PART 4211—ALLOCATING UNFUNDED VESTED BENEFITS TO WITHDRAWING EMPLOYERS Authority: 29 U.S.C. 1302(b)(3); 1391(c)(1), (c)(2)(D), (c)(5)(A), (c)(5)(B), (c)(5)(D), and (f). Source: 61 FR 34097, July 1, 1996, unless otherwise noted. Subpart A—General § 4211.1 Purpose and scope. (a) Purpose. (b) Scope. [61 FR 34097, July 1, 1996, as amended at 86 FR 1271, Jan. 8, 2021] § 4211.2 Definitions. The following terms are defined in § 4001.2 of this chapter: Code, employer, IRS, multiemployer plan, nonforfeitable benefit, PBGC, plan, and plan year. In addition, for purposes of this part: Initial plan year Initial plan year unfunded vested benefits Merged plan Merger Prior plan Unfunded vested benefits Withdrawing employer Withdrawn employer [61 FR 34097, July 1, 1996, as amended at 73 FR 79635, Dec. 30, 2008; 86 FR 1271, Jan. 8, 2021] § 4211.3 Special rules for construction industry and Code section 404(c) plans. (a) Construction plans. (b) Code section 404(c) plans. [86 FR 1271, Jan. 8, 2021] § 4211.4 Contributions for purposes of the numerator and denominator of the allocation fractions. (a) In general. (1) The numerator of the allocation fraction, with respect to a withdrawing employer, is based on the “sum of the contributions required to be made” or the “total amount required to be contributed” by the employer for the specified period. (2) The denominator of the allocation fraction is based on contributions that certain employers have made to the plan for a specified period. (b) Disregarding surcharges and contribution increases. (1) Surcharge. (2) Contribution increase. (i) The increases in contribution requirements are due to increased levels of work, employment, or periods for which compensation is provided. (ii) The additional contributions are used to provide an increase in benefits, including an increase in future benefit accruals, permitted by section 305(d)(1)(B) or (f)(1)(B) of ERISA and section 432(d)(1)(B) or (f)(1)(B) of the Code. (iii) The withdrawal occurs on or after the expiration date of the employer's collective bargaining agreement in effect in the plan year the plan is no longer in endangered or critical status, or, if earlier, the date as of which the employer renegotiates a contribution rate effective after the plan year the plan is no longer in endangered or critical status. (c) Simplified methods. [86 FR 1271, Jan. 8, 2021] § 4211.6 Disregarding benefit reductions and benefit suspensions. (a) In general. (1) Adjustable benefit. (2) Lump sum. (3) Benefit suspension. (b) Simplified methods. [86 FR 1271, Jan. 8, 2021] Subpart B—Changes Not Subject to PBGC Approval § 4211.11 Plan sponsor adoption of modifications and simplified methods. (a) General rule. (b) Building and construction industry plans. [86 FR 1271, Jan. 8, 2021] § 4211.12 Modifications to the presumptive, modified presumptive, and rolling-5 methods. (a) Disregarding certain contribution increases. (b) Changing the period for counting contributions. (1) A plan sponsor may amend a plan to provide that “the sum of all contributions made” or “total amount contributed” for a plan year means the amount of contributions that the plan actually received during the plan year, without regard to whether the contributions are treated as made for that plan year under section 304(b)(3)(A) of ERISA and section 431(b)(3)(A) of the Code. (2) A plan sponsor may amend a plan to provide that “the sum of all contributions made” or “total amount contributed” for a plan year means the amount of contributions actually received during the plan year, increased by the amount of contributions received during a specified period of time after the close of the plan year not to exceed the period described in section 304(c)(8) of ERISA and section 431(c)(8) of the Code and regulations thereunder. (3) A plan sponsor may amend a plan to provide that “the sum of all contributions made” or “total amount contributed” for a plan year means the amount of contributions actually received during the plan year, increased by the amount of contributions accrued during the plan year and received during a specified period of time after the close of the plan year not to exceed the period described in section 304(c)(8) of ERISA and section 431(c)(8) of the Code and regulations thereunder. (c) Excluding contributions of significant withdrawn employers. (1) The plan sponsor of a plan using the presumptive, modified presumptive or rolling-5 method may amend the plan to provide that only the contributions of significant withdrawn employers are excluded from the denominators of the fractions used in those methods. (2) For purposes of this paragraph (c), “significant withdrawn employer” means— (i) An employer to which the plan has sent a notice of withdrawal liability under section 4219 of ERISA; or (ii) A withdrawn employer that in any plan year used to determine the denominator of a fraction contributed at least $250,000 or, if less, 1 percent of all contributions made by employers for that year. (3) If a group of employers withdraw in a concerted withdrawal, the plan sponsor must treat the group as a single employer in determining whether the members are significant withdrawn employers under paragraph (c)(2) of this section. A “concerted withdrawal” means a cessation of contributions to the plan during a single plan year— (i) By an employer association; (ii) By all or substantially all of the employers covered by a single collective bargaining agreement; or (iii) By all or substantially all of the employers covered by agreements with a single labor organization. (d) “Fresh start” rules under presumptive method. (i) A designated plan year ending after September 26, 1980, will substitute for the plan year ending before September 26, 1980, in applying section 4211(b)(1)(B), section 4211(b)(2)(B)(ii)(I), section 4211(b)(2)(D), section 4211(b)(3), and section 4211(b)(3)(B) of ERISA; and (ii) Plan years ending after the end of the designated plan year in paragraph (d)(1)(i) of this section will substitute for plan years ending after September 25, 1980, in applying section 4211(b)(1)(A), section 4211(b)(2)(A), and section 4211(b)(2)(B)(ii)(II) of ERISA. (2) A plan amendment made pursuant to paragraph (d)(1) of this section must provide that the plan's unfunded vested benefits for plan years ending after the designated plan year are reduced by the value of all outstanding claims for withdrawal liability that can reasonably be expected to be collected from employers that had withdrawn from the plan as of the end of the designated plan year. (3) In the case of a plan that primarily covers employees in the building and construction industry, the plan year designated by a plan amendment pursuant to paragraph (d)(1) of this section must be a plan year for which the plan has no unfunded vested benefits determined in accordance with section 4211 of ERISA without regard to § 4211.6. (e) “Fresh start” rules under modified presumptive method. (i) A designated plan year ending after September 26, 1980, will substitute for the plan year ending before September 26, 1980, in applying section 4211(c)(2)(B)(i) and section 4211(c)(2)(B)(ii)(I) and (II) of ERISA; and (ii) Plan years ending after the end of the designated plan year will substitute for plan years ending after September 25, 1980, in applying section 4211(c)(2)(B)(ii)(II) and section 4211(c)(2)(C)(i)(II) of ERISA. (2) A plan amendment made pursuant to paragraph (e)(1) of this section must provide that the plan's unfunded vested benefits for plan years ending after the designated plan year are reduced by the value of all outstanding claims for withdrawal liability that can reasonably be expected to be collected from employers that had withdrawn from the plan as of the end of the designated plan year. [86 FR 1272, Jan. 8, 2021] § 4211.13 Modifications to the direct attribution method. (a) Error in direct attribution method. (b) Allocating unattributable liability based on contributions in period before withdrawal. (1) The numerator of which is the total amount of contributions required to be made by the withdrawing employer over a period of consecutive plan years (not fewer than five) ending before the withdrawal; and (2) The denominator of which is the total amount contributed under the plan by all employers for the same period of years used in paragraph (b)(1) of this section, decreased by any amount contributed by an employer that withdrew from the plan during those plan years. [61 FR 34097, July 1, 1996, as amended at 86 FR 1273, Jan. 8, 2021] § 4211.14 Simplified methods for disregarding certain contributions. (a) In general. (b) Simplified method for the numerator—after 2014 plan year. (1) The employer's contribution rate in effect on the employer freeze date, plus any contribution increase in § 4211.4(b)(2)(ii) that is effective after the employer freeze date but not later than the last day of the target year; times (2) The employer's contribution base units for the target year. (c) Simplified method for the denominator—after 2014 plan year. (d) Simplified method for the denominator—proxy group averaging. (2) For purposes of this paragraph (d) — (i) Plan freeze date (ii) Base year (iii) Contribution history (iv) Included employer (v) Rate history group (vi) Proxy group (vii) Adjusted (3) A rate history group of a plan for a plan year is a group of included employers satisfying all of the following requirements: (i) Each included employer of the plan is in one and only one rate history group. (ii) The employers in the rate history group have substantially the same contribution history (or the same percentage increases in contributions from year to year), but there need not be more than ten rate history groups. (iii) There is consistency in the composition of rate history groups from year to year. (4) The proxy group of a plan for a plan year is a group of included employers satisfying all of the following requirements: (i) On at least 1 day of the plan year, the employers in the proxy group represent at least 10 percent of active plan participants. (ii) There is at least one employer in the proxy group from each rate history group of the plan for the plan year that represents, on at least 1 day of the plan year, at least 5 percent of active plan participants. (iii) There is consistency in the composition of the proxy group from year to year. (5) The adjusted contributions of an employer under a plan for a plan year are — (i) The employer's contribution base units for the plan year; multiplied by (ii) The employer's contribution rate per contribution base unit at the end of the plan year, reduced by the sum of the employer's contribution rate increases since the plan freeze date that are required to be disregarded in determining withdrawal liability. (6) The adjusted contributions of a rate history group that is represented in the proxy group of a plan for a plan year are the total contributions for the plan year attributable to employers in the rate history group, multiplied by the adjustment factor for the rate history group. The adjustment factor for the rate history group is the quotient, for all employers in the rate history group that are also in the proxy group, of — (i) Total adjusted contributions for the plan year; divided by (ii) Total contributions for the plan year. (7) The adjusted contributions of a plan for a plan year are the plan's total contributions for the plan year by all employers, multiplied by the adjustment factor for the plan. For this purpose, “the plan's total contributions for the plan year” means the total unadjusted plan contributions for the plan year that would otherwise be included in the denominator of the allocation fraction in the absence of section 305(g)(1) of ERISA, including any employer contributions owed with respect to earlier periods that were collected in that plan year, and excluding any amounts contributed in that plan year by an employer that withdrew from the plan during that plan year. The adjustment factor for the plan is the quotient, for all rate history groups that are represented in the proxy group, of — (i) Total adjusted contributions for the plan year; divided by (ii) Total contributions for the plan year. (8) Under this method, in determining the denominator of a plan's unfunded vested benefits allocation fraction, the contributions taken into account with respect to any plan year (beginning with the base year) are the plan's adjusted contributions for the plan year. (9) Notwithstanding the foregoing provisions of this paragraph (d), if total contributions for a year for a rate history group or for a plan are not timely and reasonably available for calculating adjusted contributions for that year, each relevant contribution rate for the year may be multiplied by the projected contribution base units for the year corresponding to that rate and the sum, for all rates, may be used in place of total contributions for that year. (e) Effective and applicability dates Effective date. (2) Applicability date. [86 FR 1273, Jan. 8, 2021] § 4211.15 Simplified methods for determining expiration date of a collective bargaining agreement. (a) In general. (b) Reversion date. (1) The expiration date of the first collective bargaining agreement requiring plan contributions that expires after the plan is no longer in endangered or critical status, or (2) The date that is the later of— (i) The end of the first plan year following the plan year in which the plan is no longer in endangered or critical status; or (ii) The end of the plan year that includes the expiration date of the first collective bargaining agreement requiring plan contributions that expires after the plan is no longer in endangered or critical status. (3) For purposes of paragraph (b)(2) of this section, the expiration date of a collective bargaining agreement that by its terms remains in force until terminated by the parties thereto is considered to be the earlier of— (i) The termination date agreed to by the parties thereto; or (ii) The first day of the third plan year following the plan year in which the plan is no longer in endangered or critical status. (c) Example. (1) Facts. (2) Allocation fraction. (d) Effective and applicability dates Effective date. (2) Applicability date. [86 FR 1274, Jan. 8, 2021] § 4211.16 Simplified methods for disregarding benefit reductions and benefit suspensions. (a) In general. (b) Basic rule. (1) The amount that would be the employer's allocable amount of unfunded vested benefits determined in accordance with section 4211 of ERISA under the method in use by the plan without regard to § 4211.6 (but taking into account § 4211.4); and (2) The employer's proportional share of the value of each of the benefit reductions and benefit suspensions required to be disregarded under § 4211.6 determined in accordance with this section. (c) Benefit suspension. (1) General. (2) Static value method. (i) The numerator is the sum of all contributions required to be made by the withdrawing employer for the 5 consecutive plan years ending before the plan year in which the benefit suspension takes effect; and (ii) The denominator is the total of all employers' contributions for the 5 consecutive plan years ending before the plan year in which the suspension takes effect, increased by any employer contributions owed with respect to earlier periods which were collected in those plan years, and decreased by any amount contributed by an employer that withdrew from the plan during those plan years. If a plan uses an allocation method other than the presumptive method in section 4211(b) of ERISA or similar method, the denominator after the first year is decreased by the contributions of any employers that withdrew from the plan and were unable to satisfy their withdrawal liability claims in any year before the employer's withdrawal. (iii) In determining the numerator and the denominator in paragraph (c)(2) of this section, the rules under § 4211.4 (and permissible modifications under § 4211.12 and simplified methods under §§ 4211.14 and 4211.15) apply. (3) Adjusted value method. (i) The numerator is the sum of all contributions required to be made by the withdrawing employer for the 5 consecutive plan years ending before the employer's withdrawal; and (ii) The denominator is the total of all employers' contributions for the 5 consecutive plan years ending before the employer's withdrawal, increased by any employer contributions owed with respect to earlier periods which were collected in those plan years, and decreased by any amount contributed by an employer that withdrew from the plan during those plan years. (iii) In determining the numerator and the denominator in this paragraph (c)(3), the rules under § 4211.4 (and permissible modifications under § 4211.12 and simplified methods under §§ 4211.14 and 4211.15) apply. (iv) If a benefit suspension in § 4211.6(a)(3) is a temporary suspension of the plan's payment obligations as authorized by the Department of the Treasury, the present value of the suspended benefits in this paragraph (c)(3) includes only the value of the suspended benefits through the ending period of the benefit suspension. (d) Benefit reductions. (1) Value of a benefit reduction. (i) The unamortized balance, as of the end of the plan year before the withdrawal, of; (ii) The value of the benefit reduction as of the end of the plan year in which the reduction took effect; and (iii) Determined using the same assumptions as for unfunded vested benefits and amortization in level annual installments over a period of 15 years. (2) Employer's proportional share of a benefit reduction. (i) The numerator is the sum of all contributions required to be made by the withdrawing employer for the 5 consecutive plan years ending before the employer's withdrawal; and (ii) The denominator is the total of all employers' contributions for the 5 consecutive plan years ending before the employer's withdrawal, increased by any employer contributions owed with respect to earlier periods which were collected in those plan years, and decreased by any amount contributed by an employer that withdrew from the plan during those plan years. (iii) The 5 consecutive plan years ending before the plan year in which the adjustable benefit reduction takes effect may be used in determining the numerator and the denominator in this paragraph (d). If such 5-year period is used, in determining the denominator, if a plan uses an allocation method other than the presumptive method in section 4211(b) of ERISA or similar method, the denominator after the first year is decreased by the contributions of any employers that withdrew from the plan and were unable to satisfy their withdrawal liability claims in any year before the employer's withdrawal. (iv) In determining the numerator and the denominator in this paragraph (d), the rules under § 4211.4 (and permissible modifications under § 4211.12 and simplified methods under §§ 4211.14 and 4211.15) apply. (e) Example. (1) Facts. (2) Unfunded vested benefits allocable to Employer A. (3) Adjustment of allocation fraction. (f) Effective and applicability dates Effective date. (2) Applicability date. [86 FR 1274, Jan. 8, 2021] Subpart C—Changes Subject to PBGC Approval § 4211.21 Changes subject to PBGC approval. (a) General rule. (b) Building and construction industry plans. (c) Substantial overallocation not allowed. (d) Use of method prior to approval. (1) Demand for payment. (2) Adjustment of liability. [61 FR 34097, July 1, 1996, as amended at 86 FR 1275, Jan. 8, 2021] § 4211.22 Requests for PBGC approval. (a) Filing of request In general. (2) Method of filing. (b) Who shall submit. (c) Where to submit. (d) Content. (1) The name, address and telephone number of the plan sponsor, and of the duly authorized representative, if any, of the plan sponsor. (2) The name of the plan. (3) The nine-digit Employer Identification Number (EIN) that the Internal Revenue Service assigned to the plan sponsor and the three-digit Plan Identification Number (PIN) that the plan sponsor assigned to the plan, and, if different, also the EIN-PIN that the plan last filed with the PBGC. If the plan has no EIN-PIN, the request shall so indicate. (4) The date the amendment was adopted. (5) A copy of the amendment, setting forth the full text of the alternative allocation method or modification. (6) The allocation method that the plan currently uses and a copy of the plan amendment (if any) that adopted the method. (7) A statement certifying that notice of the adoption of the amendment has been given to all employers that have an obligation to contribute under the plan and to all employee organizations that represent employees covered by the plan. (e) Additional information. [61 FR 34097, July 1, 1996, as amended at 68 FR 61355, Oct. 28, 2003; 90 FR 39328, Aug. 15, 2025] § 4211.23 Approval of alternative method. (a) General. (b) Criteria. (1) The method or modification allocates a plan's unfunded vested benefits, both for the adoption year and for the five subsequent plan years, to the same extent as any of the statutory allocation methods, or any modification to a statutory allocation method permitted under subpart B. (2) The method or modification allocates unfunded vested benefits to each employer on the basis of either the employer's share of contributions to the plan or the unfunded vested benefits attributable to each employer. The method or modification may take into account differences in contribution rates paid by different employers and differences in benefits of different employers' employees. (3) The method or modification fully reallocates among employers that have not withdrawn from the plan all unfunded vested benefits that the plan sponsor has determined cannot be collected from withdrawn employers, or that are not assessed against withdrawn employers because of section 4209, 4219(c)(1)(B) or 4225 of ERISA. (c) PBGC action on request. [61 FR 34097, July 1, 1996, as amended at 90 FR 39329, Aug. 15, 2025] § 4211.24 Special rule for certain alternative methods previously approved. A plan may not apply to any employer withdrawing on or after November 25, 1987, an allocation method approved by the PBGC before that date that allocates to the employer the greater of the amounts of unfunded vested benefits determined under two different allocation rules. Until a plan that has been using such a method is amended to adopt a valid allocation method, its allocation method shall be deemed to be the statutory allocation method that would apply if it had never been amended. Subpart D—Allocation Methods for Merged Multiemployer Plans § 4211.31 Allocation of unfunded vested benefits following the merger of plans. (a) General rule. (b) Construction plans. (c) Section 404(c) plans. (d) Withdrawals before the end of the initial plan year. [61 FR 34097, July 1, 1996, as amended at 86 FR 1275, Jan. 8, 2021; 88 FR 76664, Nov. 7, 2023] § 4211.32 Presumptive method for withdrawals after the initial plan year. (a) General rule. (1) The employer's proportional share, if any, of the unamortized amount of the plan's initial plan year unfunded vested benefits, as determined under paragraph (b) of this section; (2) The employer's proportional share of the unamortized amount of the change in the plan's unfunded vested benefits for plan years ending after the initial plan year, as determined under paragraph (c) of this section; and (3) The employer's proportional share of the unamortized amounts of the reallocated unfunded vested benefits (if any) as determined under paragraph (d) of this section. (b) Share of initial plan year unfunded vested benefits. (1) Share of prior plan liabilities. (2) Share of adjusted initial plan year unfunded vested benefits. (i) The numerator of which is the amount determined under paragraph (b)(1) of this section; and (ii) The denominator of which is the sum of the amounts that would be determined under paragraph (b)(1) of this section for each employer that had not withdrawn as of the end of the initial plan year. (c) Share of annual changes. (1) Change in plan's unfunded vested benefits. (i) Unamortized amount of initial plan year unfunded vested benefits. (ii) Unamortized amount of the change. (2) Employer's proportional share. (i) The numerator of which is the total amount required to be contributed under the plan (or under the employer's prior plan) by the employer for the plan year in which the change arose and the four preceding full plan years; and (ii) The denominator of which is the total amount contributed under the plan (or under employer's prior plan) for the plan year in which the change arose and the four preceding full plan years by all employers that had an obligation to contribute under the plan for the plan year in which such change arose, reduced by any amount contributed by an employer that withdrew from the plan in the year in which the change arose. (iii) In determining the numerator and the denominator in this paragraph (c), the rules under § 4211.4 (and permissible simplified methods under §§ 4211.14 and 4211.15) apply. (d) Share of reallocated amounts. (1) Unamortized amount of reallocated unfunded vested benefits. (i) Uncollectible amounts. (ii) Relief amounts. (iii) Other amounts. (2) Employer's proportional share. [61 FR 34097, July 1, 1996, as amended at 86 FR 1275, Jan. 8, 2021] § 4211.33 Modified presumptive method for withdrawals after the initial plan year. (a) General rule. (b) Share of initial plan year unfunded vested benefits. (c) Share of unfunded vested benefits arising after the initial plan year. (1) Amount of unfunded vested benefits. (i) The value as of that date of all outstanding claims for withdrawal liability that can reasonably be expected to be collected, with respect to employers that withdrew before that plan year; and (ii) The sum of the amounts that would be allocable under paragraph (b) of this section to all employers that have an obligation to contribute in the plan year preceding the plan year in which the employer withdraws and that also had an obligation to contribute in the first plan year ending after the initial plan year. (2) Employer's proportional share. (i) The numerator of which is the total amount required to be contributed under the plan (or under the employer's prior plan) by the employer for the last five full plan years ending before the date on which the employer withdraws; and (ii) The denominator of which is the total amount contributed under the plan (or under each employer's prior plan) by all employers for the last five full plan years ending before the date on which the employer withdraws, increased by the amount of any employer contributions owed with respect to earlier periods that were collected in those plan years, and decreased by any amount contributed by an employer that withdrew from the plan (or prior plan) during those plan years. (iii) In determining the numerator and the denominator in this paragraph (c), the rules under § 4211.4 (and permissible simplified methods under §§ 4211.14 and 4211.15) apply. [61 FR 34097, July 1, 1996, as amended at 86 FR 1276, Jan. 8, 2021] § 4211.34 Rolling-5 method for withdrawals after the initial plan year. (a) General rule. (b) Share of initial plan year unfunded vested benefits. (c) Share of unfunded vested benefits arising after the initial plan year. § 4211.35 Direct attribution method for withdrawals after the initial plan year. The allocation method under this section is the allocation method described in section 4211(c)(4) of ERISA. § 4211.36 Modifications to the determination of initial liabilities, the amortization of initial liabilities, and the allocation fraction. (a) General rule. (b) Restarting initial liabilities. (c) Amortizing initial liabilities. (1) If two or more plans that use the presumptive allocation method of section 4211(b) of ERISA merge, the merged plan may adjust the amortization of initial liabilities under § 4211.32(b) to amortize those unfunded vested benefits over the remaining length of the prior plans' amortization schedules. (2) A plan that has adopted the allocation method under § 4211.33 or § 4211.34 may adjust the amortization of initial liabilities under § 4211.33(b) or § 4211.34(b) to amortize those unfunded vested benefits in level annual installments over any period of at least five and not more than fifteen years. (d) Changing the allocation fraction. (1) A fraction, the numerator of which is the total amount required to be contributed under the merged and prior plans by the withdrawing employer in the 60-month period ending on the last day of the initial plan year, and the denominator of which is the sum for that period of the contributions made by all employers that had not withdrawn as of the end of the initial plan year; (2) A fraction, the numerator of which is the total amount required to be contributed by the withdrawing employer for the initial plan year and the four preceding full plan years of its prior plan, and the denominator of which is the sum of all contributions made over that period by employers that had not withdrawn as of the end of the initial plan year; or (3) A fraction, the numerator of which is the total amount required to be contributed to the plan by the withdrawing employer since the effective date of the merger, and the denominator of which is the sum of all contributions made over that period by employers that had not withdrawn as of the end of the initial plan year. [61 FR 34097, July 1, 1996, as amended at 86 FR 1276, Jan. 8, 2021] § 4211.37 Allocating unfunded vested benefits for withdrawals before the end of the initial plan year. If an employer withdraws after the effective date of a merger and before the end of the initial plan year, the amount of unfunded vested benefits allocable to the employer shall be determined as if each plan had remained a separate plan. In making this determination, the plan sponsor shall use the allocation method of the withdrawing employer's prior plan and shall compute the employer's allocable share of the plan's unfunded vested benefits as if the day before the effective date of the merger were the end of the last plan year prior to the withdrawal. Appendix to Part 4211—Examples The examples in this appendix illustrate simplified methods for disregarding certain contribution increases in the allocation fraction provided in § 4211.14 of this part. Example 1. Determining the Numerator of the Allocation Fraction Using the Employer's Plan Year 2014 Contribution Rate (§ 4211.14(b)). Assume Plan X is a calendar year multiemployer plan in critical status which did not have a benefit increase after plan year 2014. In accordance with section 305(g)(3)(B) of ERISA, the annual 5 percent contribution rate increases applicable to Employer A and other employers in Plan X after the 2014 plan year were deemed to be required to enable the plan to meet the requirement of its rehabilitation plan and must be disregarded. Employer A, a contributing employer, withdraws from Plan X in 2021. Using the rolling-5 method, Plan X has unfunded vested benefits of $200 million as of the end of the 2020 plan year. To determine Employer A's allocable share of these unfunded vested benefits, Employer A's hourly required contribution rate and contribution base units for the 2014 plan year and each of the 5 plan years between 2016 and 2020 are identified as shown in the following table: 2014 PY 2016 PY 2017 PY 2018 PY 2019 PY 2020 PY 5-year total Employer A's Contribution Rate $5.51 n/a n/a n/a n/a n/a Contribution Base Units 800,000 800,000 800,000 900,000 900,000 900,000 4,300,000 Contributions $4.41M $4.86M $5.10M $6.03M $6.33M $6.64M $28.96M The plan sponsor makes a determination pursuant to section 305(g)(3) of ERISA that the annual 5 percent contribution rate increases applicable to Employer A and other employers in Plan X after the 2014 plan year were required to enable the plan to meet the requirement of its rehabilitation plan and should be disregarded; benefits were not increased after plan year 2014. Applying the simplified method, contribution rate increases that went into effect during plan years beginning after December 31, 2014 would be disregarded: The $5.51 contribution rate in effect at the end of plan year 2014 would be held steady in computing Employer A's required contributions for the plan years included in the numerator of the allocation fraction. Based on 4.3 million contribution base units, this results in total required contributions of $23.7 million over 5 years. Absent section 305(g)(3) of ERISA, the sum of the contributions required to be made by Employer A would have been determined by multiplying Employer A's contribution rate in effect for each plan year by the contribution base units in that plan year, producing total required contributions of $28.96 million over 5 years. Example 2. Determining the Denominator of the Allocation Fraction Using the Proxy Group Method (§ 4211.14(d)). Assume a plan covers ten employers. For 2017, three small employers were in rate history group X, representing less than 5 percent of active plan participants; employers A and B and two other employers were in rate history group Y; and employer C and two other employers were in rate history group Z. For 2018, there were changes in contribution rates for some of B's employees, and as a result, employer B is being treated as two employers, B1 and B2. B1 remained in rate history group Y because, while B1 has a significantly lower contribution rate than A, the contributions of both are subject to the same percentage increase each year. B2 was added to rate history group X. X continues to represent less than 5 percent of active plan participants, and the plan continues to ignore it in forming the proxy group. The plan forms a 2018 proxy group of three employers—A and B1 from rate history group Y and C from rate history group Z—that together represent more than 10 percent of active plan participants. Contributions for 2018 are $1,000,000: $20,000 for rate history group X, $740,000 for rate history group Y, and $240,000 for rate history group Z, with A and B1 accounting for $150,000 and C accounting for $45,000 of the total contribution amounts. Contribution rates for 2018 for A, B1, and C (excluding rate increases required to be disregarded for withdrawal liability purposes) and contribution base units for the three employers are: For A, 87 cents and 100,000 CBUs; for B1, 43 cents and 50,000 CBUs; and for C, 70 cents and 60,000 CBUs, as shown in rows (1) and (2) of the table below. Thus, the three employers' adjusted contributions are $87,000, $21,500, and $42,000 respectively, as shown in row (3). Moving from the employer level to the rate history group level, the adjusted contributions for employers in the proxy group that are in the same rate history group are added together (row (4)). Those totals are then divided by total actual contributions for the proxy group employers in each rate history group (row (6)) to derive an adjustment factor for each rate history group (row (7)) that is applied to the actual contributions of all employers in the rate history group (row (8)) to get the adjusted contributions for each rate history group represented in the proxy group (row (9)). Moving from the rate history group level to the plan level, the same process is repeated. Adjusted employer contributions for the rate history group are summed (row (10)) and divided by the total contributions for all rate history groups represented in the proxy group (row (11)) to get an adjustment factor for the plan (row (12)). Contributions for rate history group X are excluded from row (11) because no employer in rate history group X is in the proxy group. The adjustment factor for the plan is then applied to total plan contributions (row (13)) to get adjusted plan contributions (row (14)). Contributions for rate history group X are included in row (13) because—although X was ignored in determining the adjustment factor for the plan — the adjustment factor applies to all plan contributions (other than those by employers excluded from the plan's allocation fraction denominator). The plan will use the adjusted plan contributions in row (14) as the total contributions for 2018 in determining the denominator of any allocation fraction that includes contributions for 2018. Row number Regulatory Description of action Rate history group Y Z Employer A Employer B1 Employer C (1) (6)(ii) 2018 contribution rate excluding disregarded increases $0.87 per CBU $0.43 per CBU $0.70 per CBU (2) (6)(i) 2018 CBUs 100,000 50,000 60,000 (3) (6) Adjusted employer contributions (1)x(2) $87,000 $21,500 $42,000 (4) (7)(i) Sum of adjusted contributions for proxy employers by rate history group $108,500 $42,000 (5) (7)(ii) Unadjusted contributions for proxy employers $100,000 $25,000 $45,000 (6) (7)(ii) Sum of unadjusted contributions for proxy employers by rate history group $125,000 $45,000 (7) (7) Adjustment factor by rate history group (4)/(6) 0.868 0.933 (8) (7) Total actual contributions by rate history group $740,000 $240,000 (9) (7) Adjusted contributions by rate history group (7)x(8) $642,320 $223,920 (10) (8)(i) Sum of adjusted contributions for rate history groups represented in proxy group $866,240 (11) (8)(ii) Total actual contributions for rate history groups represented in proxy group $980,000 (12) (8) Adjustment factor for plan (10)/(11) 0.884 (13) (8) Total plan contributions $1,000,000 (14) (8) Adjusted plan contributions (for allocation fraction denominators) (12)x(13) $884,000 [86 FR 1276, Jan. 8, 2021]