The Pension Benefit Guaranty Corporation (PBGC) has proposed a regulation regarding interest rate assumptions in determining a withdrawing employer’s liability to a multiemployer plan, which could have significant implications for the unionized construction industry.
On October 13, the Pension Benefit Guaranty Corporation (PBGC) proposed a regulation regarding interest rate assumptions in determining a withdrawing employer’s liability to a multiemployer plan. Multiemployer pension plans are common in the unionized construction industry and withdrawal liability is an employer’s share of the unfunded liabilities of a plan if an employer exits the plan. The liability can often serve as a deterrent to a contractor choosing to become a signatory contractor and contributing to a plan as the withdrawal liability can be significant and unpredictable.
For over 40 years there have been various ways and accepted practices to calculate a withdrawing employer’s liability and each of them can have significant impacts on the withdrawal liability. Congress and the courts have further complicated the issue by interpreting the requirements differently.
Now, the PBGC is attempting to clarify how withdrawal liability is calculated. Whatever direction they choose, the PBGC admits that rule change will increase employer withdrawal liability payments by nearly $3 billion over the next 20 years. The impact on individual contractors and plans will vary from plan to plan. AGC is reviewing the proposal and has already requested an extension to the November 14 comment deadline.