GAO: PBGC Appropriately Using ARPA Funds for SFA

The Pension Benefit Guaranty Corporation (PBGC) has been operating appropriately and within the law in actions under the American Rescue Plan of 2021 (ARPA) regarding special financial assistance (SFA) payments, says the GAO in a recent analysis.

The GAO performed the analysis in response to a request from PBGC’s Office of the Inspector General (OIG) that it examine whether the PBGC exceeded its appropriations authority under ARPA in its calculations of interest rates applicable to SFA assets.

The GAO’s analysis comes on the heels of a report by the PBGC OIG that called on the PBGC to refine applications used to request SFA funds. 

Background 

ARPA amended ERISA to establish an additional fund by which the PBGC could provide SFA to certain multiemployer pension plans. It specified an interest rate for plans to use in determining their SFA eligibility and amounts. ARPA also directed the PBGC to issue regulations or guidance setting forth requirements for SFA applications. 

In its final rule implementing ARPA’s SFA provisions, the PBGC told SFA applicants to use ARPA’s specified interest rate for eligibility and amount calculations applicable to non-SFA assets, while using a separate interest rate for calculations applicable to SFA assets. 

GAO Looks at PBGC Procedures

The appropriation that ARPA provides the PBGC to carry out the SFA provisions was indefinite. The GAO says that when an appropriation does not specifically identify the expense in question, it applies a three-part necessary expense rule to determine whether the appropriation is available. Under this rule, an appropriation is available for an expense that (1) bears a reasonable, logical relationship to the purpose of the appropriation; (2) is not prohibited by law; and (3) is not otherwise provided for.

In considering the first of those measures, the GAO notes that agencies generally have discretion to determine whether expenditures are reasonably related to the purposes of their appropriations. In addition, authorizing and program legislation is relevant to determining an appropriation’s authorized purpose.

The GAO says that the PBGC made certain determinations regarding the interest rate that multiemployer pension plans should use to calculate eligibility for and amounts of SFA established by ARPA. Under the purpose rule, the GAO says, appropriations are only available for the purposes for which Congress made them; it says that the PBGC used the appropriation in question for the purpose of SFA. In this case, the second and third measures are not at issue.

The GAO Determination

The GAO concluded that the PBGC used its ARPA appropriation for its stated purpose. 

While the GAO said it “does not reach the issue of whether PBGC’s actions were consistent with ERISA or any other non-appropriations provision by directing plans to use an interest rate other than the one specified in that Act,” it further held that PBGC’s interest rate determinations did not violate the purpose statute or the Antideficiency Act. The GAO adds that it does not matter if the PBGC’s actions are inconsistent with non-appropriations provisions; its holding would be unaffected. 

“For present purposes,” says the GAO, Congress’ “broad and indefinite appropriation to PBGC in ARPA is sufficient to resolve any questions of appropriations law.” It further says that “notwithstanding questions about its calculation of interest rates, PBGC used its appropriation for SFA. Thus, we find no violation of the purpose statute or the Antideficiency Act.”