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Last year, a House Committee probe was launched into the Pension Benefit Guaranty Corporation (PBGC), alleging it failed to stop funds from going to deceased plan participants of the Teamsters’ pension fund. Now the PBGC, which protects the retirement security of 31 million Americans in private sector pension plans, is facing more scrutiny, after a recent court ruling upends the agency’s denial of a firm’s application for special financial assistance (SFA) program funds – and it could cost taxpayers $6 billion.
In 2022, the terminated Bakery Drivers pension plan, which benefits unionized bakery drivers in Floral Park, New York, applied for a pandemic bailout from the SFA, a pension rescue program, in the amount of $132,250,472. In response to the COVID-19 pandemic, American Rescue Plan Act (ARP) was enacted in 2021, which allowed eligible multiemployer pension plans to apply to the PBGC for SFA.
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The PBGC denied the request in 2023 on the grounds that “it is an ineligible terminated plan,” in response to the pandemic, according to a risk advisory letter from PBGC Inspector General Nicholas Novak, sent to Acting Director Alice Maroni. As a result, the Plan sued PBGC in federal court, which affirmed PBGC’s denial of the application.
However, the 2nd Circuit Court of Appeals last month overruled the previous denial of funds, now opening the door for “approximately 100” previously ineligible multiemployer pension plans to apply for Special Financial Assistance, according to the risk advisory letter from the PBGC’s inspector general.
Originally, terminated pension plans were not expected to qualify for SFA to rescue deeply underfunded multiemployer plans. This recent ruling reinterpreted that restriction, allowing previously excluded terminated and insolvent plans to resubmit applications.
As of March 2025, the PBGC had already received 202 applications for SFA funds totaling $76.4 billion, with $68.6 billion approved, according to the letter. Now an estimated 123 terminated multiemployer plans, many with extensive outstanding liabilities, “could apply for SFA as a result of the Appeals Court ruling,” according to the letter.
This new legal interpretation has an “estimated cost to taxpayers of approximately $6 billion,” according to the inspector general’s letter. The PBGC has, in a petition filed June 13, asked the 2nd Circuit to reconsider allowing the trustees of the Bakery Drivers Union Pension Fund to reinstate their application for a $130 million bailout from a COVID-era government program.
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The House probe of the PBGC last year, in which members of a House Committee alleged it failed to stop funds from going to deceased plan participants of the Teamsters pension fund, which manages the Central States Pension Fund. The PBGC was later was forced to return $127 million to the Treasury.
Last month, at the Senate Health, Education, Labor, and Pensions Committee hearing to advance the nomination of Janet Dhillon to serve as the Director of the PBGC, Senator Bill Cassidy, M.D. (R-LA), chair of HELP, said: “If confirmed … Ms. Dhillon will be charged with leading an agency that desperately needs reform.”
For this latest court ruling, Maroni is asking for “Congressional action to remedy the impact of the Appeals Court ruling,” beginning with “extending the December 31, 2025, and related deadlines to file and process an SFA application and amending ARP so that terminated plans are either specifically included or excluded from applying for SFA.”
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
