PBGC Approves First Two Plans for Funding Relief under ARPA ’21

On December 21st, the Pension Benefit Guaranty Corporation (PBGC) approved the first Multiemployer pension plan funding relief under the American Rescue Plan Act of 2021 (ARPA). As you may recall, in past articles Part 2 - American Rescue Plan Act of 2021, we provided background on the Special Financial Assistance Program (SFA) for distressed Multiemployer DB plans. In summary, the program provides approximately $94 billion in federally funded relief for those plans that qualify. The first plan approved is the Local 138 Pension Plan (Baldwin NY) which covers 1,723 participants in the transportation industry. The Plan has already received the almost $113 million in special financial assistance that was requested.

On January 17th, the PBGC approved a second plan for assistance. Bricklayers Local 5 Plan based in Newburgh, New York, which covers 821 participants in the construction industry, was approved to receive approximately $61.8 million.

Assuming the Plans follow the PBGC’s requirements (published July 12, 2021), they will not be required to pay any of the money back.

The American Rescue Plan Act allows certain financially troubled Multiemployer pension plans to apply for this special financial assistance. The SFA Program requires eligible plans to apply for the special financial assistance. Part of the application includes a calculation of the amount of assistance needed based on the PBGC’s July Interim Final Regulations.  Once approved, a plan can only use the funds (and earnings) to pay benefits and administrative expenses. The award and any subsequent earnings must be segregated from other plan assets. Plans receiving SFA are also subject to various conditions such as investing in investment-grade bonds only. There are also reporting requirements, including an annual statement documenting the plan’s compliance with the PBGC’s terms and conditions. Further, the PBGC is authorized to conduct periodic audits of the plans that receive this special assistance.

The PBGC’s current Director (Gordon Hartogensis) estimates that this program will help over 250 Multiemployer plans and 3 million participants. The program is being operated under Interim Final Regulations (published July 12, 2021). The Interim Final Rules included a request for public comments, with an emphasis on feedback where any additional guidance may be needed. The PBGC is currently reviewing those comments and may incorporate changes in the Final Rules based on the comments they receive.

Conclusion

Zenith-American Solutions will keep monitoring the results of this important legislation and are fully prepared to help our impacted clients. For more information on how we can help, please feel free to contact your Zenith Client Services team. Additionally, as always, feel free to reach out to your plan’s actuary and/or fund counsel.