Methods for Computing Withdrawal Liability; Reallocation Liability Upon Mass Withdrawal; Pension Protection Act of 2006, 79628-79637 [E8-31015]

Agencies

• Pension Benefit Guaranty Corporation

[Federal Register Volume 73, Number 250 (Tuesday, December 30, 2008)]
[Rules and Regulations]
[Pages 79628-79637]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-31015]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Parts 4001, 4211, and 4219

RIN 1212-AB07


Methods for Computing Withdrawal Liability; Reallocation 
Liability Upon Mass Withdrawal; Pension Protection Act of 2006

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule.

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SUMMARY: This final rule amends PBGC's regulation on Allocating 
Unfunded Vested Benefits to Withdrawing Employers (29 CFR part 4211) to 
implement provisions of the Pension Protection Act of 2006 that provide 
for changes in the allocation of unfunded vested benefits to 
withdrawing employers from a multiemployer pension plan, and that 
require adjustments in determining an employer's withdrawal liability 
when a multiemployer plan is in critical status. Pursuant to PBGC's 
authority under section 4211(c)(5) of ERISA to prescribe standard 
approaches for alternative withdrawal liability methods, the final rule 
also amends this regulation to provide additional modifications to the

[[Page 79629]]

statutory methods for determining an employer's allocable share of 
unfunded vested benefits. In addition, pursuant to PBGC's authority 
under section 4219(c)(1)(D) of ERISA, this final rule amends PBGC's 
regulation on Notice, Collection, and Redetermination of Withdrawal 
Liability (29 CFR part 4219) to improve the process of fully allocating 
a plan's total unfunded vested benefits among all liable employers in a 
mass withdrawal. Finally, this final rule amends PBGC's regulation on 
Terminology (29 CFR part 4001) to reflect the definition of a 
``multiemployer plan'' added by the Pension Protection Act of 2006.

DATES: Effective January 29, 2009. See Applicability in SUPPLEMENTARY 
INFORMATION.

FOR FURTHER INFORMATION CONTACT: John H. Hanley, Director; Catherine B. 
Klion, Manager; or Constance Markakis, Attorney; Legislative and 
Regulatory Department, Pension Benefit Guaranty Corporation, 1200 K 
Street NW., Washington, DC 20005-4026; 202-326-4024. (TTY and TDD users 
may call the Federal relay service toll-free at 1-800-877-8339 and ask 
to be connected to 202-326-4024.)

SUPPLEMENTARY INFORMATION: 

Background

    Under section 4201 of the Employee Retirement Income Security Act 
of 1974 (``ERISA''), as amended by the Multiemployer Pension Plan 
Amendments Act of 1980, an employer that withdraws from a multiemployer 
pension plan may incur withdrawal liability to the plan. Withdrawal 
liability represents the employer's allocable share of the plan's 
unfunded vested benefits determined under section 4211 of ERISA, and 
adjusted in accordance with other provisions in sections 4201 through 
4225 of ERISA. Section 4211 prescribes four methods that a plan may use 
to allocate a share of unfunded vested benefits to a withdrawing 
employer, and also provides for possible modifications of those methods 
and for the use of allocation methods other than those prescribed. In 
general, changes to a plan's allocation methods are subject to the 
approval of the Pension Benefit Guaranty Corporation (``PBGC'').
    Under section 4211(b)(1) of ERISA (which sets forth the 
``presumptive method'' for determining withdrawal liability), the 
amount of unfunded vested benefits allocable to a withdrawing employer 
is the sum of the employer's proportional share of--
     The unamortized amount of the change in the plan's 
unfunded vested benefits for each plan year ending after September 25, 
1980, for which the employer has an obligation to contribute under the 
plan (i.e., multiple-year liability pools) ending with the plan year 
preceding the plan year of the employer's withdrawal;
     The unamortized amount of the unfunded vested benefits at 
the end of the last plan year ending before September 26, 1980, with 
respect to employers who had an obligation to contribute under the plan 
for the first plan year ending after such date; and
     The unamortized amount of the reallocated unfunded vested 
benefits (amounts the plan sponsor determines to be uncollectible or 
unassessible) for each plan year ending before the employer's 
withdrawal.
    Each amount described above is reduced by 5 percent for each plan 
year after the plan year for which it arose. An employer's proportional 
share is based on a fraction equal to the sum of the contributions 
required to be made under the plan by the employer over total 
contributions made by all employers who had an obligation to contribute 
under the plan, for the five plan years ending with the plan year in 
which such change arose, the five plan years preceding September 26, 
1980, and the five plan years ending with the plan year such 
reallocation liability arose, respectively (the ``allocation 
fraction'').
    Section 4211(c)(1) of ERISA generally prohibits the adoption of any 
allocation method other than the presumptive method by a plan that 
primarily covers employees in the building and construction industry 
(``construction plan''), subject to regulations that allow certain 
adjustments in the denominator of an allocation fraction.
    Under section 4211(c)(2) of ERISA (which sets forth the ``modified 
presumptive method''), a withdrawing employer is liable for a 
proportional share of--
     The plan's unfunded vested benefits as of the end of the 
plan year preceding the withdrawal (less outstanding claims for 
withdrawal liability that can reasonably be expected to be collected 
and the amounts set forth in the item below allocable to employers 
obligated to contribute in the plan year preceding the employer's 
withdrawal and who had an obligation to contribute in the first plan 
year ending after September 26, 1980); and
     The plan's unfunded vested benefits as of the end of the 
last plan year ending before September 26, 1980 (amortized over 15 
years), if the employer had an obligation to contribute under the plan 
for the first plan year ending on or after such date.
    An employer's proportional share is based on the employer's share 
of total plan contributions over the five plan years preceding the plan 
year of the employer's withdrawal and over the five plan years 
preceding September 26, 1980, respectively. Plans that use this method 
fully amortize their first pool as of 1995. Then, employers that 
withdraw after 1995 are subject to the allocation of unfunded vested 
benefits as if the plan used the ``rolling-5 method'' discussed below.
    Under section 4211(c)(3) of ERISA (which sets forth the ``rolling-5 
method''), a withdrawing employer is liable for a share of the plan's 
unfunded vested benefits as of the end of the plan year preceding the 
employer's withdrawal (less outstanding claims for withdrawal liability 
that can reasonably be expected to be collected), allocated in 
proportion to the employer's share of total plan contributions for the 
last five plan years ending before the withdrawal.
    Under section 4211(c)(4) of ERISA (which sets forth the ``direct 
attribution method''), an employer's withdrawal liability is based 
generally on the benefits and assets attributable to participants' 
service with the employer, as of the end of the plan year preceding the 
employer's withdrawal; the employer is also liable for a proportional 
share of any unfunded vested benefits that are not attributable to 
service with employers who have an obligation to contribute under the 
plan in the plan year preceding the withdrawal.
    Section 4211(c)(5)(B) of ERISA authorizes PBGC to prescribe by 
regulation standard approaches for alternative methods for determining 
an employer's allocable share of unfunded vested benefits, and 
adjustments in any denominator of an allocation fraction under the 
withdrawal liability methods. PBGC has prescribed, in Sec.  4211.12 of 
its regulation on Allocating Unfunded Vested Benefits to Withdrawing 
Employers, changes that a plan may adopt, without PBGC approval, in the 
denominator of the allocation fractions used to determine a withdrawing 
employer's share of unfunded vested benefits under the presumptive, 
modified presumptive and rolling-5 methods.

Pension Protection Act of 2006 Changes

    The Pension Protection Act of 2006, Public Law 109-280 (``PPA 
2006''), which became law on August 17, 2006, makes various changes to 
ERISA's withdrawal liability provisions. Section 204(c)(2) of PPA 2006 
added section 4211(c)(5)(E) of ERISA, which permits a

[[Page 79630]]

plan, including a construction plan, to adopt an amendment that applies 
the presumptive method by substituting a different plan year for which 
the plan has no unfunded vested benefits for the plan year ending 
before September 26, 1980. Such an amendment would enable a plan to 
erase a large part of the plan's unfunded vested benefits attributable 
to plan years before the end of the designated plan year, and to start 
fresh with liabilities that arise in plan years after the designated 
plan year.
    Additionally, sections 202(a) and 212(a) of PPA 2006 create new 
funding rules for multiemployer plans in ``critical'' status, allowing 
these plans to reduce benefits and making the plans' contributing 
employers subject to surcharges. New section 305(e)(9) of ERISA and 
section 432(e)(9) of the Internal Revenue Code (``Code'') provide that 
such benefit adjustments and employer surcharges are disregarded in 
determining a plan's unfunded vested benefits and allocation fraction 
for purposes of determining an employer's withdrawal liability, and 
direct PBGC to prescribe simplified methods for the application of 
these provisions in determining withdrawal liability.
    PPA 2006 also makes other changes affecting the withdrawal 
liability provisions under ERISA that are not addressed in this final 
rule.

Proposed Rule

    On March 19, 2008 (at 73 FR 14735), PBGC published a proposed rule 
to amend parts 4001, 4211, and 4219 to implement the PPA 2006 changes 
and make other changes under its regulatory authority. PBGC received 
two comments on the proposed rule, one from a chain of food stores, and 
the other from a member organization representing food retail and 
wholesale companies. One commenter suggested that PBGC eliminate or 
limit the ``fresh start'' options proposed under PBGC's regulatory 
authority. The other commenter suggested that PBGC modify the proposed 
rule regarding the allocation fraction for reallocation liability. 
These points are discussed below with the topics to which they relate.
    The final regulation is the same as the proposed regulation, with a 
few minor exceptions, including a clarification to the language 
describing the reallocation liability formula for a plan terminated by 
mass withdrawal. (See Discussion, Reallocation Liability Upon Mass 
Withdrawal.) In response to a comment, the final rule eliminates an 
inconsistency between the fraction for reallocation liability under the 
proposed regulation and the current regulation, and updates a citation 
to a Code provision under PPA 2006.

Overview of Final Rule

    This final rule amends PBGC's regulation on Allocating Unfunded 
Vested Benefits to Withdrawing Employers (29 CFR part 4211) to 
implement the above-described changes made by PPA 2006.
    The final rule also makes changes unrelated to PPA 2006. Under its 
authority to prescribe alternatives to the statutory methods for 
determining an employer's allocable share of unfunded vested benefits, 
the final rule also amends part 4211 to broaden the rules and provide 
more flexibility in applying the statutory methods. PBGC has identified 
certain modifications that may be advantageous to plans because they 
reduce administrative burdens for plans using the presumptive method 
and may assist plans in attracting new employers in the case of the 
modified presumptive method.
    In addition, in the case of a plan termination by mass withdrawal, 
section 4219(c)(1)(D) of ERISA provides that the total unfunded vested 
benefits of the plan must be fully allocated among all liable employers 
in a manner not inconsistent with regulations prescribed by PBGC. PBGC 
has determined that the fraction for allocating this ``reallocation 
liability'' under PBGC's regulation on Notice, Collection, and 
Redetermination of Withdrawal Liability (29 CFR part 4219) does not 
adequately capture the liability of employers who had little or no 
initial withdrawal liability. Accordingly, this final rule amends part 
4219 to revise the allocation fraction for reallocation liability.
    A detailed discussion of the final rule follows.

Discussion

Withdrawal Liability Methods--Fresh Start Option

    Under section 4211(c)(5)(E) of ERISA, added by PPA 2006, a plan 
using the presumptive withdrawal liability method in section 4211(b) of 
ERISA, including a construction plan, may be amended to substitute a 
plan year that is designated in a plan amendment and for which the plan 
has no unfunded vested benefits, for the plan year ending before 
September 26, 1980. (This provision is referred to as the statutory 
``fresh start'' option.) For plan years ending before the designated 
plan year and for the designated plan year, the plan will be relieved 
of the burden of calculating changes in unfunded vested benefits 
separately for each plan year and allocating those changes to the 
employers that contributed to the plan in the year of the change. As 
the plan has no unfunded vested benefits for the designated plan year, 
employers withdrawing from the plan after the modification is effective 
will have no liability for unfunded vested benefits arising in plan 
years ending before the designated plan year. PBGC is amending Sec.  
4211.12 of its regulation on Allocating Unfunded Vested Benefits to 
Withdrawing Employers to reflect this new statutory modification to the 
presumptive method.
    In addition, PBGC is expanding Sec.  4211.12 to permit plans to 
substitute a new plan year for the plan year ending before September 
26, 1980, without regard to the amount of a plan's unfunded vested 
benefits at the end of the newly designated plan year. (This amendment 
is referred to as a regulatory ``fresh start'' option.) This change 
will allow plans using the presumptive method to aggregate the multiple 
liability pools attributable to prior plan years and the designated 
plan year. It will thus allow such plans to allocate the plan's 
unfunded vested benefits as of the end of the designated plan year 
among the employers that have an obligation to contribute under the 
plan for the first plan year ending on or after such date. The plan 
will allocate unfunded vested benefits based on the employer's share of 
the plan's contributions for the five-year period ending with the 
designated plan year. Thereafter, such plans would apply the regular 
rules under the presumptive method to segregate changes in the plan's 
unfunded vested benefits by plan year and to allocate individual plan 
year liabilities among the employers obligated to contribute under the 
plan in that plan year.
    PBGC believes this modification to the presumptive method will ease 
the administrative burdens of plans that have difficulty obtaining the 
actuarial and contributions data necessary to compute each employer's 
allocable share of annual changes in unfunded vested benefits occurring 
in plan years as far back as 1980. However this modification does not 
apply to a construction plan, because PBGC's authority is limited to 
adjustments in the denominators of the allocation fractions for such 
plans.\1\
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    \1\ Under ERISA section 4211(c)(1), construction plans are 
limited to the presumptive method, except that PBGC may by 
regulation permit adjustments in any denominator under section 4211 
(including the denominator of a fraction used in the presumptive 
method by construction industry plans) where such adjustment would 
be appropriate to ease the administrative burdens of plan sponsors. 
See ERISA section 4211(c)(5)(D) and 29 CFR 4211.11(b) and 4211.12.

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[[Page 79631]]

    PBGC is also amending Sec.  4211.12 to permit plans using the 
modified presumptive method to designate a plan year that would 
substitute for the last plan year ending before September 26, 1980, 
thus providing another regulatory ``fresh start'' option. This 
amendment provides for the allocation of substantially all of a plan's 
unfunded vested benefits among employers that have an obligation to 
contribute under the plan, while enabling plans to split a single 
liability pool for plan years ending after September 25, 1980, into two 
liability pools. The first pool would be based on the plan's unfunded 
vested benefits as of the end of the newly designated plan year, 
allocated among employers who have an obligation to contribute under 
the plan for the plan year immediately following the designated plan 
year. The second pool would be based on the unfunded vested benefits as 
of the end of the plan year prior to the withdrawal (offset in the 
manner described above for the modified presumptive method). For a 
period of time, this modification would reduce new employers' liability 
for unfunded vested benefits of the plan before the employer's 
participation, which could assist plans in attracting new employers and 
preserving the plan's contribution base. The modification would not 
require PBGC approval for adoption.
    For each of these modifications, the final rule clarifies that a 
plan's unfunded vested benefits, determined with respect to plan years 
ending after the plan year designated in the plan amendment, are 
reduced by the value of the outstanding claims for withdrawal liability 
that can reasonably be expected to be collected for employers who 
withdrew from the plan in or before the designated plan year.
    One commenter suggested that the final rule eliminate the 
regulatory ``fresh start'' options due to the commenter's concern that 
plans may use these options to maximize withdrawal liability and to 
unfairly shift the allocation of withdrawal liability among employers. 
Alternatively, the commenter suggested that the regulation be clarified 
to restrict a plan's ability to change repeatedly the ``fresh start'' 
date. The commenter also suggested limiting the application of the 
``fresh start'' options to employers that begin contributing to a plan 
after the effective date of the final regulation, or to contributions 
made by employers after a ``fresh start'' date is determined.
    Specifically, the commenter noted that section 4211(c)(5)(E) of 
ERISA, as added by PPA 2006, allows a plan to be amended with a ``fresh 
start'' option if the designated plan year in the amendment has no 
unfunded vested benefits. The commenter objected to the regulatory 
``fresh start'' options because they permit a designated plan year to 
be a plan year for which the plan has unfunded vested benefits--
resulting in liability allocated in a pool at the end of the designated 
plan year--unlike the ``fresh start'' permitted by section 
4211(c)(5)(E).
    As explained below, the ``fresh start'' provisions in the final 
regulation are unchanged from those in the proposed regulation.
    First, contrary to the commenter's concern, the ``fresh start'' 
rule does not alter the amount of withdrawal liability assessed in the 
aggregate and, therefore, does not work to maximize withdrawal 
liability. Rather, the ``fresh start'' rule allows a plan to amend the 
method for allocating substantially all of a plan's unfunded vested 
benefits among employers who have an obligation to contribute under the 
plan and does not increase the amount of the unfunded vested benefits 
to be allocated.
    Second, section 4211(c)(5)(E) is intended to provide flexibility to 
construction plans. Pursuant to section 4211(c)(1)(A) of ERISA, 
construction plans must use the presumptive method under section 
4211(b) of ERISA, and may not adopt any of the three alternative 
allocation methods described by the statute (the modified presumptive, 
rolling-5, or direct attribution methods under sections 4211(c)(2), 
(c)(3), or (c)(4) of ERISA), or adopt any other alternative methods of 
determining an employer's allocable share of unfunded vested benefits 
under section 4211(c)(5) of ERISA.
    In contrast, non-construction plans have broad discretion to amend 
their withdrawal liability methods. Such plans may, for example, 
replace the presumptive method with the rolling-5 method, without PBGC 
approval,\2\ or adopt an alternative non-statutory method designed by 
the plan to provide for the allocation of the plan's unfunded vested 
benefits, subject to PBGC approval.
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    \2\ PBGC has published a class approval of any plan amendment 
that adopts one of the three alternative allocation methods 
described in sections 4211(c)(2), (c)(3) or (c)(4) of ERISA, without 
the need to obtain PBGC approval. PBGC determined that such 
amendments would not have the effect of creating an unreasonable 
risk of loss to plan participants and beneficiaries or to the PBGC 
(49 FR 37686). It is not important which allocation method is being 
used before the change, or whether the method in use before the 
change is one of the statutory methods or some other method. (See 
PBGC Opinion Letter 86-22, available on PBGC's Web site https://
www.pbgc.gov.)
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    Third, for non-construction plans, section 4211(c)(5) of ERISA 
gives PBGC authority to regulate the adoption of modifications to the 
four statutory methods and the adoption of other allocation methods. In 
this regulation, PBGC is simply exercising its authority under section 
4211(c)(5)(B) to prescribe standard approaches for alternative methods 
that may be adopted by plan amendment, for which PBGC approval 
requirements may be waived or modified. In developing the ``fresh 
start'' options, PBGC relied upon its experience with alternative 
withdrawal liability methods, as proposed by plans or developed or 
approved by PBGC, since the inception of the withdrawal liability 
provisions in 1980 under Title IV of ERISA.
    The regulatory ``fresh start'' options satisfy the requirement 
under section 4211(c)(5)(B) of ERISA. Specifically, each ``fresh 
start'' option provides for the allocation of substantially all of a 
plan's unfunded vested benefits among employers who have an obligation 
to contribute under the plan. Each ``fresh start'' option is similar in 
effect to a plan's change from one statutory method to another 
statutory method--which plans are free to adopt without PBGC approval.
    For example, in the case of a plan replacing the presumptive method 
with the rolling-5 method or a plan adopting the ``fresh start'' option 
under the presumptive method, the plan may erase all of the negative or 
positive changes in unfunded vested benefits for any plan year through 
the plan year of the change or the designated plan year, respectively. 
Although the two plans may allocate different amounts to individual 
employers, each method apportions liability based on the withdrawing 
employer's participation in the plan measured by that employer's 
contributions relative to the total contributions to the plan. Thus, 
each method results in the allocation of substantially all of a plan's 
unfunded vested benefits among employers who have an obligation to 
contribute under the plan.
    Similarly, there is no significant difference in the degree of 
allocation of a plan's unfunded vested benefits between a plan that 
changes from the modified presumptive to the presumptive method or a 
plan that adopts a ``fresh start'' option under the modified 
presumptive method and determines liability based on the plan's 
unfunded vested benefits as of a designated plan year or as of the plan

[[Page 79632]]

year preceding the year of withdrawal. In addition, while PBGC does not 
contemplate that plans will repeatedly change the ``fresh start'' date, 
a plan's decision to adopt a new ``fresh start'' date that might result 
in a greater liability for a particular employer would have a similar 
effect on the employer as a decision by the plan to adopt instead the 
rolling-5 method.
    Finally, the regulatory ``fresh start'' options are designed to 
provide additional flexibility in the methods available to non-
construction plans for allocating a plan's unfunded vested benefits 
among withdrawing employers, without PBGC approval. The decision, 
however, to adopt a ``fresh start'' option is discretionary and made by 
the plan sponsor, which is generally a joint board of trustees with an 
equal number of employer and employee representatives. Under section 
4214 of ERISA, any plan rule or amendment may not be applied to any 
employer that withdrew before the amendment was adopted without that 
employer's consent and any rule or amendment must be uniformly applied 
to each employer.

Withdrawal Liability Computations for Plans in Critical Status--
Adjustable Benefits

    PPA 2006 establishes additional funding rules for multiemployer 
plans in ``endangered'' or ``critical'' status under section 305 of 
ERISA and section 432 of the Code. The sponsor of a plan in critical 
status (less than 65 percent funded and/or meets any of the other 
defined tests) is required to adopt a rehabilitation plan that will 
enable the plan to cease to be in critical status within a specified 
period of time or to forestall possible insolvency. Notwithstanding 
section 204(g) of ERISA or section 411(d)(6) of the Code, as deemed 
appropriate by the plan sponsor, based upon the outcome of collective 
bargaining over benefit and contribution schedules, the rehabilitation 
plan may include reductions to ``adjustable benefits,'' within the 
meaning of section 305(e)(8) of ERISA and section 432(e)(8) of the 
Code. New section 305(e)(9) of ERISA and section 432(e)(9) of the Code 
provide, however, that any benefit reductions under subsection (e) must 
be disregarded in determining a plan's unfunded vested benefits for 
purposes of an employer's withdrawal liability under section 4201 of 
ERISA. (Also, under ERISA sections 305(f)(2) and (f)(3), and Code 
sections 432(f)(2) and (f)(3), a plan is limited in its payment of lump 
sums and similar benefits after a notice of the plan's critical status 
is sent, but any such benefit limits must be disregarded in determining 
a plan's unfunded vested benefits for purposes of determining an 
employer's withdrawal liability.)
    Adjustable benefits under section 305(e)(8) of ERISA and section 
432(e)(8) of the Code include benefits, rights and features under the 
plan, such as post-retirement death benefits, 60-month guarantees, 
disability benefits not yet in pay status; certain early retirement 
benefits, retirement-type subsidies and benefit payment options; and 
benefit increases that would not be eligible for a guarantee under 
section 4022A of ERISA on the first day of the initial critical year 
because the increases were adopted (or, if later, took effect) less 
than 60 months before such date. An amendment reducing adjustable 
benefits may not affect the benefits of any participant or beneficiary 
whose benefit commencement date is before the date on which the plan 
provides notice that the plan is or will be in critical status for a 
plan year; the level of a participant's accrued benefit at normal 
retirement age also is protected.
    Under section 4213 of ERISA, a plan actuary must use actuarial 
assumptions that, in the aggregate, are reasonable and, in combination, 
offer the actuary's best estimate of anticipated experience in 
determining the plan's unfunded vested benefits for purposes of 
determining an employer's withdrawal liability (absent regulations 
setting forth such methods and assumptions). Section 4213(c) provides 
that, for purposes of determining withdrawal liability, the term 
``unfunded vested benefits'' means the amount by which the value of 
nonforfeitable benefits under the plan exceeds the value of plan 
assets.
    The final rule amends the definition of ``nonforfeitable benefits'' 
in Sec.  4211.2 of PBGC's regulation on Allocating Unfunded Vested 
Benefits to Withdrawing Employers, and the definition of ``unfunded 
vested benefits'' in Sec.  4219.2 of PBGC's regulation on Notice, 
Collection, and Redetermination of Withdrawal Liability, to include 
adjustable benefits that have been reduced by a plan sponsor pursuant 
to ERISA section 305(e)(8) or Code section 432(e)(8), to the extent 
such benefits would otherwise be nonforfeitable benefits.
    Section 305(e)(9)(C) of ERISA and section 432(e)(9)(C) of the Code 
direct PBGC to prescribe simplified methods for the application of this 
provision in determining withdrawal liability. PBGC intends to issue 
guidance on simplified methods at a later date.

Withdrawal Liability Computations for Plans in Critical Status--
Employer Surcharges

    Under section 305(e)(7) of ERISA, added by section 202(a) of PPA 
2006, and under section 432(e)(7) of the Code, added by section 212(a) 
of PPA 2006, each employer otherwise obligated to make contributions 
for the initial plan year and any subsequent plan year that a plan is 
in critical status must pay a surcharge to the plan for such plan year, 
until the effective date of a collective bargaining agreement (or other 
agreement pursuant to which the employer contributes) that includes 
terms consistent with the rehabilitation plan adopted by the plan 
sponsor. Section 305(e)(9) of ERISA and section 432(e)(9) of the Code 
provide, however, that any employer surcharges under paragraph (7) must 
be disregarded in determining an employer's withdrawal liability under 
section 4211 of ERISA, except for purposes of determining the unfunded 
vested benefits attributable to an employer under section 4211(c)(4) 
(the direct attribution method) or a comparable method approved under 
section 4211(c)(5) of ERISA.
    The presumptive, modified presumptive and rolling-5 methods of 
allocating unfunded vested benefits allocate the liability pools among 
participating employers based on the employers' contribution 
obligations for the five-year period ending with the date the liability 
pool arose or the plan year immediately preceding the plan year of the 
employer's withdrawal (depending on the method or liability pool). 
Under section 4211 of ERISA, the numerator of the allocation fraction 
is the total amount required to be contributed by the withdrawing 
employer for the five-year period, and the denominator of the 
allocation fraction is the total amount contributed by all employers 
under the plan for the five-year period.
    The final rule amends PBGC's regulation on Allocating Unfunded 
Vested Benefits to Withdrawing Employers (part 4211) by adding a new 
Sec.  4211.4 that excludes amounts attributable to the employer 
surcharge under section 305(e)(7) of ERISA and section 432(e)(7) of the 
Code from the contributions that are otherwise includable in the 
numerator and the denominator of the allocation fraction under the 
presumptive, modified presumptive and rolling-5 methods. Pursuant to 
section 305(e)(9) of ERISA and section 432(e)(9) of the Code, a 
simplified method for the application of this principle is provided 
below in the form of an illustration of the exclusion

[[Page 79633]]

of employer surcharge amounts from the allocation fraction.
    Example: Plan X is a multiemployer plan that has vested benefit 
liabilities of $200 million and assets of $130 million as of the end of 
its 2015 plan year. During the 2015 plan year, there were three 
contributing employers. Two of three employers were in the plan for the 
entire five-year period ending with the 2015 plan year. One employer 
was in the plan during the 2014 and 2015 plan years only. Each employer 
had a $4 million contribution obligation each year under a collective 
bargaining agreement. In addition, for the 2011, 2012, and 2013 plan 
years, employers were liable for the automatic employer surcharge under 
section 305(e)(7) of ERISA and section 432(e)(7) of the Code, at a rate 
of 5% of required contributions in 2011 and 10% of required 
contributions in 2012 and 2013. The following table shows the 
contributions and surcharges owed for the five-year period.

 
                                                                      [In millions]
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                                                                   Employer A                       Employer B                      Employer C
                         Year                          -------------------------------------------------------------------------------------------------
                                                         Contribution      Surcharge      Contribution      Surcharge      Contribution      Surcharge
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011..................................................              $4             $0.2              $4             $0.2
2012..................................................               4              0.4               4              0.4
2013..................................................               4              0.4               4              0.4
2014..................................................               4              0                 4              0                $4              $0
2015..................................................               4              0                 4              0                 4               0
    5-year total......................................              20              1.0              20              1.0               8               0
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    Employers A, B and C contributed $48 million during the five-year 
period, excluding surcharges, and $50 million including surcharges. 
Under the rolling-5 method, the unfunded vested benefits allocable to 
an employer are equal to the plan's unfunded vested benefits as of the 
end of the last plan year preceding the withdrawal, multiplied by a 
fraction equal to the amount the employer was required to contribute to 
the plan for the last five plan years preceding the withdrawal over the 
total amount contributed by all employers for those five plan years 
(other adjustments are also required).
    Employer A's share of the plan's unfunded vested benefits in the 
event it withdraws in 2016 is $29.17 million, determined by multiplying 
$70 million (the plan's unfunded vested benefits at the end of 2015) by 
the ratio of $20 million to $48 million. Employer B's allocable 
unfunded vested benefits are identical to Employer A's, and the amount 
allocable to Employer C is $11.66 million ($70 million multiplied by 
the ratio of $8 million over $48 million). The $2.0 million 
attributable to the automatic employer surcharge is excluded from 
contributions in the allocation fraction.

Reallocation Liability Upon Mass Withdrawal

    Section 4219(c)(1)(D) of ERISA applies special withdrawal liability 
rules when a multiemployer plan terminates because of mass withdrawal 
(i.e., the withdrawal of every employer under the plan) or when 
substantially all employers withdraw pursuant to an agreement or 
arrangement to withdraw, including a requirement that the total 
unfunded vested benefits of the plan be fully allocated among all 
employers in a manner not inconsistent with PBGC regulations. To ensure 
that all unfunded vested benefits are fully allocated among all liable 
employers, Sec.  4219.15(b) of PBGC's regulation on Notice, Collection, 
and Redetermination of Withdrawal Liability requires a determination of 
the plan's unfunded vested benefits as of the end of the plan year in 
which the plan terminates, based on the value of the plan's 
nonforfeitable benefits as of that date less the value of plan assets 
(benefits and assets valued in accordance with assumptions specified by 
PBGC), less the outstanding balance of any initial withdrawal liability 
(assessments without regard to the occurrence of a mass withdrawal) and 
redetermination liability (assessments for de minimis and 20-year cap 
reduction amounts) that can reasonably be expected to be collected.
    Pursuant to Sec.  4219.15(c)(1), each liable employer's share of 
this ``reallocation liability'' is equal to the amount of the 
reallocation liability multiplied by a fraction--
    (i) The numerator of which is the sum of the employer's initial 
withdrawal liability and any redetermination liability, and
    (ii) The denominator of which is the sum of all initial withdrawal 
liabilities and all the redetermination liabilities of all liable 
employers.
    PBGC believes the current allocation fraction for reallocation 
liability must be modified to address those situations in which 
employers--who would otherwise be liable for reallocation liability--
have little or no initial withdrawal liability or redetermination 
liability and, therefore, have a zero (or understated) reallocation 
liability. Such situations may arise, for example, where an employer 
withdraws from the plan before the mass withdrawal valuation date, but 
has no withdrawal liability under the modified presumptive and rolling-
5 methods because either (i) the plan has no unfunded vested benefits 
as of the end of the plan year preceding the plan year in which the 
employer withdrew, or (ii) the plan did not require the employer to 
make contributions for the five-year period preceding the plan year of 
withdrawal. In these cases, if the employer's withdrawal is later 
determined to be part of a mass withdrawal for which reallocation 
liability applies under section 4219 of ERISA, the employer would not 
be liable for any portion of the reallocation liability.
    A plan's status may change from funded to underfunded between the 
end of the plan year before the employer withdraws and the mass 
withdrawal valuation date as a result of differences in the actuarial 
assumptions used by the plan's actuary in determining unfunded vested 
benefits under sections 4211 and 4219 of ERISA, or due to investment 
losses that reduce the value of the plan's assets, among other reasons. 
Likewise, an employer may not have paid contributions for purposes of 
the allocation fraction used to determine the employer's initial 
withdrawal liability if the plan provided for a ``contribution 
holiday'' under which employers were not required to make 
contributions.
    PBGC believes the absence of initial withdrawal liability should 
not generally exempt an otherwise liable employer from reallocation 
liability. By

[[Page 79634]]

shifting reallocation liability away from some employers, the current 
regulation increases the allocable share of other employers in a mass 
withdrawal, increases the risk of loss of benefits to participants, and 
increases the financial risk to PBGC. To ensure that reallocation 
liability is allocated broadly among all liable employers, PBGC is 
amending Sec.  4219.15(c) of the Notice, Collection, and 
Redetermination of Withdrawal Liability regulation to replace the 
current allocation fraction based on initial withdrawal liability with 
a new allocation fraction for determining an employer's allocable share 
of reallocation liability.
    The new fraction allocates the plan's unfunded vested benefits 
based on the average of the employer's contribution base units relative 
to the combined averages of the plan's total contribution base units 
for the three plan years preceding each employer's withdrawal from the 
plan. The numerator consists of the withdrawing employer's average 
contribution base units during the three plan years preceding the 
employer's withdrawal (i.e., the employer's total contribution base 
units over the three plan years divided by three). The final rule 
clarifies that the denominator is the sum of the averages of all 
withdrawing employers' contribution base units for the three plan years 
preceding each employer's withdrawal. This is not a substantive change 
from the proposed regulation.
    Section 4001(a)(11) of ERISA defines a ``contribution base unit'' 
as a unit with respect to which an employer has an obligation to 
contribute under a multiemployer plan, e.g., an hour worked. PBGC is 
adding a similar definition for purposes of Sec.  4219.15 of the 
Notice, Collection, and Redetermination of Withdrawal Liability 
regulation.
    One commenter suggested that the final rule modify the allocation 
fraction for reallocation liability under the proposed rule to reflect 
variations in contribution rates among employers. The commenter 
proposed that a fraction be based on the product of the employer's 
contribution base units and contribution rates (e.g, the highest rate 
in effect under the collective bargaining agreement) for the three plan 
years preceding the employer's withdrawal. In the case of an employer 
that contributes at different contribution rates under different 
collective bargaining agreements or for different groups of employees, 
the numerator of the fraction would be the sum of the separate products 
for each agreement or group. The commenter suggested that the purpose 
of this change would be to allocate reallocation liability in a manner 
that takes into account employers' relative contribution rates; for 
example, in a plan with two employers that each have average 
contribution base units of 1000, and contribution rates of $1.50 and 
$2.00, respectively, the employers would have different allocation 
fractions.
    PBGC did not adopt the commenter's suggestion. A plan may adopt the 
variation proposed by the commenter, or another variation needed by the 
plan, pursuant to Sec.  4219.15(d) of the current regulation. This 
provision under the current regulation allows plans to adopt rules for 
calculating an employer's initial allocable share of the plan's 
unfunded vested benefits in a manner other than that prescribed by the 
regulation.
    The commenter also noted an inconsistency between the allocation 
fraction under the proposed regulation and Sec.  4219.15(c)(3) of the 
current regulation, which creates a special rule for certain employers 
with no or reduced initial withdrawal liability. Because the allocation 
fraction under Sec.  4219.15(c)(1) will no longer be based on initial 
withdrawal liability, the final rule eliminates current Sec.  
4219.15(c)(3).
    The commenter identified a reference in the regulation to section 
412(b)(3)(A) of the Code that should be updated to reflect PPA 2006 
section 431(b)(3)(A). The final regulation reflects this change and 
makes conforming changes in the regulation.
    PBGC is also amending Sec.  4219.1 of the regulation on Notice, 
Collection and Redetermination of Withdrawal Liability to implement a 
provision under new section 4221(g) of ERISA, added by section 
204(d)(1) of PPA 2006, which relieves an employer in certain narrowly 
defined circumstances of the obligation to make withdrawal liability 
payments until a final decision in the arbitration proceeding, or in 
court, upholds the plan sponsor's determination that the employer is 
liable for withdrawal liability based in part or in whole on section 
4212(c) of ERISA. The regulation states that an employer that complies 
with the specific procedures of section 4221(g) (or a similar provision 
in section 4221(f) of ERISA, added by Pub. L. 108-218) is not in 
default under section 4219(c)(5)(A).

Definition of Multiemployer Plan

    Section 1106 of PPA 2006 amended the definition of a 
``multiemployer'' plan in section 3(37)(G) of ERISA and section 
414(f)(6) of the Code to allow certain plans to elect to be 
multiemployer plans for all purposes under ERISA and the Code, pursuant 
to procedures prescribed by PBGC. PBGC is amending the definition of a 
``multiemployer plan'' under Sec.  4001.2 of its regulation on 
Terminology (29 CFR part 4001) to add a definition that is parallel to 
the definition in section 3(37)(G) of ERISA and section 414(f)(6) of 
the Code.

Applicability

    The changes relating to modifications to the statutory methods 
prescribed by PBGC for determining an employer's share of unfunded 
vested benefits are applicable to employer withdrawals from a plan that 
occur on or after January 29, 2009, subject to section 4214 of ERISA 
(relating to plan amendments). Changes in the fraction for allocating 
reallocation liability are applicable to plan terminations by mass 
withdrawals (or by withdrawals of substantially all employers pursuant 
to an agreement or arrangement to withdraw) that occur on or after 
January 29, 2009.
    The change relating to the presumptive method made by PPA 2006 is 
applicable to employer withdrawals occurring on or after January 1, 
2007, subject to section 4214 of ERISA.
    The changes relating to the effect of PPA 2006 benefit adjustments 
and employer surcharges for purposes of determining an employer's 
withdrawal liability are applicable to employer withdrawals from a plan 
and plan terminations by mass withdrawals (or withdrawals of 
substantially all employers pursuant to an agreement or arrangement to 
withdraw) occurring in plan years beginning on or after January 1, 
2008.
    The change in the definition of a multiemployer plan is effective 
August 17, 2006. The change in section 4221(g) of ERISA made by PPA 
2006 is effective for any person that receives a notification under 
ERISA section 4219(b)(1) on or after August 17, 2006, with respect to a 
transaction that occurred after December 31, 1998.

Compliance With Rulemaking Requirements

E.O. 12866

    The PBGC has determined, in consultation with the Office of 
Management and Budget, that this final rule is not a ``significant 
regulatory action'' under Executive Order 12866. PBGC identifies the 
following specific problems that warrant this agency action:
     This regulatory action implements the PPA 2006 amendment 
to section 4211(c)(5) of ERISA that permits a plan using the 
presumptive method to

[[Page 79635]]

substitute a specified plan year for which the plan has no unfunded 
vested benefits for the plan year ending before September 26, 1980. The 
final rule provides necessary guidance on the application of this 
modification to the specific provisions of the presumptive method under 
section 4211(b) of ERISA. Also, because the statutory amendment lacks 
specificity in describing how to compute unfunded vested benefits, the 
rule clarifies the need to reduce the plan's unfunded vested benefits 
for plan years ending on or after the last day of the designated plan 
year by the value of all outstanding claims for withdrawal liability 
reasonably expected to be collected from withdrawn employers as of the 
end of the designated plan year.
     Existing modifications to the statutory withdrawal 
liability methods not subject to PBGC approval are outmoded and 
restrictive and an expansion of the modifications is consistent with 
statutory changes under PPA 2006. This problem is significant because 
the current rules impose significant administrative burdens on plans 
and impede flexibility needed by multiemployer plans to attract new 
employers.
     This regulatory action implements the PPA 2006 amendment 
to section 305(e)(9) of ERISA and section 432(e)(9) of the Code 
requiring plans in critical status to disregard reductions in 
adjustable benefits and employer surcharges in determining a plan's 
unfunded vested benefits for purposes of an employer's withdrawal 
liability. The rule is necessary to conform the definition of 
nonforfeitable benefits and the allocation fraction based on employer 
contributions under PBGC's regulations to the statutory changes.
     The rule revises the allocation fraction for reallocation 
liability, which applies when a multiemployer plan terminates by mass 
withdrawal, to ensure that reallocation liability is allocated broadly 
among all liable employers.

Regulatory Flexibility Act

    PBGC certifies under section 605(b) of the Regulatory Flexibility 
Act (5 U.S.C. 601 et seq.) that the amendments in this final rule will 
not have a significant economic impact on a substantial number of small 
entities. Specifically, the amendments will have the following effect:
     A statutory change under PPA 2006 provides plans with a 
``fresh start'' option in determining withdrawal liability when an 
employer withdraws from a multiemployer plan. This rule clarifies the 
application of this fresh start option and extends the option to other 
withdrawal liability calculations. Under these amendments, plans may 
avoid costly and burdensome year-by-year calculations of unfunded 
vested benefits and employers' allocable shares of such benefits for 
years as far back as 1980; alternatively, these amendments may help 
plans attract new employers by shielding them from unfunded liabilities 
that arose in the past. Any changes to a plan's withdrawal liability 
method are adopted at the discretion of each plan's governing board of 
trustees. Accordingly, there is no cost to compliance.
     A statutory change under PPA requires plans in 
``critical'' status to disregard reductions in adjustable benefits and 
employer surcharges in determining an employer's withdrawal liability. 
This rule clarifies the exclusion of any surcharges from the allocation 
fraction consisting of employer contributions, and the exclusion of the 
cost of any reduced benefits from the plan's unfunded vested benefits. 
The rule simply applies the statutory provisions and imposes no 
significant burden beyond the burden imposed by statute. Furthermore, 
more than 88 percent of all multiemployer pension plans have 250 or 
more participants.
     Another amendment in the rule revises the fraction for 
allocating reallocation liability (unfunded vested benefits as of the 
end of the plan year of a plan's termination) among employers when a 
plan terminates in a mass withdrawal. Plans routinely maintain the 
contribution records necessary to apply the new fraction in place of 
the old fraction for this purpose. Moreover, a majority of all plans 
that terminate in a mass withdrawal have more than 250 participants at 
the time of termination.
    Accordingly, as provided in section 605 of the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.), sections 603 and 604 do not 
apply.

List of Subjects

29 CFR Part 4001

    Business and industry, Organization and functions (Government 
agencies), Pension insurance, Pensions, Small businesses.

29 CFR Part 4211

    Pension insurance, Pensions, Reporting and recordkeeping 
requirements.

29 CFR Part 4219

    Pensions, Reporting and recordkeeping requirements.


0
For the reasons above, PBGC is amending 29 CFR parts 4001, 4211 and 
4219 as follows.

PART 4001--TERMINOLOGY

0
1. The authority citation for part 4001 continues to read as follows:


    Authority: 29 U.S.C. 1301, 1302(b)(3).

0
2. In Sec.  4001.2, the definition of Multiemployer plan is amended by 
adding at the end the sentence ``Multiemployer plan also means a plan 
that elects to be a multiemployer plan under ERISA section 3(37)(G) and 
Code section 414(f)(6), pursuant to procedures prescribed by PBGC.''

PART 4211--ALLOCATING UNFUNDED VESTED BENEFITS TO WITHDRAWING 
EMPLOYERS

0
3. The authority citation for part 4211 continues to read as follows:


    Authority: 29 U.S.C. 1302(b)(3); 1391(c)(1), (c)(2)(D), 
(c)(5)(A), (c)(5)(B), (c)(5)(D), and (f).

0
4. In Sec.  4211.2--
0
a. The first sentence is amended by removing the words ``nonforfeitable 
benefit,''.
0
b. The definition of Unfunded vested benefits is amended to add the 
words ``, as defined for purposes of this section,'' between the words 
``plan'' and ``exceeds''.
0
c. A new definition is added in alphabetical order to read as follows:


Sec.  4211.2  Definitions.

* * * * *
    Nonforfeitable benefit means a benefit described in Sec.  4001.2 of 
this chapter plus, for purposes of this part, any adjustable benefit 
that has been reduced by the plan sponsor pursuant to section 305(e)(8) 
of ERISA or section 432(e)(8) of the Code that would otherwise have 
been includable as a nonforfeitable benefit for purposes of determining 
an employer's allocable share of unfunded vested benefits.
* * * * *
0
5. A new Sec.  4211.4 is added to read as follows:


Sec.  4211.4  Contributions for purposes of the numerator and 
denominator of the allocation fractions.

    Each of the allocation fractions used in the presumptive, modified 
presumptive and rolling-5 methods is based on contributions that 
certain employers have made to the plan for a five-year period.
    (a) The numerator of the allocation fraction, with respect to a 
withdrawing employer, is based on the ``sum of the contributions 
required to be made'' or

[[Page 79636]]

the ``total amount required to be contributed'' by the employer for the 
specified period. For purposes of these methods, this means the amount 
that is required to be contributed under one or more collective 
bargaining agreements or other agreements pursuant to which the 
employer contributes under the plan, other than withdrawal liability 
payments or amounts that an employer is obligated to pay to the plan 
pursuant to section 305(e)(7) of ERISA or section 432(e)(7) of the Code 
(automatic employer surcharge). Employee contributions, if any, shall 
be excluded from the totals.
    (b) The denominator of the allocation fraction is based on 
contributions that certain employers have made to the plan for a 
specified period. For purposes of these methods, and except as provided 
in Sec.  4211.12, ``the sum of all contributions made'' or ``total 
amount contributed'' by employers for a plan year means the amounts 
considered contributed to the plan for purposes of section 412(b)(3)(A) 
or section 431(b)(3)(A) of the Code, other than withdrawal liability 
payments or amounts that an employer is obligated to pay to the plan 
pursuant to section 305(e)(7) of ERISA or section 432(e)(7) of the Code 
(automatic employer surcharge). For plan years before section 412 
applies to the plan, ``the sum of all contributions made'' or ``total 
amount contributed'' means the amount reported to the IRS or the 
Department of Labor as total contributions for the plan year; for 
example, for the plan years in which the plan filed the Form 5500, the 
amount reported as total contributions on that form. Employee 
contributions, if any, shall be excluded from the totals.
0
6. In Sec.  4211.12--
0
a. Paragraph (a) is removed;
0
b. Paragraphs (b) and (c) are redesignated as paragraphs (a) and (b);
0
c. Newly designated paragraph (a) introductory text is amended by 
removing the words ``(b)(4)'' and adding in their place the words 
``(a)(4)'';
0
d. Newly designated paragraph (a)(1) is amended by adding the words 
``or section 431(b)(3)(A)'' after the words ``section 412(b)(3)(A)'';
0
e. Newly designated paragraphs (a)(2) and (a)(3) are amended by adding 
the words ``or section 431(c)(8)'' after the words ``section 
412(c)(10)'';
0
f. Newly designated paragraph (a)(4)(ii) is amended by removing the 
words ``paragraph (a) of this section, or the amount described in 
paragraph (b)(1), (b)(2) or (b)(3) of this section'' and adding in 
their place the words ``Sec.  4211.4(b), or the amount described in 
paragraph (a)(1), (a)(2) or (a)(3) of this section'';
0
g. Newly designated paragraph (b) introductory text is amended by 
removing the words ``(c)(1)'' and adding in their place the words 
``(b)(1)'';
0
h. Newly designated paragraph (b)(2) introductory text is amended by 
removing the words ``(c)'' and adding in their place the words ``(b)'';
0
i. Newly designated paragraph (b)(3) introductory text is amended by 
removing the words ``(c)(2)'' and adding in their place the words 
``(b)(2)''; and
0
j. Paragraphs (c) and (d) are added to read as follows:


Sec.  4211.12  Modifications to the presumptive, modified presumptive 
and rolling-5 methods.

* * * * *
    (c) ``Fresh start'' rules under presumptive method.
    (1) The plan sponsor of a plan using the presumptive method 
(including a plan that primarily covers employees in the building and 
construction industry) may amend the plan to provide--
    (i) A designated plan year ending after September 26, 1980, will 
substitute for the plan year ending before September 26, 1980, in 
applying section 4211(b)(1)(B), section 4211(b)(2)(B)(ii)(I), section 
4211(b)(2)(D), section 4211(b)(3), and section 4211(b)(3)(B) of ERISA, 
and
    (ii) Plan years ending after the end of the designated plan year in 
paragraph (c)(1)(i) will substitute for plan years ending after 
September 25, 1980, in applying section 4211(b)(1)(A), section 
4211(b)(2)(A), and section 4211(b)(2)(B)(ii)(II) of ERISA.
    (2) A plan amendment made pursuant to paragraph (c)(1) of this 
section must provide that the plan's unfunded vested benefits for plan 
years ending after the designated plan year are reduced by the value of 
all outstanding claims for withdrawal liability that can reasonably be 
expected to be collected from employers that had withdrawn from the 
plan as of the end of the designated plan year.
    (3) In the case of a plan that primarily covers employees in the 
building and construction industry, the plan year designated by a plan 
amendment pursuant to paragraph (c)(1) of this section must be a plan 
year for which the plan has no unfunded vested benefits.
    (d) ``Fresh start'' rules under modified presumptive method.
    (1) The plan sponsor of a plan using the modified presumptive 
method may amend the plan to provide--
    (i) A designated plan year ending after September 26, 1980, will 
substitute for the plan year ending before September 26, 1980, in 
applying section 4211(c)(2)(B)(i) and section 4211(c)(2)(B)(ii)(I) and 
(II) of ERISA, and
    (ii) Plan years ending after the end of the designated plan year 
will substitute for plan years ending after September 25, 1980, in 
applying section 4211(c)(2)(B)(ii)(II) and section 4211(c)(2)(C)(i)(II) 
of ERISA.
    (2) A plan amendment made pursuant to paragraph (d)(1) of this 
section must provide that the plan's unfunded vested benefits for plan 
years ending after the designated plan year are reduced by the value of 
all outstanding claims for withdrawal liability that can reasonably be 
expected to be collected from employers that had withdrawn from the 
plan as of the end of the designated plan year.

PART 4219--NOTICE, COLLECTION, AND REDETERMINATION OF WITHDRAWAL 
LIABILITY

0
7. The authority citation for part 4219 continues to read as follows:


    Authority: 29 U.S.C. 1302(b)(3) and 1399(c)(6).

0
8. In Sec.  4219.1, paragraph (c) is amended by removing the words 
``after April 28, 1980 (May 2, 1979, for certain employees in the 
seagoing industry)'' and adding in their place the words ``on or after 
September 26, 1980, except employers with respect to whom section 
4221(f) or section 4221(g) of ERISA applies (provided that such 
employers are in compliance with the provisions of those sections, as 
applicable)''.
0
9. In Sec.  4219.2--
0
a. Paragraph (a) is amended by removing the words ``nonforfeitable 
benefit,''.
0
b. Paragraph (b) is amended by adding the word ``nonforfeitable'' 
between the words ``vested'' and ``benefits'' and the words ``(as 
defined for purposes of this section)'' between the words ``benefits'' 
and ``exceeds'' in the definition of Unfunded vested benefits.
0
c. Paragraph (b) is amended by adding a new definition in alphabetical 
order to read as follows:


Sec.  4219.2  Definitions.

* * * * *
    ``Nonforfeitable benefit means a benefit described in Sec.  4001.2 
of this chapter plus, for purposes of this part, any adjustable benefit 
that has been reduced by the plan sponsor pursuant to section 305(e)(8) 
of ERISA and section 432(e)(8) of the Code that would otherwise have 
been includable as a nonforfeitable benefit.''
* * * * *
0
10. In Sec.  4219.15, revise paragraphs (c)(1) and (c)(3) to read as 
follows:

[[Page 79637]]

Sec.  4219.15  Determination of reallocation liability.

* * * * *
    (c) * * *
    (1) Initial allocable share. Except as otherwise provided in rules 
adopted by the plan pursuant to paragraph (d) of this section, and in 
accordance with paragraph (c)(3) of this section, an employer's initial 
allocable share shall be equal to the product of the plan's unfunded 
vested benefits to be reallocated, multiplied by a fraction--
    (i) The numerator of which is the yearly average of the employer's 
contribution base units during the three plan years preceding the 
employer's withdrawal; and
    (ii) The denominator of which is the sum of the yearly averages 
calculated under paragraph (c)(1)(i) of this section for each employer 
liable for reallocation liability.
* * * * *
    (3) Contribution base unit. For purposes of paragraph (c)(1) of 
this section, a contribution base unit means a unit with respect to 
which an employer has an obligation to contribute, such as an hour 
worked or shift worked or a unit of production, under the applicable 
collective bargaining agreement (or other agreement pursuant to which 
the employer contributes) or with respect to which the employer would 
have an obligation to contribute if the contribution requirement with 
respect to the plan were greater than zero.
* * * * *

    Issued in Washington, DC, this 23 day of December 2008.
Charles E.F. Millard,
Director, Pension Benefit Guaranty Corporation.
    Issued on the date set forth above pursuant to a resolution of 
the Board of Directors authorizing publication of this final rule.
Judith R. Starr,
Secretary, Board of Directors, Pension Benefit Guaranty Corporation.
[FR Doc. E8-31015 Filed 12-29-08; 8:45 am]
BILLING CODE 7709-01-P