PBGC Proposes Rule on Withdrawing Employers’ Liability to a Multiemployer Plan

The Pension Benefit Guaranty Corporation (PBGC) is proposing a new regulation to provide interest rate assumptions in determining a withdrawing employer’s liability to a multiemployer pension plan. 

Under ERISA, an employer that withdraws from an underfunded multiemployer plan may owe withdrawal liability to the plan. The amount owed represents the withdrawn employer’s share of the amount by which the present value of the plan’s nonforfeitable benefits exceed the value of the plan’s assets. 

What the Proposed Rule Would Do 

Existing PBGC regulations prescribe actuarial assumptions for determining withdrawal liability in a multiemployer plan that terminates by mass withdrawal. Until now, the PBGC has not used its explicit statutory authority under Section 4213(a)(2) of ERISA to issue regulations setting forth the assumptions that an ongoing plan may use in calculating an employer’s withdrawal liability. 

The proposed rule:

• clarifies that it is reasonable to base the interest assumption used to calculate an employer’s withdrawal liability on the market price of purchasing annuities from private insurers, such as by use of settlement interest rates prescribed by the PBGC under Section 4044 of ERISA. 
• would specifically permit the use of Section 4044 rates either as a standalone assumption or combined with funding interest rate assumptions, to determine withdrawal liability.

"This proposed rule provides the clarity that many multiemployer plans need to determine an employer’s withdrawal liability and protect the retirement security of the workers and retirees covered by the plan," said PBGC Director Gordon Hartogensis in a press release. “We look forward to receiving comments on the proposal from the public and the multiemployer pension community.”

Comments Welcome

The PBGC will accept comments on the proposed rule. They may be submitted in the following ways: 

• Through the federal eRulemaking Portal at https://www.regulations.gov. 
• By E-mail to [email protected] with subject line “4213 proposed rule.” 
• By mail or hand delivery to: Regulatory Affairs Division, Office of the General Counsel, Pension Benefit Guaranty Corporation, 445 12th Street SW, Washington, DC 20024-2101. 

All submissions received must include the agency’s name (Pension Benefit Guaranty Corporation, or PBGC) and refer to the 4213 proposed rule. 

Comments must be received by Nov. 14, 2022. 

Publication

The proposed rule will be published in the Federal Register on Oct. 14, 2022.