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

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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 305g 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 employers 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
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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 rules provision implementing the exception under section 305g3 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 rules 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 employers 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 7 The term unfunded vested benefits is defined in section 4213c of ERISA. However, for purposes of PBGCs notice, collection, and redetermination of
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withdrawing employers liability. In computing nonforfeitable benefits, under section 305g1 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 PBGCs 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 PBGCs 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 employers 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 plans 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 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.

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