Signage is displayed outside the Pension Benefit Guaranty Corp. (PBGC) building in Washington, D.C. (Photo: Andrew Harrer/Bloomberg)
The Pension Benefit Guaranty Corporation (PBGC) today announced an interim final rule implementing a new Special Financial Assistance Program for financially troubled multiemployer defined benefit pension plans.
Just as the fight over assistance for these union pension plans has been complicated and lengthy, stretching across several years and several Congresses, so too is the rule: It clocks in at 123 pages. In brief, the interim rule does the following:
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1. Details eligibility requirements for plans seeking to enter the Special Financial Assistance Program.
2. Provides the formula for determining the amount PBGC will pay to a plan under the program.
3. Identifies the priority order in which plans are permitted to apply.
4. Outlines the processing system that will be used to handle the filing and review of the expected high number of applications in a limited amount of time.
5. Specifies permissible investments for SFA funds.
6. Establishes certain restrictions and conditions on plans that receive SFA.
PBGC is currently accepting applications from plans designated as Priority Group 1 Plans only. Application openings and deadlines for plans in Priority Groups 2 through 6 will be staggered between set dates starting in 2022. Plans must meet four criteria to apply for Special Financial Assistance, according to a PBGC webinar explaining the rule:
The interim final rule is posted on PBGC's website.
Additional information, including Frequently Asked Questions, is available at PBGC.gov/arp.
The American Rescue Plan (ARP) Act of 2021 passed earlier this year contains provisions to provide an estimated $94 billion in assistance to eligible multiemployer plans that are severely underfunded. Additionally, it assists plans by providing funds to reinstate previously suspended benefits. ARP also addresses the solvency of PBGC's Multiemployer Insurance Program, which was projected to become insolvent in 2026. The interim final rule from PBGC fleshes out the nitty-gritty details.
The IRS also has issued guidance in conjunction with PBGC's announcement — on the financial assistance program as well as other issues multiemployer plans might be facing.
PBGC's interim rule will be available for public inspection at FederalRegister.gov and is scheduled for publication in the Federal Register on July 12, 2021. PBGC has included a 30-day public comment period in this rulemaking from the date of publication in the Federal Register.
"This is a historic achievement," Secretary of Labor Marty Walsh said in a statement, "And the most substantial policy ever passed to further the solvency of our nation's multiemployer pension plans. Unions, their members and beneficiaries of these plans have been fighting for years for what these workers have earned."
"As Chair of its Board of Directors, I am proud that today's rulemaking by the Pension Benefit Guaranty Corporation will help secure the pensions of an estimated 3 million American workers, retirees and their families by providing financial assistance to over 200 severely underfunded multiemployer plans."
The assistance is not funded by PBGC but by the U.S. Treasury.
READ MORE of BenefitsPRO's coverage over the years of the crisis of multiemployer plans:
- For many multiemployer pension plans, the writing is on the wall
- Clock ticking on PBGC Multiemployer Insurance Program
- 117 multiemployer plans could fail within 20 years
- The crisis of multiemployer pension plans: Where do we go from here?
- Central States pension decision: Pyrrhic victory for Teamsters
- Only cash infusion can save Central States, other multiemployer plans facing insolvency
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