The Pension Benefit Guaranty Corporation (PBGC) and Internal Revenue Service (IRS) issued guidance on Special Financial Assistance (SFA) for financially troubled multiemployer defined benefit (DB) pension plans. PBGC issued an interim final rule implementing a new SFA Program.
The American Rescue Plan Act of 2021 (ARPA) — passed by Congress and signed by President Biden on March 11, 2021 — contains provisions to provide an estimated $94 billion in assistance to eligible plans that are severely underfunded. Additionally, it assists plans by providing funds to reinstate previously suspended benefits. ARPA also addresses the solvency of PBGC’s Multiemployer Insurance Program, which was projected to become insolvent in 2026.
The interim final rule:
- Sets forth what information a plan is required to file to demonstrate eligibility for SFA and the formula to determine the amount of SFA that PBGC will pay to an eligible plan. ARPA authorizes PBGC to prioritize SFA applications of plans in specified groups, and the interim final rule identifies the priority order in which such plans are permitted to apply.
- Outlines a processing system, which will accommodate the filing and review of many applications in a limited amount of time.
- Specifies permissible investments for SFA funds and establishes certain restrictions and conditions on plans that receive SFA.
The interim final rule is effective on the date of publication in the Federal Register.
Comments are due 30 days after publication in the Federal Register.
IRS issued Notice 2021-38 providing guidance under § 432(k) of the Internal Revenue Code (Code) to sponsors of multiemployer DB pension plans that are required to reinstate certain previously suspended benefits as a condition of receiving SFA under § 4262 of the Employee Retirement Income Security Act of 1974.
The notice provides guidance on:
- Whether make-up payments with respect to previously suspended benefits under § 432(k)(2)(A)(ii) of the Code are eligible to be rolled over to another eligible retirement plan under § 402(c); and
- How to apply the rule in § 432(k)(2)(D)(i) under which any SFA received by the plan is not taken into account in determining contributions required under § 431.