PBGC Issues Guidance on Alternative Payment Rules for Employer Withdrawal Liability

By John Iekel • April 05, 2018 • 0 Comments
The Pension Benefit Guaranty Corporation (PBGC) issued guidance on April 3 to assist multiemployer pension plans that request its review of alternative plan rules for satisfying employer withdrawal liability. The guidance explains the PBGC’s review process, the information needed and factors it considers in reviewing plan proposals.

The guidance was published in the Federal Register of April 4, 2018.

The PBGC issued the guidance in response to suggestions from multiemployer plan stakeholders for more information and clarity on the process it uses to review alternative plan rules. In the guidance, the PBGC encourages plan trustees and pension practitioners to discuss their proposals with it before application. Such early consultation, the PBGC says, can shorten the time it needs to review the application.


The PBGC reports that over the past several years, it has observed more interest in alternative payment rule proposals, which it says can help troubled multiemployer plans by providing an incentive for employers to remain in the plan, particularly employers that might not be able to pay their withdrawal liability.

Such proposals can be highly complex, according to the PBGC, and involve analysis of plans’ future cash flows and underfunding under various scenarios. They often involve highly troubled plans, the PBGC says; it adds that they “require great care to ensure that the plan participants are not harmed and that the PBGC Multiemployer Insurance Program is not put at greater risk.”

More recent alternative proposals — intended to address events that may occur — involve numerous contingencies, the PBGC says. In addition, some recent proposals it has received have included alternative terms and conditions for satisfaction of withdrawal liability, as well as alternative methods of allocating unfunded vested benefits for purposes of determining withdrawal liability.

Generally, in evaluating a proposal to adopt alternative terms and conditions to satisfy withdrawal liability, the PBGC considers whether trustees have supported their conclusion that the proposed alternative terms and conditions would realistically maximize the collection of withdrawal liability and projected contributions, relative to the statutory rules.

The Review Process

The PBGC’s review of alternative terms and conditions typically includes whether the proposed alternative terms and conditions:

  • are in the interests of participants and beneficiaries and do not create an unreasonable risk of loss to the PBGC, and are consistent with ERISA and PBGC regulations;

  • would realistically maximize projected contributions and the net recovery of withdrawal liability for the plan compared to the income generated by the statutory withdrawal liability rules;

  • are reasonable in scope and application; and

  • operate and apply uniformly to all employers.

The PBGC also considers whether the assumptions used to support the plan’s submission are reasonable and supported by credible data.

The agency evaluates all proposals on a case-by-case basis.

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