The Pension Benefit Guaranty Corporation (PBGC) is proposing a new rule to provide interest rate assumptions in determining a withdrawing employer’s obligation to a multi-employer pension plan.
Under ERISA, an employer who withdraws from an underfunded multi-employer plan may owe a withdrawal liability to the plan. The amount owed represents the employer’s share withdrawn of the excess of the present value of non-forfeitable plan benefits over the value of plan assets.
What the proposed rule would do
Existing PBGC regulations prescribe actuarial assumptions for determining the withdrawal liability in a multi-employer plan that ends in a mass withdrawal. To date, the PBGC has not used its explicit statutory authority under ERISA Section 4213(a)(2) to issue regulations setting out the assumptions an ongoing plan may use to calculate an employer’s liability for withdrawal.
The proposed rule:
- clarifies that it is reasonable to base the interest assumption used to calculate an employer’s withdrawal obligation on the market price of purchasing annuities from private insurers, for example by using interest rates settlement interest prescribed by the PBGC under Section 4044 of ERISA.
- specifically allow the use of Section 4044 rates either as a stand-alone assumption, or in combination with funding interest rate assumptions, to determine the withdrawal obligation.
“This proposed rule provides the clarity that many multi-employer plans need to determine an employer’s withdrawal liability and protect the retirement security of workers and retirees covered by the plan,” the PBGC Director said. , Gordon Hartogensis, in a press release. “We look forward to receiving feedback on the proposal from the public and the multi-employer pension community.”
The PBGC will welcome comments on the proposed rule. They can be submitted as follows:
- Via the federal eRulemaking portal at https://www.regulations.gov.
- By e-mail to [email protected] with the subject line “Proposed rule 4213”.
- By mail or hand delivery to: Regulatory Affairs Division, Office of General Counsel, Pension Benefit Guaranty Corporation, 445 12th Street SW, Washington, DC 20024-2101.
All submissions received must include the name of the agency (Pension Benefit Guaranty Corporation, or PBGC) and reference Proposed Rule 4213.
Comments must be received by November 14, 2022.
The proposed rule will be published in the Federal Register on October 14, 2022.