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The commenter also suggested that to the extent adjustable benefit reductions are restored, plan sponsors should be able to treat the liability for the adjustable benefit reductions as if it had been reduced or eliminated. PBGC
agrees that, in this circumstance, a plan sponsor can offset the present value of restored adjustable benefits against the unamortized balance of the adjustable benefit reduction under 4211.16b2.
The present value of the restored adjustable benefits would be included in the calculation of the allocable amount of unfunded vested benefits determined under 4211.16b1.
The simplified framework provides simplified methods for calculating the employers proportional share of the value of any adjustable benefit reduction and the employers proportional share of the value of any suspended benefits. If a plan has adjustable benefit reductions, the plan sponsor may adopt the simplified method discussed below to determine the value of the adjustable benefit reductions. If a plan has a benefit suspension, the plan sponsor may adopt either the static value method or adjusted value method to determine the value of the suspended benefits also
discussed below. The contributions for the allocation fractions for each of the simplified methods are determined in accordance with the rules for disregarding contribution increases under 4211.4 of PBGCs unfunded vested benefits allocation regulation and permissible modifications and simplifications under 4211.12
4211.15 of PBGCs unfunded vested benefits allocation regulation.
Under the simplified framework, a plan sponsor must include liabilities for benefits that have been reduced or suspended in the value of vested benefits. But the simplified framework does not require a plan sponsor to calculate what plan assets would have been if benefit payments had been higher. One commenter asked for the final regulation to clarify that, regardless of whether plan sponsors adopt simplified methods for disregarding adjustable benefit reductions or benefit suspensions, plans are not required to track what plan assets would have been absent those reductions or suspensions.
PBGC believes that generally accepted actuarial principles and practices accommodate the adoption of assumptions about quantities like the amount of such an asset reduction that
may not have a material effect on the results of the computation. Thus, the issue raised by the commenter is one for resolution by the plan actuary.

The value of the adjustable benefit reductions is determined using the same assumptions used to determine unfunded vested benefits for purposes of section 4211 of ERISA. The unamortized balance as of a plan year is the value as of the end of the year in which the reductions took effect base year, reduced as if that amount were being fully amortized in level annual installments over 15 years, at the plans valuation interest rate, beginning with the first plan year after the base year.
The withdrawing employers allocation fraction is the amount of the employers required contributions over a 5-year period divided by the amount of all employers contributions over the same 5-year period.
The 5-year period for computing the allocation fraction is the most recent 5
plan years ending before the employers withdrawal. For purposes of determining the allocation fraction, the denominator is increased by any employer contributions owed with respect to earlier periods that were collected in the 5 plan years and decreased by any amount contributed by an employer that withdrew from the
plan during those plan years, or, alternatively, adjusted as permitted under 4211.12.
For calculating the value of adjustable benefit reductions, Technical Update 103 provides an adjustment if the plan uses the rolling-5 method. The value is reduced by outstanding claims for withdrawal liability that can reasonably be expected to be collected from employers that withdrew as of the end of the plan year before the employers withdrawal. PBGC is not including this adjustment in this final rule. The requirement to reduce the unfunded vested benefits by the present value of future withdrawal liability payments for previously withdrawn employers is part of the rolling-5 calculation, and PBGC
believes that excluding this adjustment avoids some ambiguity that might have led to additional unnecessary calculations and recordkeeping.
One commenter asked for the final regulation to provide an additional option for allocating the value of adjustable benefit reductions for plans using the presumptive method based on the 5 consecutive plan years ending before the plan year in which the
adjustable benefit reduction takes effect.
The commenter stated that the option would produce an allocation that is more consistent with the amount that would be allocated to an employer if the plan did not use a simplified allocation method. PBGC considered the comment and has determined that the option could be useful for plans using any withdrawal liability method under section 4211 of ERISA. Accordingly, PBGC has added this option to the simplified framework in 4211.16d.
Under the added option, the 5-year period for computing the allocation fraction is the most recent 5 plan years ending before the plan year in which the adjustable benefit reduction takes effect.
For purposes of determining the allocation fraction, the denominator is increased by any employer contributions owed with respect to earlier periods that were collected in the 5 plan years and decreased by any amount contributed by an employer that withdrew from the plan during those plan years, or, alternatively, adjusted as permitted under 4211.12.
For the additional option, the regulation requires an additional
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1. Employers Proportional Share of the Value of an Adjustable Benefit Reduction Except as discussed in the preamble, the final regulation, like the proposed, incorporates the guidance provided in PBGC Technical Update 103 for disregarding the value of adjustable benefit reductions. Technical Update 103 explains the simplified method for determining an employers proportional share of the value of adjustable benefit reductions. The method applies for any employer withdrawal that occurs in any plan year following the plan year in which an adjustable benefit reduction takes effect and before the value of the adjustable benefit reduction is fully amortized. The method is summarized in the chart in section III.B.3. below.
An employers proportional share of the value of adjustable benefit reductions is determined as of the end of the plan year before withdrawal as follows
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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations