The Pension Benefit Guaranty Corporation (PBGC) on Nov. 7 issued a final rule to clarify the calculation methodology for the withdrawal liability condition requiring phase-in of special financial assistance (SFA) assets. On Nov. 1 it had issued updated instructions for multiemployer plans in submitting applications for SFA funds.
Final Rule
The final rule arises from statutory changes and from the PBGC’s retrospective regulatory review program. In addition, it responds to requests for clarification of the calculation methodology for the condition imposed on plans that receive SFA requiring a phased recognition of SFA in the determination of withdrawal liability.
More specifically, the final rule amends the PBGC’s regulations on the following.
Calculation methodology. The final rule clarifies the calculation methodology for the condition that requires a phased recognition of SFA in a plan's determination of withdrawal liability for plans that receive SFA.
The final rule incorporates guidance the PBGC posted on July 19, 2023, and amends Section 4262.16(g)(2)(ix) of ERISA to reorganize existing provisions and add content to clarify how plan assets expended on make-up payments of previously suspended benefits are considered in the calculation methodology. It also clarifies how the repayment of traditional financial assistance is considered in the calculation methodology.
The final rule also adds a clarification to the SFA regulation specifying that the value of the plan assets taken into account as of the end of a determination year used for purposes of determining unfunded vested benefits (UVBs) may not be less than zero.
Dollar limit for certain lump-sum distributions. The final rule amends the PBGC regulations regarding the termination of multiemployer plans by updating the reference to the dollar limit for lump-sum distributions in the closeout of sufficient multiemployer plans, so they reflect updated dollar limits for pension plans under Section 304 of the SECURE 2.0 Act. For the period 1997-2023, that maximum had been $5,000; after 2023, it will be $7,000.
Consequently, for purposes of the PBGC’s regulation on termination of multiemployer plans, the new $7,000 maximum automatically will apply to the lump-sum payment of nonforfeitable benefits after Dec. 31, 2023.
Effective date. The final rule is effective Dec. 7, 2023.
Updated Instructions
On Nov. 1, the PBGC issued updated general instructions for multiemployer plans filing applications for SFA. They provide additional guidance to those plans on how to prepare and file the required SFA application information.
Where to file. With the exception of a lock-in application, an application, must be submitted to the PBGC electronically through PBGC’s e-Filing Portal, https://efilingportal.pbgc.gov/site/. After logging in to that portal, an applicant should go to the Multiemployer Events section and click “Create New ME Filing.” Under “Select a filing type,” the applicant should select “Application for Financial Assistance – Special.”
When to file. An initial application must be filed no later than Dec. 31, 2025, and a revised application must be filed no later than Dec. 31, 2026.
Information required. The updated instructions outline the five sections in an SFA application and what each requires of an applicant:
- Section A – Plan identifying information;
- Section B – Plan documents;
- Section C – Plan data;
- Section D – Plan statements; and
- Section E – Checklist, certifications, and SFA-related plan amendments.
After an application is filed. After an application is filed, an applicant will hear from the PBGC within 120 days of the filing date. If the application is approved, the plan will receive further instructions regarding how the SFA amount will be transferred. If the application is denied, the applicant will receive written notice providing the reasons for the denial. A filer then may submit a revised application no later than Dec. 31, 2026.
About the SFA Program
The American Rescue Plan Act of 2021 (ARPA) added Section 4262 to ERISA, which created the SFA Program. That program is intended to provide eligible multiemployer pension plans with assistance in paying all benefits due during the period beginning on the date of payment of SFA through the plan year ending in 2051.
In July 2022, the PBGC issued a final rule setting forth the requirements for SFA applications and related restrictions and conditions in accordance with ARPA. In January 2023, the agecncy issued another final rule amending the SFA regulation by adding an exception process for certain withdrawal liability conditions that apply to a plan that receives SFA. On July 19, 2023, the PBGC posted guidance on the withdrawal liability phase-in condition clarifying the calculation methodology for the phased recognition of SFA assets for plans that paid make-up payments of previously suspended benefits.
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