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. Please see our companion Legal Update on the Pension and Executive Compensation Provisions in the American Rescue Plan Act here.

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. An eligible plan will receive - in a single lump sum payment - the funds required to pay all benefits due (Click here for our Legal Update on the Pension and Executive Compensation Provisions in the American Rescue Plan Act).

The Interim Final Rule, set forth in new Section 4262 of the PBGC’s regulation, 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.

The following is a high level summary of the key provisions from the Interim Final Rule. Seyfarth will hold a webinar on Friday, July 30, 2021, at 1:00 central to review the regulation in more detail, as well as the considerations for plan sponsors and contributing employers. Stay tuned for more details about the webinar.

1. Eligible Multiemployer Pension Plans

A multiemployer pension plan is eligible for SFA relief if they fall into any one of the following four categories:

1) The multiemployer pension plan is in critical and declining status in any plan year beginning in 2020 through 2022;

2) The multiemployer pension plan suspended benefits in accordance with the Multiemployer Pension Reform Act of 2014 (“MPRA”);

3) The multiemployer pension plan: (i) is certified by the plan actuary to be in critical status in any plan year beginning in 2020 through 2022; (ii) has a “modified funded percentage” (defined as the percentage equal to a fraction, the numerator of which is current value of plan assets and withdrawal liability due, and the denominator of which is current liabilities) of less than 40%; and (iii) has a ratio of active to inactive participants which is less than 2 to 3; or

4) The multiemployer pension plan became “insolvent,” as defined under Code Section 418E, after December 16, 2014, and has remained so insolvent and has not been terminated as of March 11, 2021.

Elected Critical Status Plans, Plans Terminated by Mass withdrawal Prior to January 1, 2020

The regulation clarifies that a multiemployer pension plan that has elected to be in critical status under ERISA Section 305, but has not yet been certified as being in critical status, is not eligible for SFA. Similarly, a multiemployer pension plan that is terminated by mass withdrawal that took place prior to January 1, 2020 is not eligible for SFA relief.

Clarification on Determining Eligibility for Critical Status Plans

To ensure uniformity in applications, the data reported on the Form 5500 is to be used for purposes of determining a plan’s eligibility for SFA as a critical status plan under category “3” above. For purposes of determining the number active to inactive participants, plans should use line 6a on the 2020 Form 5500 (for total number of active participants), and the sum of lines 6b, 6c, and 6e (for total number of inactive participants based on retired or separated participants receiving benefits, retired or separated participants entitled to future benefits, and decease participants whose beneficiaries are receiving or entitled to benefits).

The regulation also provides that the three conditions necessary for a critical status plan to be eligible for SFA in category 3 above do not need to be satisfied for the same plan year, in recognition that the filing deadlines for the certification of plan’s status (known as the “zone certifications”) and the Form 5500 are not the same. The deadline for filing the certification of plan status can be more than a year before the deadline to filing the Form 5500 for the same plan year in question, and the data used for both purposes maybe from different plan years.

Assumptions For Determining Eligibility

The treatment of assumptions under the Rule differs based on the date of the applicable zone certification for the plan. If a plan sponsor applies for SFA and asserts eligibility based on a certification of critical status or critical and declining status issued prior to January 1, 2021, the PBGC is required to accept the assumptions that are incorporated into the certification, unless they are clearly erroneous.

If a plan sponsor applies for SFA and asserts eligibility based on a zone certification of critical status that was not completed prior to January 1, 2021, the plan sponsor must determine whether the multiemployer pension plan is still in critical or critical and declining status using the assumptions from the plan’s most recently completed certification prior to January 1, 2021, unless those assumptions are unreasonable (excluding the plan’s interest rate). If a plan sponsor determines one or more of those assumptions are no longer reasonable, they may propose changes to them in its application for SFA. The sponsor must disclose the proposed change, explain why the assumptions are no longer reasonable, and demonstrate that the proposed changes are reasonable.

2. Amount Of Special Financial Assistance

Under ARPA, the amount of SFA relief for eligible multiemployer plans is the “amount required for the plan to pay all benefits due during the period beginning on the date of payment of the special financial assistance payment…and ending on the last day of the plan year ending in 2051….” The PBGC clarifies that the plain meaning of the statutory language means the SFA is the amount by which “a plan’s resources fall short of its obligations, taking all plan resources and obligations into account.” The relevant amounts are determined as of the “SFA measurement date,” which is the last day of the calendar quarter immediately preceding the date the plan’s application was filed. The amount of SFA, however, is subject to further adjustment for interest, outstanding PBGC loans, and the date that funds are paid to the plan.

Resources And Obligations

The value of a multiemployer pension plan’s obligations is the sum of the present value of specified benefits payments and administrative expenses to be paid by the plan through the “SFA Coverage Period” (the period beginning on the plan’s SFA measurement date and ending on the last day of the last plan year ending in 2051). The amount of benefit payments is determined as of the SFA measurement date, and is calculated by including any reinstated benefits that were previously suspended under the MPRA.

A multiemployer pension plan’s resources include the total fair market value of assets as of the SFA measurement date, plus the present value of future contributions, investment returns, withdrawal liability payments, and other expected payments into the plan during the SFA Coverage Period. It does not include any financial assistance loans received from the PBGC under ERISA Section 4261 or the amount of SFA.

3. Calculating SFA

The projection of the plan’s resources and obligations must be made on a deterministic basis and using a single set of assumptions as set forth in Section 4262.4(d) of the new regulation. That means projections must be made based on participant data as of the first day of the plan year in which the plan’s initial application is filed for SFA. If the initial application date is less than 270 days after the beginning of the current plan year, and the current year’s actuarial valuation is not yet complete, the projections may be based instead on participant census data from the first day of the plan year preceding the plan year that the initial application is filed.

The amount of SFA must generally be calculated in accordance with generally accepted actuarial principals and certain prescribed assumptions as set forth below.

Interest Rate Assumption

For purposes of determining the amount of SFA, the assumed interest rate is the lesser of: (1) the long-term interest rate used for funding standard account purposes as projected in the most recent certification of plan status completed before January 1, 2021; and (2) the “third segment rate” specified in ERISA Section 303(h) plus 200 basis points, for the month the plan’s application is filed or one of the three preceding months, as selected by the plan.

Other Assumptions

For any other assumptions than the interest rate, the plan is to look to those used in its most recently completed certification of plan status before January 1, 2021, unless they are unreasonable. If a multiemployer plan determines that any such assumptions are unreasonable, it may include a proposed change in its SFA application, except with respect to the interest rate assumption. The PBGC will accept a plan’s proposed changes to these assumptions unless it determines that the assumption is “individually unreasonable,” or that the proposed changes in assumptions are “unreasonable in the aggregate.”

4. Multiple Applications

The PBGC explains that the wording of ARPA suggests plans may have multiple filing dates by providing for separate deadlines for initial applications and revised applications. The PBGC also notes there is no limit to the number of times a multiemployer pension plan may revise its application for SFA, as long as the last revised application is filed by the statutory deadline of December 31, 2026. To prevent plan sponsors from submitting multiple applications to change the interest rate, however, the PBGC dictates in the Rule that the assumed interest rate will always be the rate from the plan’s initial application.

5. Certain Events Disregarded For Calculation Of SFA

Recognizing that a plan could implement certain changes that could entitle the plan to more SFA than was intended under the ARPA, certain events that occur between July 9, 2021 and the SFA measurement date (the last day of the quarter preceding the plan’s application) are disregarded in calculating the amount of SFA for a multiemployer pension plan. The following events are disregarded:

a) Transfers of assets or liabilities, including spin-offs.

b) Benefit Increases. The execution of a plan amendment increasing accrued or projected benefits, other than a restoration of benefits previously reduced under the MPRA.

c) Contribution Reductions. The execution of “a document reducing a plan’s contribution rate (including any reduction in benefit accruals adopted simultaneously or arising from a pre-exiting linkage between benefit accruals and contributions),” but only if the plan does not demonstrate that risk of loss for participants and beneficiaries is reduced by execution of the document (disregarding any SPA). The plan sponsor must make such demonstration in accordance with the instructions on the PBGC’s website at pbgc.gov. The “document” referred to in this rule can be either a collective bargaining agreement not rejected by the plan, or a document reallocating contribution rates.

If a multiemployer pension plan experiences a merger between July 9, 2021 and the measurement date, the total amount of SFA available is limited to the sum that each individual plan would have been eligible for had the merger not occurred. The PBGC further concludes that it is reasonable and within its regulatory authority to disregard changes made to a multiemployer pension plan after July 9, 2021, if the effect was to artificially inflate the amount of SFA. In that regard, the PBGC explained it was authorized to impose reasonable conditions to ensure that the amount of SFA provided to plans is not “inflated by way of contrived events.”

6. Information To Be Filed With SFA Application

Initial Application

The following information is required to be submitted with a multiemployer pension plan’s SFA application in order for it to be considered complete:

a) Basic plan information specified in Section 4262.7 of the new regulation, including the name of the plan, EIN and plan number, identification of the individual filing the application and his or her role, contact information for the plan sponsor and authorized representative(s), the amount of SFA requested, identification of the applicable eligibility criteria, priority group identification, plan documents, actuarial valuation reports from the 2018 plan year to the year the application is filed, most recent rehabilitation or funding improvement plan and all amendments, Form 5500 filings, actuarial certifications and financial information, and withdrawal liability policies and procedures;

b) Actuarial and financial information specified in Section 4262.8, including projected benefit payments as reported on Form 5500 and Schedule MB for 2018 to the year the application is filed, identification of the 15 largest employers (for plans with more than 10,000 participants), historical financial information, information used to determine the amount of SFA including, among other things, interest rate, fair market value of plan assets, projected amount of contributions and withdrawal liability payments, projected administrative expenses, and explanations for any proposed changes to assumptions from certification prior to January 1, 2021, and information regarding certain events;

c) Copy of an executed plan amendment confirming the plan was amended to add the following provision: “Beginning with the SFA measurement date selected by the plan in the plan’s application for special financial assistance, the plan shall be administered in accordance with the restrictions and conditions specified in section 4262 of ERISA and 29 CFR part 4262. This amendment is contingent upon approval by PBGC of the plan’s application for special financial assistance;

d) Copy of a proposed plan amendment to reinstate any benefits previously suspended under the MPRA;

e) A complete checklist and certain other information as described on the PBGC’s website at PBGC.gov.

Trustee Signature

The application for SFA must be signed and dated by an authorized trustee who is a current member of the plan’s board of trustees, or another authorized representative. The following statement must also be included in the application and signed by the authorized trustee:

“Under penalties of perjury under the laws of the United States of America, I declare that I have examined this application, including accompanying documents, and, to the best of my knowledge and belief, the application contains all the relevant facts relating to the application, and such facts are true, correct, and complete.”

Actuarial Certification

All required calculations for the SFA application must be accompanied by a certification by the plan’s enrolled actuary.

Duty To Supplement And Clarify

The PBGC may require additional information from the plan sponsor to substantiate or clarify information provided in the application. Plan sponsors are required to promptly comply with such requests.

The regulation specify that plan sponsors have a duty to promptly notify the PBGC if at any time when the application is pending they become aware that any material fact or representation is no longer accurate, or that any material fact or representation was omitted from the application.

Disclosure of Information

Unless it is considered confidential under the Privacy Act, all information submitted as part of an SFA application may be made publically available, and the PBGC offers no assurances that any information or documentation submitted with an application will remain confidential.

7. Applications For Plans With Partitions

ARPA requires the PBGC to provide an alternative application for use by multiemployer pension plans that have been approved for a partition by the PBGC before March 11, 2021. This alternative process is provided in Section 4262.9 of the new regulation. A plan sponsor of a partitioned plan must file a single application with information about the original plan and successor plan. The filing of an application for partitioned plans falls under “priority group 2.”

8. Processing, Priority Groups, And Filing Deadlines

All initial applications for SFA must be filed by December 31, 2025. Any revised application must be filed by December 31, 2026. Applications must be filed electronically.

The PBGC will limit the number of applications accepted in a manner so that each application can be processed within 120 days. The PBGC will approve or deny the application within 120 days. The PBGC may consider an application incomplete if it does not have all of the required information. A plan sponsor may withdraw their application or revise it.

Priority Groups

Until March 11, 2023, certain plans will be given priority to file an application if they are in one of the following groups:

Priority Group 1. The plan is insolvent or projected to become insolvent by March 11, 2022. A plan in priority group 1 may file SFA applications beginning on July 9, 2021.

Priority Group 2. The plan suspended benefits under the MPRA as of March 11, 2021, or the plan is expected to be insolvent within 1 year of the date the plan’s application was filed (as indicated above, plans that have undergone partition also fall in priority group 2). A plan in priority group 2 may file SFA applications beginning on January 1, 2022, or such earlier date specified on the PBGC’s website.

Priority Group 3. The plan is in critical and declining status and had 350,000 or more participants. A plan in priority group 3 may file SFA applications beginning on April 1, 2022, or such earlier date specified on the PBGC’s website.

Priority Group 4. The plan is projected to become insolvent by March 11, 2023. A plan in priority group 4 may file SFA applications beginning on July 1, 2022, or such earlier date specified on the PBGC’s website.

Priority Group 5. The plan is projected to become insolvent by March 11, 2026. The PBGC will specify the date a plan in this group can file an application on its website at least 21 days in advance of such date, and such date will not be later than February 11, 2023.

Priority Group 6. The plan is projected by the PBGC to have a present value of financial assistance payments under ERISA Section 4261 that exceeds $1,000,000,000 if special assistance is not provided. The PBGC will specify the date a plan in this group can file an application on its website at least 21 days in advance of such date, and such date will not be later than February 11, 2023.

Additional Priority Groups. The PBGC may add additional priority groups and deadlines to apply, which will be posted on its website.

Beginning with when the PBGC starts accepting applications for priority group 2, an application for emergency filing may be accepted if: (1) the plan is insolvent or expected to become insolvent within 1 year of filing the application or suspended benefits under the MPRA as of March 11, 2021; and (2) the plan notifies the PBGC before submitting the application that it qualifies as an emergency in accordance with the instructions on the PBGC website.

9. Restrictions On SFA Use And Investment

A multiemployer pension plan that receives SFA must separately account for such amounts and it must be segregated from other assets. SFA funds, and any earnings thereon, can only be used to make benefit payments and pay administrative expenses. SFA funds must also be invested in fixed income securities and investment-grade bonds or other investments as permitted by Section 4262.14 of the PBGC regulation. Plans will be required to keep at least one year’s worth of benefit payments and administrative expenses invested in accordance with these rules, even if it runs out of SFA funds.

The PBGC acknowledged concerns that its restrictions on investing SFA could have adverse impacts on overall plan financial health, especially given historically low interest rates on fixed income securities. The PBGC considers the investment restrictions set forth in the new regulation to be a starting point, and is seeking public input on refining its rules in this area, with several specific questions posed by the PBGC for public comment.

10. Conditions For Receipt Of SFA

A multiemployer pension plan that receives SFA must be administered in accordance with PBGC guidelines. Those conditions include prohibiting benefit increases during the SFA period if it is attributable to service accrued prior to the amendment (other than restoring benefits suspended under the MPRA), and only allowing prospective benefit increases where the plan’s actuary certifies that employer contribution increases are sufficient to pay for the benefit and those increases were not included in the determination of SFA.

During the SFA period, the contributions that a multiemployer pension plan receives per contribution base unit (e.g., per hour worked) cannot be less than those set forth in the collective bargaining agreement(s) or plan documents in effect on March 11, 2021, unless the plan sponsor determines the change lessens the risk of loss to participants. If the reduction affects annual contributions over $10 million and over 10% of all employer contributions, the change is subject to PBGC approval.

The regulation also prohibits a decrease in the proportion of income received or an increase in the proportion of expenses allocated to a plan that receives SFA, subject to certain exceptions. Plans receiving SFA are also prohibited from engaging in a transfer of assets or liabilities (including a spinoff) or merger except with PBGC approval.

The PBGC is soliciting public comment on whether there are other circumstances relating to the conditions for receipt of SFA where the PBGC should consider providing approval for exceptions.

11. Withdrawal Liability Conditions For Receipt Of SFA

As anticipated, the PBGC did impose certain conditions on withdrawal liability for plans that receive SFA. The PBGC, however, considered and apparently rejected mandating that, during the SFA Coverage Period, SFA assets would be disregarded in the determination of unfunded vested benefits for the assessment of withdrawal liability. Instead, it adopted two other conditions: a restriction on withdrawal liability interest assumptions, and a requirement for PBGC approval of certain withdrawal liability settlements.

Withdrawal Liability Interest Assumptions

The interest assumptions used to determine unfunded vested benefits and calculate withdrawal liability must be the PBGC’s mass withdrawal interest assumptions that approximate the market price that insurance companies charge to assume a similar pension-benefit-like liability. Plans receiving SFA must use those interest assumptions for withdrawal liability calculations until the later of 10 years after the end of the plan year in which the plan receives payment of SFA or the last day of the plan year in which the plan no longer holds SFA or any earnings thereon in a segregated account. Given plan termination interest rates are generally much lower than rates most plans use to calculate withdrawal liability, this will likely increase a withdrawing employer’s liability—although whether that increase will necessarily offset the impact of SFA may depend upon the particular circumstances of the withdrawing employer and the plan.

The PBGC determined that without the interest assumption change “the receipt of SFA could substantially reduce withdrawal liability owed by a withdrawing employer,” and “could cause more withdrawals in the near future than if the plan did not receive SFA.” Payment of SFA “was not intended to reduce withdrawal liability or to make it easier for employers to withdraw.”

PBGC Approval of Certain Withdrawal Liability Settlements

Any settlement of withdrawal liability during the SFA Coverage Period is subject to PBGC approval if the present value of the liability settled is greater than $50 million. The PBGC will only approve such a settlement if it determines that: (1) it is in the best interests of the participants in the plan; and (2) it does not create an unreasonable risk of loss to PBGC. The information the PBGC will require in order to review a proposed settlement includes: the proposed settlement agreement; the facts leading to the settlement; the withdrawn employer’s most recent 3 years of audited financials and a 5-year cash flow projection; a copy of the plan’s most recent actuarial evaluation; and a statement certifying the trustees have determined that the proposed settlement is in the best interest of the plan, its participants and beneficiaries.

12. Promise Of Additional PBGC Regulations As To Assumptions For All Plans

Last but not least, in its explanation of the final interim rule the PBGC noted that it plans to use its authority under Section 4213(a) of ERISA to propose a separate rule of general applicability setting forth actuarial assumptions which “may” be used to determine an employer’s withdrawal liability. Presumably, this general rule would be applicable to all plans, not simply those that receive SFA. This could have a significant impact on how withdrawal liability is calculated in the future.


It will take some time for plans and participating employers to digest the interim final rule and what it means for their particular situation. As noted there will be a thirty day public comment period, which may lead to additional changes. The PBGC is not done with its rulemaking, both as to SFA recipients or, apparently, plans generally. Stay tuned, and mark your calendars for the webinar on July 30th.

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.