Proposed Regulations Simplify Calculation of Withdrawal Liability

Under ERISA, an employer that stops participating in a multiemployer plan will be charged with paying withdrawal liability, which is the unfunded vested liability that the employer leaves behind when it exits the plan. ERISA allows four methods to calculate this liability. These methods disregard certain changes that may be put in place by underfunded plans to make the plan more stable. For example, when determining liability, plans must disregard benefit suspensions for a period of 10 years and ignore certain contribution increases. Additionally, plans must disregard surcharges and contribution increases when determining the annual withdrawal liability payment.

In early February, the Pension Benefit Guaranty Corporation (PBGC) released proposed regulations that provide guidance regarding these calculations and simplify the way plans calculate withdrawal liability under these circumstances. The PBGC welcomes comments on the proposed legislation.