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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations
Adjustable benefit reductions
Benefit Suspensions
Surcharges
Contribution Increases

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While each of the changes has its own requirements, they generally are all required to be disregarded by the plan sponsor in determining an employers 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 109280 PPA 2006, amended ERISAs withdrawal liability rules to require a plan sponsor to disregard the adjustable benefits reductions in section 305e8 of ERISA
and the elimination of accelerated forms of distribution in section 305f of ERISA which, for purposes of this preamble are referred to as adjustable benefit reductions in determining a plans unfunded vested benefits. PPA
2006 also requires a plan sponsor to disregard the contribution surcharges in section 305e7 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 3 Section 305e8 and f of ERISA and section 432e8 and f of the Code.
4 Section 305e9 of ERISA and section 432e9
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 113235 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.
5 Under section 305e7 of ERISA and section 432e7 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.
6 The plan sponsor of a plan in endangered status for a plan year must adopt a funding improvement plan under section 305c of ERISA and section 432c of the Code. The plan sponsor of a plan in critical status for a plan year must adopt a rehabilitation plan under section 305e of ERISA
and section 432e of the Code.

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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
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, calculated as a percentage of required contributions, that certain underfunded plans are required to impose on contributing employers.5
Contribution increases that plan trustees may require under a funding improvement or rehabilitation plan.6

modifying the definition of nonforfeitable benefit for purposes of PBGCs 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 103 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 113235
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 plans 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 employers 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 PBGCs simplified methods. Each simplified method provided applies to one or more
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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, PBGCs 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.

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