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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations
Q
R
S
T
U
V
W
X
Y

2013
2013
2013
2014
2014
2014
2014
2015
2015

Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2

and later

The annual percentage increases for employers in Category D through Y are cumulative. Thus, if an employers contribution rate for the second quarter of 2010 in Category F was $100.00, its contributions for 2010, 2011, and 2012
would be $104.00, $108.16, and $112.49
based on rates in effect at year-end.
Appropriate rate history groups for 2015 through 2021 could be as follows:
Rate history group
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1
2
3
4
5
6
7
8
9
10

Employer categories in group A, B, C.
D, E, F, G.
H, I, J, K.
L, M, N, O.
P, Q.
R, S.
T, U.
V, W.
X.
Y.

These groupings take advantage of the provision that no more than ten rate history groups need be provided for.
In response to a comment requesting more flexibility in the determination of proxy groups, the final regulation omits the requirement that the proxy group employers be named in the plan.
However, the regulation requires that there be consistency from year to year in the composition of both the proxy group and rate history groups, with certain exceptions. The intent is to keep these groups generally unchanged but to permit changes in their make-up to accommodate changes in circumstances such as contribution histories and employer withdrawals.
Employers contributing under the same rate schedule would typically be in the same rate history group, and a change in the rate schedule would typically not change the composition of the rate history group, because the rate histories of all employers in the group would be similarly affected. For example, suppose all the employers under a rate schedule are in the same rate history group, and the rate schedule changes. This would typically not
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Annual percentage increase thereafter through 2021

First increase year and quarter
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change the composition of the rate history group, because the rate histories of all employers in the group would be similarly affected.
In the same vein, employers with disparate rate histories would typically be in different rate history groups, and the fact that they became covered by the same rate schedule would not typically place them in the same rate history group because their rate histories would remain different. For example, suppose two employers with disparate rate histories are in different rate history groups and become covered by the same rate schedule. This would not typically place them in the same rate history group because their rate histories would remain different.
On the other hand, if two employers in a rate history group moved to a different rate schedule, their rate histories would no longer match those of the other employers in the group.
Depending on circumstances, this change might result in the formation of a new rate history group that if it represented more than 5 percent of active participants would require representation in the proxy group.
For proxy group employers, adjusted contributions for the plan year are determined by multiplying each employers contribution base units for the plan year by what would have been the employers contribution rate excluding contribution rate increases that are required to be disregarded in determining withdrawal liability.
Determining adjusted contributions for rate history groups is a two-step process. First, an adjustment factor is determined for the plan year for each rate history group represented in the proxy group of employers. This adjustment factor equals the sum of the adjusted contributions for the plan year for all employers in the rate history group that are in the proxy group, divided by the sum of those employers actual total contributions for the plan year. Second, the adjustment factor for the year for each rate history group is multiplied by the contributions for the year of all employers in the rate history
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group both proxy group members and non-members to determine the adjusted contributions for the rate history group for the year.
Finally, the same steps are performed to determine adjusted contributions at the plan level. The sum of the adjusted contributions for all the rate history groups represented in the proxy group is divided by the sum of the actual contributions for the employers in those rate history groups, and the resulting adjustment factor for the plan is multiplied by the plans total contributions for the plan year, including contributions by employers in small rate history groups not represented in the proxy group. The resultthe adjusted contributions for the whole planis the amount of contributions for the plan year that may be used to determine the denominator for the allocation fraction under the proxy group method.
This process weights contributors by the size of their contributions. Heavy contributors rates have a greater impact on the adjusted contributions than light contributors rates.
A commenter asked that relief be provided for cases where information needed to determine adjusted contributions is unavailable. In response, PBGC has added a provision addressing situations where total contributions for a rate history group or a plan are unavailable to calculate adjusted contributions. In such situations, total contributions may be estimated by multiplying each contribution rate times the relevant projected contribution base units and adding all the results.
An example illustrating the simplified method for disregarding certain contributions in determining the denominator of the allocation fraction using the proxy group method is provided in the appendix to part 4211.
C. Simplified Methods After Plan Is No Longer in Endangered or Critical Status As noted above in section IV.A., changes in contributions can affect the calculation of an employers withdrawal
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