ARTICLE
The Pension Benefit Guaranty Corporation (PBGC) proposed a new regulation to provide interest rate assumptions in determining a withdrawing employer’s liability to a multiemployer pension plan. Under the Employee Retirement Income Security Act of 1974 (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 The amount owed represents the withdrawn employer’s share of the amount by which the present value of the plan’s nonforfeitable benefits exceed the value of the plan’s assets. 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. Existing PBGC regulations prescribe actuarial assumptions for determining withdrawal liability in a multiemployer plan that terminates by mass withdrawal, but until now, 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. –FCA