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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations
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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 305g5 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 PBGCs unfunded vested benefits allocation regulation. A plan sponsor may adopt the simplified framework in 4211.16 to satisfy the requirements of section 305g1 of ERISA and 4211.6 of PBGCs 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 employers withdrawal liability using the plans withdrawal liability method reflecting any adjustable benefit reduction and benefit suspension 4211.16b1. The plan sponsor adds the employers proportional share of the value of any adjustable benefit reduction and any benefit suspension 4211.16b2. In summary, withdrawal liability for a withdrawing employer is based on the sum of the following 1 The amount that would be the employers 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 plans nonforfeitable benefits reflecting any adjustable benefit reduction and any benefit suspension,8 and 2 The employers proportional share of the value of any adjustable benefit reduction and the employers 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 8 The amount of unfunded vested benefits allocable to an employer under section 4211 may not be less than zero.

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by section 4201b1 of ERISA, including the de minimis reduction and the 20-year cap on payments under section 4219c1B of ERISA.
Two commenters asked for clarification on how the rule for the application of adjustments required by section 4201b1 of ERISA interacts with guidance provided under Technical Update 103 July 15, 2010
for plan sponsors required to disregard adjustable benefit reductions. The commenters stated that plans may have interpreted Technical Update 103 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 103 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 103 differently.
PBGC agrees that Technical Update 103 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 103 make separate calculations of an employers liability under section 4211 of ERISA, subject to the adjustments required under section 4201, and an employers 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 4201b1 of ERISA, which is calculated before adjustments are made, should include the employers 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 4201b1 of ERISA
are made after adding the amount that would be the employers allocable amount of unfunded vested benefits determined in accordance with section 4211 of ERISA and the employers proportional share of the value of each of the benefit reductions and benefit suspensions required to be disregarded.
Section 4211.16b of the final rule is unchanged from the proposed rule with respect to the application of the adjustments in section 4201b1 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
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in plan years beginning after the effective date of the final rule.
One commenter suggested that if the employers allocable amount determined under 4211.16a results in a negative value, a plan sponsor should be able to use the negative value to offset the employers allocable share of the value of the adjustable benefit reductions and benefit suspensions under 4211.16b. 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 employers 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 4211.16b to make it clear that the amount determined under paragraph b1 may not be a negative number to be used as an offset to the employers 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 sponsors 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 4211.12d3 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.

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