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

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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 305g3 of ERISA and section 432g3 of the Code and 4211.4b2
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 numeratorafter 2014 plan year. A
plan sponsor may amend a plan to provide that the withdrawing employers 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 employers contribution rate in effect on the employer freeze date, plus any contribution increase in 4211.4b2ii that is effective after the employer freeze date but not later than the last day of the target year; times 2 The employers contribution base units for the target year.
c Simplified method for the denominatorafter 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 denominatorproxy 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 d2i 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.

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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 d3 of this section.
vi Proxy group is defined in paragraph d4 of this section.
vii Adjusted as applied to contributions for an employer, a rate history group, or a plan is defined in paragraphs d5, 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.

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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 employers contribution base units for the plan year; multiplied by ii The employers contribution rate per contribution base unit at the end of the plan year, reduced by the sum of the employers 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 plans total contributions for the plan year by all employers, multiplied by the adjustment factor for the plan. For this purpose, the plans 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 305g1 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 plans unfunded vested benefits allocation fraction, the contributions taken into account with respect to any plan year beginning with the base year are the plans 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,
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