PBGC Issues Much Anticipated Interim Final Rule on Special Financial Assistance Under American Rescue Plan Act

Seyfarth Shaw LLP

Seyfarth Synopsis: On July 9, 2021, the PBGC issued its interim final rule on ARPA’s Special Financial Assistance Program for financially troubled multiemployer pension plans. The new regulations provide guidance on the application process for Special Financial Assistance and the related restrictions and requirements, including the priority in which applications will be reviewed. The guidance also sets forth special rules regarding employer withdrawals and withdrawal liability settlements for plans receiving Special Financial Assistance. Seyfarth has prepared a Legal Update summarizing the interim final rule and will be holding a webinar on the rule on July 30, 2021.

On July 9, 2021, the Pension Benefit Guaranty Corporation (“PBGC”) issued extensive guidance in an interim final rule (the “Interim Final Rule,” “Rule,” or “regulation”) to implement the American Recue Plan Act’s Special Financial Assistance (“SFA”) Program for financially troubled multiemployer defined benefit pension plans. Under the SFA Program, an eligible plan will receive the funds required for the plan to pay all benefits due from the date of the SFA payment and ending on the last day of the plan year ending in 2051.

The Interim Final Rule, set forth in new Section 4262 of the PBGC’s regulations, provides guidance to plan sponsors on the SFA application process, including what plans need to file to demonstrate eligibility for relief; calculating the amount of SFA; assumption requirements; the PBGC’s review of SFA applications; and other restrictions and conditions. The Interim Final Rule also sets forth the order of priority in which applications will be reviewed and provides much anticipated clarification on the calculation of withdrawal liability and the assumptions to be used for SFA.

There is a thirty (30) day public comment period starting from the date of publication of the rule in the Federal Register on July 12, 2021.

Seyfarth has issued a detailed Legal Update, too long for a blog post, summarizing the interim final rule which can be accessed here. It is recommended reading. (Our earlier Legal Update on the Pension and Executive Compensation Provisions in the American Rescue Plan Act can be accessed here.)

In addition, there are a number of issues that have not been addressed in this regulation, and we will be issuing a further memorandum soon outlining some of the important open questions. Seyfarth will also hold a webinar on Friday, July 30, 2021, at 1:00 central to review the regulations in more detail, as well as any considerations for plan sponsors and contributing employers. Stay tuned to this site for more details and an invite to the webinar.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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