On July 9, 2021, the Pension Benefit Guarantee Corporation (PBGC) issued interim final rules and assumptions on special financial assistance (SFA) for multiemployer pension plans, as provided by the American Rescue Plan Act (ARPA). The ARPA authorized PBGC to provide SFA to multiemployer pension plans that are in critical and declining or critical status, were approved to suspend benefits under the Multiemployer Pension Reform Act of 2014, or became insolvent after December 16, 2014, but have not been terminated.
The interim final rule discusses how the SFA amount will be calculated, the order in which plans will be permitted to file SFA applications, details on what must be included in applications, how the PBGC will go about reviewing SFA submissions, and the conditions that will apply to plans that receive the SFA.
In determining eligibility for and the amount of SFA, ERISA generally looks to the plan assumptions previously selected by the actuaries. However, the ARPA also allows plans to propose changes to those assumptions (except for the interest rate) if they are no longer reasonable. The PBGC provided guidance on acceptable assumption changes in PBGC SFA 21-02.
Simultaneously with the release of the interim final rules and assumptions guidance, the IRS released Notice 2021-38 to provide guidance to multiemployer plan sponsors that must reinstate certain previously suspended benefits as a condition of receiving SFA. The guidance also clarifies that make-up benefits paid to individuals as a result of the reinstatement of previously suspended benefits may be paid in a lump sum within three months of the receipt of SFA funds or in equal monthly installments over the five year period beginning three months after the receipt of SFA funds. Additionally, the SFA funds received are not taken into account if a multiemployer plan needs to make certain contributions to avoid funding deficiencies. Finally, the IRS guidance indicated that multiemployer plans with suspended benefits must submit an SFA application to the Department of the Treasury, but this requirement will be satisfied if they send the application to the PBGC.
Multiemployer plan sponsors that will seek to apply for SFA funds should familiarize themselves with this guidance and consult with their counsel and tax advisors in complying with the requirements.
Interim Final Rule »
Special Financial Assistance Assumptions »
IRS Notice 2021-38 »