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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations
in determining withdrawal liabilityto include in the denominator of the allocation fraction. Accordingly, the regulation provides a second simplified method for determining contributions in the denominator. This method, called the proxy group method, is available for plans that are amended to provide for use of the method. The method permits the contributions included in the denominator of the allocation fraction for a plan year to be based on an amount calculated for proxy representatives of the plans contributing employers.
A commenter noted that different schedules and rate increases may apply to different categories of employees of a single employerfor example, because different collective bargaining agreements apply to different categories of the employers employees. In response, the final regulation permits a
single employer whose employees have highly dissimilar contribution histories to be treated as two or more employers with more uniform contribution histories in applying the proxy group method.
Under the proxy group method, employers are grouped in rate history groups, based on similarity of contribution histories or same percentage increases in contributions from year to year. Notwithstanding the diversity of contribution histories, rate history groups may be limited to 10.
Representative employers, representing at least 10 percent of active plan participants, are drawn from rate history groups to form the proxy group.
Adjusted contributionsexcluding contribution rate increases that must be disregarded for withdrawal liability purposesare determined for Column 1

Row 1
Row 2
Row 3

The rehabilitation plan requires increases of $0.50 per hour per year for employers in Row 1, $0.75 per hour per year for those in Row 2, and $1.00 per
hour per year for those in Row 3. All collective bargaining agreements are amended by the beginning of 2015, and the increases are effective as of the
Row 1
Row 2
Row 3

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$2.25
3.25
4.25

Column 3
$2.50
3.50
4.50

Column 2
percent 22.22
23.08
23.53

Column 3
percent
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1

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18.18
20.00
21.05

occurring in 2010; 55 percent in 2011
for employers in Category B defaults occurring in 2011; and 60 percent in 2012 for employers in Category C
defaults occurring in 2012. For employers in Category D through Y, which have negotiated new collective bargaining agreements, increases are as shown in the following table:
Annual percentage increase thereafter through 2021

16:26 Jan 07, 2021

$2.75
3.75
4.75

Column 4
percent
20.00
21.43
22.22

First increase year and quarter 2010
2010
2010
2010
2011
2011
2011
2011
2012
2012
2012
2012
2013

Column 4

beginning of 2015. The following table shows the percentage rates of increase in contribution rates at year-end 2015
compared with year-end 2014:

25.00
25.00
25.00

2; and employers in Columns 3 and 4
of Row 3 could be grouped together with those in Column 3 of Row 2.
Example 2. Plan B has many employers and many contribution rate schedules. Contributions change between 2010 and 2021 as follows:
Under the default schedule, there are one-time increases of 50 percent in 2010
for employers in Category A defaults
Category D
E
F
G
H
I
J
K
L
M
N
O
P

Column 2

$2.00
3.00
4.00

Column 1
percent
Since the increase rates for employers in Column 1 are the same, the plan can put those employers in one rate group.
Similarly, employers in Column 2 have relatively uniform rates and can be grouped together, and likewise for those in Columns 3 and those in Column 4.
Alternatively, employers in Columns 3
and 4 of Row 1 could be grouped together with those in Column 4 of Row
employers in the proxy group; then for rate history groups, based on the adjusted contributions of employers in each rate history group; and finally for the plan, based on the adjusted contributions of rate history groups represented in the proxy group. The plans adjusted contributions form the denominator of the withdrawal liability allocation fraction.
As with other simplified methods, only contribution rates in effect at year end need be considered.
The process of forming rate history groups may be illustrated by the following examples.
Example 1. Employers in Plan A had twelve different contribution rates at the start of the rehabilitation period, as shown in the following table:

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3.8
3.9
4.0
4.1
4.3
4.5
4.7
4.9
5.2
5.5
5.8
6.1
6.4