Multiemployer pension plans (MEPPs) that have applied or are considering applying for special financial assistance (SFA) under the American Rescue Plan Act (ARPA) (Pub. L. No. 117-2) have a new final rule from the Pension Benefit Guaranty Corp. (PBGC). The rule makes a few notable changes to last year’s interim final rule (IFR), but otherwise leaves the SFA program mostly intact. The final rule takes effect Aug. 8, but won’t apply to any plan that has already received SFA unless the plan files a supplemented application under the final rule. This article reviews the final rule’s provisions of most interest to employers.
ARPA created a temporary special fund within PBGC to provide SFA to help eligible, poorly funded MEPPs remain solvent until 2051. The implementation time frame was quite short: ARPA was enacted in March 2021, and the SFA application process opened in July 2021 under the IFR. PBGC approved its first application in December 2021 and made the first payment in January 2022.
PBGC received more than 100 comments on the IFR, many of which noted that certain aspects of the IFR would nearly guarantee that plans receiving SFA would go insolvent before 2051. The final rule addresses these concerns with a few targeted fixes:
The final rule makes some other changes not directed toward solvency concerns:
The final rule takes effect on Aug. 8. Because the changes may increase the amount of SFA that a plan is awarded, PBGC provides the following transition provisions:
Plans that received SFA under the IFR will remain subject to the IFR’s restrictions on investing SFA assets and must fully recognize SFA assets when calculating withdrawal liability. However, those plans may choose to file a supplemented application — even if they won’t receive any additional SFA. Plans doing do may rely on the new rule’s provisions on investments and withdrawal liability from the date the supplemented application is filed, regardless of whether it is ultimately approved.
Although the rule is final, PBGC is accepting comments for 30 days on the phased-in recognition of SFA assets in withdrawal liability calculations. The agency is interested to hear whether the calculation balances the interests of various stakeholders or a different approach might work better. Depending on the comments received, PBGC may revise this section of the rule.