PBGC Simplifies Withdrawal Liability Calculation for Multiemployer Pension Plans

The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule regarding methods for computing withdrawal liability under the Multiemployer Pension Reform Act of 2014 (MPRA).

The agency says it expects that the final rule will reduce the actuarial fees historically paid by financially troubled multiemployer plans when calculating withdrawal liability. However, it admits that the withdrawal liability assessed on employer members of multiemployer pension plans that withdraw from a plan could go up or down with the simplified calculations.

The final rule amends PBGC’s regulations on “Allocating Unfunded Vested Benefits to Withdrawing Employers” and “Notice, Collection, and Redetermination of Withdrawal Liability.” The amendments implement statutory changes affecting the determination of an employer’s withdrawal liability and annual withdrawal liability payment amount. They 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-five method for purposes of determining the allocation of unfunded vested benefits to an employer; and
• Disregard certain contribution increases for purposes of determining an employer’s annual withdrawal liability payment.

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 plan sponsors must follow the statutory withdrawal liability rules for all other aspects.

The final rule applies to employer withdrawals from multiemployer plans that occur in plan years beginning on or after February 8.