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PBGC RIN: 1212-AB54 Publication ID: Fall 2022 
Title: Actuarial Assumptions for Determining an Employer's Withdrawal Liability 

This final rule would prescribe actuarial assumptions which may be used by a multiemployer plan actuary in determining an employer’s withdrawal liability.

Agency: Pension Benefit Guaranty Corporation(PBGC)  Priority: Economically Significant 
RIN Status: Previously published in the Unified Agenda Agenda Stage of Rulemaking: Proposed Rule Stage 
Major: Yes  Unfunded Mandates: No 
CFR Citation: 29 CFR 4213   
Legal Authority: 29 U.S.C. 1393    29 U.S.C. 1302(b)(3)   
Legal Deadline:  None

Statement of Need:

Benefit levels in a multiemployer plan are typically set by trustees representing contributing employers and unions. Withdrawal liability generally represents an employer’s share of the plan’s unfunded vested benefits (UVBs) that the plan may have at the end of the plan year immediately preceding the plan year in which the employer withdraws.  Withdrawal liability is the portion of the UVBs allocable to the withdrawing employer and represents a plan’s only opportunity to require a withdrawing employer to pay its allocated share of the unfunded liabilities.  When a plan does not collect an adequate amount of withdrawal liability from a withdrawing employer or collects an amount that is less than a withdrawing employer’s allocated share of the plan’s UVBs, that burden is shifted to the remaining contributing employers in the plan.  There is a higher likelihood that the plan will not be able to pay full accrued benefits, and ultimately, there is an increased likelihood that it would not have resources to pay basic (PBGC-guaranteed) benefits.  In that case, a plan may have to cut benefits to the PBGC guarantee level and apply to PBGC for financial assistance, which shifts costs to plan participants and to others in the multiemployer insurance system who fund PBGC via annual premiums.

This rulemaking is needed to clarify that a plan actuary’s use of 4044 rates represents a valid approach to selecting an interest rate assumption to determine withdrawal liability in all circumstances.  The rulemaking would thereby reduce or eliminate the cost-shifting effects of impediments to actuaries’ use of 4044 rates.

Anticipated Costs and Benefits:

PBGC estimates that, in the 20 years following the final rule’s effective date, there will be a nominal increase in cumulative withdrawal liability payments ranging between $804 million and $2.98 billion.  While PBGC expects that the rulemaking will deter employer withdrawals, it will do so only at the margin, and this impact is difficult to estimate.  Accordingly, this analysis does not model any change to the rate of employer withdrawals or decrease in contributions due to improved plan funding attributable to these changes because doing so would be too speculative.

The major expenses associated with a withdrawal liability dispute are attorney fees, arbitration fees (including fees to initiate arbitration and fees charged by an arbitrator), and fees charged by expert witnesses.  Though costs will vary greatly from plan to plan based on the plan’s benefit formula, size of the plan, attorney and expert witness rates, and other factors, PBGC estimates that a withdrawal liability arbitration, measuring from a request for plan sponsor review of a withdrawal liability determination through the end of arbitration would range from $82,500 to $222,000.  For lengthy litigation, costs can be over $1 million.  Assuming some arbitrations and litigation would be avoided entirely, and others would be less complex because they would not include disputes over interest assumptions, PBGC estimates that this rulemaking would result in an annual savings of $500,000 to $1 million, split evenly between plans and employers.

Action Date FR Cite
NPRM  10/14/2022  87 FR 62316   
NPRM Comment Period End  11/14/2022  87 FR 62316   
NPRM Comment Period Extended  11/10/2022  87 FR 67853   
NPRM Comment Period End  12/13/2022 
Final Rule  06/00/2023 
Regulatory Flexibility Analysis Required: No  Government Levels Affected: None 
Federalism: No 
Included in the Regulatory Plan: Yes 
RIN Data Printed in the FR: No 
Agency Contact:
Hilary Duke
Assistant General Counsel for Regulatory Affairs
Pension Benefit Guaranty Corporation
445 12th Street SW,
Washington, DC 20024
Phone:202 229-3839