three methods, the basic formula 

for an employer’s withdrawal liability is 

one or more pools of unfunded vested 

benefits times the withdrawing 

employer’s allocation fraction— 

The withdrawing employer’s 

allocation fraction is generally equal to 

the withdrawing employer’s required 

contributions over all employers’ 

contributions over the 5 years preceding 

the relevant period or periods. Under 

the fourth method, the direct attribution 

method, an employer’s withdrawal 

liability is based on the benefits and 

assets attributed directly to the 

employer’s participants’ service, and a 

portion of the unfunded benefit 

obligations not attributable to any 

present employer. 

PBGC’s regulation on Allocating 

Unfunded Vested Benefits to 

Withdrawing Employers (29 CFR part 

4211) provides modifications to the 

allocation methods that plan sponsors 

may adopt. Part 4211 also provides a 

process that plan sponsors may use to 

request approval of other methods. 

A withdrawn employer makes annual 

withdrawal liability payments at a set 

rate over the number of years necessary 

to amortize its withdrawal liability, 

generally limited to a period of 20 years. 

If any of an employer’s withdrawal 

liability remains unpaid under the 

payment schedule after 20 years, the 

unpaid amount may be allocated to 

other employers in addition to their 

basic withdrawal liability. 

Annual withdrawal liability payments 

are designed to approximate the 

employer’s annual contributions before 

its withdrawal. The basic formula for 

the annual withdrawal liability payment 

under section 4219(c) of ERISA is a 

contribution rate multiplied by a 

contribution base. Specifically, the 

annual withdrawal liability payment is 

determined as follows— 

As the basic formulas show, 

withdrawal liability and an employer’s 

annual withdrawal liability payment 

depend, among other things, on the 

value of unfunded vested benefits and 

the amount of contributions. 

In response to financial difficulties 

faced by some multiemployer plans, 

Congress made statutory changes in 

2006 and 2014 that affect benefits and 

contributions under these plans. The 

four types of changes provided for are 

shown in the following table: 


tkelley on DSKBCP9HB2PROD with RULESER08JA21.008</GPH> ER08JA21.009</GPH>
1258 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

3Section 305(e)(8) and (f) of ERISA and section 

432(e)(8) and (f) of the Code. 4Section 305(e)(9) of ERISA and section 432(e)(9) 

of the Code. The Department of the Treasury must 

approve an application for a benefit suspension, in 

consultation with PBGC and the Department of 

Labor, upon finding that the plan is eligible for the 

suspension and has satisfied the criteria specified 

by the Multiemployer Pension Reform Act of 2014, 

Public Law 113–235 (MPRA). The Department of 

the Treasury has jurisdiction over benefit 

suspensions and issued a final rule implementing 

the MPRA provisions on April 28, 2016 (81 FR 

25539). 

5Under section 305(e)(7) of ERISA and section 

432(e)(7) of the Code, each employer otherwise 

obligated to make contributions for the initial plan 

year and any subsequent plan year that a plan is 

in critical status must pay a surcharge to the plan 

for such plan year, until the effective date of a 

collective bargaining agreement (or other agreement 

pursuant to which the employer contributes) that 

includes terms consistent with the rehabilitation 

plan adopted by the plan sponsor. 

6The plan sponsor of a plan in endangered status 

for a plan year must adopt a funding improvement 

plan under section 305(c) of ERISA and section 

432(c) of the Code. The plan sponsor of a plan in 

critical status for a plan year must adopt a 

rehabilitation plan under section 305(e) of ERISA 

and section 432(e) of the Code. 

Adjustable benefit reductions ............................. Reductions in adjustable benefits (e.g., post-retirement death benefits, early retirement benefits) and reductions arising from a restriction on lump sums and other benefits.3

Benefit Suspensions ........................................... Temporary or permanent suspension of any current or future payment obligation of the plan to 

any participant or beneficiary under the plan, whether or not in pay status at the time of the 

benefit suspension.4

Surcharges .......................................................... Surcharges, calculated as a percentage of required contributions, that certain underfunded 

plans are required to impose on contributing employers.5

Contribution Increases ........................................ Contribution increases that plan trustees may require under a funding improvement or rehabilitation plan.6

While each of the changes has its own 

requirements, they generally are all 

required to be ‘‘disregarded’’ by the plan 

sponsor in determining an employer’s 

withdrawal liability. The statutory 

‘‘disregard’’ rules require in effect that 

all computations in determining and 

assessing withdrawal liability be made 

using values that do not reflect the 

lowering of benefits or raising of 

contributions required to be 

disregarded. 

The Pension Protection Act of 2006, 

Public Law 109–280 (PPA 2006), 

amended ERISA’s withdrawal liability 

rules to require a plan sponsor to 

disregard the adjustable benefits 

reductions in section 305(e)(8) of ERISA 

and the elimination of accelerated forms 

of distribution in section 305(f) of 

ERISA (which, for purposes of this 

preamble are referred to as adjustable 

benefit reductions) in determining a 

plan’s unfunded vested benefits. PPA 

2006 also requires a plan sponsor to 

disregard the contribution surcharges in 

section 305(e)(7) of ERISA in 

determining the allocation of unfunded 

vested benefits. 

PBGC issued a final rule in December 

2008 (73 FR 79628) implementing these 

PPA 2006 ‘‘disregard’’ rules by 

modifying the definition of 

‘‘nonforfeitable benefit’’ for purposes of 

PBGC’s regulations on Allocating 

Unfunded Vested Benefits to 

Withdrawing Employers (29 CFR part 

4211) and on Notice, Collection, and 

Redetermination of Withdrawal 

Liability (29 CFR part 4219). PBGC 

provided simplified methods to 

determine withdrawal liability for plan 

sponsors required to disregard 

adjustable benefit reductions in 

Technical Update 10–3 (July 15, 2010). 

The 2008 final rule also excluded the 

employer surcharge from the numerator 

and denominator of the allocation 

fractions used under section 4211 of 

ERISA. The preamble included an 

example of the application of the 

exclusion of surcharge amounts from 

contributions in the allocation fraction. 

The Multiemployer Pension Reform 

Act of 2014, Public Law 113–235 

(MPRA), made further amendments to 

the withdrawal liability rules and 

consolidated them with the PPA 2006 

changes. The additional MPRA 

amendments require a plan sponsor to 

disregard benefit suspensions in 

determining the plan’s unfunded vested 

benefits for a period of 10 years after the 

effective date of a benefit suspension. 

MPRA also requires a plan sponsor to 

disregard certain contribution increases 

in determining the allocation of 

unfunded vested benefits. A plan 

sponsor must also disregard surcharges 

and those contribution increases in 

determining an employer’s annual 

withdrawal liability payment under 

section 4219 of ERISA. The MPRA 

amendments apply to benefit 

suspensions and contribution increases 

that go into effect during plan years 

beginning after December 31, 2014, and 

to surcharges for which the obligation 

accrues on or after December 31, 2014. 

Congress also authorized PBGC to 

create simplified methods for applying 

the ‘‘disregard’’ rules. 

Proposed Regulation 

On February 6, 2019 (at 84 FR 2075), 

PBGC published a proposed rule to 

explain the PPA 2006 and MPRA 

‘‘disregard’’ requirements and PBGC’s 

simplified methods. Each simplified 

method provided applies to one or more 

specific aspects of the process of 

determining and assessing withdrawal 

liability. 

PBGC provided a 60-day comment 

period and received eight comment 

letters from: Actuarial consulting firms; 

associations representing multiemployer 

plans, pension practitioners, and 

contributing employers; and a 

practitioner. To address the comments, 

PBGC is making modifications and 

clarifications, adding examples, and 

providing additional simplified 

methods. The public comments, PBGC’s 

responses, and the provisions of this 

final rule are discussed below. 

II. Discussion of Final Regulation and 

Public Comments 

Overview 

This final rule, like the proposed, 

implements the PPA 2006 and MPRA 

requirements to disregard adjustable 

benefit reductions, benefit suspensions, 

surcharges, and contribution increases. 

All of the commenters commented on 

the provision in the proposed rule 

implementing the exception to the 

disregard rules for a contribution 

increase that provides an increase in 

benefits. The provision, comments, and 

changes to the proposed rule in 

response to the comments are discussed 

in more detail in section IV.A. of the 

preamble. Except for those changes, the 

final rule is substantially the same as 

the proposed rule. 

The final rule, like the proposed rule, 

provides: (1) Simplified methods for 

disregarding adjustable benefit 

reductions and benefit suspensions; and 

(2) simplified methods for disregarding 

certain contribution increases in 

determining the allocation of unfunded 

vested benefits to an employer and the 

annual withdrawal liability payment 

amount. A plan sponsor may, but is not 

required to, adopt any one or more of 

the simplified methods to use in the 

calculation of determining and assessing 

withdrawal liability but must follow the 

statutory withdrawal liability rules for 

all other aspects. In response to 

comments, PBGC made clarifications 

and improvements to the simplified 

methods, which are discussed below in 

sections III and IV of the preamble. 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1259 

7The term ‘‘unfunded vested benefits’’ is defined 

in section 4213(c) of ERISA. However, for purposes 

of PBGC’s notice, collection, and redetermination of 

withdrawal liability regulation (29 CFR part 4219), 

the calculation of unfunded vested benefits, as used 

in subpart B of the regulation, is modified to reflect 

the value of certain claims. To avoid confusion, 

PBGC proposes to add a specific definition of 

‘‘unfunded vested benefits’’ in each part of its 

multiemployer regulations that uses the term. 

Because some of the commenters 

found the examples illustrating 

calculations using the simplified 

methods helpful, PBGC is adding some 

of the examples to the operative text and 

to an appendix to part 4211. The final 

rule also eliminates some language that 

merely repeats statutory provisions and 

makes other editorial changes. 

‘‘Safe Harbors’’ 

One commenter asked PBGC to clarify 

that the simplified methods are ‘‘safe 

harbor’’ methods, but that alternate 

simplified methods could be 

appropriate. The commenter requested 

that PBGC consider providing plan 

sponsors with the opportunity to seek 

approval for an alternative simplified 

method. Under the final rule, PBGC 

clarifies that, similar to a safe harbor, a 

plan sponsor that adopts one of the 

simplified methods satisfies the 

requirements of the applicable statutory 

provision and regulations. Consistent 

with the proposed rule, a plan sponsor 

may choose to use an alternative 

approach that satisfies the requirements 

of the applicable statutory provisions 

and regulations rather than any of the 

simplified methods. While PBGC does 

not approve alternative simplified 

methods on a plan-by-plan basis, PBGC 

welcomes informal consultations with 

trustees and their advisors on whether 

an alternative approach could satisfy the 

requirements of the applicable statutory 

provisions and regulations. In addition, 

PBGC invited comments in the 

proposed rule on other simplified 

methods that a plan might use to satisfy 

certain requirements in section 305(g) of 

ERISA and incorporated changes in the 

final rule in response to comments 

received. PBGC encourages trustees and 

their advisors to inform PBGC of 

additional simplified methods to 

consider for a future rulemaking. 

Effective and Applicability Dates 

Under the proposed rule, the changes 

relating to simplified methods would be 

applicable to employer withdrawals that 

occur on or after the effective date of the 

final rule. It further proposed that the 

changes relating to MPRA benefit 

suspensions and contribution increases 

for determining an employer’s 

withdrawal liability would apply to 

plan years beginning after December 31, 

2014, and to surcharges the obligation 

for which occur on or after December 

31, 2014. The proposed rule did not 

provide an effective date. 

Three commenters asked for 

clarification of the effective date and 

were concerned that the rule would 

require retroactive application. Two 

commenters were concerned that plans 

could be required to implement changes 

at some time other than the beginning 

or end of a specified plan year. The 

commenters made specific 

recommendations for an applicability 

date. One commenter recommended 

that the date be based on withdrawals 

in plan years beginning on or after the 

effective date of the final rule. A second 

commenter recommended that the 

regulation apply for withdrawals 

beginning in the plan year that next 

follows the plan year in which the rule 

becomes effective with a transition 

period in the event the next plan year 

begins within 6 months following the 

issuance of the final regulation. A third 

commenter recommended a transition 

period of at least 1 plan year to give 

plans time to evaluate and consider the 

methodologies included in the 

regulation for contribution increases 

that provide an increase in benefits. 

PBGC did not adopt this suggested 

transition period because the final rule 

does not include the proposed rule’s 

provision implementing the exception 

under section 305(g)(3) of ERISA for 

additional contributions used to provide 

an increase in benefits. The provision is 

discussed in section IV.A. of the 

preamble. 

In response to the comments about 

the rule’s effective date, PBGC is 

clarifying that the changes made by the 

final rule apply to plans prospectively. 

Accordingly, the final rule is effective 

February 8, 2021 and applies to 

employer withdrawals from 

multiemployer plans that occur in plan 

years beginning on or after the effective 

date. Just as before the final rule, plan 

sponsors may apply their own 

reasonable interpretations of the 

statutory provisions to calculate an 

employer’s withdrawal liability. Plan 

sponsors may, but are not required to, 

adopt the simplified methods provided 

in the final rule. In addition, as 

suggested by one commenter, PBGC 

added effective dates in parts 4211 and 

4219 for the new sections providing 

simplified methods. 

III. Regulatory Changes To Reflect 

Benefit Decreases 

A. Requirement To Disregard Adjustable 

Benefit Reductions and Benefit 

Suspensions (§ 4211.6) 

Under the basic methodology 

explained in section I above, a plan 

sponsor must calculate the value of 

unfunded vested benefits (the value of 

nonforfeitable benefits that exceeds the 

value of plan assets) 7 to determine a 

withdrawing employer’s liability. In 

computing nonforfeitable benefits, 

under section 305(g)(1) of ERISA, a plan 

sponsor is required to disregard certain 

adjustable benefit reductions and 

benefit suspensions. 

The final regulation, like the 

proposed, adds a new § 4211.6 to 

PBGC’s unfunded vested benefits 

allocation regulation to implement the 

requirements that plan sponsors must 

disregard adjustable benefit reductions 

and benefit suspensions in allocating 

unfunded vested benefits. Section 

4211.6 replaces the approach previously 

taken by PBGC to implement the PPA 

2006 ‘‘disregard’’ rules by modifying the 

definition of ‘‘nonforfeitable benefit.’’ 

The added MPRA ‘‘disregard’’ rules 

made that prior approach difficult to 

sustain. The final regulation, like the 

proposed, eliminates the special 

definition of ‘‘nonforfeitable benefit’’ in 

PBGC’s unfunded vested benefits 

allocation regulation and notice, 

collection, and redetermination of 

withdrawal liability regulation. 

MPRA limited the requirement for a 

plan sponsor to disregard a benefit 

suspension in determining an 

employer’s withdrawal liability to 10 

years. Under the final regulation, like 

the proposed, the requirement to 

disregard a benefit suspension applies 

only for withdrawals that occur within 

the 10 plan years after the end of the 

plan year that includes the effective date 

of the benefit suspension. To calculate 

withdrawal liability during the 10-year 

period, a plan sponsor disregards the 

benefit suspension by including the 

value of the suspended benefits in 

determining the amount of unfunded 

vested benefits allocable to an employer. 

For example, if a plan has a benefit 

suspension with an effective date within 

the plan’s 2018 plan year, the plan 

sponsor would include the value of the 

suspended benefits in determining the 

amount of unfunded vested benefits 

allocable to an employer for any 

withdrawal occurring in plan years 2019 

through 2028. The plan sponsor would 

not include the value of the suspended 

benefits in determining the amount of 

unfunded vested benefits allocable to an 

employer for a withdrawal occurring 

after the 2028 plan year. 

In cases where a benefit suspension 

ends and full benefit payments resume 

during the 10-year period following a 

suspension, the value of the suspended 


tkelley on DSKBCP9HB2PROD with RULES
1260 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

8The amount of unfunded vested benefits 

allocable to an employer under section 4211 may 

not be less than zero. 

benefits would continue to be included 

when calculating withdrawal liability 

until the end of the plan year in which 

the resumption of full benefit payments 

was required as determined under 

Department of the Treasury guidance, or 

otherwise occurs. 

B. Simplified Methods for Disregarding 

Adjustable Benefit Reductions and 

Benefit Suspensions (§ 4211.16) 

Under section 305(g)(5) of ERISA, 

PBGC is required to provide simplified 

methods for a plan sponsor to determine 

withdrawal liability when the plan has 

adjustable benefit reductions or benefit 

suspensions that are required to be 

disregarded. The final regulation, like 

the proposed, provides a simplified 

framework for disregarding adjustable 

benefit reductions and benefit 

suspensions in § 4211.16 of PBGC’s 

unfunded vested benefits allocation 

regulation. A plan sponsor may adopt 

the simplified framework in § 4211.16 to 

satisfy the requirements of section 

305(g)(1) of ERISA and § 4211.6 of 

PBGC’s unfunded vested benefits 

allocation regulation, or may choose to 

use an alternative approach to satisfy 

the requirements of the statutory 

provisions and regulation. 

Under the simplified framework, if a 

plan has adjustable benefit reductions or 

benefit suspensions, the plan sponsor 

first calculates an employer’s 

withdrawal liability using the plan’s 

withdrawal liability method reflecting 

any adjustable benefit reduction and 

benefit suspension (§ 4211.16(b)(1)). The 

plan sponsor adds the employer’s 

proportional share of the value of any 

adjustable benefit reduction and any 

benefit suspension (§ 4211.16(b)(2)). In 

summary, withdrawal liability for a 

withdrawing employer is based on the 

sum of the following— 

(1) The amount that would be the 

employer’s allocable amount of 

unfunded vested benefits determined in 

accordance with section 4211 of ERISA 

under the method in use by the plan 

(based on the value of the plan’s 

nonforfeitable benefits reflecting any 

adjustable benefit reduction and any 

benefit suspension),8 and 

(2) The employer’s proportional share 

of the value of any adjustable benefit 

reduction and the employer’s 

proportional share of the value of any 

suspended benefits. 

Consistent with the proposed rule, 

under the final rule, this amount is 

required to be calculated before 

application of the adjustments required 

by section 4201(b)(1) of ERISA, 

including the de minimis reduction and 

the 20-year cap on payments under 

section 4219(c)(1)(B) of ERISA. 

Two commenters asked for 

clarification on how the rule for the 

application of adjustments required by 

section 4201(b)(1) of ERISA interacts 

with guidance provided under 

Technical Update 10–3 (July 15, 2010) 

for plan sponsors required to disregard 

adjustable benefit reductions. The 

commenters stated that plans may have 

interpreted Technical Update 10–3 to 

adjust for the de minimis reduction 

before adding the proportional share of 

the adjustable benefit reduction. One 

commenter stated that any clarification 

of the method provided in Technical 

Update 10–3 should be provided only 

on a prospective basis and that the final 

rule should provide a safe harbor for 

plans that may have interpreted 

Technical Update 10–3 differently. 

PBGC agrees that Technical Update 

10–3 did not specifically address how 

adjustments for the de minimis 

reduction and the 20-year cap on 

payments should be applied. PBGC is 

aware that some plans that adopted the 

simplified method under Technical 

Update 10–3 make separate calculations 

of an employer’s liability under section 

4211 of ERISA, subject to the 

adjustments required under section 

4201, and an employer’s liability for 

adjustable benefit reductions. 

In reviewing the issue in the context 

of benefit suspensions, PBGC concluded 

that the ‘‘allocable amount of unfunded 

vested benefits’’ under section 

4201(b)(1) of ERISA, which is calculated 

before adjustments are made, should 

include the employer’s proportional 

share of the value of benefit suspensions 

required to be disregarded. For purposes 

of providing a simplified framework for 

adjustable benefit reductions and 

benefit suspensions, PBGC provided in 

the proposed rule that the adjustments 

required by section 4201(b)(1) of ERISA 

are made after adding the amount that 

would be the employer’s allocable 

amount of unfunded vested benefits 

determined in accordance with section 

4211 of ERISA and the employer’s 

proportional share of the value of each 

of the benefit reductions and benefit 

suspensions required to be disregarded. 

Section 4211.16(b) of the final rule is 

unchanged from the proposed rule with 

respect to the application of the 

adjustments in section 4201(b)(1) of 

ERISA. In consideration of the 

comments received, PBGC is clarifying 

that the simplified framework in the 

final rule applies prospectively only and 

is applicable for withdrawals that occur 

in plan years beginning after the 

effective date of the final rule. 

One commenter suggested that if the 

employer’s allocable amount 

determined under § 4211.16(a) results in 

a negative value, a plan sponsor should 

be able to use the negative value to 

offset the employer’s allocable share of 

the value of the adjustable benefit 

reductions and benefit suspensions 

under § 4211.16(b). The preamble to the 

proposed rule stated that under the 

simplified framework, the amount of 

unfunded vested benefits allocable to an 

employer under section 4211 of ERISA 

may not be less than zero. PBGC 

acknowledges that in some cases where 

precise actuarial calculations are being 

made (i.e., calculations made not using 

a simplified method), it might be 

appropriate to offset an interim negative 

value of allocable unfunded vested 

benefits calculated under section 4211 

of ERISA against a positive allocable 

value of benefit reductions or benefit 

suspensions. However, because the 

value of the employer’s allocable share 

of the value of adjustable benefit 

reductions and benefit suspensions 

under the simplified framework are 

approximations that may be less than 

the value that would be allocated under 

a non-simplified actuarial calculation, 

PBGC did not allow for an offset of a 

negative number. In the final rule, a 

sentence is added to the basic rule for 

the simplified framework in 

§ 4211.16(b) to make it clear that the 

amount determined under paragraph 

(b)(1) may not be a negative number to 

be used as an offset to the employer’s 

allocable share of the value of the 

adjustable benefit reductions and 

benefit suspensions. 

The same commenter stated that 

construction-industry plans that have 

no unfunded vested benefits under 

section 4211 of ERISA should be 

permitted to elect a fresh start for that 

plan year, even if the plan continues to 

have liability for adjusted benefit 

reductions and benefit suspensions. 

PBGC agrees with the comment and that 

a plan sponsor’s decision to implement 

a fresh start does not affect the value of 

adjustable benefit reductions and 

benefit suspensions in calculating 

withdrawal liability. In the final rule, 

PBGC is clarifying in new 

§ 4211.12(d)(3) that in the case of a plan 

that primarily covers employees in the 

building and construction industry, the 

plan year designated by a plan 

amendment to implement a fresh start 

must be a plan year for which the plan 

has no unfunded vested benefits 

determined in accordance with section 

4211 of ERISA without regard to 

§ 4211.6. 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1261 

The commenter also suggested that to 

the extent adjustable benefit reductions 

are restored, plan sponsors should be 

able to treat the liability for the 

adjustable benefit reductions as if it had 

been reduced or eliminated. PBGC 

agrees that, in this circumstance, a plan 

sponsor can offset the present value of 

restored adjustable benefits against the 

unamortized balance of the adjustable 

benefit reduction under § 4211.16(b)(2). 

The present value of the restored 

adjustable benefits would be included 

in the calculation of the allocable 

amount of unfunded vested benefits 

determined under § 4211.16(b)(1). 

The simplified framework provides 

simplified methods for calculating the 

employer’s proportional share of the 

value of any adjustable benefit 

reduction and the employer’s 

proportional share of the value of any 

suspended benefits. If a plan has 

adjustable benefit reductions, the plan 

sponsor may adopt the simplified 

method discussed below to determine 

the value of the adjustable benefit 

reductions. If a plan has a benefit 

suspension, the plan sponsor may adopt 

either the static value method or 

adjusted value method to determine the 

value of the suspended benefits (also 

discussed below). The contributions for 

the allocation fractions for each of the 

simplified methods are determined in 

accordance with the rules for 

disregarding contribution increases 

under § 4211.4 of PBGC’s unfunded 

vested benefits allocation regulation 

(and permissible modifications and 

simplifications under §§ 4211.12– 

4211.15 of PBGC’s unfunded vested 

benefits allocation regulation). 

Under the simplified framework, a 

plan sponsor must include liabilities for 

benefits that have been reduced or 

suspended in the value of vested 

benefits. But the simplified framework 

does not require a plan sponsor to 

calculate what plan assets would have 

been if benefit payments had been 

higher. One commenter asked for the 

final regulation to clarify that, regardless 

of whether plan sponsors adopt 

simplified methods for disregarding 

adjustable benefit reductions or benefit 

suspensions, plans are not required to 

track what plan assets would have been 

absent those reductions or suspensions. 

PBGC believes that generally accepted 

actuarial principles and practices 

accommodate the adoption of 

assumptions about quantities (like the 

amount of such an asset reduction) that 

may not have a material effect on the 

results of the computation. Thus, the 

issue raised by the commenter is one for 

resolution by the plan actuary. 

1. Employer’s Proportional Share of the 

Value of an Adjustable Benefit 

Reduction 

Except as discussed in the preamble, 

the final regulation, like the proposed, 

incorporates the guidance provided in 

PBGC Technical Update 10–3 for 

disregarding the value of adjustable 

benefit reductions. Technical Update 

10–3 explains the simplified method for 

determining an employer’s proportional 

share of the value of adjustable benefit 

reductions. The method applies for any 

employer withdrawal that occurs in any 

plan year following the plan year in 

which an adjustable benefit reduction 

takes effect and before the value of the 

adjustable benefit reduction is fully 

amortized. The method is summarized 

in the chart in section III.B.3. below. 

An employer’s proportional share of 

the value of adjustable benefit 

reductions is determined as of the end 

of the plan year before withdrawal as 

follows— 

The value of the adjustable benefit 

reductions is determined using the same 

assumptions used to determine 

unfunded vested benefits for purposes 

of section 4211 of ERISA. The 

unamortized balance as of a plan year is 

the value as of the end of the year in 

which the reductions took effect (base 

year), reduced as if that amount were 

being fully amortized in level annual 

installments over 15 years, at the plan’s 

valuation interest rate, beginning with 

the first plan year after the base year. 

The withdrawing employer’s 

allocation fraction is the amount of the 

employer’s required contributions over 

a 5-year period divided by the amount 

of all employers’ contributions over the 

same 5-year period. 

The 5-year period for computing the 

allocation fraction is the most recent 5 

plan years ending before the employer’s 

withdrawal. For purposes of 

determining the allocation fraction, the 

denominator is increased by any 

employer contributions owed with 

respect to earlier periods that were 

collected in the 5 plan years and 

decreased by any amount contributed by 

an employer that withdrew from the 

plan during those plan years, or, 

alternatively, adjusted as permitted 

under § 4211.12. 

For calculating the value of adjustable 

benefit reductions, Technical Update 

10–3 provides an adjustment if the plan 

uses the rolling-5 method. The value is 

reduced by outstanding claims for 

withdrawal liability that can reasonably 

be expected to be collected from 

employers that withdrew as of the end 

of the plan year before the employer’s 

withdrawal. PBGC is not including this 

adjustment in this final rule. The 

requirement to reduce the unfunded 

vested benefits by the present value of 

future withdrawal liability payments for 

previously withdrawn employers is part 

of the rolling-5 calculation, and PBGC 

believes that excluding this adjustment 

avoids some ambiguity that might have 

led to additional unnecessary 

calculations and recordkeeping. 

One commenter asked for the final 

regulation to provide an additional 

option for allocating the value of 

adjustable benefit reductions for plans 

using the presumptive method based on 

the 5 consecutive plan years ending 

before the plan year in which the 

adjustable benefit reduction takes effect. 

The commenter stated that the option 

would produce an allocation that is 

more consistent with the amount that 

would be allocated to an employer if the 

plan did not use a simplified allocation 

method. PBGC considered the comment 

and has determined that the option 

could be useful for plans using any 

withdrawal liability method under 

section 4211 of ERISA. Accordingly, 

PBGC has added this option to the 

simplified framework in § 4211.16(d). 

Under the added option, the 5-year 

period for computing the allocation 

fraction is the most recent 5 plan years 

ending before the plan year in which the 

adjustable benefit reduction takes effect. 

For purposes of determining the 

allocation fraction, the denominator is 

increased by any employer 

contributions owed with respect to 

earlier periods that were collected in the 

5 plan years and decreased by any 

amount contributed by an employer that 

withdrew from the plan during those 

plan years, or, alternatively, adjusted as 

permitted under § 4211.12. 

For the additional option, the 

regulation requires an additional 


tkelley on DSKBCP9HB2PROD with RULESER08JA21.010</GPH>
1262 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

adjustment to the denominator of the 

allocation fraction for a plan using a 

method other than the presumptive 

method or a similar method. The 

denominator after the first year of the 5- 

year period is decreased by the 

contributions of any employers that 

withdrew and were unable to satisfy 

their withdrawal liability claims in any 

year before the employer’s withdrawal. 

This adjustment is intended to 

approximate how a withdrawn 

employer’s withdrawal liability is 

calculated under the rolling-5 and 

modified presumptive methods by fully 

allocating the present value of the 

suspended benefits to solvent 

employers. The adjustment is not 

necessary under the presumptive 

method, as that method has a specific 

adjustment for previously allocated 

withdrawal liabilities that are deemed 

uncollectible. 

2. Employer’s Proportional Share of the 

Value of a Benefit Suspension 

a. Static Value Method and Adjusted 

Value Method 

PBGC’s simplified framework 

provides two simplified methods that a 

plan sponsor may choose between to 

calculate a withdrawing employer’s 

proportional share of the value of a 

benefit suspension—the static value 

method and the adjusted value method. 

Both methods apply for any employer 

withdrawal that occurs within the 10 

plan years after the end of the plan year 

that includes the effective date of the 

benefit suspension (10-year period). A 

chart including a comparison of the two 

methods is in section III.B.3. below. 

Under either method, an employer’s 

proportional share of the value of a 

benefit suspension is determined as 

follows— 

Under the static value method, the 

present value of the suspended benefits 

as of a single calculation date is used for 

all withdrawals in the 10-year period. 

At the plan sponsor’s option, the 

present value could be determined as of: 

(1) The effective date of the benefit 

suspension (as similar calculations are 

required as of that date to obtain 

approval of the benefit suspension); or 

(2) the last day of the plan year 

coincident with or following the date of 

the benefit suspension (as calculations 

are required as of that date for other 

withdrawal liability purposes). The 

present value is determined using the 

amount of the benefit suspension as 

authorized by the Department of the 

Treasury under the plan’s application 

for benefit suspension. 

Under the adjusted value method, the 

present value of the suspended benefits 

for a withdrawal in the first year of the 

10-year period is the same as under the 

static value method. For withdrawals in 

years 2–10 of the 10-year period, the 

value of the suspended benefits is 

determined as of the ‘‘revaluation date,’’ 

the last day of the plan year before the 

employer’s withdrawal. The value of the 

suspended benefits is equal to the 

present value of the benefits not 

expected to be paid in the year of 

withdrawal or thereafter due to the 

benefit suspension. For example, 

assume that a calendar year 

multiemployer plan receives final 

authorization by the Secretary of the 

Treasury for a benefit suspension, 

effective January 1, 2018, and a 

contributing employer withdraws 

during the 2022 plan year. The 

revaluation date is December 31, 2021. 

The value of the suspended benefits is 

the present value of the benefits not 

expected to be paid after December 31, 

2021, due to the benefit suspension. 

For both methods, the withdrawing 

employer’s allocation fraction is the 

amount of the employer’s required 

contributions over a 5-year period 

divided by the amount of all employers’ 

contributions over the same 5-year 

period. 

For the static value method, the 5-year 

period is determined based on the most 

recent 5 plan years ending before the 

plan year in which the benefit 

suspension takes effect. For the adjusted 

value method, the 5-year period is 

determined based on the most recent 5 

plan years ending before the employer’s 

withdrawal (which is the same 5-year 

period as is used for the simplified 

method for adjustable benefit 

reductions). 

For both the static value method and 

the adjusted value method, the 

denominator of the allocation fraction is 

increased by any employer 

contributions owed with respect to 

earlier periods that were collected in the 

applicable 5-year period for the 

allocation fraction and decreased by any 

amount contributed by an employer that 

withdrew from the plan during those 

same 5 plan years, or, alternatively, 

adjusted as permitted under § 4211.12 

(the same adjustments are made using 

the simplified method for adjustable 

benefit reductions). 

For the static value method, the 

regulation requires an additional 

adjustment in the denominator of the 

allocation fraction for a plan using a 

method other than the presumptive 

method or similar method. The 

denominator after the first year of the 5- 

year period is decreased by the 

contributions of any employers that 

withdrew and were unable to satisfy 

their withdrawal liability claims in any 

year before the employer’s withdrawal. 

This adjustment is intended to 

approximate how a withdrawn 

employer’s withdrawal liability is 

calculated under the rolling-5 and 

modified presumptive methods by fully 

allocating the present value of the 

suspended benefits to solvent 

employers. The adjustment is not 

necessary under the presumptive 

method, as that method has a specific 

adjustment for previously allocated 

withdrawal liabilities that are deemed 

uncollectible. 

An example illustrating the simplified 

framework using the static value 

method for disregarding a benefit 

suspension is provided in § 4211.16(e) 

of PBGC’s unfunded vested benefits 

allocation regulation. 

b. Temporary Benefit Suspension 

If a benefit suspension is a temporary 

suspension of the plan’s payment 

obligations as authorized by the 

Department of the Treasury, the present 

value of the suspended benefits 

includes the value of the suspended 

benefits only through the ending period 

of the benefit suspension. 

For example, assume that a calendaryear plan has an approved benefit 

suspension effective December 31, 2018, 

for a 15-year period ending December 

31, 2033. Effective January 1, 2034, 

benefits are to be restored (prospectively 

only) to levels not less than those 

accrued as of December 30, 2018, plus 

benefits accrued after December 31, 

2018. Employer A withdraws in a 

complete withdrawal during the 2022 

plan year. The plan sponsor first 

determines Employer A’s allocable 

amount of unfunded vested benefits 

under section 4211 of ERISA. That 


tkelley on DSKBCP9HB2PROD with RULESER08JA21.011</GPH>
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1263 

amount is the present value of vested 

benefits as of December 31, 2021, 

including the present value of the 

vested benefits that are expected to be 

restored effective January 1, 2034. The 

plan sponsor then determines Employer 

A’s proportional share of the value of 

the suspended benefits. The plan uses 

the static value method. The value of 

the suspended benefits equals the 

present value, as of December 31, 2018, 

of the benefits accrued as of December 

30, 2018, that would otherwise have 

been expected to have been paid, but for 

the benefit suspension, during the 15- 

year period beginning December 31, 

2018, and ending December 31, 2033. 

The portion of this present value 

allocable to Employer A is added to the 

unfunded vested benefits allocable to 

Employer A under section 4211 of 

ERISA. 

c. Partial Withdrawals 

PBGC invited public comment on 

whether the examples in the proposed 

rule are helpful and whether there are 

additional types of examples that would 

help plan sponsors with these 

calculations. Two commenters stated 

that the provided examples are helpful 

and suggested that PBGC provide 

examples involving partial withdrawals. 

One commenter asked for clarification 

with examples of the simplified method 

for adjustable benefit reductions as 

applied to partial withdrawals. Section 

4206 of ERISA and 29 CFR part 4206 

provide rules for determining the 

amount of an employer’s liability for a 

partial withdrawal and, in the case of a 

subsequent withdrawal, for determining 

the amount of the reduction of the 

employer’s liability for the prior partial 

withdrawal. PBGC appreciates the 

comments requesting examples 

involving partial withdrawals and 

provides the following example using 

the simplified method in § 4211.16. 

Example: Assume the following: 

(1) The employer’s allocable amount 

of unfunded vested benefits determined 

under section 4211 of ERISA is 

$1,000,000. 

(2) The employer’s proportional share 

of the value of the adjustable benefit 

reduction is $100,000 (after 8 years of 

amortization of the original amount). 

(3) The employer’s proportional share 

of the value of the benefit suspension is 

$250,000 (the employer’s partial 

withdrawal occurs 3 years after the 

effective date of the benefit suspension). 

To calculate the employer’s 

withdrawal liability amount, under 

§ 4211.16(b), the amounts in (1) through 

(3) above are added together for a sum 

of $1,350,000. Based on the sum, a de 

minimis reduction would not apply. 

The sum is then adjusted in accordance 

with the rules for adjustment of partial 

withdrawal under section 4206 of 

ERISA. Thus, in this example, the 

employer’s proportional share of the 

value of the adjustable benefit reduction 

and proportional share of the value of 

the benefit suspension are disregarded 

in determining the withdrawn 

employer’s partial withdrawal liability 

assessment amount. 

4. Chart of Simplified Methods To 

Determine Employer’s Proportional 

Share of the Value of a Benefit 

Suspension and an Adjustable Benefit 

Reduction 

The following chart provides a 

summary of the simplified methods 

discussed above: 

EMPLOYER’S PROPORTIONAL SHARE OF THE VALUE OF A BENEFIT SUSPENSION OR AN ADJUSTABLE BENEFIT REDUCTION

[Value of benefit × allocation fraction] 

Method 

Benefit suspension 

Adjustable benefit reduction 

Static value method Adjusted value method 

Value of Benefit 

Suspension or Adjustable Benefit 

Reduction.

Withdrawals in years 1–10 after the 

benefit suspension: Present value of 

the suspended benefits as authorized by the Department of the 

Treasury in accordance with section 

305(e)(9) of ERISA calculated as of 

the date of the benefit suspension or 

the last day of the plan year coincident with or following the date of the 

benefit suspension.

Withdrawals in year 1 after the suspension: Same as Static Value 

Method.

Withdrawals in years 2–10 after the 

suspension: The present value, determined as of the end of the plan 

year before a withdrawal, of the benefits not expected to be paid in the 

year of withdrawal or thereafter due 

to the benefit suspension.

Unamortized balance of the value of 

the adjustable benefit reduction 

using the same assumptions as for 

UVBs for purposes of section 4211 

of ERISA and amortization in level 

annual installments over 15 years. 

Allocation Fraction .. For all three methods, the Allocation Fraction is the amount of the employer’s required contributions over a 5-year period 

divided by the amount of all employers’ contributions over the same 5-year period. The Allocation Fraction is determined in accordance with rules to disregard contribution increases under § 4211.4 and permissible modifications and 

simplifications under §§ 4211.12–15. 

Five-Year Period for 

the Allocation 

Fraction.

Five consecutive plan years ending 

before the plan year in which the 

benefit suspension takes effect.

Five consecutive plan years ending 

before the employer’s withdrawal.

Choice of 5 consecutive plan years 

ending before the employer’s withdrawal or the plan year in which the 

adjustable benefit reduction takes effect. 

Adjustments to Denominator of the 

Allocation Fraction.

Same as Adjusted Value Method, but 

using the 5-year period for the Static 

Value Method. In addition, if a plan 

uses a method other than the presumptive method, the denominator 

after the first year of the 5-year period is decreased by the contributions of any employers that withdrew 

from the plan and were unable to 

satisfy their withdrawal liability 

claims in any year before the employer’s withdrawal.

The denominator is increased by any 

employer contributions owed with respect to earlier periods which were 

collected in the 5-year period and 

decreased by any amount contributed by an employer that withdrew 

from the plan during the 5-year period, or, alternatively, adjusted as 

permitted under § 4211.12.

Same as Adjusted Value Method if 

using 5 consecutive plan years before the employer’s withdrawal. 

If using alternative 5-year period, same 

as Static Value Method, but using 

the 5 consecutive plan years before 

the plan year in which the adjustable 

benefit reduction takes effect. 


tkelley on DSKBCP9HB2PROD with RULES
1264 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

9The requirement to disregard surcharges for 

purposes of determining an employer’s annual 

withdrawal liability payment is effective for surcharges the obligation for which accrues on or 

after December 31, 2014. 

IV. Regulatory Changes To Reflect 

Surcharges and Contribution Increases 

A. Requirement To Disregard 

Surcharges and Certain Contribution 

Increases in Determining the Allocation 

of Unfunded Vested Benefits to an 

Employer (§ 4211.4) and the Annual 

Withdrawal Liability Payment Amount 

(§ 4219.3) 

Changes in contributions can affect 

the calculation of an employer’s 

withdrawal liability and annual 

withdrawal liability payment amount. 

For example, such changes can increase 

or decrease the allocation fraction 

(discussed above in section I) that is 

used to calculate an employer’s 

withdrawal liability. They can also 

increase or decrease an employer’s 

highest contribution rate used to 

calculate the employer’s annual 

withdrawal liability payment amount 

(also discussed above in section I). 

Required surcharges and certain 

contribution increases would typically 

result in an increase in an employer’s 

withdrawal liability even though 

unfunded vested benefits are being 

reduced by the increased contributions. 

Sections 305(g)(2) and (3) of ERISA 

mitigate the effect on withdrawal 

liability by providing that these 

surcharges and contribution increases 

that are required or made to enable the 

plan to meet the requirements of the 

funding improvement plan or 

rehabilitation plan are disregarded in 

determining contribution amounts used 

for the allocation of unfunded vested 

benefits and the annual payment 

amount. These sections do not apply for 

purposes of determining the unfunded 

vested benefits attributable to an 

employer by a plan using the direct 

attribution method under section 

4211(c)(4) of ERISA or a comparable 

method. 

Except as described below the final 

regulation, like the proposed, amends 

§ 4211.4 of PBGC’s unfunded vested 

benefits allocation regulation and 

§ 4219.3 of PBGC’s notice, collection, 

and redetermination of withdrawal 

liability regulation to incorporate the 

requirements to disregard these 

surcharges and contribution increases. 

The final regulation also provides 

simplified methods for disregarding 

certain contribution increases in the 

allocation fraction in § 4211.14 of 

PBGC’s unfunded vested benefits 

allocation regulation (discussed below 

in section IV.B.). The final rule 

incorporates the disregard rules and 

simplified methods for contribution 

increases in the allocation methods for 

merged multiemployer plans provided 

in subpart D of part 4211. PBGC is not 

providing a simplified method for 

disregarding surcharges in the final rule 

because we believe that plans have been 

able to apply the statutory requirements 

without the need for a simplified 

method. 

The provision regarding contribution 

increases applies to increases in the 

contribution rate or other required 

contribution increases that go into effect 

during plan years beginning after 

December 31, 2014.9 A special rule 

under section 305(g)(3)(B) of ERISA 

provides that a contribution increase is 

deemed to be required or made to 

enable the plan to meet the requirement 

of the funding improvement plan or 

rehabilitation plan, such that the 

contribution increase is disregarded. 

However, the statute provides that this 

deeming rule does not apply to 

increases in contribution requirements 

due to increases in levels of work, 

employment, or periods for which 

compensation is provided, or additional 

contributions used to provide an 

increase in benefits, including an 

increase in future benefit accruals, 

permitted by section 305(d)(1)(B) or 

305(f)(1)(B). Accordingly, the final 

regulation, with changes from the 

proposed rule as discussed below, 

provides that these increases are 

included as contribution increases for 

purposes of determining the allocation 

fraction and the highest contribution 

rate. In addition, under section 305(g)(4) 

of ERISA, contribution increases are not 

treated as necessary to satisfy the 

requirement of the funding 

improvement plan or rehabilitation plan 

after the plan has emerged from critical 

or endangered status. This exception 

applies only to the determination of the 

allocation fraction. The table below 

summarizes the statutory exceptions to 

the rule to disregard a contribution 

increase under section 305(g)(3) and (4) 

of ERISA. 

EXCEPTIONS TO DISREGARDING A CONTRIBUTION INCREASE

Allocation fraction and highest contribution rate exceptions (simplified 

methods for these exceptions are explained in III.B. of the preamble).

(1) Increases in contribution requirements associated with increased 

levels of work, employment, or periods for which compensation is 

provided. 

(2) Additional contributions used to provide an increase in benefits, including an increase in future benefit accruals, permitted by section 

305(d)(1)(B) or (f)(1)(B) of ERISA. 

Allocation fraction exception (simplified methods for this exception are 

explained in III.C. of the preamble).

(3) The withdrawal occurs on or after the expiration date of the employer’s collective bargaining agreement in effect in the plan year the 

plan is no longer in endangered or critical status, or, if earlier, the 

date as of which the employer renegotiates a contribution rate effective after the plan year the plan is no longer in endangered or critical 

status. 

Sections 4211.4(b)(2)(ii) and 

4219.3(a)(2)(ii) of the proposed rule 

reflected an interpretation of the 

exception under section 305(g)(3) of 

ERISA for additional contributions used 

to provide an increase in benefits. Those 

sections provided, ‘‘The contribution 

increase provides an increase in 

benefits, including an increase in future 

benefit accruals, permitted by sections 

305(d)(1)(B) or 305(f)(1)(B) of ERISA or 

sections 432(d)(1)(B) or section 

432(f)(1)(B) of the Code, and an increase 

in benefit accruals as an integral part of 

the benefit formula.’’ The proposed rule 

required the portion of such 

contribution increase that is attributable 

to an increase in benefit accruals to be 

determined actuarially and for those 

contribution increases to be included in 

the calculation of a withdrawn 

employer’s withdrawal liability and 

annual withdrawal liability payment 

amount. 

Three commenters disagreed with the 

interpretation provided in the proposed 

rule. They said that the only narrow 

exception to include contribution 

increases that are used to provide an 

increase in benefits in the calculation of 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1265 

withdrawal liability is for increases 

specifically referred to in sections 

305(d)(1)(B) or 305(f)(1)(B) of ERISA. 

These commenters noted that plans 

have excluded all contribution increases 

under a funding improvement plan or 

rehabilitation plan that became effective 

in plan years beginning after December 

31, 2014 from the calculation of 

withdrawal liability. In contrast, two 

commenters noted that some plans have 

included all contribution increases. One 

commenter explained that some plans 

use a benefit formula that makes it 

nearly impossible to allocate between 

what is and is not benefit bearing. 

Commenters objected to the requirement 

for the portion of the contribution 

increase that is benefit bearing to be 

determined actuarially. They stated that 

this would cause an increase in 

administrative costs and that plans have 

used other methods to differentiate 

between benefit bearing and non-benefit 

bearing portions of contribution 

increases. For example, some plan 

sponsors classify contribution increases 

as either benefit-bearing (i.e., included 

in a benefit formula that bases accruals 

on contributions) or supplemental (i.e., 

excluded from the benefit accrual 

formula). Finally, one commenter asked 

whether certifications under sections 

305(d)(1)(B) or 305(f)(1)(B) of ERISA are 

required in the case of a plan with a 

percentage of contribution formula and 

a contribution increase required by a 

funding improvement plan or 

rehabilitation plan. 

The final rule modifies proposed 

§ 4211.4(b)(2)(ii) and § 4219.3(a)(2)(ii) to 

provide the exception to the disregard 

rules for a contribution increase that 

provides an increase in benefits by 

simply referring to section 305(g)(3) of 

ERISA. Specifically, § 4211.4(b)(2)(ii) 

and § 4219.3(a)(2)(ii) in the final rule 

describe the exception as applying to 

contribution increases ‘‘used to provide 

an increase in benefits, including an 

increase in future benefit accruals, 

permitted by section (d)(1)(B) or (f)(1)(B) 

of ERISA.’’ A plan sponsor is required 

to include such contribution increases 

in the calculation of a withdrawn 

employer’s withdrawal liability and 

annual withdrawal liability payment 

amount. The final rule does not provide 

further interpretation. Commenters 

raised interpretive issues about sections 

305(g)(3), 305(d)(1)(B), and 305(f)(1)(B) 

of ERISA that are under the jurisdiction 

of the Department of the Treasury as 

well as plan benefit design issues that 

require further study. PBGC is 

continuing to examine these issues with 

the Department of the Treasury and, if 

appropriate, will issue additional 

guidance. 

B. Simplified Methods for Disregarding 

Certain Contribution Increases in the 

Allocation Fraction (§ 4211.14) 

The allocation fraction that is used in 

the presumptive, modified presumptive, 

and rolling-5 methods to determine an 

employer’s proportional share of 

unfunded vested benefits is discussed 

above in section I. The final regulation 

adds a new § 4211.14 to the unfunded 

vested benefits allocation regulation to 

provide a choice of one simplified 

method for the numerator and two 

simplified methods for the denominator 

of the allocation fraction. A plan 

sponsor may adopt the simplified 

methods in § 4211.14 to satisfy the 

requirements of section 305(g)(3) of 

ERISA and § 4211.4(b)(2) to disregard 

contribution increases in determining 

the allocation of unfunded vested 

benefits, or may choose an alternative 

approach that satisfies the requirements 

of the statutory provisions and 

regulations. A plan amended to use one 

or more of the simplified methods in 

this section must also apply the rules to 

disregard surcharges under new 

§ 4211.4. 

One commenter asked that the final 

regulation allow plans using the direct 

attribution method to use the simplified 

methods for contribution increases if 

use of such methods is otherwise 

reasonable. The disregard rules for 

contribution increases under section 

305(g)(3)(A) of ERISA do not apply for 

purposes of determining the unfunded 

vested benefits attributable to an 

employer by a plan using the direct 

attribution method under section 

4211(c)(4) of ERISA or a comparable 

method. PBGC’s authority to provide 

simplified methods under section 

305(g)(5) of ERISA is limited to methods 

for applying the disregard rules in 

determining withdrawal liability and 

payment amounts. PBGC therefore did 

not incorporate the commenter’s 

requested change in the final rule. 

1. Determining the Numerator Using the 

Employer’s Plan Year 2014 Contribution 

Rate 

Under the simplified method for 

determining the numerator of the 

allocation fraction, a plan sponsor bases 

the calculation on an employer’s 

contribution rate as of the last day of 

each plan year (rather than applying a 

separate calculation for contribution 

increases that occur in the middle of a 

plan year). The plan sponsor starts with 

the employer’s contribution rate as of 

the ‘‘employer freeze date.’’ The 

employer freeze date is the date that is 

the later of the last day of the first plan 

year that ends on or after December 31, 

2014 (December 31, 2014 for a calendar 

year plan) and the last day of the plan 

year the employer first contributes to 

the plan. If, after the employer freeze 

date, the plan has a contribution rate 

increase that provides an increase in 

benefits so that the contribution 

increase is included, that rate increase 

is added to the contribution rate for 

each target year for which the rate 

increase is effective. Under the method, 

the product of the employer freeze date 

contribution rate (increased in 

accordance with the prior sentence, if 

applicable) and the withdrawn 

employer’s contribution base units in 

each plan year (‘‘target year’’) are used 

for the numerator and the comparable 

amount determined for each employer is 

included in the denominator (described 

in B.2 below), unless the plan sponsor 

uses the proxy group method for 

determining the denominator (described 

in B.3 below). If there is more than one 

contribution rate or basis for calculating 

contribution base units, the calculations 

can be performed separately for each 

contribution rate or contribution base 

sub-group and then summed. An 

example illustrating the simplified 

method for disregarding certain 

contributions in determining the 

numerator using the employer’s plan 

year 2014 contribution rate is provided 

in the appendix to part 4211. 

2. Determining the Denominator Using 

Each Employer’s Plan Year 2014 

Contribution Rate 

Under the first simplified method for 

determining the denominator of the 

allocation fraction, a plan sponsor 

applies the same principles as for the 

simplified method above for 

determining the numerator of the 

allocation fraction. The plan sponsor 

holds steady each employer’s 

contribution rate as of the employer 

freeze date, except for contribution 

increases that provide benefit increases 

as described above. For each employer, 

the plan sponsor multiplies this rate by 

each employer’s contribution base units 

in each target year. 

3. Determining the Denominator Using 

the Proxy Group Method 

Plans frequently offer multiple 

contribution schedules under a funding 

improvement plan or rehabilitation 

plan, which may have varying 

contribution rate increases. Under these 

and other circumstances, it could be 

administratively burdensome for plans 

to determine the exact amount of an 

employer’s contributions—excluding 

contributions required to be disregarded 


tkelley on DSKBCP9HB2PROD with RULES
1266 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

in determining withdrawal liability—to 

include in the denominator of the 

allocation fraction. Accordingly, the 

regulation provides a second simplified 

method for determining contributions in 

the denominator. This method, called 

the proxy group method, is available for 

plans that are amended to provide for 

use of the method. The method permits 

the contributions included in the 

denominator of the allocation fraction 

for a plan year to be based on an amount 

calculated for ‘‘proxy’’ representatives 

of the plan’s contributing employers. 

A commenter noted that different 

schedules and rate increases may apply 

to different categories of employees of a 

single employer—for example, because 

different collective bargaining 

agreements apply to different categories 

of the employer’s employees. In 

response, the final regulation permits a 

single employer whose employees have 

highly dissimilar contribution histories 

to be treated as two or more employers 

with more uniform contribution 

histories in applying the proxy group 

method. 

Under the proxy group method, 

employers are grouped in rate history 

groups, based on similarity of 

contribution histories (or same 

percentage increases in contributions 

from year to year). (Notwithstanding the 

diversity of contribution histories, rate 

history groups may be limited to 10.) 

Representative employers, representing 

at least 10 percent of active plan 

participants, are drawn from rate history 

groups to form the proxy group. 

‘‘Adjusted contributions’’—excluding 

contribution rate increases that must be 

disregarded for withdrawal liability 

purposes—are determined for 

employers in the proxy group; then for 

rate history groups, based on the 

adjusted contributions of employers in 

each rate history group; and finally for 

the plan, based on the adjusted 

contributions of rate history groups 

represented in the proxy group. The 

plan’s adjusted contributions form the 

denominator of the withdrawal liability 

allocation fraction. 

As with other simplified methods, 

only contribution rates in effect at year 

end need be considered. 

The process of forming rate history 

groups may be illustrated by the 

following examples. 

Example 1. Employers in Plan A had 

twelve different contribution rates at the 

start of the rehabilitation period, as 

shown in the following table: 

Column 1 Column 2 Column 3 Column 4 

Row 1 ............................................................................................................... $2.00 $2.25 $2.50 $2.75 

Row 2 ............................................................................................................... 3.00 3.25 3.50 3.75 

Row 3 ............................................................................................................... 4.00 4.25 4.50 4.75 

The rehabilitation plan requires 

increases of $0.50 per hour per year for 

employers in Row 1, $0.75 per hour per 

year for those in Row 2, and $1.00 per 

hour per year for those in Row 3. All 

collective bargaining agreements are 

amended by the beginning of 2015, and 

the increases are effective as of the 

beginning of 2015. The following table 

shows the percentage rates of increase 

in contribution rates at year-end 2015 

compared with year-end 2014: 

Column 1 

(percent) 

Column 2 

(percent) 

Column 3 

(percent) 

Column 4 

(percent) 

Row 1 ............................................................................................................... 25.00 22.22 20.00 18.18 

Row 2 ............................................................................................................... 25.00 23.08 21.43 20.00 

Row 3 ............................................................................................................... 25.00 23.53 22.22 21.05 

Since the increase rates for employers 

in Column 1 are the same, the plan can 

put those employers in one rate group. 

Similarly, employers in Column 2 have 

relatively uniform rates and can be 

grouped together, and likewise for those 

in Columns 3 and those in Column 4. 

Alternatively, employers in Columns 3 

and 4 of Row 1 could be grouped 

together with those in Column 4 of Row 

2; and employers in Columns 3 and 4 

of Row 3 could be grouped together 

with those in Column 3 of Row 2. 

Example 2. Plan B has many 

employers and many contribution rate 

schedules. Contributions change 

between 2010 and 2021 as follows: 

Under the default schedule, there are 

one-time increases of 50 percent in 2010 

for employers in Category A (defaults 

occurring in 2010); 55 percent in 2011 

for employers in Category B (defaults 

occurring in 2011); and 60 percent in 

2012 for employers in Category C 

(defaults occurring in 2012). For 

employers in Category D through Y, 

which have negotiated new collective 

bargaining agreements, increases are as 

shown in the following table: 

Category First increase 

(year and quarter) 

Annual percentage 

increase thereafter 

through 2021 

D ................... 2010 Q1 ............................................................................................................................................................ 3.8 

E ................... 2010 Q2 ............................................................................................................................................................ 3.9 

F ................... 2010 Q3 ............................................................................................................................................................ 4.0 

G .................. 2010 Q4 ............................................................................................................................................................ 4.1 

H ................... 2011 Q1 ............................................................................................................................................................ 4.3 

I .................... 2011 Q2 ............................................................................................................................................................ 4.5 

J ................... 2011 Q3 ............................................................................................................................................................ 4.7 

K ................... 2011 Q4 ............................................................................................................................................................ 4.9 

L ................... 2012 Q1 ............................................................................................................................................................ 5.2 

M .................. 2012 Q2 ............................................................................................................................................................ 5.5 

N ................... 2012 Q3 ............................................................................................................................................................ 5.8 

O .................. 2012 Q4 ............................................................................................................................................................ 6.1 

P ................... 2013 Q1 ............................................................................................................................................................ 6.4 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1267 

Category First increase 

(year and quarter) 

Annual percentage 

increase thereafter 

through 2021 

Q .................. 2013 Q2 ............................................................................................................................................................ 6.7 

R ................... 2013 Q3 ............................................................................................................................................................ 7.1 

S ................... 2013 Q4 ............................................................................................................................................................ 7.5 

T ................... 2014 Q1 ............................................................................................................................................................ 8.0 

U ................... 2014 Q2 ............................................................................................................................................................ 8.5 

V ................... 2014 Q3 ............................................................................................................................................................ 9.0 

W .................. 2014 Q4 ............................................................................................................................................................ 9.5 

X ................... 2015 Q1 ............................................................................................................................................................ 10.3 

Y ................... 2015 Q2 and later ............................................................................................................................................. 11.0 

The annual percentage increases for 

employers in Category D through Y are 

cumulative. Thus, if an employer’s 

contribution rate for the second quarter 

of 2010 in Category F was $100.00, its 

contributions for 2010, 2011, and 2012 

would be $104.00, $108.16, and $112.49 

(based on rates in effect at year-end). 

Appropriate rate history groups for 

2015 through 2021 could be as follows: 

Rate history group 

Employer 

categories in 

group 

1 ............................................. A, B, C. 

2 ............................................. D, E, F, G. 

3 ............................................. H, I, J, K. 

4 ............................................. L, M, N, O. 

5 ............................................. P, Q. 

6 ............................................. R, S. 

7 ............................................. T, U. 

8 ............................................. V, W. 

9 ............................................. X. 

10 ........................................... Y. 

These groupings take advantage of the 

provision that no more than ten rate 

history groups need be provided for. 

In response to a comment requesting 

more flexibility in the determination of 

proxy groups, the final regulation omits 

the requirement that the proxy group 

employers be named in the plan. 

However, the regulation requires that 

there be consistency from year to year 

in the composition of both the proxy 

group and rate history groups, with 

certain exceptions. The intent is to keep 

these groups generally unchanged but to 

permit changes in their make-up to 

accommodate changes in circumstances 

such as contribution histories and 

employer withdrawals. 

Employers contributing under the 

same rate schedule would typically be 

in the same rate history group, and a 

change in the rate schedule would 

typically not change the composition of 

the rate history group, because the rate 

histories of all employers in the group 

would be similarly affected. For 

example, suppose all the employers 

under a rate schedule are in the same 

rate history group, and the rate schedule 

changes. This would typically not 

change the composition of the rate 

history group, because the rate histories 

of all employers in the group would be 

similarly affected. 

In the same vein, employers with 

disparate rate histories would typically 

be in different rate history groups, and 

the fact that they became covered by the 

same rate schedule would not typically 

place them in the same rate history 

group because their rate histories would 

remain different. For example, suppose 

two employers with disparate rate 

histories are in different rate history 

groups and become covered by the same 

rate schedule. This would not typically 

place them in the same rate history 

group because their rate histories would 

remain different. 

On the other hand, if two employers 

in a rate history group moved to a 

different rate schedule, their rate 

histories would no longer match those 

of the other employers in the group. 

Depending on circumstances, this 

change might result in the formation of 

a new rate history group that (if it 

represented more than 5 percent of 

active participants) would require 

representation in the proxy group. 

For proxy group employers, adjusted 

contributions for the plan year are 

determined by multiplying each 

employer’s contribution base units for 

the plan year by what would have been 

the employer’s contribution rate 

excluding contribution rate increases 

that are required to be disregarded in 

determining withdrawal liability. 

Determining adjusted contributions 

for rate history groups is a two-step 

process. First, an adjustment factor is 

determined for the plan year for each 

rate history group represented in the 

proxy group of employers. This 

adjustment factor equals the sum of the 

adjusted contributions for the plan year 

for all employers in the rate history 

group that are in the proxy group, 

divided by the sum of those employers’ 

actual total contributions for the plan 

year. Second, the adjustment factor for 

the year for each rate history group is 

multiplied by the contributions for the 

year of all employers in the rate history 

group (both proxy group members and 

non-members) to determine the adjusted 

contributions for the rate history group 

for the year. 

Finally, the same steps are performed 

to determine adjusted contributions at 

the plan level. The sum of the adjusted 

contributions for all the rate history 

groups represented in the proxy group 

is divided by the sum of the actual 

contributions for the employers in those 

rate history groups, and the resulting 

adjustment factor for the plan is 

multiplied by the plan’s total 

contributions for the plan year, 

including contributions by employers in 

small rate history groups not 

represented in the proxy group. The 

result—the adjusted contributions for 

the whole plan—is the amount of 

contributions for the plan year that may 

be used to determine the denominator 

for the allocation fraction under the 

proxy group method. 

This process weights contributors by 

the size of their contributions. Heavy 

contributors’ rates have a greater impact 

on the adjusted contributions than light 

contributors’ rates. 

A commenter asked that relief be 

provided for cases where information 

needed to determine adjusted 

contributions is unavailable. In 

response, PBGC has added a provision 

addressing situations where total 

contributions for a rate history group or 

a plan are unavailable to calculate 

adjusted contributions. In such 

situations, total contributions may be 

estimated by multiplying each 

contribution rate times the relevant 

projected contribution base units and 

adding all the results. 

An example illustrating the simplified 

method for disregarding certain 

contributions in determining the 

denominator of the allocation fraction 

using the proxy group method is 

provided in the appendix to part 4211. 

C. Simplified Methods After Plan Is No 

Longer in Endangered or Critical Status 

As noted above in section IV.A., 

changes in contributions can affect the 

calculation of an employer’s withdrawal 


tkelley on DSKBCP9HB2PROD with RULES
1268 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

liability and annual withdrawal liability 

payment amount. Once a plan is no 

longer in endangered or critical status, 

the ‘‘disregard’’ rules for contribution 

increases change. Under section 

305(g)(4) of ERISA, plan sponsors are 

required to: (1) Include contribution 

increases in determining the allocation 

fraction used to calculate withdrawal 

liability under section 4211 of ERISA; 

and (2) continue to disregard 

contribution increases in determining 

the highest contribution rate used to 

calculate the annual withdrawal 

liability payment amount under section 

4219(c) of ERISA, as follows: 

PLANS NO LONGER IN ENDANGERED OR CRITICAL STATUS

Allocation Fraction (section 4211 of 

ERISA).

A plan sponsor is required to include contribution increases (previously disregarded) as of the expiration 

date of the collective bargaining agreement in effect when a plan is no longer in endangered or critical 

status. 

Highest Contribution Rate (section 

4219(c) of ERISA).

A plan sponsor is required to continue disregarding contribution increases that applied for plan years during which the plan was in endangered or critical status. 

The final regulation, like the 

proposed, amends § 4211.4 of PBGC’s 

unfunded vested benefits allocation 

regulation and § 4219.3 of PBGC’s 

notice, collection, and redetermination 

of withdrawal liability regulation to 

incorporate the requirements for 

contribution increases when a plan is no 

longer in endangered or critical status. 

The final regulation also provides 

simplified methods required by section 

305(g)(5) of ERISA that a plan sponsor 

could adopt to satisfy the requirements 

of section 305(g)(4). 

1. Including Contribution Increases in 

Determining the Allocation of Unfunded 

Vested Benefits (§ 4211.15) 

The rule to begin including 

contribution increases for purposes of 

determining withdrawal liability is 

based, in part, on when a plan’s 

collective bargaining agreements expire. 

Because plans may operate under 

numerous collective bargaining 

agreements with varying expiration 

dates, it could be burdensome for a plan 

sponsor to calculate the amount 

contributed by employers over the 5- 

year periods used for the denominators 

of the plan’s allocation method. The 

plan sponsor would have to make a 

year-by-year determination of whether 

contribution increases should be 

included or disregarded in the 

denominators relative to collective 

bargaining agreements expiring in each 

applicable year. The final regulation 

adds a new § 4211.15 to PBGC’s 

unfunded vested benefits allocation 

regulation to provide two alternative 

simplified methods that a plan sponsor 

could adopt for determining the 

denominators in the allocation fractions 

when the plan is no longer in 

endangered or critical status. 

Under the first simplified method, a 

plan sponsor could adopt a rule that 

contribution increases previously 

disregarded are included in the 

allocation fraction as of the expiration 

date of the first collective bargaining 

agreement requiring contributions that 

expires after the plan’s emergence from 

endangered or critical status. If the plan 

sponsor adopts this rule, then for any 

withdrawals after the applicable 

expiration date, the plan sponsor would 

include the total amount contributed by 

employers for plan years included in the 

denominator of the allocation fraction 

determined in accordance with section 

4211 of ERISA under the method in use 

by the plan. This would relieve plan 

sponsors of the burden of a year-by-year 

determination of whether contribution 

increases should be included or 

disregarded in the denominator under 

the plan’s allocation method relative to 

collective bargaining agreements 

expiring in that year. An example 

illustrating this simplified method is 

provided in § 4211.15(c) of PBGC’s 

unfunded vested benefits allocation 

regulation. 

Under the second simplified method, 

a plan sponsor could adopt a rule that 

contribution increases previously 

disregarded are included in calculating 

withdrawal liability for any employer 

withdrawal that occurs after the first full 

plan year after a plan is no longer in 

endangered or critical status, or if later, 

the plan year including the expiration 

date of the first collective bargaining 

agreement requiring plan contributions 

that expires after the plan’s emergence 

from endangered or critical status. 

The final regulation also provides 

that, for purposes of these simplified 

methods, an ‘‘evergreen contract’’ that 

continues until the collective bargaining 

parties elect to terminate the agreement 

has a termination date that is the earlier 

of— 

(1) The termination of the agreement 

by decision of the parties. 

(2) The beginning of the third plan 

year following the plan year in which 

the plan is no longer in endangered or 

critical status. 

PBGC invited public comment on 

other simplified methods that a plan 

operating under numerous collective 

bargaining agreements with varying 

expiration dates might use to satisfy the 

requirement in section 305(g)(4) of 

ERISA that, as of the expiration date of 

the first collective bargaining agreement 

requiring plan contributions that expires 

after a plan is no longer in endangered 

or critical status, the allocation fraction 

must include contribution increases that 

were previously disregarded. Two 

commenters supported PBGC’s 

proposed simplified method as a 

reasonable way to satisfy the 

requirements of section 305(g)(4) of 

ERISA. 

2. Continuing To Disregard Contribution 

Increases in Determining the Highest 

Contribution Rate (§ 4219.3) 

The rule for determining the highest 

contribution rate requires a plan 

sponsor of a plan that is no longer in 

endangered or critical status to continue 

to disregard increases in the 

contribution rate that applied for plan 

years during which the plan was in 

endangered or critical status. Because an 

employer’s highest contribution rate is 

determined over the 10 plan years 

ending with the year of withdrawal, 

applying the rule would require a yearby-year determination of whether 

contribution increases should be 

included or disregarded. The final 

regulation adds a new § 4219.3 to 

PBGC’s notice, collection, and 

redetermination of withdrawal liability 

regulation to provide a simplified 

method that a plan sponsor could adopt 

for determining the highest contribution 

rate. 

The simplified method provides that, 

for a plan that is no longer in 

endangered or critical status, the highest 

contribution rate for purposes of section 

4219(c) of ERISA is the greater of— 

(1) The employer’s contribution rate 

in effect, for a calendar year plan, as of 

December 31, 2014, and for other plans, 

the last day of the plan year that ends 

on or after December 31, 2014, plus any 

contribution increases occurring after 

that date and before the employer’s 

withdrawal that must be included in 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1269 

10https://www.pbgc.gov/sites/default/files/2017_

pension_data_tables.pdf, Table M–18. 

determining the highest contribution 

rate under section 305(g)(3) of ERISA, or 

(2) The highest contribution rate for 

any plan year after the plan year that 

includes the expiration date of the first 

collective bargaining agreement of the 

withdrawing employer requiring plan 

contributions that expires after the plan 

is no longer in endangered or critical 

status, or, if earlier, the date as of which 

the withdrawing employer renegotiated 

a contribution rate effective after a plan 

is no longer in endangered or critical 

status. 

An example illustrating this 

simplified method is provided in 

§ 4219.3 of PBGC’s notice, collection, 

and redetermination of withdrawal 

liability regulation. PBGC received two 

comments about the simplified method 

provided in § 4219.3. One commenter 

asked for clarification about the 

contribution rate that should be 

included in determining the highest 

contribution rate if an employer 

withdraws after its collective bargaining 

agreement expires, but before a new 

collective bargaining agreement is 

adopted. Another commenter stated that 

under the simplified method, if the plan 

year ends soon after the expiration date 

of the collective bargaining agreement, a 

higher contribution rate could be 

imposed on an employer than the plan’s 

later negotiated contribution rate. PBGC 

agrees that this could occur under the 

simplified method if the bargaining 

parties do not reach agreement by the 

plan year after the plan year that 

includes the expiration date of the first 

collective bargaining agreement of the 

withdrawing employer requiring plan 

contributions that expires after the plan 

is no longer in endangered or critical 

status. 

A commenter suggested that a grace 

period could be provided after the 

expiration date of the collective 

bargaining agreement, such as 180 days, 

during which the higher rate would not 

apply if it had not been agreed to in 

collective bargaining. While in many 

cases collective bargaining agreements 

are not renegotiated until after the 

expiration date of the collective 

bargaining agreement, PBGC believes 

that the collective bargaining parties 

will generally have time to resolve the 

scenario described by the commenter 

before a plan emerges from endangered 

or critical status. In addition, PBGC’s 

simplified method already extends the 

disregard period beyond the highest 

contribution rate ‘‘for plan years during 

which the plan was in endangered or 

critical status’’ to include the period 

through the end of the plan year after 

the plan year that includes the 

expiration date of the first collective 

bargaining agreement that expires after 

the plan is no longer in endangered or 

critical status. Therefore, PBGC did not 

adopt the commenter’s suggestion to 

change the simplified method in the 

final rule. 

V. Compliance With Rulemaking 

Guidelines 

Executive Orders 12866, 13563, and 

13771 

The Office of Management and Budget 

(OMB) has determined that this 

rulemaking is not a ‘‘significant 

regulatory action’’ under Executive 

Order 12866 and Executive Order 

13771. The rule provides simplified 

methods, as required by section 

305(g)(5) of ERISA, to determine 

withdrawal liability and payment 

amounts, which multiemployer plan 

sponsors may choose, but are not 

required, to adopt. Accordingly, this 

final rule is exempt from Executive 

Order 13771 and OMB has not reviewed 

the rule under Executive Order 12866. 

Executive Orders 12866 and 13563 

direct 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, and public health and 

safety effects, distributive impacts, and 

equity). E.O. 13563 emphasizes 

retrospective review of regulations, 

harmonizing rules, and promoting 

flexibility. 

Although this is not a significant 

regulatory action under Executive Order 

12866, PBGC has examined the 

economic implications of this final rule 

and has concluded that the amendments 

providing simplified methods for plan 

sponsors to comply with the statutory 

requirements will reduce costs for 

multiemployer plans by approximately 

$1,476,000. Based on 2016 data, there 

are about 450 plans that are in 

endangered or critical status.10 PBGC 

estimates that a portion of these plans 

using the simplified methods under the 

final rule will have administrative 

savings, as follows: 

Annual amounts 

Estimated 

number 

of plans 

affected 

Savings per 

plan Total savings 

Savings on actuarial calculations using simplified methods and assuming an average hourly rate of $400 

Disregarding benefit suspensions (Section III.B.2.) .................................................................... 5 $2,000 $10,000 

Exceptions to disregarding contribution increases (Section IV.A.) ............................................. 40 4,000 160,000 

Allocation fraction numerator (Section IV.B.1.) ........................................................................... 200 1,200 240,000 

Allocation fraction denominator using 2014 contribution rate (Section IV.B.2.) ......................... 160 4,000 640,000 

Allocation fraction denominator using proxy group of employers (Section IV.B.3.) ................... 40 8,000 320,000 

Other estimated savings 

Reduced plan valuation cost for plans that have a benefit suspension and use the static 

value method ............................................................................................................................ 3 2,000 6,000 

Savings on potential withdrawal liability arbitration costs assuming an average hourly rate of 

$400 ......................................................................................................................................... 5 20,000 100,000 

Total savings ........................................................................................................................ ........................ ........................ 1,476,000 

PBGC invited public comment on the 

expected savings on actuarial 

calculations and other costs using the 

simplified methods. A commenter noted 

that expected savings on actuarial 

calculations and plan administration 


tkelley on DSKBCP9HB2PROD with RULES
1270 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

11See, e.g., special rules for small plans under 

part 4007 (Payment of Premiums). 

12See, 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. 

13See, 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. 

14See, e.g., DOL’s final rule on Prohibited 

Transaction Exemption Procedures, 76 FR 66637, 

66644 (Oct. 27, 2011). 

will vary greatly from plan to plan based 

on the plan’s industry, benefit formula, 

and other factors. Three commenters 

stated that the requirement in the 

proposed rule that the portion of 

contribution increases that is funding an 

increase in future benefit accruals be 

determined actuarially would cause an 

increase in administrative costs. As 

discussed above in section IV.A. of the 

preamble, the final rule does not adopt 

this provision. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act 

imposes certain requirements with 

respect to rules that are subject to the 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act and that are likely to 

have a significant economic impact on 

a substantial number of small entities. 

Unless an agency determines that a rule 

is not likely to have a significant 

economic impact on a substantial 

number of small entities, section 604 of 

the Regulatory Flexibility Act requires 

that the agency present a final 

regulatory flexibility analysis at the time 

of the publication of the final regulation 

describing the impact of the rule on 

small entities and steps taken to 

minimize the impact. Small entities 

include small businesses, organizations, 

and governmental jurisdictions. 

For purposes of the Regulatory 

Flexibility Act requirements with 

respect to this final rule, PBGC 

considers a small entity to be a plan 

with fewer than 100 participants. This 

is substantially the same criterion PBGC 

uses in other regulations 11 and is 

consistent with certain requirements in 

title I of ERISA 12 and the Code,13 as 

well as the definition of a small entity 

that the Department of Labor has used 

for purposes of the Regulatory 

Flexibility Act.14

Thus, PBGC believes that assessing 

the impact of the proposed regulation 

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 (13 CFR 

121.201) pursuant to the Small Business 

Act. PBGC therefore requested 

comments on the appropriateness of the 

size standard used in evaluating the 

impact on small entities of the proposed 

amendments. PBGC did not receive any 

such comments. 

On the basis of its 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 final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Based on data for recent premium 

filings, PBGC estimates that only 38 

plans of the approximately 1,400 plans 

covered by PBGC’s multiemployer 

program are small plans, and that only 

about 14 of those plans will be impacted 

by this final rule. Furthermore, plan 

sponsors may, but are not required to, 

use the simplified methods under the 

final rule. As shown above, plans that 

use the simplified methods will have 

administrative savings. The final rule 

will not impose costs on plans. 

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. 

List of Subjects 

20 CFR Part 4001 

Business and industry, Employee 

benefit plans, Pension insurance. 

20 CFR Part 4204 

Employee benefit plans, Pension 

insurance, Reporting and recordkeeping 

requirements. 

20 CFR Part 4206 

Employee benefit plans, Pension 

insurance. 

20 CFR Part 4207 

Employee benefit plans, Pension 

insurance. 

29 CFR Part 4211 

Employee benefit plans, Pension 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 4219 

Employee benefit plans, Pension 

insurance, Reporting and recordkeeping 

requirements. 

For the reasons given above, PBGC 

amends 29 CFR parts 4001, 4204, 4206, 

4207, 4211 and 4219 as follows: 

PART 4001—TERMINOLOGY 

■ 1. The authority citation for part 4001 

continues to read as follows: 

Authority: 29 U.S.C. 1301, 1302(b)(3). 

§ 4001.2 [Amended] 

■ 2. In § 4001.2, amend the definition of 

‘‘Nonforfeitable benefit’’ by removing 

‘‘will be considered forfeitable.’’ and 

adding in its place ‘‘are considered 

forfeitable.’’ 

PART 4204—VARIANCES FOR SALE 

OF ASSETS 

■ 3. The authority citation for part 4204 

continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3), 1384(c). 

■ 4. In § 4204.2, add in alphabetical 

order a definition for ‘‘Unfunded vested 

benefits’’ to read as follows: 

§ 4204.2 Definitions. 

* * * * * 

Unfunded vested benefits means, as 

described in section 4213(c) of ERISA, 

the amount by which the value of 

nonforfeitable benefits under the plan 

exceeds the value of the assets of the 

plan. 

§ 4204.12 [Amended] 

■ 5. In § 4204.12: 

■ a. Amend the first sentence by 

removing ‘‘for the purposes of section’’ 

and adding in its place ‘‘for the 

purposes of section 304(b)(3)(A) of 

ERISA and section’’; and 

■ b. Remove the second sentence. 

PART 4206—ADJUSTMENT OF 

LIABILITY FOR A WITHDRAWAL 

SUBSEQUENT TO A PARTIAL 

WITHDRAWAL 

■ 6. The authority citation for part 4206 

continues to read as follows: 

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

1386(b). 

■ 7. In § 4206.2, add in alphabetical 

order a definition for ‘‘Unfunded vested 

benefits’’ to read as follows: 

§ 4206.2 Definitions. 

* * * * * 

Unfunded vested benefits means, as 

described in section 4213(c) of ERISA, 

the amount by which the value of 

nonforfeitable benefits under the plan 

exceeds the value of the assets of the 

plan. 

PART 4207—REDUCTION OR WAIVER 

OF COMPLETE WITHDRAWAL 

LIABILITY 

■ 8. The authority citation for part 4207 

continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3), 1387. 

■ 9. In § 4207.2, add in alphabetical 

order a definition for ‘‘Unfunded vested 

benefits’’ to read as follows: 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1271 

§ 4207.2 Definitions. 

* * * * * 

Unfunded vested benefits means, as 

described in section 4213(c) of ERISA, 

the amount by which the value of 

nonforfeitable benefits under the plan 

exceeds the value of the assets of the 

plan. 

PART 4211—ALLOCATING UNFUNDED 

VESTED BENEFITS TO WITHDRAWING 

EMPLOYERS 

■ 10. The authority citation for part 

4211 continues to read as follows: 

Authority: 29 U.S.C. 1302(b)(3); 1391(c)(1), 

(c)(2)(D), (c)(5)(A), (c)(5)(B), (c)(5)(D), and (f). 

■ 11. In § 4211.1, amend paragraph (a) 

by removing the sixth, seventh, and 

eighth sentences and adding two 

sentences in their place to read as 

follows: 

§ 4211.1 Purpose and scope. 

(a) * * * Section 4211(c)(5) of ERISA 

also permits certain modifications to the 

statutory allocation methods that PBGC 

may prescribe in a regulation. Subpart B 

of this part contains the permissible 

modifications to the statutory methods 

that plan sponsors may adopt without 

PBGC approval. * * * 

* * * * * 

■ 12. In § 4211.2: 

■ a. Amend the introductory text by 

removing ‘‘multiemployer plan,’’ and 

adding in its place ‘‘multiemployer 

plan, nonforfeitable benefit,’’; 

■ b. Amend the definition of ‘‘Initial 

plan year’’ by removing ‘‘establishment’’ 

and adding in its place ‘‘effective date’’; 

■ c. Remove the definition of 

‘‘Nonforfeitable benefit’’; 

■ d. Revise the definition of ‘‘Unfunded 

vested benefits’’; 

■ e. Amend the definition of 

‘‘Withdrawing employer’’ by removing 

‘‘for whom’’ and adding in its place ‘‘for 

which’’; 

■ f. Amend the definition of 

‘‘Withdrawn employer’’ by removing 

‘‘who, prior to the withdrawing 

employer,’’ and adding in its place 

‘‘that, in a plan year before the 

withdrawing employer withdraws,’’; 

The revision reads as follows: 

§ 4211.2 Definitions. 

* * * * * 

Unfunded vested benefits means, as 

described in section 4213(c) of ERISA, 

the amount by which the value of 

nonforfeitable benefits under the plan 

exceeds the value of the assets of the 

plan. 

* * * * * 

■ 13. Revise § 4211.3 to read as follows: 

§ 4211.3 Special rules for construction 

industry and Code section 404(c) plans. 

(a) Construction plans. A plan that 

primarily covers employees in the 

building and construction industry must 

use the presumptive method for 

allocating unfunded vested benefits, 

except as provided in §§ 4211.11(b) and 

4211.21(b). 

(b) Code section 404(c) plans. A plan 

described in section 404(c) of the Code 

or a continuation of such a plan must 

use the rolling-5 method for allocating 

unfunded vested benefits unless the 

plan sponsor, by amendment, adopts an 

alternative method or modification. 

■ 14. Revise § 4211.4 to read as follows: 

§ 4211.4 Contributions for purposes of the 

numerator and denominator of the 

allocation fractions. 

(a) In general. Subject to paragraph (b) 

of this section, each of the allocation 

fractions used in the presumptive, 

modified presumptive and rolling-5 

methods is based on contributions that 

certain employers have made to the plan 

for a 5-year period. 

(1) The numerator of the allocation 

fraction, with respect to a withdrawing 

employer, is based on the ‘‘sum of the 

contributions required to be made’’ or 

the ‘‘total amount required to be 

contributed’’ by the employer for the 

specified period. 

(2) The denominator of the allocation 

fraction is based on contributions that 

certain employers have made to the plan 

for a specified period. 

(b) Disregarding surcharges and 

contribution increases. For each of the 

allocation fractions used in the 

presumptive, modified presumptive and 

rolling-5 methods in determining the 

allocation of unfunded vested benefits 

to an employer, a plan in endangered or 

critical status must disregard: 

(1) Surcharge. Any surcharge under 

section 305(e)(7) of ERISA and section 

432(e)(7) of the Code. 

(2) Contribution increase. Any 

increase in the contribution rate or other 

increase in contribution requirements 

that goes into effect during plan years 

beginning after December 31, 2014, so 

that a plan may meet the requirements 

of a funding improvement plan under 

section 305(c) of ERISA and section 

432(c) of the Code or a rehabilitation 

plan under section 305(e) of ERISA and 

432(e) of the Code, except to the extent 

that one of the following exceptions 

applies pursuant to section 305(g)(3) or 

(4) of ERISA and section 432(g)(3) or (4) 

of the Code: 

(i) The increases in contribution 

requirements are due to increased levels 

of work, employment, or periods for 

which compensation is provided. 

(ii) The additional contributions are 

used to provide an increase in benefits, 

including an increase in future benefit 

accruals, permitted by section 

305(d)(1)(B) or (f)(1)(B) of ERISA and 

section 432(d)(1)(B) or (f)(1)(B) of the 

Code. 

(iii) The withdrawal occurs on or after 

the expiration date of the employer’s 

collective bargaining agreement in effect 

in the plan year the plan is no longer in 

endangered or critical status, or, if 

earlier, the date as of which the 

employer renegotiates a contribution 

rate effective after the plan year the plan 

is no longer in endangered or critical 

status. 

(c) Simplified methods. See 

§§ 4211.14 and 4211.15 for simplified 

methods of meeting the requirements of 

this section. 

■ 15. Add § 4211.6 to read as follows: 

§ 4211.6 Disregarding benefit reductions 

and benefit suspensions. 

(a) In general. A plan must disregard 

the following nonforfeitable benefit 

reductions and benefit suspensions in 

determining a plan’s nonforfeitable 

benefits for purposes of determining an 

employer’s withdrawal liability under 

section 4201 of ERISA: 

(1) Adjustable benefit. A reduction to 

adjustable benefits under section 

305(e)(8) of ERISA and section 432(e)(8) 

of the Code. 

(2) Lump sum. A benefit reduction 

arising from a restriction on lump sums 

or other benefits under section 305(f) of 

ERISA and section 432(f) of the Code. 

(3) Benefit suspension. A benefit 

suspension under section 305(e)(9) of 

ERISA and section 432(e)(9) of the Code, 

but only for withdrawals not more than 

10 years after the end of the plan year 

in which the benefit suspension takes 

effect. 

(b) Simplified methods. See § 4211.16 

for simplified methods for meeting the 

requirements of this section. 

■ 16. Revise § 4211.11 to read as 

follows: 

§ 4211.11 Plan sponsor adoption of 

modifications and simplified methods. 

(a) General rule. A plan sponsor, other 

than the sponsor of a plan that primarily 

covers employees in the building and 

construction industry, may adopt by 

amendment, without the approval of 

PBGC, any of the statutory allocation 

methods and any of the modifications 

and simplified methods set forth in 

§§ 4211.12 through 4211.16. 

(b) Building and construction industry 

plans. The plan sponsor of a plan that 

primarily covers employees in the 

building and construction industry may 

adopt by amendment, without the 


tkelley on DSKBCP9HB2PROD with RULES
1272 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

approval of PBGC, any of the 

modifications to the presumptive rule 

and simplified methods set forth in 

§ 4211.12 and §§ 4211.14 through 

4211.16. 

■ 17. Revise § 4211.12 to read as 

follows: 

§ 4211.12 Modifications to the 

presumptive, modified presumptive, and 

rolling-5 methods. 

(a) Disregarding certain contribution 

increases. A plan amended to use the 

modifications in this section must apply 

the rules to disregard surcharges and 

contribution increases under § 4211.4. A 

plan sponsor may amend a plan to 

incorporate the simplified methods in 

§§ 4211.14 and 4211.15 to fulfill the 

requirements of § 4211.4 with the 

modifications in this section if done 

consistently from year to year. 

(b) Changing the period for counting 

contributions. A plan sponsor may 

amend a plan to modify the 

denominators in the presumptive, 

modified presumptive and rolling-5 

methods in accordance with one of the 

alternatives described in this paragraph 

(b). Any amendment adopted under this 

paragraph (b) must be applied 

consistently to all plan years. 

Contributions counted for 1 plan year 

may not be counted for any other plan 

year. If a contribution is counted as part 

of the ‘‘total amount contributed’’ for 

any plan year used to determine a 

denominator, that contribution may not 

also be counted as a contribution owed 

with respect to an earlier year used to 

determine the same denominator, 

regardless of when the plan collected 

that contribution. 

(1) A plan sponsor may amend a plan 

to provide that ‘‘the sum of all 

contributions made’’ or ‘‘total amount 

contributed’’ for a plan year means the 

amount of contributions that the plan 

actually received during the plan year, 

without regard to whether the 

contributions are treated as made for 

that plan year under section 

304(b)(3)(A) of ERISA and section 

431(b)(3)(A) of the Code. 

(2) A plan sponsor may amend a plan 

to provide that ‘‘the sum of all 

contributions made’’ or ‘‘total amount 

contributed’’ for a plan year means the 

amount of contributions actually 

received during the plan year, increased 

by the amount of contributions received 

during a specified period of time after 

the close of the plan year not to exceed 

the period described in section 304(c)(8) 

of ERISA and section 431(c)(8) of the 

Code and regulations thereunder. 

(3) A plan sponsor may amend a plan 

to provide that ‘‘the sum of all 

contributions made’’ or ‘‘total amount 

contributed’’ for a plan year means the 

amount of contributions actually 

received during the plan year, increased 

by the amount of contributions accrued 

during the plan year and received 

during a specified period of time after 

the close of the plan year not to exceed 

the period described in section 304(c)(8) 

of ERISA and section 431(c)(8) of the 

Code and regulations thereunder. 

(c) Excluding contributions of 

significant withdrawn employers. 

Contributions of certain withdrawn 

employers are excluded from the 

denominator in each of the fractions 

used to determine a withdrawing 

employer’s share of unfunded vested 

benefits under the presumptive, 

modified presumptive and rolling-5 

methods. Except as provided in 

paragraph (c)(1) of this section, 

contributions of all employers that 

permanently cease to have an obligation 

to contribute to the plan or permanently 

cease covered operations before the end 

of the period of plan years used to 

determine the fractions for allocating 

unfunded vested benefits under each of 

those methods (and contributions of all 

employers that withdrew before 

September 26, 1980) are excluded from 

the denominators of the fractions. 

(1) The plan sponsor of a plan using 

the presumptive, modified presumptive 

or rolling-5 method may amend the plan 

to provide that only the contributions of 

significant withdrawn employers are 

excluded from the denominators of the 

fractions used in those methods. 

(2) For purposes of this paragraph (c), 

‘‘significant withdrawn employer’’ 

means— 

(i) An employer to which the plan has 

sent a notice of withdrawal liability 

under section 4219 of ERISA; or 

(ii) A withdrawn employer that in any 

plan year used to determine the 

denominator of a fraction contributed at 

least $250,000 or, if less, 1 percent of all 

contributions made by employers for 

that year. 

(3) If a group of employers withdraw 

in a concerted withdrawal, the plan 

sponsor must treat the group as a single 

employer in determining whether the 

members are significant withdrawn 

employers under paragraph (c)(2) of this 

section. A ‘‘concerted withdrawal’’ 

means a cessation of contributions to 

the plan during a single plan year— 

(i) By an employer association; 

(ii) By all or substantially all of the 

employers covered by a single collective 

bargaining agreement; or 

(iii) By all or substantially all of the 

employers covered by agreements with 

a single labor organization. 

(d) ‘‘Fresh start’’ rules under 

presumptive method. (1) The plan 

sponsor of a plan using the presumptive 

method (including a plan that primarily 

covers employees in the building and 

construction industry) may amend the 

plan to provide that— 

(i) A designated plan year ending after 

September 26, 1980, will substitute for 

the plan year ending before September 

26, 1980, in applying section 

4211(b)(1)(B), section 

4211(b)(2)(B)(ii)(I), section 

4211(b)(2)(D), section 4211(b)(3), and 

section 4211(b)(3)(B) of ERISA; and 

(ii) Plan years ending after the end of 

the designated plan year in paragraph 

(d)(1)(i) of this section will substitute for 

plan years ending after September 25, 

1980, in applying section 4211(b)(1)(A), 

section 4211(b)(2)(A), and section 

4211(b)(2)(B)(ii)(II) of ERISA. 

(2) A plan amendment made pursuant 

to paragraph (d)(1) of this section must 

provide that the plan’s unfunded vested 

benefits for plan years ending after the 

designated plan year are reduced by the 

value of all outstanding claims for 

withdrawal liability that can reasonably 

be expected to be collected from 

employers that had withdrawn from the 

plan as of the end of the designated plan 

year. 

(3) In the case of a plan that primarily 

covers employees in the building and 

construction industry, the plan year 

designated by a plan amendment 

pursuant to paragraph (d)(1) of this 

section must be a plan year for which 

the plan has no unfunded vested 

benefits determined in accordance with 

section 4211 of ERISA without regard to 

§ 4211.6. 

(e) ‘‘Fresh start’’ rules under modified 

presumptive method. (1) The plan 

sponsor of a plan using the modified 

presumptive method may amend the 

plan to provide— 

(i) A designated plan year ending after 

September 26, 1980, will substitute for 

the plan year ending before September 

26, 1980, in applying section 

4211(c)(2)(B)(i) and section 

4211(c)(2)(B)(ii)(I) and (II) of ERISA; and 

(ii) Plan years ending after the end of 

the designated plan year will substitute 

for plan years ending after September 

25, 1980, in applying section 

4211(c)(2)(B)(ii)(II) and section 

4211(c)(2)(C)(i)(II) of ERISA. 

(2) A plan amendment made pursuant 

to paragraph (e)(1) of this section must 

provide that the plan’s unfunded vested 

benefits for plan years ending after the 

designated plan year are reduced by the 

value of all outstanding claims for 

withdrawal liability that can reasonably 

be expected to be collected from 

employers that had withdrawn from the 

plan as of the end of the designated plan 

year. 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1273 

§ 4211.13 [Amended] 

■ 18. In § 4211.13: 

■ a. Amend paragraph (a) by removing 

‘‘shall’’ and adding in its place ‘‘must’’; 

■ b. Amend paragraph (b) by removing 

‘‘shall be’’ and adding in its place ‘‘is’’. 

■ 19. Add § 4211.14 to read as follows: 

§ 4211.14 Simplified methods for 

disregarding certain contributions. 

(a) In general. A plan sponsor may 

amend a plan without PBGC approval to 

adopt any of the simplified methods in 

paragraphs (b) through (d) of this 

section to fulfill the requirements of 

section 305(g)(3) of ERISA and section 

432(g)(3) of the Code and § 4211.4(b)(2) 

in determining an allocation fraction. 

Examples illustrating calculations using 

the simplified methods in this section 

are provided in the appendix to this 

part. 

(b) Simplified method for the 

numerator—after 2014 plan year. A 

plan sponsor may amend a plan to 

provide that the withdrawing 

employer’s required contributions for 

each plan year (a ‘‘target year’’) after the 

date that is the later of the last day of 

the first plan year that ends on or after 

December 31, 2014 and the last day of 

the plan year the employer first 

contributes to the plan (the ‘‘employer 

freeze date’’) is the product of— 

(1) The employer’s contribution rate 

in effect on the employer freeze date, 

plus any contribution increase in 

§ 4211.4(b)(2)(ii) that is effective after 

the employer freeze date but not later 

than the last day of the target year; times 

(2) The employer’s contribution base 

units for the target year. 

(c) Simplified method for the 

denominator—after 2014 plan year. A 

plan sponsor may amend a plan to 

provide that the denominator for the 

allocation fraction for each plan year 

after the employer freeze date is 

calculated using the same principles as 

paragraph (b) of this section. 

(d) Simplified method for the 

denominator—proxy group averaging. 

(1) A plan sponsor may amend a plan 

to provide that, for purposes of 

determining the denominator of the 

unfunded vested benefits allocation 

fraction, employer contributions for a 

plan year beginning after the plan freeze 

date described in paragraph (d)(2)(i) of 

this section are calculated, in 

accordance with this paragraph (d), 

based on an average of representative 

contribution rates that exclude 

contribution increases that are required 

to be disregarded in determining 

withdrawal liability. The method 

described in this paragraph (d) is 

effective only for plan years to which 

the amendment applies. 

(2) For purposes of this paragraph 

(d) — 

(i) Plan freeze date means the last day 

of the first plan year that ends on or 

after December 31, 2014. 

(ii) Base year means the first plan year 

beginning after the plan freeze date. 

(iii) Contribution history for a plan 

year means the history of total 

contribution rates, and contribution 

rates that are not required to be 

disregarded in determining withdrawal 

liability, from the plan freeze date up to 

the end of the plan year. 

(iv) Included employer with respect to 

a plan for a plan year means an 

employer that is a contributing 

employer of the plan on at least 1 day 

of the plan year and whose 

contributions for the plan year are to be 

taken into account under the plan in 

determining the denominator of the 

unfunded vested benefits allocation 

fraction under section 4211 of ERISA. If 

the contribution histories of different 

categories of employees of an employer 

are not substantially the same, the 

employer may be treated as two or more 

employers that have more uniform 

contribution histories. 

(v) Rate history group is defined in 

paragraph (d)(3) of this section. 

(vi) Proxy group is defined in 

paragraph (d)(4) of this section. 

(vii) Adjusted as applied to 

contributions for an employer, a rate 

history group, or a plan is defined in 

paragraphs (d)(5), (6), and (7) of this 

section. 

(3) A rate history group of a plan for 

a plan year is a group of included 

employers satisfying all of the following 

requirements: 

(i) Each included employer of the 

plan is in one and only one rate history 

group. 

(ii) The employers in the rate history 

group have substantially the same 

contribution history (or the same 

percentage increases in contributions 

from year to year), but there need not be 

more than ten rate history groups. 

(iii) There is consistency in the 

composition of rate history groups from 

year to year. 

(4) The proxy group of a plan for a 

plan year is a group of included 

employers satisfying all of the following 

requirements: 

(i) On at least 1 day of the plan year, 

the employers in the proxy group 

represent at least 10 percent of active 

plan participants. 

(ii) There is at least one employer in 

the proxy group from each rate history 

group of the plan for the plan year that 

represents, on at least 1 day of the plan 

year, at least 5 percent of active plan 

participants. 

(iii) There is consistency in the 

composition of the proxy group from 

year to year. 

(5) The adjusted contributions of an 

employer under a plan for a plan year 

are — 

(i) The employer’s contribution base 

units for the plan year; multiplied by 

(ii) The employer’s contribution rate 

per contribution base unit at the end of 

the plan year, reduced by the sum of the 

employer’s contribution rate increases 

since the plan freeze date that are 

required to be disregarded in 

determining withdrawal liability. 

(6) The adjusted contributions of a 

rate history group that is represented in 

the proxy group of a plan for a plan year 

are the total contributions for the plan 

year attributable to employers in the rate 

history group, multiplied by the 

adjustment factor for the rate history 

group. The adjustment factor for the rate 

history group is the quotient, for all 

employers in the rate history group that 

are also in the proxy group, of — 

(i) Total adjusted contributions for the 

plan year; divided by 

(ii) Total contributions for the plan 

year. 

(7) The adjusted contributions of a 

plan for a plan year are the plan’s total 

contributions for the plan year by all 

employers, multiplied by the 

adjustment factor for the plan. For this 

purpose, ‘‘the plan’s total contributions 

for the plan year’’ means the total 

unadjusted plan contributions for the 

plan year that would otherwise be 

included in the denominator of the 

allocation fraction in the absence of 

section 305(g)(1) of ERISA, including 

any employer contributions owed with 

respect to earlier periods that were 

collected in that plan year, and 

excluding any amounts contributed in 

that plan year by an employer that 

withdrew from the plan during that plan 

year. The adjustment factor for the plan 

is the quotient, for all rate history 

groups that are represented in the proxy 

group, of — 

(i) Total adjusted contributions for the 

plan year; divided by 

(ii) Total contributions for the plan 

year. 

(8) Under this method, in determining 

the denominator of a plan’s unfunded 

vested benefits allocation fraction, the 

contributions taken into account with 

respect to any plan year (beginning with 

the base year) are the plan’s adjusted 

contributions for the plan year. 

(9) Notwithstanding the foregoing 

provisions of this paragraph (d), if total 

contributions for a year for a rate history 

group or for a plan are not timely and 

reasonably available for calculating 

adjusted contributions for that year, 


tkelley on DSKBCP9HB2PROD with RULES
1274 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

each relevant contribution rate for the 

year may be multiplied by the projected 

contribution base units for the year 

corresponding to that rate and the sum, 

for all rates, may be used in place of 

total contributions for that year. 

(e) Effective and applicability dates. 

(1) Effective date. This section is 

effective on February 8, 2021. 

(2) Applicability date. This section 

applies to employer withdrawals from 

multiemployer plans that occur in plan 

years beginning on or after February 8, 

2021. 

■ 20. Add § 4211.15 to read as follows: 

§ 4211.15 Simplified methods for 

determining expiration date of a collective 

bargaining agreement. 

(a) In general. A plan sponsor may 

amend a plan without PBGC approval to 

adopt any of the simplified methods in 

this section to fulfill the requirements of 

section 305(g)(4) of ERISA and 432(g)(4) 

of the Code and § 4211.4(b)(2)(iii) for a 

withdrawal that occurs on or after the 

plan’s reversion date. 

(b) Reversion date. The reversion date 

is either— 

(1) The expiration date of the first 

collective bargaining agreement 

requiring plan contributions that expires 

after the plan is no longer in endangered 

or critical status, or 

(2) The date that is the later of— 

(i) The end of the first plan year 

following the plan year in which the 

plan is no longer in endangered or 

critical status; or 

(ii) The end of the plan year that 

includes the expiration date of the first 

collective bargaining agreement 

requiring plan contributions that expires 

after the plan is no longer in endangered 

or critical status. 

(3) For purposes of paragraph (b)(2) of 

this section, the expiration date of a 

collective bargaining agreement that by 

its terms remains in force until 

terminated by the parties thereto is 

considered to be the earlier of— 

(i) The termination date agreed to by 

the parties thereto; or 

(ii) The first day of the third plan year 

following the plan year in which the 

plan is no longer in endangered or 

critical status. 

(c) Example. The simplified method 

in paragraph (b)(1) of this section is 

illustrated by the following example. 

(1) Facts. A plan certifies that it is not 

in endangered or critical status for the 

plan year beginning January 1, 2021. 

The plan operates under several 

collective bargaining agreements. The 

plan sponsor adopts a rule providing 

that all contribution increases will be 

included in the numerator and 

denominator of the allocation fractions 

for withdrawals occurring after October 

31, 2022, the expiration date of the first 

collective bargaining agreement 

requiring plan contributions that expires 

after January 1, 2021. 

(2) Allocation fraction. A contributing 

employer withdraws from the plan in 

November 2022, after the date 

designated by the plan sponsor for the 

inclusion of all contribution rate 

increases in the allocation fraction. The 

allocation fraction used by the plan 

sponsor to determine the employer’s 

share of the plan’s unfunded vested 

benefits includes all of the employer’s 

required contributions in the numerator 

and total contributions made by all 

employers in the denominator, 

including any amounts related to 

contribution increases previously 

disregarded. 

(d) Effective and applicability dates. 

(1) Effective date. This section is 

effective on February 8, 2021. 

(2) Applicability date. This section 

applies to employer withdrawals from 

multiemployer plans that occur in plan 

years beginning on or after February 8, 

2021. 

■ 21. Add § 4211.16 to read as follows: 

§ 4211.16 Simplified methods for 

disregarding benefit reductions and benefit 

suspensions. 

(a) In general. A plan sponsor may 

amend a plan without PBGC approval to 

adopt the simplified methods in this 

section to fulfill the requirements of 

section 305(g)(1) of ERISA and section 

432(g)(1) of the Code and § 4211.6 to 

disregard benefit reductions and benefit 

suspensions. 

(b) Basic rule. The withdrawal 

liability of a withdrawing employer is 

the sum of paragraphs (b)(1) and (2) of 

this section, and then adjusted by 

paragraphs (A)-(D) of section 4201(b)(1) 

of ERISA. The amount determined 

under paragraph (b)(1) may not be less 

than zero. 

(1) The amount that would be the 

employer’s allocable amount of 

unfunded vested benefits determined in 

accordance with section 4211 of ERISA 

under the method in use by the plan 

without regard to § 4211.6 (but taking 

into account § 4211.4); and 

(2) The employer’s proportional share 

of the value of each of the benefit 

reductions and benefit suspensions 

required to be disregarded under 

§ 4211.6 determined in accordance with 

this section. 

(c) Benefit suspension. This paragraph 

(c) applies to a benefit suspension under 

§ 4211.6(a)(3). 

(1) General. The employer’s 

proportional share of the present value 

of a benefit suspension as of the end of 

the plan year before the employer’s 

withdrawal is determined by applying 

paragraph (c)(2) or (3) of this section to 

the present value of the suspended 

benefits, as authorized by the 

Department of the Treasury in 

accordance with section 305(e)(9) of 

ERISA, calculated either as of the date 

of the benefit suspension or as of the 

end of the plan year coincident with or 

following the date of the benefit 

suspension (the ‘‘authorized value’’). 

(2) Static value method. A plan may 

provide that the present value of the 

suspended benefits as of the end of the 

plan year in which the benefit 

suspension takes effect and for each of 

the succeeding 9 plan years is the 

authorized value in paragraph (c)(1) of 

this section. An employer’s proportional 

share of the present value of a benefit 

suspension to which this paragraph (c) 

applies using the static value method is 

determined by multiplying the present 

value of the suspended benefits by a 

fraction— 

(i) The numerator is the sum of all 

contributions required to be made by 

the withdrawing employer for the 5 

consecutive plan years ending before 

the plan year in which the benefit 

suspension takes effect; and 

(ii) The denominator is the total of all 

employers’ contributions for the 5 

consecutive plan years ending before 

the plan year in which the suspension 

takes effect, increased by any employer 

contributions owed with respect to 

earlier periods which were collected in 

those plan years, and decreased by any 

amount contributed by an employer that 

withdrew from the plan during those 

plan years. If a plan uses an allocation 

method other than the presumptive 

method in section 4211(b) of ERISA or 

similar method, the denominator after 

the first year is decreased by the 

contributions of any employers that 

withdrew from the plan and were 

unable to satisfy their withdrawal 

liability claims in any year before the 

employer’s withdrawal. 

(iii) In determining the numerator and 

the denominator in paragraph (c)(2) of 

this section, the rules under § 4211.4 

(and permissible modifications under 

§ 4211.12 and simplified methods under 

§§ 4211.14 and 4211.15) apply. 

(3) Adjusted value method. A plan 

may provide that the present value of 

the suspended benefits as of the end of 

the plan year in which the benefit 

suspension takes effect is the authorized 

value in paragraph (c)(1) of this section 

and that the present value as of the end 

of each of the succeeding nine plan 

years (the ‘‘revaluation date’’) is the 

present value, as of a revaluation date, 

of the benefits not expected to be paid 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1275 

after the revaluation date due to the 

benefit suspension. An employer’s 

proportional share of the present value 

of a benefit suspension to which this 

paragraph (c) applies using the adjusted 

value method is determined by 

multiplying the present value of the 

suspended benefits by a fraction— 

(i) The numerator is the sum of all 

contributions required to be made by 

the withdrawing employer for the 5 

consecutive plan years ending before 

the employer’s withdrawal; and 

(ii) The denominator is the total of all 

employers’ contributions for the 5 

consecutive plan years ending before 

the employer’s withdrawal, increased by 

any employer contributions owed with 

respect to earlier periods which were 

collected in those plan years, and 

decreased by any amount contributed by 

an employer that withdrew from the 

plan during those plan years. 

(iii) In determining the numerator and 

the denominator in this paragraph (c)(3), 

the rules under § 4211.4 (and 

permissible modifications under 

§ 4211.12 and simplified methods under 

§§ 4211.14 and 4211.15) apply. 

(iv) If a benefit suspension in 

§ 4211.6(a)(3) is a temporary suspension 

of the plan’s payment obligations as 

authorized by the Department of the 

Treasury, the present value of the 

suspended benefits in this paragraph 

(c)(3) includes only the value of the 

suspended benefits through the ending 

period of the benefit suspension. 

(d) Benefit reductions. This paragraph 

(d) applies to benefits reduced under 

§ 4211.6(a)(1) or (2). 

(1) Value of a benefit reduction. The 

value of a benefit reduction is— 

(i) The unamortized balance, as of the 

end of the plan year before the 

withdrawal, of; 

(ii) The value of the benefit reduction 

as of the end of the plan year in which 

the reduction took effect; and 

(iii) Determined using the same 

assumptions as for unfunded vested 

benefits and amortization in level 

annual installments over a period of 15 

years. 

(2) Employer’s proportional share of a 

benefit reduction. An employer’s 

proportional share of the value of a 

benefit reduction to which this 

paragraph (d) applies is determined by 

multiplying the value of the benefit 

reduction by a fraction— 

(i) The numerator is the sum of all 

contributions required to be made by 

the withdrawing employer for the 5 

consecutive plan years ending before 

the employer’s withdrawal; and 

(ii) The denominator is the total of all 

employers’ contributions for the 5 

consecutive plan years ending before 

the employer’s withdrawal, increased by 

any employer contributions owed with 

respect to earlier periods which were 

collected in those plan years, and 

decreased by any amount contributed by 

an employer that withdrew from the 

plan during those plan years. 

(iii) The 5 consecutive plan years 

ending before the plan year in which the 

adjustable benefit reduction takes effect 

may be used in determining the 

numerator and the denominator in this 

paragraph (d). If such 5-year period is 

used, in determining the denominator, if 

a plan uses an allocation method other 

than the presumptive method in section 

4211(b) of ERISA or similar method, the 

denominator after the first year is 

decreased by the contributions of any 

employers that withdrew from the plan 

and were unable to satisfy their 

withdrawal liability claims in any year 

before the employer’s withdrawal. 

(iv) In determining the numerator and 

the denominator in this paragraph (d), 

the rules under § 4211.4 (and 

permissible modifications under 

§ 4211.12 and simplified methods under 

§§ 4211.14 and 4211.15) apply. 

(e) Example. The simplified 

framework using the static value 

method under § 4211.16(c)(2) for 

disregarding a benefit suspension is 

illustrated by the following example. 

(1) Facts. Assume that a calendar year 

multiemployer plan receives final 

authorization by the Secretary of the 

Treasury for a benefit suspension, 

effective January 1, 2018. The present 

value, as of that date, of the benefit 

suspension is $30 million. Employer A, 

a contributing employer, withdraws 

during the 2022 plan year. Employer A’s 

proportional share of contributions for 

the 5 plan years ending in 2017 (the 

year before the benefit suspension takes 

effect) is 10 percent. Employer A’s 

proportional share of contributions for 

the 5 plan years ending before Employer 

A’s withdrawal in 2022 is 11 percent. 

The plan uses the rolling-5 method for 

allocating unfunded vested benefits to 

withdrawn employers under section 

4211 of ERISA. The plan sponsor has 

adopted by amendment the static value 

simplified method for disregarding 

benefit suspensions in determining 

unfunded vested benefits. Accordingly, 

there is a one-time valuation of the 

initial value of the suspended benefits 

with respect to employer withdrawals 

occurring during the 2019 through 2028 

plan years, the first 10 years of the 

benefit suspension. 

(2) Unfunded vested benefits allocable 

to Employer A. To determine the 

amount of unfunded vested benefits 

allocable to Employer A, the plan’s 

actuary first determines the amount of 

Employer A’s withdrawal liability as of 

the end of 2021 assuming the benefit 

suspensions remain in effect. Under the 

rolling-5 method, if the plan’s unfunded 

vested benefits as determined in the 

plan’s 2021 plan year valuation were 

$170 million (not including the present 

value of the suspended benefits), the 

share of these unfunded vested benefits 

allocable to Employer A is equal to $170 

million multiplied by Employer A’s 

allocation fraction of 11 percent, or 

$18.7 million. The plan’s actuary then 

adds to this amount Employer A’s 

proportional 10 percent share of the $30 

million initial value of the suspended 

benefits, or $3 million. Employer A’s 

share of the plan’s unfunded vested 

benefits for withdrawal liability 

purposes is $21.7 million ($18.7 million 

+ $3 million). 

(3) Adjustment of allocation fraction. 

If another significant contributing 

employer—Employer B—had 

withdrawn in 2019 and was unable to 

satisfy its withdrawal liability claim, the 

allocation fraction applicable to the 

value of the suspended benefits is 

adjusted. The contributions in the 

denominator for the last 5 plan years 

ending in 2017 is reduced by the 

contributions that were made by 

Employer B, thereby increasing 

Employer A’s allocable share of the $30 

million value of the suspended benefits. 

(f) Effective and applicability dates. 

(1) Effective date. This section is 

effective on February 8, 2021. 

(2) Applicability date. This section 

applies to employer withdrawals from 

multiemployer plans that occur in plan 

years beginning on or after February 8, 

2021. 

§ 4211.21 [Amended] 

■ 22. In § 4211.21, amend paragraph (b) 

by removing ‘‘§ 4211.12’’ and adding in 

its place ‘‘section 4211 of ERISA’’. 

§ 4211.31 [Amended] 

■ 23. In § 4211.31, amend paragraph (b) 

by removing ‘‘set forth in § 4211.12’’ 

and adding in its place ‘‘subpart B of 

this part’’. 

■ 24. Amend § 4211.32 by adding 

paragraph (c)(2)(iii) to read as follows: 

§ 4211.32 Presumptive method for 

withdrawals after the initial plan year. 

* * * * * 

(c) * * * 

(2) * * * 

(iii) In determining the numerator and 

the denominator in this paragraph (c), 

the rules under § 4211.4 (and 

permissible simplified methods under 

§§ 4211.14 and 4211.15) apply. 

* * * * * 


tkelley on DSKBCP9HB2PROD with RULES
1276 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

■ 25. Amend § 4211.33 by adding 

paragraph (c)(2)(iii) to read as follows: 

§ 4211.33 Modified presumptive method 

for withdrawals after the initial plan year. 

* * * * * 

(c) * * * 

(2) * * * 

(iii) In determining the numerator and 

the denominator in this paragraph (c), 

the rules under § 4211.4 (and 

permissible simplified methods under 

§§ 4211.14 and 4211.15) apply. 

■ 26. In § 4211.36, amend paragraph (a) 

by adding a sentence at the end of the 

paragraph to read as follows: 

§ 4211.36 Modifications to the 

determination of initial liabilities, the 

amortization of initial liabilities, and the 

allocation fraction. 

(a) * * * In determining the 

numerators and the denominators in 

paragraph (d) of this section, the rules 

under § 4211.4 (and permissible 

simplified methods under §§ 4211.14 

and 4211.15) apply. 

* * * * * 

■ 27. Add appendix to part 4211 to read 

as follows: 

APPENDIX TO PART 4211— 

EXAMPLES 

The examples in this appendix illustrate 

simplified methods for disregarding certain 

contribution increases in the allocation 

fraction provided in § 4211.14 of this part. 

Example 1. Determining the Numerator of 

the Allocation Fraction Using the Employer’s 

Plan Year 2014 Contribution Rate 

(§ 4211.14(b)). 

Assume Plan X is a calendar year 

multiemployer plan in critical status which 

did not have a benefit increase after plan year 

2014. In accordance with section 305(g)(3)(B) 

of ERISA, the annual 5 percent contribution 

rate increases applicable to Employer A and 

other employers in Plan X after the 2014 plan 

year were deemed to be required to enable 

the plan to meet the requirement of its 

rehabilitation plan and must be disregarded. 

Employer A, a contributing employer, 

withdraws from Plan X in 2021. Using the 

rolling-5 method, Plan X has unfunded 

vested benefits of $200 million as of the end 

of the 2020 plan year. To determine 

Employer A’s allocable share of these 

unfunded vested benefits, Employer A’s 

hourly required contribution rate and 

contribution base units for the 2014 plan year 

and each of the 5 plan years between 2016 

and 2020 are identified as shown in the 

following table: 

2014 PY 2016 PY 2017 PY 2018 PY 2019 PY 2020 PY 5-year total 

Employer A’s Contribution Rate .............. $5.51 n/a n/a n/a n/a n/a ....................

Contribution Base Units ........................... 800,000 800,000 800,000 900,000 900,000 900,000 4,300,000 

Contributions ............................................ $4.41M $4.86M $5.10M $6.03M $6.33M $6.64M $28.96M 

The plan sponsor makes a determination 

pursuant to section 305(g)(3) of ERISA that 

the annual 5 percent contribution rate 

increases applicable to Employer A and other 

employers in Plan X after the 2014 plan year 

were required to enable the plan to meet the 

requirement of its rehabilitation plan and 

should be disregarded; benefits were not 

increased after plan year 2014. 

Applying the simplified method, 

contribution rate increases that went into 

effect during plan years beginning after 

December 31, 2014 would be disregarded: 

The $5.51 contribution rate in effect at the 

end of plan year 2014 would be held steady 

in computing Employer A’s required 

contributions for the plan years included in 

the numerator of the allocation fraction. 

Based on 4.3 million contribution base units, 

this results in total required contributions of 

$23.7 million over 5 years. Absent section 

305(g)(3) of ERISA, the sum of the 

contributions required to be made by 

Employer A would have been determined by 

multiplying Employer A’s contribution rate 

in effect for each plan year by the 

contribution base units in that plan year, 

producing total required contributions of 

$28.96 million over 5 years. 

Example 2. Determining the Denominator 

of the Allocation Fraction Using the Proxy 

Group Method (§ 4211.14(d)). 

Assume a plan covers ten employers. For 

2017, three small employers were in rate 

history group X, representing less than 5 

percent of active plan participants; 

employers A and B and two other employers 

were in rate history group Y; and employer 

C and two other employers were in rate 

history group Z. For 2018, there were 

changes in contribution rates for some of B’s 

employees, and as a result, employer B is 

being treated as two employers, B1 and B2. 

B1 remained in rate history group Y because, 

while B1 has a significantly lower 

contribution rate than A, the contributions of 

both are subject to the same percentage 

increase each year. B2 was added to rate 

history group X. X continues to represent less 

than 5 percent of active plan participants, 

and the plan continues to ignore it in forming 

the proxy group. The plan forms a 2018 

proxy group of three employers—A and B1 

from rate history group Y and C from rate 

history group Z—that together represent 

more than 10 percent of active plan 

participants. 

Contributions for 2018 are $1,000,000: 

$20,000 for rate history group X, $740,000 for 

rate history group Y, and $240,000 for rate 

history group Z, with A and B1 accounting 

for $150,000 and C accounting for $45,000 of 

the total contribution amounts. 

Contribution rates for 2018 for A, B1, and 

C (excluding rate increases required to be 

disregarded for withdrawal liability 

purposes) and contribution base units for the 

three employers are: For A, 87 cents and 

100,000 CBUs; for B1, 43 cents and 50,000 

CBUs; and for C, 70 cents and 60,000 CBUs, 

as shown in rows (1) and (2) of the table 

below. Thus, the three employers’ adjusted 

contributions are $87,000, $21,500, and 

$42,000 respectively, as shown in row (3). 

Moving from the employer level to the rate 

history group level, the adjusted 

contributions for employers in the proxy 

group that are in the same rate history group 

are added together (row (4)). Those totals are 

then divided by total actual contributions for 

the proxy group employers in each rate 

history group (row (6)) to derive an 

adjustment factor for each rate history group 

(row (7)) that is applied to the actual 

contributions of all employers in the rate 

history group (row (8)) to get the adjusted 

contributions for each rate history group 

represented in the proxy group (row (9)). 

Moving from the rate history group level to 

the plan level, the same process is repeated. 

Adjusted employer contributions for the rate 

history group are summed (row (10)) and 

divided by the total contributions for all rate 

history groups represented in the proxy 

group (row (11)) to get an adjustment factor 

for the plan (row (12)). Contributions for rate 

history group X are excluded from row (11) 

because no employer in rate history group X 

is in the proxy group. The adjustment factor 

for the plan is then applied to total plan 

contributions (row (13)) to get adjusted plan 

contributions (row (14)). Contributions for 

rate history group X are included in row (13) 

because—although X was ignored in 

determining the adjustment factor for the 

plan — the adjustment factor applies to all 

plan contributions (other than those by 

employers excluded from the plan’s 

allocation fraction denominator). The plan 

will use the adjusted plan contributions in 

row (14) as the total contributions for 2018 

in determining the denominator of any 

allocation fraction that includes 

contributions for 2018. 


tkelley on DSKBCP9HB2PROD with RULES
Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 1277 

Row number 

Regulatory 

reference in 

§ 4211.14(d) 

Description of action 

Rate history group 

Y Z 

Employer A Employer B1 Employer C 

(1) ......................... (6)(ii) ..................... 2018 contribution rate excluding disregarded increases.$0.87 per CBU ..... $0.43 per CBU ..... $0.70 per CBU 

(2) ......................... (6)(i) ..................... 2018 CBUs ......................................... 100,000 50,000 60,000 

(3) ......................... (6) ......................... Adjusted employer contributions 

(1)x(2).

$87,000 $21,500 $42,000 

(4) ......................... (7)(i) ..................... Sum of adjusted contributions for 

proxy employers by rate history 

group.

$108,500 $42,000 

(5) ......................... (7)(ii) ..................... Unadjusted contributions for proxy 

employers.

$100,000 $25,000 $45,000 

(6) ......................... (7)(ii) ..................... Sum of unadjusted contributions for 

proxy employers by rate history 

group.

$125,000 $45,000 

(7) ......................... (7) ......................... Adjustment factor by rate history 

group (4)/(6).

0.868 0.933 

(8) ......................... (7) ......................... Total actual contributions by rate history group.$740,000 $240,000 

(9) ......................... (7) ......................... Adjusted contributions by rate history 

group (7)x(8).

$642,320 $223,920 

(10) ....................... (8)(i) ..................... Sum of adjusted contributions for rate 

history groups represented in proxy 

group.

$866,240 

(11) ....................... (8)(ii) ..................... Total actual contributions for rate history groups represented in proxy 

group.

$980,000 

(12) ....................... (8) ......................... Adjustment factor for plan (10)/(11) ... 0.884 

(13) ....................... (8) ......................... Total plan contributions ...................... $1,000,000 

(14) ....................... (8) ......................... Adjusted plan contributions (for allocation fraction denominators) 

(12)x(13).

$884,000 

PART 4219—NOTICE, COLLECTION, 

AND REDETERMINATION OF 

WITHDRAWAL LIABILITY 

■ 28. The authority citation for part 

4219 continues to read as follows: 

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

1399(c)(6). 

■ 29. In § 4219.1: 

■ a. Amend paragraph (a) by adding two 

sentences at the end of the paragraph; 

■ b. Amend paragraph (b)(1) by 

removing in the third sentence ‘‘shall’’ 

and adding in its place ‘‘does’’; 

■ c. Amend paragraph (b)(2) by 

removing in the second sentence ‘‘shall 

cease’’ and adding in its place ‘‘cease’’; 

■ d. Amend paragraph (c) by removing 

in the second sentence ‘‘whom’’ and 

adding in its place ‘‘which’’. 

The additions read as follows: 

§ 4219.1 Purpose and scope. 

(a) * * * Section 4219(c) of ERISA 

requires a withdrawn employer to make 

annual withdrawal liability payments at 

a set rate over the number of years 

necessary to amortize its withdrawal 

liability, generally limited to a period of 

20 years. This subpart provides rules for 

disregarding certain contribution 

increases in determining the highest 

contribution rate under section 4219(c) 

of ERISA. 

* * * * * 

§ 4219.2 [Amended] 

■ 30. In § 4219.2: 

■ a. Amend paragraph (a) by removing 

‘‘multiemployer plan,’’ and adding in its 

place ‘‘multiemployer plan, 

nonforfeitable benefit,’’; 

■ b. Amend the definition of ‘‘Mass 

withdrawal valuation date’’ by removing 

the last sentence of the definition; 

■ c. Amend the definition of 

‘‘Reallocation record date’’ by removing 

‘‘shall be’’ and adding in its place ‘‘is’’; 

■ d. Amend the definition of 

‘‘Unfunded vested benefits’’ by 

removing ‘‘a plan’s vested nonforfeitable 

benefits (as defined for purposes of this 

section)’’ and adding in its place ‘‘a 

plan’s nonforfeitable benefits’’. 

■ 31. Add § 4219.3 to read as follows: 

§ 4219.3 Disregarding certain 

contributions. 

(a) General rule. For purposes of 

determining the highest contribution 

rate under section 4219(c) of ERISA, a 

plan must disregard: 

(1) Surcharge. Any surcharge under 

section 305(e)(7) of ERISA and section 

432(e)(7) of the Code the obligation for 

which accrues on or after December 31, 

2014. 

(2) Contribution increase. Any 

increase in the contribution rate or other 

increase in contribution requirements 


tkelley on DSKBCP9HB2PROD with RULES
1278 Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations 

that goes into effect during a plan year 

beginning after December 31, 2014, so 

that a plan may meet the requirements 

of a funding improvement plan under 

section 305(c) of ERISA and section 

432(c) of the Code or a rehabilitation 

plan under section 305(e) of ERISA and 

section 432(e) of the Code, except to the 

extent that one of the following 

exceptions applies pursuant to section 

305(g)(3) of ERISA and section 432(g)(3) 

of the Code: 

(i) The increases in contribution 

requirements are due to increased levels 

of work, employment, or periods for 

which compensation is provided. 

(ii) The additional contributions are 

used to provide an increase in benefits, 

including an increase in future benefit 

accruals, permitted by section 

305(d)(1)(B) or (f)(1)(B) of ERISA and 

section 432(d)(1)(B) or (f)(1)(B) of the 

Code. 

(b) Simplified method for a plan that 

is no longer in endangered or critical 

status. A plan sponsor may amend a 

plan without PBGC approval to use the 

simplified method in this paragraph (b) 

for purposes of determining the highest 

contribution rate for a plan that is no 

longer in endangered or critical status. 

The highest contribution rate is the 

greater of— 

(1) The employer’s contribution rate 

as of the date that is the later of the last 

day of the first plan year that ends on 

or after December 31, 2014 and the last 

day of the plan year the employer first 

contributes to the plan (the ‘‘employer 

freeze date’’) plus any contribution 

increases after the employer freeze date, 

and before the employer’s withdrawal 

date that are determined in accordance 

with the rules under § 4219.3(a)(2)(ii); or 

(2) The highest contribution rate for 

any plan year after the plan year that 

includes the expiration date of the first 

collective bargaining agreement of the 

withdrawing employer requiring plan 

contributions that expires after the plan 

is no longer in endangered or critical 

status, or, if earlier, the date as of which 

the withdrawing employer renegotiated 

a contribution rate effective after the 

plan year the plan is no longer in 

endangered or critical status. 

(c) Example: The simplified method 

in paragraph (b) of this section is 

illustrated by the following example. 

(1) Facts. A contributing employer 

withdraws in plan year 2028, after the 

2027 expiration date of the first 

collective bargaining agreement 

requiring plan contributions that expires 

after the plan is no longer in critical 

status in plan year 2026. The plan 

sponsor determines that under the 

expiring collective bargaining agreement 

the employer’s $4.50 hourly 

contribution rate in plan year 2014 was 

required to increase each year to $7.00 

per hour in plan year 2025, to enable the 

plan to meet its rehabilitation plan. The 

plan sponsor determines that, over this 

period, a cumulative increase of $0.85 

per hour was used to fund benefit 

increases, as provided by plan 

amendment. Under a new collective 

bargaining agreement effective in 2027, 

the employer’s hourly contribution rate 

is reduced to $5.00. 

(2) Highest contribution rate. The plan 

sponsor determines that the employer’s 

highest contribution rate for purposes of 

section 4219(c) of ERISA is $5.35, 

because it is the greater of the highest 

rate in effect after the plan is no longer 

in critical status ($5.00) and the 

employer’s contribution rate in plan 

year 2014 ($4.50) plus any increases 

between 2015 and 2025 ($0.85) that 

were required to be taken into account 

under section 305(g)(3) of ERISA. 

(d) Effective and applicability dates. 

(1) Effective date. This section is 

effective on February 8, 2021. 

(2) Applicability date. This section 

applies to employer withdrawals from 

multiemployer plans that occur in plan 

years beginning on or after February 8, 

2021. 

Issued in Washington, DC. 

Gordon Hartogensis, 

Director, Pension Benefit Guaranty 

Corporation. 

[FR Doc. 2020–28866 Filed 1–7–21; 8:45 am] 

BILLING CODE 7709–02–P 

DEPARTMENT OF DEFENSE 

Department of the Army, Corps of 

Engineers 

33 CFR Part 220 

[COE–2020–0009] 

RIN 0710–AA85 

Design Criteria for Dam and Lake 

Projects 

AGENCY: U.S. Army Corps of Engineers, 

Department of Defense. 

ACTION: Final rule. 

SUMMARY: This final rule removes the 

U.S. Army Corps of Engineers’ part 

titled Design Criteria for Dam and Lake 

Projects. This part is out-of-date and 

otherwise covers internal agency 

operations that have no public 

compliance component or adverse 

public impact. Therefore, this part can 

be removed from the Code of Federal 

Regulations (CFR). 

DATES: This rule is effective on January 

8, 2021. 

ADDRESSES: Department of the Army, 

U.S. Army Corps of Engineers, ATTN: 

CECW–EC (Mr. Robert Bank), 441 G 

Street NW, Washington, DC 20314– 

1000. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Robert Bank at (202) 761–5532 or by 

email at Robert.Bank@usace.army.mil. 

SUPPLEMENTARY INFORMATION: 

This final rule removes from the 33 

CFR part 220, Design Criteria for Dam 

and Lake Projects providing policy, 

design, and report requirements for low 

level discharge facilities for drawdown 

of lakes to be impounded by Corps Civil 

Works projects. The rule was initially 

published in the Federal Register on 

May 8, 1975 (40 FR 20081), and 

amended on August 22, 1975 (40 FR 

36774). While the rule applies only to 

Corps design criteria on Corps dam and 

lake projects, it was published, at that 

time, in the Federal Register to aid 

public accessibility. 

The solicitation of public comment 

for this removal is unnecessary because 

the rule is out-of-date, duplicative of 

existing internal agency guidance, and 

otherwise covers internal agency 

operations that have no public 

compliance component or adverse 

public impact. For current public 

accessibility purposes, updated internal 

agency policy on this topic may be 

found in Engineer Manual 1110–2– 

1602, ‘‘Hydraulic Design of Reservoir 

Outlet Works’’ (available at https://

www.publications.usace.army.mil/ 

Portals/76/Publications/ 

EngineerManuals/EM_1110-2-1602.pdf). 

The agency policy is only applicable to 

field operating activities having 

responsibility for the design of Corps 

Civil Works projects and provides 

guidance specific to the Corps’ 

hydraulic design analysis of reservoir 

outlet works facilities. 

This rule removal is being conducted 

to reduce confusion for the public as 

well as for the Corps regarding the 

current policy which governs the Corps’ 

design criteria for Corps dam and lake 

projects. Because the regulation does 

not place a burden on the public, its 

removal does not provide a reduction in 

public burden or costs. 

This rule is not significant under 

Executive Order (E.O.) 12866, 

‘‘Regulatory Planning and Review.’’ 

Therefore, the requirements of E.O. 

13771, ‘‘Reducing Regulation and 

Controlling Regulatory Costs,’’ do not 

apply. This removal supports a 

recommendation of the DoD Regulatory 

Reform Task Force. 

List of Subjects in 33 CFR Part 220 

Dams, Flood control. 


tkelley on DSKBCP9HB2PROD with RULES