PBGC Proposes Rule Addressing Withdrawal Liability for Multiemployer Plans
The Pension Benefit Guaranty Corporation (PBGC) is proposing to provide interest rate assumptions that may be used by a plan actuary in determining a withdrawing employer’s liability under a multiemployer plan. Under ERISA, an employer that withdraws from a multiemployer plan may be liable to the plan for withdrawal liability, which generally represents the employer’s share of any unfunded vested benefits that the plan may have at the end of the plan year immediately preceding the plan year in which the employer withdraws. The plan actuary determines the present value of the plan’s nonforfeitable benefits using actuarial assumptions and methods.
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 PBGC under Section 4044 of ERISA (4044 rates). The proposed rule would specifically permit the use of 4044 rates either as a standalone assumption or combined with funding interest rate assumptions, to determine withdrawal liability.
PBGC indicates the rule will be published in the Federal Register on October 14, 2022, and comments may be submitted by November 14, 2022.