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Federal Register / Vol. 86, No. 5 / Friday, January 8, 2021 / Rules and Regulations
liability and annual withdrawal liability payment amount. Once a plan is no longer in endangered or critical status, the disregard rules for contribution increases change. Under section 305g4 of ERISA, plan sponsors are
required to: 1 Include contribution increases in determining the allocation fraction used to calculate withdrawal liability under section 4211 of ERISA;
and 2 continue to disregard contribution increases in determining
the highest contribution rate used to calculate the annual withdrawal liability payment amount under section 4219c of ERISA, as follows:

PLANS NO LONGER IN ENDANGERED OR CRITICAL STATUS
Allocation Fraction section 4211 of ERISA.
Highest Contribution Rate section 4219c of ERISA.

A plan sponsor is required to include contribution increases previously disregarded as of the expiration date of the collective bargaining agreement in effect when a plan is no longer in endangered or critical status.
A plan sponsor is required to continue disregarding contribution increases that applied for plan years during which the plan was in endangered or critical status.

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The final regulation, like the proposed, amends 4211.4 of PBGCs unfunded vested benefits allocation regulation and 4219.3 of PBGCs notice, collection, and redetermination of withdrawal liability regulation to incorporate the requirements for contribution increases when a plan is no longer in endangered or critical status.
The final regulation also provides simplified methods required by section 305g5 of ERISA that a plan sponsor could adopt to satisfy the requirements of section 305g4.
1. Including Contribution Increases in Determining the Allocation of Unfunded Vested Benefits 4211.15
The rule to begin including contribution increases for purposes of determining withdrawal liability is based, in part, on when a plans collective bargaining agreements expire.
Because plans may operate under numerous collective bargaining agreements with varying expiration dates, it could be burdensome for a plan sponsor to calculate the amount contributed by employers over the 5year periods used for the denominators of the plans allocation method. The plan sponsor would have to make a year-by-year determination of whether contribution increases should be included or disregarded in the denominators relative to collective bargaining agreements expiring in each applicable year. The final regulation adds a new 4211.15 to PBGCs unfunded vested benefits allocation regulation to provide two alternative simplified methods that a plan sponsor could adopt for determining the denominators in the allocation fractions when the plan is no longer in endangered or critical status.
Under the first simplified method, a plan sponsor could adopt a rule that contribution increases previously disregarded are included in the allocation fraction as of the expiration date of the first collective bargaining agreement requiring contributions that
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expires after the plans emergence from endangered or critical status. If the plan sponsor adopts this rule, then for any withdrawals after the applicable expiration date, the plan sponsor would include the total amount contributed by employers for plan years included in the denominator of the allocation fraction determined in accordance with section 4211 of ERISA under the method in use by the plan. This would relieve plan sponsors of the burden of a year-by-year determination of whether contribution increases should be included or disregarded in the denominator under the plans allocation method relative to collective bargaining agreements expiring in that year. An example illustrating this simplified method is provided in 4211.15c of PBGCs unfunded vested benefits allocation regulation.
Under the second simplified method, a plan sponsor could adopt a rule that contribution increases previously disregarded are included in calculating withdrawal liability for any employer withdrawal that occurs after the first full plan year after a plan is no longer in endangered or critical status, or if later, the plan year including the expiration date of the first collective bargaining agreement requiring plan contributions that expires after the plans emergence from endangered or critical status.
The final regulation also provides that, for purposes of these simplified methods, an evergreen contract that continues until the collective bargaining parties elect to terminate the agreement has a termination date that is the earlier of 1 The termination of the agreement by decision of the parties.
2 The beginning of the third plan year following the plan year in which the plan is no longer in endangered or critical status.
PBGC invited public comment on other simplified methods that a plan operating under numerous collective bargaining agreements with varying expiration dates might use to satisfy the
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requirement in section 305g4 of ERISA that, as of the expiration date of the first collective bargaining agreement requiring plan contributions that expires after a plan is no longer in endangered or critical status, the allocation fraction must include contribution increases that were previously disregarded. Two commenters supported PBGCs proposed simplified method as a reasonable way to satisfy the requirements of section 305g4 of ERISA.
2. Continuing To Disregard Contribution Increases in Determining the Highest Contribution Rate 4219.3
The rule for determining the highest contribution rate requires a plan sponsor of a plan that is no longer in endangered or critical status to continue to disregard increases in the contribution rate that applied for plan years during which the plan was in endangered or critical status. Because an employers highest contribution rate is determined over the 10 plan years ending with the year of withdrawal, applying the rule would require a yearby-year determination of whether contribution increases should be included or disregarded. The final regulation adds a new 4219.3 to PBGCs notice, collection, and redetermination of withdrawal liability regulation to provide a simplified method that a plan sponsor could adopt for determining the highest contribution rate.
The simplified method provides that, for a plan that is no longer in endangered or critical status, the highest contribution rate for purposes of section 4219c of ERISA is the greater of 1 The employers contribution rate in effect, for a calendar year plan, as of December 31, 2014, and for other plans, the last day of the plan year that ends on or after December 31, 2014, plus any contribution increases occurring after that date and before the employers withdrawal that must be included in
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