36598 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

1Multiemployer plan guaranteed benefits are 

primarily nonforfeitable benefits and the maximum 

guarantee is set by law under section 4022A of 

ERISA. 

2A plan is in critical and declining status if the 

plan satisfies the criteria for critical status under 

section 305(b)(2) of ERISA and is projected to 

become insolvent within the meaning of section 

4245 during the current plan year or any of the 14 

succeeding plan years (or 19 succeeding plan years 

if the plan has a ratio of inactive participants to 

active participants that exceeds 2 to 1 or if the 

funded percentage of the plan is less than 80 

percent). 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Parts 4000 and 4262 

RIN 1212–AB53 

Special Financial Assistance by PBGC 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Interim final rule; request for 

comments. 

SUMMARY: This document contains an 

interim final rule that sets forth the 

requirements for special financial 

assistance applications and related 

restrictions and conditions pursuant to 

the American Rescue Plan Act of 2021. 

DATES: 

Effective date: This interim final rule 

is effective on July 12, 2021. 

Comment date: Comments must be 

received on or before August 11, 2021 

to be assured of consideration. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the online 

instructions for submitting comments. 

• Email: reg.comments@pbgc.gov. 

• Mail or Hand Delivery: Regulatory 

Affairs Division, Office of the General 

Counsel, Pension Benefit Guaranty 

Corporation, 1200 K Street NW, 

Washington, DC 20005–4026. 

Commenters are strongly encouraged 

to submit public comments 

electronically. PBGC expects to have 

limited personnel available to process 

public comments that are submitted on 

paper through mail. Until further notice, 

any comments submitted on paper will 

be considered to the extent practicable. 

All submissions must include the 

agency’s name (Pension Benefit 

Guaranty Corporation, or PBGC) and 

title for this rulemaking (Special 

Financial Assistance by PBGC) and the 

Regulation Identifier Number for this 

rulemaking (RIN 1212–AB53). 

Comments received will be posted 

without change to PBGC’s website, 

www.pbgc.gov, including any personal 

information provided. Do not submit 

comments that include any personally 

identifiable information or confidential 

business information. 

Copies of comments may also be 

obtained by writing to Disclosure 

Division, Office of the General Counsel, 

Pension Benefit Guaranty Corporation, 

1200 K Street NW, Washington, DC 

20005–4026 or calling 202–229–4040 

during normal business hours. TTY 

users may call the Federal relay service 

toll-free at 800–877–8339 and ask to be 

connected to 202–229–4040. 

FOR FURTHER INFORMATION CONTACT: 

Daniel S. Liebman (liebman.daniel@

pbgc.gov; 202–229–6510) Deputy 

General Counsel, Program Law and 

Policy Department, Hilary Duke 

(duke.hilary@pbgc.gov; 202–229–3839), 

Assistant General Counsel for 

Regulatory Affairs, or Stephanie Cibinic 

(cibinic.stephanie@pbgc.gov; 202–229– 

6352), Deputy Assistant General 

Counsel for Regulatory Affairs, Office of 

the General Counsel, Pension Benefit 

Guaranty Corporation, 1200 K Street 

NW, Washington, DC 20005–4026. TTY 

users may call the Federal Relay service 

toll-free at 800–877–8339 and ask to be 

connected to 202–229–6510, 202–229– 

3839, or 202–229–6352. 

SUPPLEMENTARY INFORMATION: 

Executive Summary 

Purpose and Authority 

This interim final rule adds to the 

regulations of the Pension Benefit 

Guaranty Corporation (PBGC) a new 

part 4262 to implement the 

requirements under section 9704 of the 

American Rescue Plan Act of 2021, 

‘‘Special Financial Assistance Program 

for Financially Troubled Multiemployer 

Plans.’’ This program enhances 

retirement security for millions of 

Americans by providing eligible 

multiemployer defined benefit pension 

plans with special financial assistance 

(SFA) in the amounts required for the 

plans to pay all benefits due during the 

period beginning on the date of payment 

of SFA through the plan year ending in 

2051. 

PBGC’s legal authority for this 

rulemaking comes from new section 

4262 of the Employee Retirement 

Income Security Act of 1974 (ERISA) 

(Special Financial Assistance by the 

Corporation), which requires PBGC to 

issue regulations or guidance setting 

forth requirements for SFA applications 

by July 9, 2021, permits PBGC to 

provide for how SFA and earnings 

thereon are to be invested, and, in 

consultation with the Secretary of the 

Treasury, permits PBGC to impose 

reasonable conditions by regulation or 

other guidance on an eligible 

multiemployer plan that receives SFA. 

PBGC’s legal authority also comes from 

section 4002(b)(3) of ERISA, which 

authorizes PBGC to issue regulations to 

carry out the purposes of title IV of 

ERISA, and from section 4003(a) of 

ERISA, which authorizes PBGC to 

conduct investigations and audits. 

Major Provisions of the Regulatory 

Action 

This rulemaking sets forth what 

information a plan is required to file to 

demonstrate eligibility for SFA and the 

amount of SFA to be paid by PBGC to 

the plan. It identifies which plans will 

be given priority to file applications 

before March 11, 2023, and provides for 

a processing system, which will 

accommodate the filing and review of 

many applications in a limited amount 

of time. It also establishes permissible 

investments for SFA funds and 

restrictions and conditions on plans that 

receive SFA. 

Background 

PBGC and the Multiemployer Insurance 

Program 

PBGC administers two insurance 

programs for private-sector defined 

benefit pension plans under title IV of 

ERISA: One for single-employer defined 

benefit pension plans and one for 

multiemployer defined benefit pensions 

plans (multiemployer plans). In general, 

a multiemployer plan is a collectively 

bargained plan involving two or more 

unrelated employers. The 

multiemployer insurance program 

protects the benefits of approximately 

10.9 million workers and retirees in 

approximately 1,400 plans. This interim 

final rule deals with multiemployer 

plans. 

The multiemployer insurance 

program provides PBGC with tools to 

help plans that are insolvent or 

approaching insolvency to be able to 

pay guaranteed benefits.1 This help is 

primarily in the form of financial 

assistance loans under section 4261(a) 

of ERISA. Under that provision, when a 

multiemployer plan becomes insolvent, 

PBGC provides periodic financial 

assistance payments to the insolvent 

plan in amounts that, together with 

existing plan assets and any other plan 

income, are sufficient to pay guaranteed 

benefit amounts to participants and 

beneficiaries. In general terms, a plan is 

insolvent if it cannot pay benefits when 

due. 

The Multiemployer Pension Reform 

Act of 2014 (MPRA) created pathways 

under ERISA to help improve solvency 

for plans that are likely to become 

insolvent. Plans that are in critical and 

declining status 2 may apply to the U.S. 


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3Plans with suspended benefits pursuant to 

sections 305(e)(9) and 4245(a) of ERISA. 

4See sections 4262(k) and 4262(n) of ERISA. 

5See sections 4262(m) and 4262(n) of ERISA. 

Department of the Treasury (Treasury 

Department) for a suspension of benefits 

under section 305(e)(9) of ERISA to 

avoid insolvency. Generally, under this 

process, these plans may propose a 

reduction of benefits to no less than 110 

percent of PBGC’s guaranteed benefit 

amount if a plan is projected to become 

insolvent before paying all promised 

benefits when due. A plan may also 

request partition assistance from PBGC 

(under section 4233 of ERISA), which 

allows the plan to transfer responsibility 

for paying monthly guaranteed benefits 

for a portion of the plan’s participants 

and beneficiaries to a newly created 

successor plan that receives financial 

assistance from PBGC. When a partition 

is approved, the original plan has an 

ongoing obligation to pay and preserve 

benefits for all participants at levels 

above PBGC’s guaranteed amounts. 

MPRA also allows critical and 

declining plans that are likely to become 

insolvent to request financial assistance 

from PBGC upon merging with another 

multiemployer plan (‘‘facilitated 

mergers’’ under section 4231(e) of 

ERISA). Financial assistance to the 

merged plan may promote mergers with 

more viable plans and eliminate the 

need for benefit reductions. 

In recent years, Congress considered a 

range of proposals to address the 

funding crisis in the multiemployer 

pension system, including proposals to 

expand PBGC’s partition authority, loan 

programs, and broader reforms to 

stabilize multiemployer plans and 

extend the solvency of PBGC’s 

multiemployer insurance program. In 

2018, Congress created the Joint Select 

Committee on Solvency of 

Multiemployer Pension Plans to 

develop recommendations to address 

the problems in the multiemployer 

pension system. While the Committee 

did not issue recommendations before 

its term expired, it succeeded in 

creating a broader understanding of the 

issues and identifying potential reforms. 

While not a permanent solution, 

Congress enacted, and the President 

signed into law on March 11, 2021, the 

American Rescue Plan (ARP) Act of 

2021 (Pub. L. 117–2), to address the 

immediate crisis facing severely 

underfunded multiemployer plans and 

the solvency of PBGC, and to assist 

plans by providing funds to reinstate 

suspended benefits. 

American Rescue Plan Act of 2021— 

Special Financial Assistance Program 

for Financially Troubled Multiemployer 

Plans 

ARP creates a program to enhance 

retirement security for millions of 

Americans by providing SFA to 

financially troubled multiemployer 

plans. The SFA program is expected to 

assist plans covering more than 3 

million participants and beneficiaries, 

including the provision of funds to 

reinstate suspended monthly benefits 

going forward, and for make-up 

payments to restore previously 

suspended benefits of participants and 

beneficiaries. In turn, the SFA program 

improves the financial condition of 

PBGC’s multiemployer insurance 

program. It is expected that over 100 

plans that would have otherwise 

become insolvent during the next 15 

years will instead forestall insolvency as 

a direct result of receiving SFA. 

Section 9704 of ARP amends section 

4005 of ERISA to establish an eighth 

fund for SFA from which PBGC will 

provide SFA to multiemployer plans 

under the program created by the 

addition of section 4262 of ERISA. The 

eighth fund will be credited with 

amounts from time to time as the 

Secretary of the Treasury, in 

conjunction with the Director of PBGC, 

determines appropriate, from the 

general fund of the Treasury 

Department. Transfers from the general 

fund to the eighth fund cannot occur 

after September 30, 2030. 

New section 4262 of ERISA sets forth 

the requirements for SFA, including 

specifying which plans are eligible to 

apply, the cutoff date for applications, 

actuarial assumptions, determinations 

on applications, restrictions on the use 

of SFA, and that certain plans with 

suspended benefits 3 must reinstate 

those benefits and provide make-up 

payments to restore previously 

suspended benefits. Unlike the financial 

assistance provided under section 4261 

of ERISA, which is in the form of a loan 

and provided in periodic payments, a 

plan receiving SFA under section 4262 

has no obligation to repay SFA, and 

PBGC must pay SFA in the form of a 

single, lump sum payment. 

Section 4262 of ERISA requires PBGC 

to prescribe in regulations or other 

guidance the requirements for SFA 

applications, including an alternate 

application for plans with an approved 

partition under section 4233 of ERISA. 

PBGC also may prioritize applications 

during the first 2 years after March 11, 

2021, prescribe how SFA funds are to be 

invested, and impose conditions on 

plans that receive SFA. 

Although PBGC’s rulemakings 

generally involve coordination and 

consultation with the other two agencies 

that have jurisdiction over pension 

plans (the Treasury Department and the 

U.S. Department of Labor (Department 

of Labor or Department)), section 4262 

of ERISA specifically provides for 

consultation with the Treasury 

Department particularly on SFA 

applications involving a plan’s 

reinstatement of suspended benefits.4

The statute also provides for 

consultation with the Treasury 

Department with respect to a plan that 

proposes in its application to change 

assumptions, with respect to a plan that 

files an application under PBGC 

regulations or guidance prioritizing 

certain applications, and on the 

conditions imposed on plans that 

receive SFA.5 This interim final rule is 

a result of that coordination and 

consultation, which will continue as the 

SFA program gets underway at PBGC 

and plans begin to apply. 

Listening Sessions and Request for 

Comment 

After ARP was enacted, interested 

parties requested to share their views 

with PBGC, and PBGC held listening 

sessions at their request. 

Representatives of PBGC’s Board of 

Directors (the Secretaries of the 

Department of Labor, the Treasury 

Department, and the Department of 

Commerce) also participated in these 

listening sessions. Most of the 

requesters provided letters or agendas 

outlining their concerns. In addition, 

other interested parties sent PBGC 

letters communicating their views. 

PBGC considered the views and 

concerns expressed, which helped to 

inform this interim final rule. 

PBGC has included a request for 

public comment in this rulemaking and 

encourages all interested parties to 

submit their comments, suggestions, 

and views concerning the rule’s 

provisions. PBGC is particularly 

interested in feedback on where any 

additional guidance may be needed. 

Overview and Section-by-Section 

Discussion of Regulation 

Overview and Purpose 

To implement section 4262 of ERISA, 

PBGC is adding a new part 4262 to its 

regulations, ‘‘Special Financial 

Assistance by PBGC.’’ The purpose of 

this new part is to prescribe rules 

governing applications for SFA and 

related requirements. Part 4262 provides 

guidance to multiemployer pension 

plan sponsors on eligibility, 

determining the amount of SFA, content 

of an application for SFA, the process of 

applying, PBGC’s review of 


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36600 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

6Section 412(a)(1) of the Internal Revenue Code 

(the Code) requires a pension plan to satisfy the 

minimum funding standard applicable to the plan 

for each plan year. In the case of a multiemployer 

defined benefit plan, section 412(a)(2)(C) provides 

that participating employers must make 

contributions under the plan for a plan year that, 

in the aggregate, are sufficient to ensure that the 

plan does not have an accumulated funding 

deficiency under section 431 as of the end of the 

plan year. Section 412(e)(4) provides that the 

minimum funding rules under section 412 apply 

until the last day of the plan year in which a plan 

terminates within the meaning of section 

4041A(a)(2) of ERISA (that is, termination by mass 

withdrawal or a cessation of the obligation of all 

employers to contribute under the plan). 

Accordingly, the rules of section 431 of the Code 

do not apply to such a plan for periods after the 

plan year of termination. 

The Internal Revenue Service (IRS) has informed 

PBGC that section 432 of the Code, which provides 

additional funding rules for multiemployer plans in 

endangered status or critical status, likewise does 

not apply to a multiemployer plan for periods after 

the plan year of termination within the meaning of 

section 4041A(a)(2) of ERISA. This is consistent 

with section 301(c) of ERISA (over which the IRS 

has interpretive jurisdiction pursuant to section 101 

of Reorganization Plan No. 4 of 1978 (43 FR 

47713)), which provides that part 3 of title I of 

ERISA, including the minimum funding rules 

parallel to sections 412, 431, and 432 of the Code, 

applies until the last day of the plan year in which 

the plan terminates within the meaning of section 

4041A(a)(2) of ERISA. 

7All line references in this section are to the 2020 

Form 5500 and schedules. 

8The 2020 Form 5500 instructions provide that, 

with certain exceptions, assets reported on line 2a 

of Schedule MB should be the same as reported on 

line 1l, (column a) of the Schedule H. 

9PBGC notes that Financial Accounting 

Standards Board (FASB) Accounting Standards 

Codification (ASC) 960, Plan Accounting—Defined 

Benefit Pension Plans 960–310–25–3A states: ‘‘A 

multiemployer plan may also have a receivable for 

a withdrawing employer’s share of the plan’s 

unfunded liability. The plan should record the 

receivable, net of any allowance for an amount 

deemed uncollectible, when entitlement has been 

determined.’’ 

10The withdrawal liability payments due to be 

received by the plan are not included in the 

actuarial value of assets or the market value of 

assets for purposes of sections 431 and 432 of the 

Code and the corresponding sections 304 and 305 

of ERISA. 

applications, and restrictions and 

conditions. 

Eligible Multiemployer Plans 

There are four types of multiemployer 

plans identified in section 4262(b)(1) of 

ERISA that are eligible to apply for SFA 

under § 4262.3 of PBGC’s regulation. 

This exclusive list consists of: 

(1) A plan in critical and declining 

status (within the meaning of section 

305(b)(6) of ERISA) in any plan year 

beginning in 2020, 2021, or 2022. 

(2) A plan with a suspension of 

benefits approved under section 

305(e)(9) of ERISA as of the date ARP 

became law (March 11, 2021). 

(3) A plan certified to be in critical 

status (within the meaning of section 

305(b)(2) of ERISA) that has a modified 

funded percentage of less than 40 

percent and a ratio of active to inactive 

participants which is less than 2 to 3, in 

any plan year beginning in 2020, 2021, 

or 2022. 

(4) A plan that became insolvent for 

purposes of section 418E of the Internal 

Revenue Code (the Code) after 

December 16, 2014 (the date MPRA 

became law), has remained insolvent, 

and has not terminated under section 

4041A of ERISA as of March 11, 2021. 

PBGC notes that a plan that 

terminated by mass withdrawal in a 

plan year that ended before January 1, 

2020, is not eligible for SFA under 

section 4262(b)(1)(A) of ERISA and 

§ 4262.3(a)(1) (plans that are in critical 

and declining status (within the 

meaning of section 305(b)(6) of ERISA) 

in any plan year beginning in 2020, 

2021, or 2022). This is because the 

additional funding rules for plans in 

endangered, critical, and critical and 

declining status under section 432 of the 

Code do not apply to such a plan in a 

plan year that begins in 2020, 2021, or 

2022.6 Accordingly, a plan that 

terminated by mass withdrawal before 

the plan year selected to determine 

eligibility under § 4262.3(a)(1) is not in 

critical and declining status for that year 

and therefore is not eligible for SFA. For 

example, if a plan in critical and 

declining status terminated by mass 

withdrawal in 2019, the plan would not 

be eligible for SFA under § 4262.3(a)(1) 

because it was not in critical and 

declining status in 2020, 2021, or 2022. 

However, if a plan in critical and 

declining status terminated by mass 

withdrawal in 2020, the plan would be 

eligible for SFA. 

With respect to critical status plans, 

PBGC provides some clarifications on 

eligibility. Section 4262.3(c)(1) clarifies 

that a plan that has elected to be in 

critical status under section 305(b)(4) of 

ERISA but is not certified to be in 

critical status under section 305(b)(2) is 

not an eligible multiemployer plan. To 

ensure uniformity for applications and 

clarify what data to use to satisfy 

eligibility requirements for critical 

status plans under section 4262(b)(1)(C), 

§ 4262.3(a)(3) and (c)(2) specify the data 

that is used for this purpose, including 

specifying line items entered on the 

Form 5500 Schedule MB to determine 

the ‘‘modified funded percentage,’’ and 

line items entered on the Form 5500 to 

determine the ratio of active to inactive 

participants. 

Under the regulation, the conditions 

for eligibility do not need to be satisfied 

for the same plan year. PBGC adds this 

flexibility in recognition that the filing 

dates for the certification of plan status 

and the Form 5500 are not the same. 

Generally, the due date for filing the 

certification of plan status is well over 

a year before the due date for filing the 

Form 5500 for the same plan year. In 

addition, data used for the certification 

of plan status for a plan year may be 

from a different year than the data used 

for the Form 5500 for the same plan 

year, and section 4262 of ERISA is 

unclear as to the date within a plan year 

as of which data used to satisfy the 

conditions is determined. 

Section 4262(b)(2) of ERISA defines 

‘‘modified funded percentage’’ to mean 

the percentage equal to a fraction the 

numerator of which is the current value 

of plan assets (as defined in section 

3(26) of ERISA) and the denominator of 

which is current liabilities (as defined 

in section 431(c)(6)(D) of the Code). 

The numerator for the plan’s funded 

percentage under § 4262.3(c)(2) is 

calculated using the current value of 

assets on line 2a of Schedule MB,7

which is also required to be reported on 

line 1l, column (a) of the Schedule H,8

and adding to it the current value of 

withdrawal liability payments due to be 

received by the plan on an accrual basis 

reflecting a reasonable allowance for 

amounts considered uncollectible 9 (if 

not already included in the current 

value of net assets reported on line 2a). 

The value calculated for the numerator 

is consistent with the meaning of 

current value of assets under section 

3(26) of ERISA.10 The current value of 

assets includes total cash contributions 

due to be received on an accrual basis. 

The denominator for the plan’s 

funded percentage under § 4262.3(c)(2) 

is calculated using the current liability 

measurement from line 2b(4) column 

(2). This entry requires current liability 

to be calculated using the assumptions, 

including interest rate, in the 

instructions for line 1d(2)(a) of the 

Schedule MB. Those instructions 

provide how to calculate current 

liability under section 431(c)(6)(D) of 

the Code and provide specifically that 

the interest rate used to compute current 

liability must be in accordance with 

guidelines issued by the Treasury 

Department and the Internal Revenue 

Service (IRS) and within the interest 

rate rules referred to under section 

431(c)(6)(D), which are outlined under 

section 431(c)(6)(E). PBGC notes that the 

current liability is a measure derived 

using an interest rate chosen by the 

actuary within a ‘‘permissible range’’ 

under section 431(c)(6)(E). Since the 

selection of the interest rate by the 

actuary is part of the determination of 

current liability, for purposes of 

measuring the modified funded 


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11Furthermore, it would not be a reasonable 

result if the amount of SFA were to be calculated 

under a formula that disregards the plan’s available 

resources, which could lead to a windfall for a plan 

that needs only a small amount of SFA to pay 

benefits. PBGC estimates that under such an 

approach, the total amount of SFA distributed 

under the program would increase by 2 to 4 times 

the estimated $94 billion amount projected under 

PBGC’s ME–PIMS model. See section (4), Estimated 

Impact of Regulatory Action, of the Regulatory 

Impact Analysis section. 

percentage PBGC has chosen to accept 

the interest rate selected by the actuary 

and not to require the use of an alternate 

interest rate. 

As explained earlier in this section of 

the preamble, section 4262(b)(1)(C) of 

ERISA requires as one of the conditions 

of eligibility, for critical status plans to 

have a ratio of active to inactive 

participants that is less than 2 to 3. The 

statute does not specify what participant 

count to use. To fill in this gap, the 

regulation refers to end-of-year 

participant counts on the Form 5500. 

On the 2020 Form 5500, these are the 

number of participants identified on 

line 6a(2) (for total number of active 

participants) and the sum of lines 6b, 

6c, and 6e (for inactive participants: 

Retired or separated participants 

receiving benefits, other retired or 

separated participants entitled to future 

benefits, and deceased participants 

whose beneficiaries are receiving or are 

entitled to receive benefits). Requiring 

the use of these counts provides for 

uniformity among applications in the 

use of participant counts to determine 

the ratio. 

Assumptions for Determining Eligibility 

A plan’s eligibility for SFA is 

determined by PBGC in accordance with 

§ 4262.3(d) of the regulation, which 

incorporates the actuarial assumptions 

for determining eligibility found in 

sections 4262(e)(1) and (e)(4) of ERISA. 

When a plan sponsor applies for SFA 

claiming the plan’s eligibility based on 

a certification of either critical status or 

critical and declining status completed 

before January 1, 2021, PBGC is required 

to accept the assumptions incorporated 

into that certification unless the 

assumptions are clearly erroneous. 

When a plan sponsor applies for SFA 

and claims the plan is eligible based on 

a certification of plan status for a plan 

year that was not completed before 

January 1, 2021, the sponsor must 

determine whether the plan is in critical 

status or critical and declining status 

using the assumptions that were used in 

the plan’s most recently completed 

certification before January 1, 2021, 

unless those assumptions (excluding the 

plan’s interest rate) are unreasonable. A 

plan sponsor that determines that one or 

more of the assumptions used in the 

plan’s most recently completed 

certification before January 1, 2021, is 

unreasonable may propose changes to 

the assumptions in the plan’s 

application (except to the interest rate) 

by disclosing the changes, describing 

why such assumptions are no longer 

reasonable, and demonstrating that the 

changed assumptions are reasonable. 

The information required to be 

included as part of an application, 

including to support changes to 

assumptions, is described in §§ 4262.6 

through 4262.8 of the regulation. 

PBGC’s review of the assumptions used 

by a plan are described in § 4262.5 of 

the regulation. 

Amount of Special Financial Assistance 

Under section 4262(a)(1) of ERISA, 

PBGC is to provide SFA to an eligible 

multiemployer plan upon application. 

Under section 4262(j)(1), the amount of 

SFA to be provided 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 . . . .’’ This is referred to in 

section 4262(i)(1) as ‘‘the amount 

necessary as demonstrated by the plan 

sponsor.’’ PBGC believes that the plain 

meaning of the statutory language is that 

SFA is the amount by which a plan’s 

resources fall short of its obligations, 

taking all plan resources and obligations 

into account. 

The heart of the matter is found in the 

requirement that SFA be ‘‘the amount 

necessary’’ or ‘‘required for the plan to 

pay all benefits due.’’ To the extent that 

a plan has other means available to pay 

benefits, it does not require or need SFA 

for that purpose.11 Thus, all of a plan’s 

resources must be considered in 

determining the amount of SFA for the 

plan. Moreover, since the determination 

must be made by looking through the 

end of the last plan year ending in 2051, 

the resources to be considered must 

include plan assets and income 

(contributions, investment returns, etc.). 

If Congress had contemplated the 

exclusion of these resources in the 

calculation of the amount of SFA 

‘‘required for the plan,’’ it would have 

done so explicitly. 

Additionally, all of a plan’s benefits 

must be considered, as the statute says 

clearly ‘‘all benefits.’’ And, because plan 

expenses must be paid to keep the plan 

in operation and capable of paying 

benefits, all expenses must likewise be 

taken into account. In short, the 

statutory language, by requiring the 

payment of all benefits due, mandates 

by clear implication the consideration of 

all plan obligations and resources in 

determining the amount of SFA that is 

needed or is ‘‘necessary.’’ 

Some interested parties commented to 

PBGC on section 4262(j)(1) of ERISA 

that, in determining the amount of SFA, 

PBGC should exclude from 

consideration all or a portion of one or 

more plan obligations or resources, such 

as existing assets, expected benefit 

payments, earnings on assets, 

contributions, withdrawal liability, and 

administrative expenses. The items to 

be disregarded, and the theories on 

which they are to be ignored, differ from 

one commenter to another. 

The common thread among these 

comments is that they advance a 

particular policy goal or desired 

outcome and an approach designed to 

fit that desired policy goal or outcome. 

Such desired goals include providing 

generous assistance, long-term 

sustainability, avoiding a recurrence of 

the current crisis, protection of retirees, 

and simplicity. The approaches 

advanced to achieve such goals vary 

among commenters, but include 

disregarding resources such as current 

assets, or the portion thereof needed to 

fund post-2051 payments; future 

contributions; and other sources of 

revenue. In considering these 

comments, PBGC has concluded that the 

approaches recommended in these 

comments could be supported only by 

a strained reading of the clear language 

of section 4262(j)(1), which defines the 

SFA amount as 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 under this section 

and ending on the last day of the plan 

year ending in 2051 . . . .’’ 

The inability to project resources and 

obligations with absolute precision for 

30 years prompted another objection to 

the plain meaning of the language in 

question from some interested parties. 

The benefits projected to be paid into 

the future will rarely turn out to be the 

same as the benefits that actually will be 

paid (which can only be determined in 

hindsight). These interested parties 

argued that the amount of SFA is 

insufficient unless it enables a plan to 

pay ‘‘all benefits’’ actually due through 

the last plan year in 2051, for example 

by assuming zero mortality for that 

period. However, this approach would 

be a radical departure from accepted 

actuarial practice and would be at odds 

with the pattern of actuarial 

determinations that underlies section 

4262 of ERISA. PBGC thus considers 

this suggestion to be contradictory to the 

statute. 


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36602 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

Calculating the Amount of SFA 

Section 4262.4(a) provides that the 

amount of SFA for a plan is the amount 

(if any), subject to adjustment for the 

date of payment as described in 

§ 4262.12, by which the value of all plan 

obligations exceeds the value of all plan 

resources, determined as of the plan’s 

SFA measurement date and limited to 

the SFA coverage period (the period 

ending on the last day of the last plan 

year ending in 2051). The SFA 

measurement date is the last day of the 

calendar quarter immediately preceding 

the date the plan’s application was filed. 

The value of plan obligations under 

§ 4262.4(b) is the sum of the present 

value of specified benefit payments and 

administrative expenses. The value of 

benefit payments is calculated as the 

present value of benefit payments 

expected to be paid during the SFA 

coverage period including any 

reinstatement of benefits attributable to 

the elimination of reductions in a 

participant’s or beneficiary’s benefit due 

to a suspension of benefits under 

sections 305(e)(9) or 4245(a) of ERISA as 

required under § 4262.15 or restoration 

of benefits under 26 CFR 1.432(e)(9)– 

1(e)(3). The reinstatement of benefits 

must be calculated assuming such 

reinstatements are paid beginning as of 

the SFA measurement date instead of 

the date SFA is paid. The value of 

administrative expenses is calculated as 

the present value of administrative 

expenses expected to be paid during the 

SFA coverage period (excluding the 

amount owed to PBGC under section 

4261). 

The value of plan resources under 

§ 4262.4(c) is the total of the fair market 

value of assets on the SFA measurement 

date and the present value of future 

contributions, withdrawal liability 

payments, and other payments expected 

to be made to the plan (excluding the 

amount of financial assistance under 

section 4261 of ERISA and the amount 

of SFA to be received by the plan) 

during the SFA coverage period. 

The amount of financial assistance 

owed to PBGC under section 4261 of 

ERISA, if any, is excluded in the 

calculation of SFA in the plan’s 

application. Instead, it is added to the 

amount of SFA to be paid to the plan 

under § 4262.12 as of the date PBGC 

sends payment of SFA, offset by the 

value of financial assistance payments 

under section 4261 received by the plan 

following the SFA measurement date, 

accumulated with interest. 

The projections in § 4262.4(b)(1) and 

(2) and (c)(2) must be performed on a 

deterministic basis using a single set of 

assumptions as provided in § 4262.4(d). 

The deterministic projections must be 

based on recent participant census data. 

Participant census data must be as of the 

first day of the plan year in which the 

plan’s initial application is filed, or, if 

the date on which the plan’s initial 

application is filed is less than 270 days 

after the beginning of the current plan 

year and the actuarial valuation for the 

current plan year is not complete, the 

projections may instead be based on the 

participant census data as of the first 

day of the plan year preceding the year 

in which the plan’s initial application is 

filed. If a plan experiences a significant 

event between the date of the plan’s 

most recent participant census date and 

the date the application is filed, PBGC’s 

assumptions guidance (issued on 

PBGC’s website at www.pbgc.gov/ 

guidance) provides guidelines on how 

to reflect that significant event. Plans 

may, but are not required to, use the 

guidelines if they are reasonable for the 

plan. 

The SFA measurement date, which is 

the beginning date for the deterministic 

projections, is a date certain in the past 

instead of a payment date in the future 

because the SFA payment date 

(described under § 4262.12) is unknown 

at the time the plan sponsor files the 

application. This approach of using a 

date certain in the past instead of a date 

in the future simplifies the calculation 

but does not change the SFA amount 

that would otherwise be calculated as of 

the payment date because: (i) Both the 

SFA-eligible plan resources and SFAeligible plan obligations will be reduced 

equally by the benefit payments and 

expenses between those two dates, (ii) 

the contributions between those two 

dates would typically need to be 

estimated either way, and (iii) the SFA 

amount is adjusted for interest between 

those two dates at the interest rate used 

to calculate the present values as of the 

SFA measurement date. 

Section 4262.4(e)(1) of the regulation 

specifies the interest rate assumption a 

plan must use to calculate the amount 

of SFA in the plan’s application. Section 

4262(e)(2)(A) of ERISA requires a plan 

to use an interest rate that is based on 

the rate used in the plan’s most recently 

completed certification of plan status 

before January 1, 2021, subject to an 

interest rate limit, but does not consider 

that there are potentially two rates used 

in a certification of plan status: A shortterm rate (used for projecting plan 

assets) and a long-term rate (used to 

determine plan liabilities and for 

interest adjustments in the funding 

standard account). As the determination 

of the SFA amount involves long-term 

projections, the regulation specifies that 

the SFA amount is calculated based on 

the long-term rate that was used for 

funding standard account purposes in 

the plan actuary’s projections that are 

part of the certification of plan status. 

The interest rate limit specified in 

section 4262(e)(3) of ERISA is the rate 

that is 200 basis points higher than the 

rate specified in section 303(h)(2)(C)(iii) 

(disregarding modifications made under 

clause (iv) of such section) ‘‘for the 

month in which the plan’s application 

for SFA is filed or the 3 preceding 

months.’’ This provision places a ‘‘cap’’ 

on the interest rate, and that the cap is 

any permissible rate for a month during 

the 4-month period ending with the 

month in which the plan’s application 

was filed. 

Section 4262(f) of ERISA suggests that 

a plan may have multiple filing dates by 

providing two applications deadlines: 

One for initial applications and one for 

revised applications. There is no limit to 

the number of times that a plan sponsor 

may file revised applications as long as 

the last revised application is filed by 

the statutory deadline of December 31, 

2026. Once PBGC has accepted an 

application for processing, PBGC 

believes that it is in the best interest of 

all parties to avoid the duplicative work 

and delays that would result if a revised 

application were to use a different 

interest rate. To prevent multiple filings 

for purposes of changing the interest 

rate, PBGC establishes a rule in 

§ 4262.11(c) that the assumed interest 

rate will always be the rate used in the 

plan’s initial application. 

Accordingly, under § 4262.4(e)(1), the 

assumed interest rate is the interest rate 

that is the lesser of the rate used by the 

plan for funding standard account 

projections in the plan’s most recently 

completed certification of plan status 

before January 1, 2021, or the rate that 

is 200 basis points higher than the rate 

specified in section 303(h)(2)(C)(iii) of 

ERISA (disregarding modifications 

made under clause (iv) of such section) 

for any month selected by the plan in 

the 4-month period ending with the 

month in which the plan’s application 

was filed (or the month in which the 

initial application was filed if there was 

more than one filing date). If an 

application is revised as provided under 

§ 4262.11 of the regulation, the interest 

rate used for the revised application 

must be the same as the interest rate 

used for the initial application. 

Some interested parties commented 

that the interest rate required under 

section 4262(e) of ERISA should only 

apply to the earnings on current plan 

assets and that PBGC should allow a 

separate rate to be used to determine the 

amount of SFA required to pay for 

benefits not provided by current plan 


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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 36603 

12PBGC’s inherent authority under section 

4002(b)(3) of ERISA allows PBGC to adopt 

regulations to carry out the purposes of the title IV 

insurance program. 

assets. Of those commenters, some 

contend that because the 2020 

certifications of plan status did not 

include an interest rate assumption for 

SFA, the interest rate should reflect 

expected returns for investment grade 

bonds. To determine eligibility, for 

certifications of plan status completed 

after December 31, 2020, section 

4262(e)(1) requires a plan to use its most 

recently completed certification of plan 

status before January 1, 2021, unless 

such assumptions, excluding the plan’s 

interest rate, are unreasonable 

(emphasis added). To determine the 

amount of SFA, section 4262(e)(2) 

mandates that a plan must ‘‘use the 

interest rate used by the plan in its most 

recently completed certification of plan 

status before January 1, 2021, provided 

that such interest rate may not exceed 

the interest rate limit.’’ These provisions 

do not require the interest rate used 

under the certification of plan status to 

be reasonable for purposes of eligibility 

or determining the amount of SFA. 

Under section 4262(e)(4), if a plan 

determines that use of one or more prior 

assumptions is unreasonable, the plan 

may propose to change such 

assumption. This provision specifically 

states that the plan may not propose a 

change to the interest rate required for 

eligibility or SFA amount. In addition, 

PBGC does not have authority to 

provide a different rate or bifurcate the 

statutorily mandated interest rate. 

For assumptions other than the 

interest rate, § 4262.4(e)(2) provides that 

a plan must use the assumptions that 

the plan used in its most recently 

completed certification of plan status 

before January 1, 2021, unless such 

assumptions are unreasonable. If a plan 

determines that use of one or more of 

the assumptions in its most recently 

completed certification of plan status 

before January 1, 2021, is unreasonable, 

the plan may propose in its application 

to change the assumptions as provided 

in § 4262.5 of the regulation. 

The information required to be 

included as part of an application, 

including to support changes to 

assumptions, is described in §§ 4262.6 

through 4262.8 of the regulation. 

PBGC’s review of the assumptions used 

by a plan is described in § 4262.5 of the 

regulation. 

Calculating the Amount of SFA With 

Respect to Certain Events 

Section 4262.4(f) addresses the 

possibility that a plan may implement 

certain changes that could entitle the 

plan to more SFA than was intended 

under section 4262 of ERISA. In these 

situations, the amount of SFA that 

would apply to a plan is limited to the 

amount of SFA determined as if the 

events described in § 4262.4(f) had not 

occurred. These events include mergers, 

transfers of assets or liabilities 

(including spinoffs), certain increases in 

accrued or projected benefits, and 

certain reductions in contribution rates. 

The limitation applies to events that 

occur between July 9, 2021, and the SFA 

measurement date. To accommodate the 

possibility of multiple events, the 

limitation does not apply on an eventby-event basis but is based on 

comparing the amount of SFA a plan 

applies for with the amount of SFA a 

plan (or all plans in the case of a 

merger) would have received had the 

events not occurred. 

Section 4262(b)(1) of ERISA 

establishes criteria for eligibility of a 

multiemployer plan for SFA, and 

section 4262(j) provides for determining 

the amount of the SFA, but these 

provisions do not address the situation 

in which a multiemployer plan has 

engaged in a transaction that affects the 

amount of SFA to which a plan is 

entitled, including through the 

manipulation of the eligibility criteria. 

Moreover, section 4262(e)(2)(B) 

provides, as a general rule, that the 

actuarial assumptions to be used by a 

plan are the assumptions used in the 

plan’s actuarial certification for the most 

recently completed certification of plan 

status before January 1, 2021 (unless 

those assumptions are unreasonable), 

indicating that the plan applying for 

SFA must have been in existence and 

had an actuarial certification as to its 

status before January 1, 2021. The 

provisions regarding interest rate 

assumptions under section 4262(e)(2)(A) 

are specific to the plan in its most recent 

certification of plan status completed 

before January 1, 2021, and, under the 

terms of section 4262(e), those 

assumptions cannot be changed. A 

manipulation of those rates via a merger 

would not be consistent with that 

requirement. Although the statute does 

not directly address plan mergers, each 

plan’s assumptions from the most 

recently completed pre-2021 

certification of plan status must be 

maintained in order for section 4262(e) 

to have meaning with respect to the 

plans that merged. This rule fills the gap 

left in the statute for the calculation of 

SFA for plans that have been involved 

in a merger. 

It is likewise appropriate for PBGC, as 

a prudent steward of taxpayer funds, 

and with responsibility for carrying out 

the purposes of the title IV insurance 

program,12 to impose conditions on 

plans receiving SFA designed to ensure 

that plans receive no more than the 

amount of SFA to which they are 

entitled. PBGC concludes that, to 

achieve that end, it is reasonable not to 

give effect to changes made to a plan’s 

structure or terms on or after July 9, 

2021, if such changes either artificially 

inflate the amount of SFA to which a 

plan is entitled or convert an ineligible 

plan into an eligible plan. 

Section 4262(m)(1) of ERISA 

expressly authorizes PBGC, in 

consultation with the Secretary of the 

Treasury, to impose reasonable 

conditions ‘‘on an eligible 

multiemployer plan that receives 

special financial assistance’’ relating to 

certain aspects of plan terms or 

operations. Such conditions include 

those relating to the diversion of 

contributions to, and allocation of 

expenses to, other benefit plans; 

increases in future accrual rates and any 

retroactive benefit improvements; and 

reductions in employer contribution 

rates. PBGC’s authority to impose 

reasonable conditions under section 

4262(m)(1) is not limited to restrictions 

on a plan following its receipt of SFA 

given that these conditions apply to a 

plan that ‘‘receives’’ SFA, rather than a 

plan that has received SFA. That 

understanding of section 4262(m)(1) 

finds further support in section 

4262(m)(2), which restricts the 

conditions that PBGC can impose not 

only ‘‘following receipt of’’ SFA, but 

also ‘‘as a condition of’’ SFA. That broad 

prohibition would be unnecessary if 

PBGC’s authority under section 

4262(m)(1) was limited to only postreceipt conditions. 

Accordingly, pursuant to section 

4262(m) of ERISA, in conjunction with 

sections 4002(b)(3) and 4262(e), PBGC is 

authorized to impose reasonable 

conditions that ensure that SFA is 

provided to plans in an amount that is 

not inflated by way of contrived events. 

(a) Mergers 

The rule provides that if two or more 

plans are merged, then the SFA is 

limited so that it does not exceed the 

sum of the SFA that would have been 

calculated for all of the plans involved 

in the merger had the plans applied 

separately for SFA. Thus, a plan that 

would not have been entitled to any 

SFA if not for a merger that occurs on 

or after July 9, 2021, cannot become 

entitled to SFA by merging with a plan 

that also would not otherwise be 

entitled to any SFA. Further, a plan may 

not increase the amount of SFA to 


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36604 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

13Actuarial Standards of Practice (ASOPs) are 

issued by the Actuarial Standards Board and are 

available at http://www.actuarialstandardsboard.

org/standards-of-practice. Certain ASOPs, 

including ASOPs Nos. 4, 23, 27, 35, 41, and 56 may 

be relevant to the actuary’s work related to special 

financial assistance, including the assessment of the 

reasonableness of the actuary’s assumptions and 

methods. 

which it is entitled by merging with 

another plan or plans on or after July 9, 

2021. 

As explained earlier in this section of 

the preamble, this condition fills the gap 

in the rules for the calculation of SFA 

for plans that merge after the most 

recent certification of plan status 

completed before January 1, 2021. In 

addition, this requirement is consistent 

with PBGC’s authority under section 

4262(m)(1) of ERISA to impose 

reasonable conditions relating to the 

‘‘diversion of contributions to, and 

allocation of expenses to, other benefit 

plans.’’ When two or more plans merge, 

a predecessor plan has diverted its 

contributions and allocated its expenses 

to the merged plan. Specifically, a 

merged plan, which combines assets 

and liabilities of two or more plans, 

each with its own set of participants and 

beneficiaries, and to all of whom all the 

assets (and, thus, all the contributions) 

must be available following the merger, 

is, in effect, diverting contributions 

intended to benefit one set of 

participants to another. 

(b) Transfers 

The rule provides that where assets or 

liabilities are transferred, an applicant 

plan’s SFA is limited based on the 

amount of SFA the plan would be 

entitled to if the transfer did not occur. 

Similar to mergers, this requirement is 

premised on PBGC’s authority under 

section 4262(m)(1) of ERISA to impose 

reasonable conditions relating to the 

‘‘diversion of contributions to, and 

allocation of expenses to, other benefit 

plans.’’ 

(c) Other Events 

Similar considerations apply to 

benefit increases and contribution 

reductions. These events are also 

described in section 4262(m)(1) of 

ERISA, which permits PBGC to impose 

conditions on the receipt of SFA 

relating to ‘‘increases in future accrual 

rates and retroactive benefit 

improvements’’ and on ‘‘reductions in 

employer contribution rates.’’ These 

events are ordinarily thought of as 

increasing burdens on plans, and 

changes of this type are not commonly 

adopted with respect to plans in 

financial distress. Because SFA is 

designed to relieve financial distress, 

creating or increasing burdens could be 

a net plus for a plan. In other words, 

absent an effective condition in this 

regulation, these events would create 

artificial financial stress on the plan 

with the expectation that the plan 

would be compensated through the 

payment of additional SFA. To prevent 

this manipulation of the standards for 

determining the amount of SFA, the rule 

provides that SFA is limited to the 

amount that would have applied had 

the event not occurred. 

There is an exception to this rule. One 

possible benefit increase could arise 

from the restoration of benefit 

suspensions of retirees and beneficiaries 

in pay status that satisfies the 

requirements of 26 CFR 1.432(e)(9)– 

1(e)(3). Under that Treasury Department 

regulation, the restoration of benefits is 

not subject to the benefit increase 

restrictions under sections 432(e)(9)(E) 

or 432(f)(1)(B) of the Code, and an 

amendment restoring benefits that 

satisfies the requirements of 26 CFR 

1.432(e)(9)–1(e)(3) can be adopted at any 

time. Because a major goal of the SFA 

program is the prompt resumption of 

payment of suspended benefits, the 

restoration of these benefits should be 

encouraged and the exception in these 

regulations (under which benefit 

increases pursuant to such an 

amendment are taken into account in 

determining the amount of SFA) 

facilitates that goal. If an amendment 

that satisfies 26 CFR 1.432(e)(9)–1(e)(3) 

is adopted before the SFA measurement 

date, it is taken into account in 

determining the amount of the SFA (as 

the benefits attributable to the 

restoration would be if the amendment 

were adopted later), and the adoption is 

not an event that is subject to the 

limitation on SFA arising from potential 

abuses. 

Finally, if two or more plans are 

merged and any of the plans involved in 

the merger also experienced a transfer of 

assets or liabilities, a benefit increase, or 

a reduction in contributions that would 

be subject to the limitation in § 4262.4(f) 

during the period described in 

§ 4262.4(f)(1)(i), the amount of SFA for 

the merged plan must be determined by 

applying the limitation in 

§ 4262.4(f)(1)(i) to the plan that 

experienced the other applicable event. 

PBGC Review of Plan Assumptions 

PBGC’s review of an application for 

SFA will focus on the reasonableness of 

the plan’s and the plan actuary’s 

demonstration regarding the amount of 

SFA for the plan. Section 4262.5 sets 

forth how PBGC will review plan 

assumptions. 

As described earlier, instead of 

prescribing actuarial assumptions to be 

used for determining SFA, or calling on 

PBGC to prescribe assumptions, section 

4262 of ERISA generally looks to plan 

assumptions previously selected by the 

plan actuary for determining eligibility 

for and calculating the amount of SFA. 

A mechanism is provided for a plan to 

propose changes to actuarial 

assumptions if it determines that the use 

of one or more of its original 

assumptions (other than the interest 

rate) is unreasonable. 

Actuarial assumptions under section 

4262 of ERISA are derived from a plan’s 

certification of plan status under section 

305 of ERISA. In general, PBGC believes 

that a plan’s actuarial assumptions 

adopted for the certification of plan 

status (and not for entitlement to SFA) 

represent a neutral view of 

circumstances, unbiased by the prospect 

of receiving a substantial sum of money 

based on those assumptions. 

Accordingly, PBGC expects to give far 

less intensive scrutiny to ‘‘original’’ 

assumptions than to changed 

assumptions. 

PBGC is to accept actuarial 

assumptions incorporated in a plan’s 

certification of plan status completed 

before 2021 for purposes of eligibility 

under § 4262.3(d)(1) unless PBGC 

determines that such assumptions are 

‘‘clearly erroneous.’’ 

For all other purposes, PBGC will 

accept the assumptions used unless 

PBGC determines that they are 

unreasonable. Each of the actuarial 

assumptions and methods used for the 

actuarial projections (excluding the 

interest rate), must be reasonable in 

accordance with generally accepted 

actuarial principles and practices,13

taking into account the experience of 

the plan and reasonable expectations. 

To be reasonable, among other things, 

an actuarial assumption or method must 

be appropriate for the purpose of the 

measurement, reflect the actuary’s 

professional judgment, take into account 

current and historical data that is 

relevant to selecting the assumption for 

the measurement date, reflect the 

actuary’s estimate of future experience, 

and reflect the actuary’s observation of 

the estimates inherent in market data (if 

any). In addition, an actuarial 

assumption or method must be expected 

to have no significant bias (i.e., it is not 

significantly optimistic or pessimistic). 

If a plan determines that one or more 

original assumptions are unreasonable 

and must be changed, § 4262.5(c) 

provides that the plan’s application 

must describe why the original 

assumption is no longer reasonable, 

disclose the changed assumption, and 

demonstrate that the changed 


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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 36605 

assumption is reasonable. If there is a 

change in assumptions, each of the 

actuarial assumptions and methods 

(other than the interest rate) must be 

reasonable and the combination of those 

actuarial assumptions and methods 

(excluding the interest rate) must also be 

reasonable. With large amounts of SFA 

at stake, PBGC will be called on to 

perform a more searching analysis of 

any changed assumptions. While PBGC 

expects actuaries to be conscientious in 

setting assumptions, it is a process that 

presents many opportunities for 

judgment calls that may be influenced 

by the goal of maximizing SFA. 

Concurrent with this interim final 

rule, PBGC has issued guidelines for 

changes to certain assumptions that 

plans may use for purposes of 

determining eligibility for SFA and the 

amount of SFA. Plans may, but are not 

required to, use the guidelines if they 

are reasonable for the plan. Guidelines 

are available for contribution base units 

(CBUs), administrative expenses, 

mortality, contribution rates, and new 

entrant profiles, and can be found in the 

guidance issued on PBGC’s website at 

www.pbgc.gov/guidance. 

Additionally, PBGC acknowledges 

that plans may have a gap in the 

assumption for projected CBUs and 

administrative expenses used in the 

prior certification of plan status such 

that the assumption cannot be used ‘‘as 

is’’ for determining SFA. This is because 

plans generally do not project these 

assumptions more than 20 years in the 

future. In addition, before the enactment 

of ARP, if a plan was projected to 

become insolvent within 20 years, then 

the plan is unlikely to have assumptions 

for CBUs or plan-related administrative 

expenses for years after the projected 

insolvency date. These are natural 

practices for purposes of a certification 

of plan status, but a significant 

deficiency where those assumptions are 

needed to determine the amount of SFA. 

A plan can fill this gap with any 

reasonable extension of its CBU 

assumption and administrative expense 

assumption, but that will generally 

mean a ‘‘change’’ in assumptions, 

triggering a more intensive (and timeconsuming) review by PBGC. To assist 

applicants and aid in the review of a 

plan’s CBU assumption and 

administrative expense assumption, 

PBGC has developed ‘‘standard’’ 

extensions that plans can use to 

complete the assumption set for a plan 

that otherwise can use its original 

assumptions. These assumptions are 

described in the guidance mentioned 

earlier in this section of the preamble. 

Information To Be Filed 

Sections 4262.6 through 4262.8 of the 

regulation describe the information that 

must be included in a plan’s SFA 

application. Section 4262.6 summarizes 

the requirements for an application to 

be considered complete, including plan 

information; actuarial and financial 

information (including the amount of 

SFA requested); a completed checklist 

(per the SFA instructions on PBGC’s 

website at www.pbgc.gov); the signature 

of an authorized trustee who is a current 

member of the board of trustees; a 

signed penalties of perjury statement; a 

copy of the executed plan amendment 

providing that, beginning with the SFA 

measurement date, the plan must be 

administered in accordance with the 

restrictions and conditions specified in 

section 4262 of ERISA and this 

regulation; a copy of the proposed plan 

amendment to reinstate benefits and pay 

make-up payments and certification by 

the plan sponsor that the plan 

amendment will be adopted timely; and 

information required by PBGC to clarify 

or verify the information in a filed 

application. If any of the information 

required under this part and in the SFA 

instructions is missing from the filed 

application, the application will not be 

considered complete. 

The SFA instructions, including 

templates, supplement the regulation 

and provide guidance to plan sponsors 

and practitioners on how to prepare and 

file the required application 

information. 

Sections 4262.6 through 4262.8 and 

the instructions specify the minimum 

necessary plan, actuarial, and financial 

information that PBGC requires to 

approve or deny an application for SFA 

and to verify the amount of SFA within 

the short 120-day review window 

permitted under section 4262(g) of 

ERISA. As described in the Paperwork 

Reduction Act section of this preamble, 

the application instructions and 

checklist have been submitted to the 

Office of Management and Budget 

(OMB) for review and approval under 

the Paperwork Reduction Act. OMB’s 

decision regarding this information 

collection request will be available at 

http://www.Reginfo.gov. 

Unless confidential under the Privacy 

Act, all information that is filed with 

PBGC for an application for SFA may be 

made publicly available, at PBGC’s sole 

discretion, on PBGC’s website at 

www.pbgc.gov or otherwise publicly 

disclosed. Except to the extent required 

by the Privacy Act, PBGC provides no 

assurance of confidentiality in any 

information or documentation included 

in an application for SFA. 

Application for Plans With a Partition 

Under section 4233 of ERISA, a plan 

may apply to PBGC for a partition to 

fund a portion of the plan’s benefits to 

avoid insolvency. Upon PBGC’s 

approval of an application for partition, 

PBGC issues a partition order to 

provide: (1) For a transfer from the 

original plan to the plan created by the 

partition order (the successor plan), the 

minimum amount of benefit liabilities 

necessary for the original plan to remain 

solvent, and (2) financial assistance 

from PBGC under section 4261 to pay 

those benefits. The successor plan is but 

a creature of PBGC’s partition order, 

terminated and insolvent from its 

inception. The original and successor 

plans are required by section 4233(d)(2) 

to have the same plan sponsor and 

administrator. 

Section 4262(c)(3) of ERISA requires 

PBGC to provide an alternative 

application for SFA that may be used for 

a plan approved for a partition before 

March 11, 2021. Section 4262.9 of 

PBGC’s regulation describes this 

application. 

The plan sponsor of a partitioned plan 

must apply for SFA using the alternative 

application, which contemplates 

PBGC’s rescission of the partition order 

as prescribed under § 4262.9(c) and 

other conditions particular to a 

partitioned plan as described under 

§ 4262.9(b). One of these conditions is 

that the plan sponsor must file a single 

application for SFA consisting of 

information about the original plan and 

the successor plan. The combined 

information must reflect that, on the 

date SFA is transferred to the plan, 

PBGC will rescind the order that created 

the successor plan, and the plan sponsor 

will remove plan provisions and 

amendments that were required to be 

adopted under the order. 

Another condition is that the 

application must include a statement 

that the plan was partitioned and a copy 

of the provisions or amendments that 

the plan was required to adopt under 

the partition order. A partitioned plan’s 

application must include all the 

required information described in 

§§ 4262.6 through 4262.8 for 

applications generally. However, if the 

plan sponsor of a partitioned plan has 

filed any of the required information 

with PBGC already, the sponsor is not 

required to include that information 

again with its SFA application. Instead, 

the sponsor must only note on the 

checklist described under § 4262.6(a) 

that the information was already filed. 

Partitioned plans also have benefit 

suspensions that must be reinstated if 

the plan is approved for SFA. Under 


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§ 4262.15, a plan receiving SFA must 

reinstate benefits suspended under 

section 305(e)(9) of ERISA and provide 

make-up payments to participants and 

beneficiaries, to restore previously 

suspended benefits, in accordance with 

guidance issued by the Treasury 

Department and the IRS. This 

requirement applies to both the original 

plan and the successor plan created by 

a partition where benefits under the 

original plan were suspended. Having 

the original and successor plans apply 

as one will ensure coordinated benefit 

reinstatements for all participants in the 

partitioned plan. 

The filing of an application for a 

partitioned plan falls under priority 

group 2 for purposes of § 4262.10(d) 

(explained in Processing applications), 

consistent with other plans that are 

eligible for SFA because they have 

implemented a suspension of benefits 

under section 305(e)(9) of ERISA as of 

March 11, 2021. The plan sponsor of a 

partitioned plan, therefore, may file an 

application for SFA beginning on 

January 1, 2022, or earlier date specified 

on PBGC’s website. 

Partitioned plans have also been 

receiving financial assistance from 

PBGC with repayment obligations under 

section 4261 of ERISA. How financial 

assistance under section 4261 is repaid 

is prescribed under § 4262.12(b) of the 

regulation. 

Processing Applications 

PBGC expects the SFA program to 

attract many applicants, and the statute 

makes clear that PBGC is expected to 

process applications quickly. PBGC is 

required to hold application processing 

times to within 120 days and is given 

authority to manage that process. 

Under section 4262(c) of ERISA, 

PBGC must issue regulations or 

guidance setting forth requirements for 

SFA applications. Applications are 

considered timely filed under section 

4262(g) only if they are filed in 

accordance with PBGC’s regulations. 

PBGC’s inherent authority under section 

4002(b)(3) of ERISA allows PBGC to 

adopt regulations relating to the conduct 

of its business and to carry out the 

purposes of the title IV insurance 

program. Under section 4262(d) of 

ERISA, PBGC also may limit the filing 

of SFA applications to filings for plans 

that are in one or more of four ‘‘priority’’ 

categories during a period limited to 

within the first 2 years after March 11, 

2021. 

While PBGC is confident in its ability 

to process an application within the 

mandated 120 days, it might not be able 

to process all applications timely if 

many applications must be processed 

within a brief period. Thus, PBGC is 

concerned about the rate at which 

applications are submitted for 

processing. Relying on the 

aforementioned authorities that allow 

PBGC to administer the SFA application 

process, PBGC has developed a 

‘‘metering’’ system to manage the filing 

and processing of applications. The goal 

of this system is to process the large 

number of expected applications within 

the 120 days mandated by the statute, 

while avoiding both ‘‘floods’’ of 

applications that could cause 

applications to be deemed approved (as 

described in § 4262.11) without 

sufficient PBGC review, and ‘‘droughts’’ 

when processing capacity is sitting idle. 

The risks of an insufficiently reviewed 

application are varied, including, but 

not limited to, SFA payments that are 

insufficient to meet program 

requirements, and SFA payments that 

are higher than necessary to meet 

program requirements. These risks are 

exacerbated by the lump sum form of 

payment required by ARP. To manage 

these risks and ensure the success, 

integrity, and proper stewardship of the 

program, it is important that PBGC 

thoroughly review each application. 

The electronic filing system described 

in § 4262.10 of the regulation is based 

on three mechanisms. The first 

mechanism permits PBGC to accept 

applications in a manner that in PBGC’s 

estimation allows for sufficient review 

and processing within 120 days of 

filing. The inherent authority provided 

by section 4002(b)(3) of ERISA to issue 

regulations related to the conduct of its 

business, and the directive under 

section 4262(c) to set forth requirements 

for applications, clearly authorize PBGC 

to limit the number of applications it 

will accept at any one time, and to close 

the filing window to avoid choking the 

processing system, provided that every 

prospective submitter has a fair 

opportunity to file its application by 

December 31, 2025 (or December 31, 

2026, for a revised application). 

The second mechanism is a priority 

system permitted by section 4262(d) of 

ERISA. PBGC is establishing ‘‘priority’’ 

periods during which an application 

will be accepted only for a plan that is 

in the category (or one of the categories) 

to which the period is limited. This 

mechanism is consistent with section 

4262(d), although not a direct 

implementation of that provision, which 

(by its use of the disjunctive ‘‘or’’) 

indicates that priority status may be 

extended to any one or more subgroups 

of priority-status plans and which does 

not limit the number of priority 

submission windows. Accordingly, 

PBGC has designed this mechanism to 

prioritize the most impacted plans and 

participants first. For example, the 

highest priority is given to applications 

of plans that are projected to become 

insolvent under section 4245 of ERISA 

by March 11, 2022, so that they will not 

have to reduce participant benefits, and 

plans that are already insolvent, to 

enable them to reinstate benefits and 

provide make-up payments to 

participants and beneficiaries, to restore 

previously suspended benefits. The 

objective is to accept and process as 

many applications in the highest 

priority group as possible before 

opening the submission process to the 

next priority group. Ultimately—no later 

than March 11, 2023—the submission 

process will be opened to all eligible 

plans, to ensure that every prospective 

submitter has a fair opportunity to file 

its application during the statutory 

period. As described earlier in this 

section of the preamble, PBGC will 

continue to meter the flow of 

applications to avoid exceeding its 

capacity to process them within 120 

days. 

PBGC will accept applications for 

filing for priority group 1 beginning on 

July 9, 2021. The second highest priority 

is given to applications of plans that 

have implemented a suspension of 

benefits under section 305(e)(9) of 

ERISA as of March 11, 2021, to enable 

them to reinstate benefits and provide 

make-up payments to participants and 

beneficiaries to restore previously 

suspended benefits, and plans expected 

to be insolvent within 1 year of the date 

an application for SFA is filed. PBGC 

will accept applications for filing for 

priority group 2 beginning no later than 

January 1, 2022. The filing dates for 

applications from the remaining four 

priority groups (groups 3–6) are 

provided for in § 4262.10(d)(2)(iii) 

through (vi), with filings for priority 

groups 5 and 6 beginning no later than 

February 11, 2023. In addition, PBGC 

will specify on its website, at least 21 

days in advance, the date the last 2 

priority groups (groups 5 and 6) may 

file. 

This table shows when applications 

for each priority group may begin to be 

filed. 


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14For instance, the value of plan assets may 

fluctuate during a deferral period and the amount 

of SFA will adjust based on that experience. 

Priority group Description of priority group Date plans may apply for SFA 

1 ...................... Plans already insolvent or projected to become insolvent before March 11, 2022.Beginning on July 9, 2021. 

2 ...................... Plans that implemented a benefit suspension under section 

305(e)(9) of ERISA as of March 11, 2021.

Beginning on January 1, 2022, or earlier date specified on 

PBGC’s website. 

Plans expected to be insolvent within 1 year of the date an 

application for SFA is filed. 

3 ...................... Plans in critical and declining status that had 350,000 or more 

participants.

Beginning on April 1, 2022, or earlier date specified on 

PBGC’s website. 

4 ...................... Plans projected to become insolvent before March 11, 2023 ... Beginning on July 1, 2022, or earlier date specified on 

PBGC’s website. 

5 ...................... Plans projected to become insolvent before March 11, 2026 ... Date to be specified on PBGC’s website at least 21 days in 

advance of such date, but no later than February 11, 2023. 

6 ...................... Plans for which PBGC computes the present value of financial 

assistance under section 4261 of ERISA to be in excess of 

$1 billion (in the absence of SFA).

Date to be specified on PBGC’s website at least 21 days in 

advance of such date, but no later than February 11, 2023. 

7 ...................... Additional plans that may be added by PBGC based on other 

circumstances similar to those described for priority groups 

1–6.

Date to be specified on PBGC’s website no later than March 

11, 2023. 

As priority groups open, PBGC will 

continue to accept applications from 

plans in earlier priority groups. While 

the priority mechanism may entail a 

relatively short deferral of an 

application for a given plan until its 

respective priority group opens, the 

amount of SFA ultimately awarded will 

reflect the amount required to pay all 

benefits due pursuant to the statute.14

Applications of plans in a priority 

category must also be submitted to the 

Secretary of the Treasury under section 

432(k)(1)(D) of the Code. If that 

requirement applies to an application, 

PBGC will transmit the application to 

the Treasury Department on behalf of 

the plan, and the Treasury Department 

has provided in guidance (Notice 2021– 

38) that it will treat the requirement 

under section 432(k)(1)(D) as satisfied. 

The third mechanism is a notification 

system on PBGC’s website to keep 

prospective applicants apprised of when 

a filing window opens or closes and (if 

applicable) to what priority groups 

filing is limited. This mechanism will 

enable applicants to know when the 

system is accepting their priority 

group’s filing. 

In sum, the system works like this: 

• Applications will be accepted 

initially only from plans in the highest 

priority group. PBGC will begin 

accepting applications from the other 

priority groups as of the dates described 

earlier in this section of the preamble 

(and set forth in § 4262.10(d)(2) of the 

regulation) and posted on PBGC’s 

website at www.pbgc.gov. 

• Applications are processed based 

on capacity. An application will be 

considered filed on the date it is 

electronically submitted to PBGC if the 

application meets any applicable 

priority requirements and can be 

accommodated in accordance with the 

processing system. Otherwise, PBGC 

will not consider the application filed 

and will notify the applicant that the 

application must be filed in accordance 

with the processing system and 

instructions on PBGC’s website. 

PBGC will accept as many 

applications as the agency estimates it 

can process in 120 days. Once the 

number of applications reaches that 

level, the filing window will 

temporarily close until PBGC has 

capacity to process more applications. 

PBGC will maintain a dedicated web 

page for applications on its website at 

www.pbgc.gov to inform prospective 

applicants about the current status of 

the filing window, as well as to provide 

advance notice of when PBGC expects 

to open or temporarily close the filing 

window. PBGC will contact interested 

prospective applicants via email when 

such new information is available. 

PBGC will also post information about 

the status of filed applications. 

A plan sponsor may contact PBGC 

informally to discuss a potential 

application for SFA. 

Emergency Filings 

PBGC recognizes that in rare 

circumstances a plan may experience an 

event that brings it closer to insolvency 

than previously projected. Consistent 

with section 4262(d)(1)(D) of ERISA, 

which allows PBGC to add priority 

categories as it determines appropriate 

based on other similar circumstances, 

PBGC is including an emergency filing 

process to accept priority applications 

from a plan that is insolvent or expected 

to be insolvent under section 4245(a) of 

ERISA within 1 year of filing an 

application, or a plan that has 

implemented a suspension of benefits 

under section 305(e)(9) of ERISA as of 

March 11, 2021. Beginning with PBGC’s 

acceptance of ‘‘priority group 2’’ filings, 

PBGC will accept emergency filings 

from these plans during periods when 

PBGC would not otherwise accept such 

applications. A filer submitting an 

application under the emergency filing 

process must substantiate the claim of 

emergency status and notify PBGC, in 

accordance with the SFA instructions 

on PBGC’s website at www.pbgc.gov, 

before submission of the impending 

application. 

PBGC Action on Applications 

Section 4262(g) of ERISA provides 

that PBGC can either approve or deny 

an application for SFA and establishes 

a short time period during which PBGC 

must act or an application is deemed 

approved. As described under § 4262.11 

of the regulation, PBGC must act on an 

application within 120 days after the 

date an initial or revised application is 

properly and timely filed. If PBGC 

approves an application, it will notify 

the plan sponsor of the payment of SFA 

in accordance with § 4262.12. 

If PBGC denies an application, it will 

notify the plan sponsor in writing of the 

reasons for the denial. An application 

may be denied because it is incomplete 

(it does not accurately include the 

information required to be filed); 

because an assumption is unreasonable, 

a proposed change in assumption is 

individually unreasonable, or the 

proposed changed assumptions are 

unreasonable in the aggregate; or 

because the plan is not an eligible 

multiemployer plan. For example, 

pending approval of an application if 

PBGC determines that documentation 

supporting a certification of critical and 

declining status is missing or the plan 

sponsor has not responded to a PBGC 

request for information to clarify an 

item in that documentation, PBGC’s 


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15For example, if a plan’s SFA payment exceeds 

the statutory limitation for a federal wire of $10 

billion, the plan will receive multiple Fedwire 

payments that will equal the approved lump sum 

amount. 

notice will identify the missing 

information or documentation required 

to complete the application. If PBGC 

denies an application, the plan sponsor 

may choose to submit a revised 

application or withdraw the denied 

application. If the plan sponsor submits 

a revised application, the revised 

application must not differ from the 

denied application except to the extent 

necessary to address the reasons stated 

in PBGC’s notification for the denial. In 

other words, PBGC is not requiring a 

plan sponsor to refile the entire 

application. PBGC only needs the 

information that cures the reasons 

specified in the denial notice. 

The plan sponsor may withdraw an 

application (in writing and in 

accordance with the SFA instructions 

on PBGC’s website, www.pbgc.gov) at 

any time before or after PBGC denies the 

application, but not after PBGC has 

approved the application. If an 

application is withdrawn, the plan 

sponsor may refile the application as a 

revised application. 

For any revised application, PBGC 

requires that the ‘‘base data’’ (the SFA 

measurement date, participant census 

data, and interest rate assumption) 

remain the same as reported on the 

plan’s initial application to guard 

against multiple filings for purposes of 

changing this data. Once PBGC has 

accepted an initial application for 

processing, PBGC believes that it is in 

the best interest of all parties to avoid 

the duplicate work and delays 

associated with changes to the base 

data. Accordingly, if the plan sponsor 

withdraws an application and submits a 

revised application it must use the base 

data from its initial application, but it 

may make other changes. 

PBGC’s decision on an application for 

SFA is a final agency action for 

purposes of judicial review under the 

Administrative Procedure Act (5 U.S.C. 

704). 

Payment of Special Financial 

Assistance 

Section 4262(j) of ERISA provides that 

SFA is the amount required for an 

eligible plan to pay all benefits due from 

the date PBGC pays the SFA to the plan 

until the last day of the plan year ending 

in 2051. But as described earlier in this 

preamble, a plan sponsor does not know 

when SFA will be paid at the time the 

sponsor prepares an application. The 

SFA amount supported by an 

application and approved by PBGC will 

be the amount appropriate to a date in 

the past. The amount of SFA could be 

recomputed as of the date of payment, 

yet the result would still be an estimate 

and the burden of computation would 

be significant. Instead, § 4262.12 

provides that PBGC will pay a plan the 

amount demonstrated under the plan’s 

application, determined as of the SFA 

measurement date, plus interest on that 

amount, representing the time 

differential between the computation 

and the date PBGC sends payment (not 

the bank settlement date) and using the 

interest rate equal to the rate required 

under § 4262.4(e)(1). 

Section 4262.12(d) of the regulation 

provides that PBGC will pay SFA to a 

plan in a lump sum or substantially so 15

as soon as practicable upon approval of 

the plan’s SFA application. PBGC 

expects payment to be made usually 

within 60 days, but no later than 90 

days after the plan’s SFA application is 

approved by PBGC or deemed approved 

(and in any event not later than 

September 30, 2030). Payment will be 

made in accordance with payment 

instructions provided by the plan in its 

application. Payment will be considered 

made when, in accordance with the 

plan’s payment instructions, PBGC no 

longer has ownership of the amount 

being paid. Any adjustment for delay 

will be borne by PBGC only to the 

extent that it arises while PBGC has 

ownership of the funds. 

For a plan with an obligation to repay 

financial assistance under section 4261 

of ERISA, the regulation describes the 

process for that repayment. 

Unlike assistance under section 4261, 

section 4262(a)(2) of ERISA provides 

that payment of SFA is not a loan 

subject to repayment obligations. 

However, PBGC clarifies in 

§ 4262.12(d)(1) that SFA is subject to 

recalculation or adjustment to correct a 

clerical or arithmetic error. PBGC will, 

and plans must, make payments as 

needed to reflect any such changes in a 

timely manner. SFA is also subject to 

debt collection if PBGC determines that 

a payment for SFA to a plan exceeded 

the amount to which the plan was 

entitled. Section 4262.12(d)(2) provides 

the rules for payment of a debt owed to 

the Federal Government. 

Restrictions on Special Financial 

Assistance 

Section 4262(l) of ERISA places 

restrictions on the use of SFA. These 

restrictions are described in § 4262.13 of 

the regulation. SFA received, and any 

earnings thereon, must be segregated 

from other plan assets and may only be 

used to make benefit payments and pay 

plan expenses (but SFA may be used 

before other plan assets are used for 

these purposes). In addition, SFA (and 

earnings) must be invested by plans in 

investment-grade bonds or other 

investments as permitted by PBGC in 

§ 4262.14. These limitations on the use 

of SFA reflect the purpose of SFA. As 

provided for under section 4262(j)(1) of 

ERISA and in § 4262.4, SFA is the 

amount required for the plan to pay all 

benefits due during the SFA coverage 

period taking into account all plan 

resources and obligations. SFA should 

not be used in a manner that would 

divert SFA funds to other purposes—for 

instance, reducing sources of plan 

income, such as employer contributions 

or withdrawal liability, or increasing 

plan obligations, such as to pay for 

additional future increases in benefits. 

Permissible Investments 

Section 4262(l) of ERISA requires that 

SFA received, and any earnings thereon, 

may be used to make benefit payments 

and pay plan expenses, and such SFA 

and earnings must be held separately 

from other plan assets. Section 4262(l) 

also requires that SFA funds be invested 

in investment-grade bonds or other 

investments permitted by PBGC. 

Given the statute’s requirement that 

SFA funds, and any earnings on 

investment of those funds, be used 

solely to pay benefits and plan 

expenses, PBGC understands that SFA 

funds should be invested in relatively 

safe vehicles that will help ensure that 

short-term needs to pay benefits and 

plan expenses can be met. That section 

4262(l) of ERISA refers to investmentgrade bonds first, supports this view. 

The allowance under section 4262(l) for 

‘‘other investments permitted by the 

corporation’’ could provide some 

flexibility (as well as limited exposure 

to other assets), but PBGC in this 

interim final rule is reluctant to allow 

for investment vehicles with 

fundamentally different characteristics 

without further input from the public. 

Section 4262.14 of the regulation 

describes the permitted investments of 

SFA, referred to as permissible 

investments. To give effect to the 

evident intention that SFA be invested 

in relatively safe investments, the 

regulation permits SFA and earnings on 

SFA to be invested only in fixed income 

securities that must be considered 

investment grade except for a 5 percent 

sleeve that allows a plan to hold on to 

investments that were considered 

investment grade at the time of purchase 

but are no longer of that credit quality. 

Thus, SFA funds will be fairly protected 

and plans will have clear expectations 

about what the income return will be. 


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16See, e.g., 12 CFR 16.2. 

17Notional value is a term often used to value the 

underlying asset in a derivatives trade. It can be the 

total value of a position, how much value a position 

controls, or an agreed-upon amount in the contract. 

Definition provided on ‘‘Investopedia’’ at https://

www.investopedia.com/terms/n/notionalvalue.asp. 

Permissible investments may be held 

in individual fixed-income securities or 

in commingled funds, such as Exchange 

Traded Funds (ETFs), mutual funds, 

pooled trusts, or other commingled 

securities (which are defined in the 

regulation as permissible fund vehicles). 

To ensure the quality of the securities 

that may be invested with SFA, the 

regulation provides that permissible 

investments are considered investment 

grade if a fiduciary, within the meaning 

of section 3(21) of ERISA, who is or 

seeks the advice of an experienced 

investor (such as an Investment Advisor 

registered under section 203 of the 

Investment Advisor’s Act of 1940) 

makes such a determination. 

For purposes of the regulation, 

investment grade means publicly traded 

securities for which the issuer has at 

least adequate capacity to meet the 

financial commitments under the 

security for the projected life of the asset 

or exposure. Adequate capacity means 

that the risk of default by the obligor is 

low and the full and timely repayment 

of principal and interest on the security 

is expected. These definitions are 

consistent with other Federal agency 

regulations that make reference to 

investment grade securities in 

compliance with Section 939A of the 

Dodd Frank Act of 2010.16 Further, the 

requirement that securities be 

considered investment grade by an 

experienced investor acknowledges that 

plans receiving SFA, and their advisors, 

have the requisite investment 

knowledge and experience to make 

sound investment decisions. 

Plans may be able to access fixedincome securities from overseas so long 

as the securities are denominated in 

U.S. dollars. In practice, this would 

mean that such securities are accessible 

mainly within publicly traded markets. 

To acknowledge that securities held 

in ETFs, mutual funds, other 

commingled funds, or directly through 

a portfolio of individual securities, often 

are supplemented by derivatives that 

replicate exposure to physical bonds or 

that implement hedging strategies to 

protect against downside risk, the 

regulation permits investment in 

vehicles allowing for such strategies so 

long as any derivative or leveraging 

strategy does not increase the interest 

rate risk or credit risk of the investments 

beyond the risk in a similar portfolio of 

physical securities (i.e., non-derivative 

securities) with the same market value. 

Further, any notional derivative 

exposure 17 on permissible investments 

that are held in separate accounts (i.e., 

not through a permissible fund vehicle), 

must be supported by liquid assets that 

are cash or cash equivalents 

denominated in U.S. dollars. This will 

ensure that the plan or the investment 

manager will be able to cover the 

derivative exposure with little risk to 

SFA assets. 

In listening sessions with interested 

parties, PBGC heard concerns about 

how overly restrictive requirements on 

how SFA assets could be invested could 

have significant adverse impacts on 

overall plan financial health. For 

instance, with interest rates on fixed 

income securities remaining at 

historically extremely low levels, both 

SFA and other plan assets could be 

depleted and be unable to pay plan 

benefits long before 2051. PBGC agrees 

with such concerns. Because PBGC 

thought it important for plans exploring 

whether to apply for SFA to know what 

restrictions could be placed on 

investment of SFA funds, PBGC is 

providing a starting point for discussion 

on permissible investments of SFA 

assets in this interim final rule. With an 

eye toward finding a more appropriate 

balance between certainty and safety of 

investments on the one hand, and the 

opportunity for plans to have flexibility 

to decide appropriate overall investment 

policies on the other, PBGC seeks public 

input for refining § 4262.14. In 

particular, PBGC requests responses, 

with corresponding data, on the 

following: 

(1) PBGC is interested in 

understanding the potential benefits and 

risks of investing SFA assets in other 

vehicles that are or have the nature of 

fixed income. These might include 

synthetic replications of fixed income 

securities, insurance contracts, hybrid 

securities, preferred stock or other 

vehicles. In this regard, the following 

questions are of interest: 

• What are the advantages of 

investing in such vehicles, relative to a 

portfolio of investment grade fixed 

income, in terms of expected returns, 

reduced risk or other improved 

outcomes? 

• What are the disadvantages of 

investing in such vehicles relative to a 

portfolio of investment grade fixed 

income, including lower returns, higher 

risk, inequitable outcomes amongst 

participants or other issues? 

• What are the implementation and 

management costs of investing in such 

vehicles? 

• Which organizations are qualified 

to manage and advise on these vehicles? 

• Can the vehicles, as they might be 

used in multiemployer plan portfolios 

or in the pool of SFA assets, be clearly 

defined and easily used? 

(2) Should permissible investments of 

SFA assets be limited to fixed income 

securities? For instance, should the rule 

permit investment of a percentage of 

SFA assets in certain stock ETFs or 

mutual funds that have investment 

profiles that are not materially riskier 

than fixed income-based investment 

grade securities? 

(3) What is the appropriate amount of 

SFA assets that may be permitted to be 

invested in non-investment grade 

securities? 

(4) What is the proper relationship to 

restrictions on SFA asset investments to 

other plan asset allocations? 

Conditions for Special Financial 

Assistance 

To ensure that SFA is used for the 

purpose of paying benefits and the 

expenses related to those benefit 

payments, section 4262(m)(1) of ERISA 

gives PBGC authority, in consultation 

with the Secretary of the Treasury, to 

impose reasonable conditions on an 

eligible multiemployer plan that 

receives SFA. Conditions may relate to 

increases in future accrual rates and any 

retroactive benefit improvements, 

allocation of plan assets, reductions in 

employer contribution rates, diversion 

of contributions to, and allocation of 

expenses to, other benefit plans, and 

withdrawal liability. In determining 

what conditions to impose, in 

consultation with the Treasury 

Department, PBGC considered, among 

other things, the potential actions of 

contributing employers and the security 

of the accrued benefits of plan 

participants. These considerations are 

discussed in greater detail in the 

regulatory impact analysis section of the 

rule. 

Under certain circumstances, a plan 

sponsor may request approval from 

PBGC for an exception to conditions 

relating to reductions in employer 

contribution rates, transfers or mergers, 

and settlement of withdrawal liability. 

These exceptions are explained later in 

this section of the preamble. PBGC is 

soliciting public comment on whether 

there are other circumstances relating to 

the conditions described under 

§ 4262.16 where PBGC should consider 

providing approval for exceptions. 

(a) Benefit Increases 

Section 4262.16(b) imposes 

reasonable conditions on a plan that 

receives SFA with respect to the types 


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36610 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

of benefits and benefit increases 

described in section 4022A(b)(1) of 

ERISA, without regard to the time the 

benefit or benefit increase has been in 

effect. These conditions are intended to 

prevent excessive increases in benefits 

that would result in a transfer of SFA 

beyond the payment of benefits at the 

level that participants were promised as 

of the date of enactment of section 4262, 

without being overly restrictive. The 

condition does not apply to the required 

reinstatement of benefits suspended 

under sections 305(e)(9) or 4245(a) of 

ERISA or any restoration of benefits 

under 26 CFR 1.432(e)(9)–1(e)(3). 

The condition in § 4262.16(b)(1) 

restricts retrospective benefit increases 

by providing that a benefit or benefit 

increase must not be adopted during the 

SFA coverage period (defined in 

§ 4262.2 of the regulation) if it is in 

whole or in part attributable to service 

accrued or other events occurring before 

the adoption date of the amendment. 

This condition is needed because 

retroactive increases in benefits harm 

the funded position of the plan without 

improving expected future plan income. 

The condition in § 4262.16(b)(2) 

restricts prospective benefit increases by 

providing that a benefit or benefit 

increase must not be adopted during the 

SFA coverage period unless the plan 

actuary certifies that employer 

contribution increases projected to be 

sufficient to pay for the benefit increase 

have been adopted or agreed to, 

provided that these increased 

contributions were not included in the 

determination of SFA. The plan sponsor 

must demonstrate that a benefit increase 

is paid for in the statement of 

compliance described under 

§ 4262.16(i). This condition is intended 

to guard against plans implementing 

significant benefit increases that may 

accelerate plan insolvencies and hasten 

an inability to pay plan-level benefits. 

However, plans still have the flexibility 

to offer active participants more 

attractive benefit accruals when the plan 

is able to afford them. 

These conditions on benefit increases 

are in addition to the limitations under 

section 305(f)(1)(B) of ERISA (and 

corresponding section 432(f)(1)(B) of the 

Code) applicable to plans in critical 

status. 

(b) Allocation of Plan Assets 

Section 4262.16(c) imposes a 

condition on a plan that receives SFA 

relating to the allocation of plan assets. 

This condition requires that, during the 

SFA coverage period, plan assets, 

including SFA, must be invested in 

permissible investments as described in 

§ 4262.14 sufficient to pay for at least 1 

year (or until the date the plan is 

projected to become insolvent, if earlier) 

of projected benefit payments and 

administrative expenses. 

By imposing investment constraints 

on SFA assets in section 4262(l) of 

ERISA and providing PBGC the 

authority to impose additional 

constraints on asset allocation in section 

4262(m), the statute contemplates a 

desire to prevent excessive risk-taking 

by plans that receive SFA. PBGC views 

the gradual increase in the proportion of 

assets allocated to fixed income as a 

plan approaches insolvency as a 

sensible and prudent approach to 

investing over a gradually shortening 

time horizon. However, PBGC is 

interested in whether this condition is 

seen as preventing plans from achieving 

reasonable investment objectives. PBGC 

encourages interested parties to 

respond, and provide supporting data, 

to the following questions: 

• Will the requirement to maintain 1 

year (or until the date the plan is 

projected to become insolvent, if earlier) 

of benefit payments and administrative 

expenses in investment grade fixed 

income assets result in an allocation 

that is significantly different from the 

allocation that the plan’s investment 

policy (after receiving SFA) would 

otherwise attain? 

• What are the advantages and 

disadvantages of PBGC not imposing 

any conditions under section 4262(m) of 

ERISA on asset allocation compared to 

the proposed condition requiring 1 year 

(or until the date the plan is projected 

to become insolvent, if earlier) of benefit 

payments and administrative expenses 

in investment grade fixed income? 

• Could an alternative condition, or 

modification of the condition under 

§ 4262.16(c), better achieve the objective 

of preventing excessive risk-taking by 

plans while allowing plans to meet their 

investment objectives? 

(c) Contribution Decreases, Allocating 

Contributions and Other Practices 

Section 4262.16(d) of the regulation 

imposes reasonable conditions on a plan 

that receives SFA relating to 

contribution decreases to ensure that 

SFA is used for the exclusive purpose 

of paying benefits and reasonable 

administrative expenses and is not 

effectively transferred to contributing 

employers through decreased 

contribution obligations. Similarly, 

§ 4262.16(e) imposes reasonable 

conditions relating to allocation of 

income or expenses with another 

employee benefit plan and other 

practices. 

For the condition on contribution 

decreases, § 4262.16(d) provides that 

during the SFA coverage period, the 

contributions required for each CBU 

must not be less than, and the definition 

of the CBUs must not be different from, 

those set forth in collective bargaining 

agreements or plan documents in effect 

on March 11, 2021 (including agreed to 

contribution rate increases through the 

expiration date of the collective 

bargaining agreements). 

The regulation provides an exception 

to this condition where the plan sponsor 

determines that the risk of loss to plan 

participants and beneficiaries is 

lessened by the reduction. Where the 

reduction affects annual contributions 

over $10 million and over 10 percent of 

all employer contributions, PBGC must 

also determine that the change lessens 

the risk of loss to participants and 

beneficiaries. Information required to be 

submitted to PBGC for a request for 

approval of a proposed changed is 

described in § 4262.16(d)(2). The 

exception is intended, for example, to 

allow a contributing employer to reduce 

contributions below collectively 

bargained rates so that the employer 

may continue in business and not be 

forced to withdraw in conjunction with 

a bankruptcy. This condition generally 

is intended to prevent reductions in 

contribution rates that may accelerate 

plan insolvencies, while providing 

limited flexibility for employers with 

extenuating financial circumstances. 

With respect to the allocation of 

contributions and other practices during 

the SFA coverage period, § 4262.16(e) 

prohibits a decrease in the proportion of 

income (contributions, investment 

returns, etc.) or an increase in the 

proportion of expenses allocated to a 

plan that receives SFA. This prohibition 

applies to written or oral agreements or 

practices (other than a written 

agreement in existence on March 11, 

2021, to the extent not subsequently 

amended or modified) under which 

income or expenses are divided or to be 

divided between a plan that receives 

SFA and one or more other employee 

benefit plans. 

Among the practices covered by this 

prohibition is any allocation or 

reallocation of contribution rates from 

the plan receiving SFA to a newly 

formed pension plan. Similarly, plan 

expenses can be paid by a plan only if 

they are properly allocable to that plan. 

Accordingly, another prohibited 

practice is a change in the allocation of 

expenses with other benefit plans that 

serves to increase the proportion of 

expenses to be paid by the plan 

receiving SFA. 

However, the prohibition under 

§ 4262.16(e) does not apply to a good 

faith allocation of contributions 


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18PBGC intends to propose a separate rule of 

general applicability under section 4213(a) of 

ERISA to prescribe actuarial assumptions which 

may be used by a plan actuary in determining an 

employer’s withdrawal liability. 

pursuant to a reciprocity agreement. (If 

the principal purpose of entering into, 

amending, or modifying a reciprocity 

agreement after March 11, 2021, is to 

circumvent § 4262.16(e), any allocation 

made pursuant to such reciprocity 

agreement will not be considered as 

made in good faith.) The prohibition 

also does not apply to a good faith 

allocation of contributions where the 

contributions to a plan that receives 

SFA required for each base unit are not 

reduced (except if the reduction is 

approved by PBGC). It also does not 

apply to a good faith allocation of the 

costs of securing shared space, goods, or 

services, where such allocation does not 

constitute a prohibited transaction 

under ERISA or is otherwise exempt 

from the prohibited transaction 

provisions pursuant to section 408(b)(2), 

408(c)(2), or 408(a) of ERISA, or of the 

actual cost of services provided to the 

plan by an unrelated third party. As 

with the other conditions under 

§ 4262.16, the condition under 

§ 4262.16(e) is intended to ensure that 

plans receiving SFA do not engage in 

transactions that may accelerate plan 

insolvency. 

(d) Transfers or Mergers 

Section 4262.16(f) provides that 

during the SFA coverage period, a plan 

must not engage in a transfer of assets 

or liabilities (including a spinoff) or 

merger except with PBGC’s approval. 

Notwithstanding anything to the 

contrary in PBGC’s regulation on 

mergers and transfers between 

multiemployer plans (29 CFR part 

4231), the plans involved in the 

transaction must request approval from 

PBGC. A request for approval must 

contain information that would be 

required to be submitted under 

§ 4231.10 and the additional actuarial 

and financial information described in 

§ 4262.16(f)(2). PBGC will approve a 

proposed transfer or merger if: (1) The 

transaction complies with section 

4231(a)–(d) of ERISA, (2) the transfer or 

merger, or the larger transaction of 

which the transfer or merger is a part, 

does not unreasonably increase PBGC’s 

risk of loss respecting any plan involved 

in the transaction, and (3) the transfer or 

merger is not reasonably expected to be 

adverse to the overall interests of the 

participants and beneficiaries of any of 

the plans involved in the transaction. 

An example of a larger transaction is 

where the trustees of a plan receiving 

SFA arrange a transfer of assets and 

liabilities from the plan and amend the 

plan to substantially or completely end 

benefit accruals in connection with the 

plan’s active participants beginning to 

accrue benefits under another existing 

or newly formed plan. 

(e) Withdrawal Liability 

Under sections 4201 through 4225 of 

ERISA, when a contributing employer 

withdraws from an underfunded 

multiemployer plan, the plan sponsor 

assesses withdrawal liability against the 

employer. Withdrawal liability 

represents a withdrawing employer’s 

proportionate share of the plan’s 

unfunded benefit obligations and is an 

important source of income for the plan. 

To assess withdrawal liability, the plan 

sponsor must determine the 

withdrawing employer’s (1) allocable 

share of the plan’s unfunded vested 

benefits (the value of nonforfeitable 

benefits that exceeds the value of plan 

assets) as of the end of the plan year 

before the employer’s withdrawal as 

provided under section 4211, and (2) 

annual withdrawal liability payment as 

provided under section 4219. Under 

section 4219(c)(1), an employer’s 

withdrawal liability may be reduced if 

the period required to amortize the 

liability exceeds 20 years. 

To preserve SFA for the payment of 

benefits and expenses and avoid an 

indirect transfer of SFA to a 

withdrawing employer by reducing the 

employer’s withdrawal liability, in 

§ 4262.16 PBGC uses its authority under 

section 4262(m) of ERISA to place 

reasonable conditions relating to 

withdrawal liability on a plan that 

receives SFA. PBGC determined that a 

reasonable condition on a plan that 

receives SFA is to require specified 

interest assumptions to be used for 

purposes of determining withdrawal 

liability.18

Under § 4262.16(g), for withdrawals 

that occur after the plan year in which 

the plan receives SFA, the interest 

assumptions used in determining 

unfunded vested benefits for purposes 

of determining withdrawal liability 

must be mass withdrawal interest 

assumptions under § 4281.13(a) of 

PBGC’s regulation on Duties of Plan 

Sponsor Following Mass Withdrawal 

(29 CFR part 4281). PBGC’s interest 

assumptions used for mass withdrawal 

liability approximate the market price 

insurance companies charge to assume 

a pension-benefit-like liability. Using 

mass withdrawal interest assumptions 

for purposes of calculating withdrawal 

liability is reasonable because 

withdrawal liability is the final 

settlement of the withdrawing 

employer’s obligation to pay for 

unfunded vested benefits. Doing so is 

particularly important for plans that 

have developed an adverse demographic 

structure, with a small contribution base 

relative to their unfunded vested 

benefits, which is the condition of many 

of the plans that are or will become 

eligible for SFA. 

The prescribed interest assumptions 

must be used 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. The minimum 10-year period 

for using these required assumptions is 

similar to the time period for the special 

withdrawal liability rules for benefit 

suspensions under MPRA. 

PBGC determined that these are 

reasonable conditions because SFA does 

not result from employer contributions, 

and, without such conditions, the 

receipt of SFA could substantially 

reduce withdrawal liability owed by a 

withdrawing employer. That could 

cause more withdrawals in the near 

future than if the plan did not receive 

SFA, which would reduce plan income 

and be an additional burden for these 

plans. Congress specified in section 

4262 of ERISA that SFA and earnings 

thereon may be used by a plan to make 

benefit payments and pay plan 

expenses. Payment of SFA was not 

intended to reduce withdrawal liability 

or to make it easier for employers to 

withdraw. 

In addition, under § 4262.16(h) any 

settlement of withdrawal liability 

during the SFA coverage period must be 

made only with PBGC approval if the 

present value of the liability settled is 

greater than $50 million (calculated as 

described under § 4262.16(h)(1)). 

Approval ensures that any negotiated 

settlements of material size are in the 

best interests of the participants in the 

plan, and do not create an unreasonable 

risk of loss to PBGC. The information 

required to be submitted for a request 

for approval of a proposed withdrawal 

liability settlement is under 

§ 4262.16(h)(3). 

(f) Reporting and Audit 

In order to monitor compliance with 

the conditions imposed on plans that 

receive SFA, PBGC requires under 

§ 4262.16(i) that plan sponsors file with 

PBGC each plan year, beginning with 

the plan year after the payment of SFA 

and through the last day of the last plan 

year ending in 2051, a statement of 

compliance with the terms and 

conditions of SFA. The statement must 

be filed with PBGC no later than 90 days 


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36612 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

19Section 4262(k) of ERISA contains rules that 

are parallel to section 432(k) of the Code. Under 

section 9704(d)(3) of ARP, the Secretary of the 

Treasury has interpretive jurisdiction over the rules 

for determining the benefit reinstatement and makeup payments that must be made by a multiemployer 

plan receiving SFA, for purposes of ERISA as well 

as the Code. Under section 4262(k), the Secretary 

of Labor, in coordination with Secretary of the 

Treasury, must ensure benefits are reinstated and 

previously suspended benefits paid. 

after the end of the plan year and in 

accordance with the statement of 

compliance instructions on PBGC’s 

website at www.pbgc.gov. 

PBGC may conduct periodic audits of 

plans that have received SFA to review 

compliance with the terms and 

conditions of the SFA program. 

Reinstatement of Benefits Previously 

Suspended 

Section 4262(k) of ERISA imposes two 

conditions on a plan that receives SFA 

and previously suspended benefits in 

accordance with sections 305(e)(9) or 

4245(a) of ERISA. A plan must reinstate 

any benefits that were suspended and 

must provide payments to certain 

participants or beneficiaries to make up 

past amounts of benefits previously 

suspended. 

As provided under section 4262(k) of 

ERISA,19 § 4262.15 requires plans to 

reinstate these previously suspended 

benefits as of the month in which SFA 

is paid, and to provide make-up 

payments with respect to the previously 

suspended benefits, in accordance with 

guidance issued by the Treasury 

Department and the IRS. This guidance 

has been issued as Notice 2021–38. 

Section 4262(k) and § 4262.15 give the 

plan sponsor flexibility to design 

payment of make-up amounts as a single 

lump sum within 3 months of the 

payment date of SFA, or in equal 

monthly installments over a period of 5 

years, commencing within 3 months of 

the payment date, with no installment 

payment adjusted for interest. 

The plan sponsor of a plan with 

benefits that were suspended under 

section 305(e)(9) or 4245(a) of ERISA is 

required in § 4262.15(c) to furnish a 

notice of reinstatement to participants 

and beneficiaries whose benefits were 

previously suspended and then 

reinstated in accordance with section 

4262(k) of ERISA. The requirements for 

the notice, including content 

requirements, are in notice of 

reinstatement instructions, in an 

addendum to the SFA application 

instructions, available on PBGC’s 

website at www.pbgc.gov. 

PBGC is providing for this notice of 

reinstatement so that participants and 

beneficiaries are adequately informed 

about the amount (and calculation) of 

reinstatement and make-up payments, 

taking into account any restoration of 

benefits under 26 CFR 1.432(e)(9)– 

1(e)(3), and know when to expect the 

reinstatement and make-up payments. 

The notice also informs participants and 

beneficiaries how to contact the 

Department of Labor if they need 

assistance in understanding their rights 

under the reinstatement process. The 

Department has advised that if 

participants and beneficiaries better 

understand the benefits they will be 

receiving as a result of the plan 

receiving SFA, it will help the 

Department meet its obligations under 

section 4262(k) of ERISA to ensure that 

suspended benefits are reinstated and 

make-up payments made. 

Section 4262(k) of ERISA states that 

‘‘the Secretary, in coordination with the 

Secretary of the Treasury, shall ensure 

that an eligible multiemployer plan that 

receives special financial assistance’’ 

reinstates suspended benefits and 

provides make-up payments required by 

the statute. The Department of Labor 

notes that it will need access to, and if 

requested, copies of records to ensure 

that plans receiving SFA reinstate the 

suspended benefits of participants and 

beneficiaries as required by section 

4262(k). Plan fiduciaries have an 

obligation under title I of ERISA to 

maintain complete and accurate records, 

including information the Department 

may need to ensure the timely 

reinstatement of suspended benefits and 

payment of make-up payments under 

section 4262(k) of ERISA. The 

Department has advised that a plan’s 

failure to maintain adequate and 

complete records could result in 

violations of sections 107, 209, and 404 

of ERISA. The Department is 

considering issuing guidance to address 

the records and information that plans 

receiving SFA will need to maintain and 

retain to comply with title I of ERISA. 

Other Provisions 

Section 4262 of ERISA contains other 

provisions that apply to SFA and plans 

receiving SFA. These provisions are 

enumerated under § 4262.17 of the 

regulation: 

• SFA must not be capped by the 

guarantee under section 4022A of 

ERISA. 

• A plan receiving SFA is required to 

continue to pay premiums due under 

section 4007 of ERISA for participants 

and beneficiaries in the plan. 

• A plan that receives SFA is deemed 

to be in critical status within the 

meaning of section 305(b)(2) of ERISA 

until the last plan year ending in 2051. 

• A plan that receives SFA and 

subsequently becomes insolvent under 

section 4245 of ERISA will be subject to 

the rules and guarantee for insolvent 

plans in effect when the plan becomes 

insolvent. 

• A plan that receives SFA is not 

eligible to apply for a suspension of 

benefits under section 305(e)(9) of 

ERISA. 

Section 4262.17 also provides that a 

plan that receives SFA and meets the 

eligibility requirements for partition of 

the plan under section 4233(b) of ERISA 

may apply for partition under section 

4233. One of those requirements, in 

section 4233(b)(2), provides that a 

multiemployer plan is eligible for 

partition if ‘‘the corporation determines, 

after consultation with the Participant 

and Plan Sponsor Advocate . . ., that 

the plan sponsor has taken (or is taking 

concurrently with an application for 

partition) all reasonable measures to 

avoid insolvency, including the 

maximum benefit suspensions under 

section 305(e)(9), if applicable[.]’’ 

Section 4262(m)(6) provides that a plan 

that receives SFA is not eligible to apply 

for a subsequent suspension of benefits 

under MPRA. Therefore, for a plan that 

has received SFA, a suspension of 

benefits under section 305(e)(9) is not 

‘‘applicable’’ within the meaning of 

section 4233(b)(2) and is not a 

reasonable measure available to the 

plan. 

Finally, § 4262.17 includes a 

severability provision that provides that 

if any of the provisions of this interim 

final rule are found to be invalid or 

stayed pending further agency action, 

the remaining portions of the rule 

would remain operative. 

Compliance With Rulemaking 

Guidelines 

Administrative Procedure Act 

The Administrative Procedure Act at 

5 U.S.C. 553(b) provides that notice and 

comment requirements do not apply 

when an agency, for good cause, finds 

that they are impracticable, 

unnecessary, or contrary to the public 

interest. An exception is also provided 

at 5 U.S.C. 553(d)(3) to the requirement 

of a 30-day delay before the effective 

date of a rule ‘‘for good cause found and 

published with the rule.’’ Section 9704 

of the American Rescue Plan (ARP) Act 

of 2021 set up a ‘‘Special Financial 

Assistance Program for Financially 

Troubled Multiemployer Plans.’’ PBGC 

is issuing this rule without advance 

notice and public comment as an 

interim final rule to allow for immediate 

implementation of this program. 

Under new section 4262(c) of ERISA, 

PBGC is mandated to issue regulations 

or guidance setting forth the 


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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 36613 

requirements for eligible plans to apply 

for special financial assistance (SFA) 

within a short 120 days of the date of 

enactment of ARP (March 11, 2021). 

Moreover, PBGC must review 

applications within only 120 days of 

filing and plans must apply by the 

statutory cutoff date of December 31, 

2025 (December 31, 2026, for revised 

applications). The compressed timeline 

for issuing rules, applying for 

assistance, and processing applications 

expresses a clear urgency to get 

appropriate assistance to eligible plans 

as quickly as possible. 

Underscoring that urgency, Congress 

authorized PBGC to prioritize the filing 

of applications for eligible plans with 

the greatest need, but only during the 

first 2 years after March 11, 2021. 

Recognizing that need, PBGC in this 

interim final rule is prioritizing 

applications of plans, including soon-tobe insolvent plans and already insolvent 

plans that previously suspended 

benefits of participants and 

beneficiaries—benefits that must be 

reinstated and restored through makeup payments as a requirement of 

receiving SFA. Any delay of the 

effective date of the rule would be 

contrary to the financial interests of the 

participants and beneficiaries in these 

plans. If financial assistance is delayed 

and plans become insolvent, benefits for 

participants and beneficiaries will be 

reduced. For plans already insolvent 

with participant benefits that were 

already reduced, any delay will result in 

participants and beneficiaries having to 

wait longer to have their benefits 

reinstated and to receive their make-up 

payments. 

Furthermore, the interim final rule 

imposes reasonable conditions on 

eligible plans that receive SFA, as 

permitted under section 4262(m)(1) of 

ERISA. PBGC finds good cause for 

making the conditions provided in the 

rule effective simultaneously with the 

application requirements. Plan sponsors 

need to know, before applying for SFA, 

what conditions will be imposed on the 

plan. The conditions may affect a plan 

sponsor’s decision to apply for SFA or 

its determination of the amount of SFA. 

For example, the condition on 

withdrawal liability may affect the 

assumptions used to determine the 

amount of SFA in the plan’s 

application. The conditions in the 

interim final rule are integral to the 

application requirements and decisions 

being made by plan sponsors, and, 

therefore, should be effective without 

delay. 

Accordingly, because of the urgent 

need to get financial assistance to 

eligible plans as quickly as possible, 

PBGC has determined that prior notice 

and comment through the issuance of a 

notice of proposed rulemaking is 

impracticable and that the public 

interest is best served by issuing this 

interim final rule. Further, prior notice 

and comment is impracticable within 

the challenging statutory deadline under 

which PBGC must issue regulations to 

set forth requirements for special 

financial assistance applications, and 

within the limited statutory timeframe 

(already begun) in which PBGC has to 

prioritize the filing of applications of 

plans with the most urgent need for 

assistance. However, PBGC is requesting 

comments at the time this interim final 

rule is issued and may include changes 

in a final rule in response to those 

comments. For the same reasons 

discussed earlier, pursuant to 5 U.S.C. 

553(d)(3), PBGC is making this rule 

effective on July 12, 2021. 

Congressional Review Act 

Pursuant to Subtitle E of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (also known as the 

Congressional Review Act or CRA) (5 

U.S.C. 801 et seq.), the Office of 

Management and Budget (OMB) has 

designated this interim final rule as a 

‘‘major rule,’’ as defined by 5 U.S.C. 

804(2)(a), which is a rule likely to result 

in an annual effect on the economy of 

$100 million or more. Section 808(2) of 

the CRA provides that, notwithstanding 

the effective date of a major rule defined 

under section 801, any rule which an 

agency for good cause finds that notice 

and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest, shall take effect at 

such time as the Federal agency 

promulgating the rule determines. This 

good cause justification supports waiver 

of the 60-day delayed effective date for 

major rules under the CRA. 

As discussed earlier, because of the 

urgent need for the SFA program, PBGC 

has determined that this interim final 

rule must take effect on the date of 

publication. This immediate effective 

date is necessary based on the mandate 

of section 4262(c) of ERISA to issue 

regulations or guidance setting forth the 

requirements for SFA applications 

within 120 days of the date of 

enactment of ARP. This short statutory 

deadline is to allow eligible plans, 

particularly plans that are close to 

insolvency or already insolvent, to begin 

applying for much needed financial 

assistance. Under the circumstances, 

PBGC has determined that prior notice 

and comment through the issuance of a 

notice of proposed rulemaking is 

impracticable and that the public 

interest is best served by making this 

interim final rule effective on July 12, 

2021. PBGC does not want to unduly 

delay providing financial assistance to 

plans. 

Regulatory Impact Analysis 

(1) Relevant Executive Orders for 

Regulatory Impact Analysis 

Under Executive Order (E.O.) 12866, 

OMB reviews any regulation determined 

to be a ‘‘significant regulatory action.’’ 

Section 3(f) of E.O. 12866 defines a 

‘‘significant regulatory action’’ as an 

action that is likely to result in a rule 

that: (1) Has an annual effect on the 

economy of $100 million or more, or 

adversely affects in a material way a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or State, local or 

tribal governments or communities (also 

referred to as economically significant); 

(2) creates serious inconsistency or 

otherwise interferes with an action 

taken or planned by another agency; (3) 

materially alters the budgetary impacts 

of entitlement grants, user fees, or loan 

programs, or the rights and obligations 

of recipients thereof; or (4) raises novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the E.O. 

OMB has determined that this interim 

final rule is economically significant 

under section 3(f)(1) and has therefore 

reviewed this rule under E.O. 12866. 

E.O. 13563 supplements and reaffirms 

the principles, structures, and 

definitions governing contemporary 

regulatory review that were established 

in E.O. 12866, emphasizing the 

importance of quantifying both costs 

and benefits, reducing costs, 

harmonizing rules, and promoting 

flexibility. It directs agencies to assess 

the costs and benefits of available 

regulatory alternatives and, if regulation 

is necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, and public health and 

safety effects, distributive impacts, and 

equity). 

PBGC has provided an assessment of 

the potential benefits, costs, and 

transfers associated with this interim 

final rule. 

(2) Introduction and Need for 

Regulation 

As discussed earlier in the preamble, 

section 9704 of the American Rescue 

Plan (ARP) Act of 2021, ‘‘Special 

Financial Assistance Program for 

Financially Troubled Multiemployer 

Plans,’’ establishes a new section 4262 

of ERISA. To implement section 4262, 

this interim final rule adds to PBGC’s 


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36614 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

20Specifically, section 9704 of ARP establishes an 

eighth fund under section 4005 of ERISA. 

21Congressional Budget Office Cost Estimate, 

February 17, 2021, https://www.cbo.gov/system/ 

files/2021-02/hwaysandmeansreconciliation.pdf. 

regulations a new part 4262 (Special 

Financial Assistance by PBGC). It is 

through this program that PBGC will 

provide special financial assistance 

(SFA) to eligible multiemployer pension 

plans from a fund established by ARP 20

for SFA purposes and credited with 

transfers from the general fund of the 

Treasury Department. 

Before the enactment of ARP on 

March 11, 2021, the Congressional 

Budget Office (CBO) projected the SFA 

program under section 4262 of ERISA to 

pay approximately $86 billion in total 

assistance to on average (across model 

simulations) 185 plans.21 PBGC has 

estimated the transfer amounts of the 

SFA program using ME–PIMS, PBGC’s 

stochastic modeling tool, and projects 

the aggregate SFA to be approximately 

$94 billion in assistance payments to 

more than 200 plans and $150 million 

to PBGC to administer the SFA program. 

PBGC further estimates that plans that 

received financial assistance from PBGC 

under section 4261 of ERISA in the form 

of loans will repay PBGC in aggregate 

approximately $200 million. 

SFA is expected to assist plans 

covering more than 3 million 

participants, including by providing 

funds for make-up payments to restore 

previously suspended benefits that total 

approximately $150 million for 

currently insolvent plans and 

approximately $550 million for plans 

that have adopted approved benefit 

suspensions under MPRA. Based on the 

average of 500 stochastic model 

simulations, ME–PIMS projects that 

over 100 plans that would have 

otherwise become insolvent during the 

next 15 years will instead forestall 

insolvency as a direct result of receiving 

SFA. 

Section 4262(m) of ERISA provides 

PBGC with specific regulatory authority 

(in consultation with the Secretary of 

the Treasury) to impose reasonable 

conditions on eligible multiemployer 

plans that receive SFA (see Conditions 

for special financial assistance earlier in 

the preamble). Absent the imposition of 

any conditions, there would be a 

potential for employers and plan 

sponsors to take actions that could 

impair the financial health of their plans 

and thereby jeopardize the retirement 

security of plan participants and PBGC’s 

multiemployer insurance program. 

Examples include actions that will 

increase plan obligations, such as 

amendments to increase benefit levels, 

or actions that could reduce future plan 

income, such as reductions to 

contribution rates or employer 

withdrawals. Each of these actions has 

the potential to accelerate plan 

insolvencies, which would bring about 

participant benefit cuts and increased 

future claims to PBGC’s multiemployer 

insurance program that may impair 

PBGC’s ability to pay financial 

assistance under section 4261. 

(3) Regulatory Action 

PBGC strives to implement the SFA 

program established under this interim 

final rule in a manner that is consistent 

with the following key objectives: (1) To 

transfer to a plan the amount required 

under section 4262 of ERISA as soon as 

practicable; (2) to prioritize the 

applications of plans in imminent need 

of financial support and where 

participants’ suspended benefits are to 

be restored; (3) to establish an efficient 

system for processing applications; and 

(4) to ensure prudent stewardship of 

taxpayer-funded appropriations for 

SFA, including the prevention of waste, 

fraud, and abuse in the SFA program. 

Section 4262(m) of ERISA gives PBGC 

authority, in consultation with the 

Secretary of the Treasury, to impose 

reasonable conditions on an eligible 

multiemployer plan that receives SFA 

relating to increases in future accrual 

rates and any retroactive benefit 

improvements, allocation of plan assets, 

reductions in employer contribution 

rates, the allocation of contributions and 

other practices, and withdrawal 

liability. In determining what 

conditions to impose, in consultation 

with the Treasury Department, PBGC 

evaluated the regulatory alternatives 

under section 4262(m) to set conditions 

based on the following objectives: (1) 

Meeting the goals of ARP in providing 

for the SFA program; (2) stewardship of 

taxpayer-funded appropriations for 

SFA; (3) maintaining the security of the 

accrued pension benefits (current and 

future accruals) of participants in plans 

that receive SFA; and (4) preservation of 

the solvency of the PBGC 

multiemployer insurance program. 

The regulatory action and related 

economic considerations for each 

condition are described as follows. 

Conditions Related to Future Benefit 

Accruals 

The interim final rule provides that, 

during the SFA coverage period 

(beginning on the plan’s SFA 

measurement date through the last day 

of the last plan year ending in 2051), 

plans that receive SFA can only accept 

a collective bargaining agreement (CBA) 

that increases future benefit accruals 

unless the plan actuary certifies that 

employer contribution increases 

projected to be sufficient to pay for the 

benefit increase have been adopted or 

agreed to, and provided that such 

increased contributions were not 

included in the determination of SFA. 

Plans in critical status are already 

subject to constraints on increasing 

future benefit accrual levels. Under 

section 305(f)(1) of ERISA, they must be 

able to fund any benefit improvements 

using contributions that are not already 

contemplated within their rehabilitation 

plans. 

The interim final rule similarly would 

prohibit plans from implementing 

significant benefit increases that likely 

could accelerate insolvencies after 

receiving taxpayer-funded assistance. 

However, it is evident that attracting 

and retaining active members to these 

financially troubled plans is critical to 

ensuring that the plans retain 

contribution income levels sufficient to 

sustain plan assets. Accordingly, the 

interim final rule allows plans to 

provide benefit increases when these 

increases can be paid for by additional 

employer contributions. The condition 

also does not apply to the required 

reinstatement of benefits suspended 

under section 305(e)(9) or 4245(a) of 

ERISA or to any restoration of benefits 

under 26 CFR 1.432(e)(9)–1(e)(3). 

Conditions Related to Retroactive 

Benefit Improvements 

The interim final rule provides that, 

during the SFA coverage period, plans 

that receive SFA are strictly prohibited 

from adopting an amendment to provide 

any retroactive benefit improvements. 

Unlike increases to the level of future 

accruals, which incentivize active 

members to participate in the plan and 

can thereby improve the expected 

contribution income, increases to 

retroactive benefit levels harm the 

funded position of the plan without 

improving expected future plan income. 

Conditions Related to Allocation of Plan 

Assets 

The interim final rule provides that, 

during the SFA coverage period, plans 

must hold a sufficient portion of total 

plan assets, which includes all 

segregated accounts (including SFA), in 

permissible investments (described in 

§ 4262.14) to meet expected plan benefit 

payments and administrative expenses 

for at least 1 year (or until the date the 

plan is projected to become insolvent, if 

earlier). This requirement is in addition 

to the restrictions on investments under 

§ 4262.14. For plans with a large 

proportion of plan assets as SFA, this 

additional condition is not likely to 


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22SFA payments to plans are expected to be $474 

million in 2027 and $0 thereafter. PBGC 

administrative expenses are expected to be $14 

million per year from 2027 through 2029 and $10.5 

million in 2030. Additional PBGC expenses are 

expected to be incurred from 2031 through 2051, 

but would not be funded through general 

appropriations. Annual compliance filings are 

expected to be $726,800 per year from 2027 through 

2051. Condition exemption filings are expected to 

be $19,600 per year from 2027 through 2051. 

result in any additional restrictions on 

asset allocation until the plan’s SFA 

account is depleted. 

The interim final rule provides plans 

that receive SFA with the opportunity to 

invest in a portfolio that can benefit 

from risk and illiquidity premiums over 

the long-term investment horizon. This 

flexibility to invest in other assets is 

likely to extend the solvency of these 

plans, and the limit on that flexibility 

will only constrain plans that would 

otherwise accept an inappropriate level 

of risk after receiving taxpayer 

assistance. 

Conditions Related to Reductions in 

Employer Contribution Rates 

The interim final rule provides that, 

during the SFA coverage period, the 

contributions required for each CBU 

must not be less than, and the definition 

of the CBUs used must not be different 

from, those set forth in the CBA or plan 

documents (including agreed to 

contribution increases to the end of the 

collective bargaining agreements) in 

effect on March 11, 2021. However, an 

exception is provided where a plan 

sponsor determines that the risk of loss 

to plan participants and beneficiaries is 

lessened by the reduction. Where the 

reduction affects annual contributions 

over $10 million and over 10 percent of 

all employer contributions, the plan 

sponsor must request approval from 

PBGC, which must also determine that 

the change lessens the risk of loss to 

participants and beneficiaries. Plans in 

critical status are already subject to 

constraints on reducing future 

contribution rates and must abide by the 

terms of their rehabilitation plans. The 

interim final rule is intended to broadly 

prevent reductions in contribution rates 

that may accelerate the future 

insolvencies of plans, while still 

providing very limited flexibility for 

employers with extenuating financial 

circumstances. 

Conditions Related to the Allocation of 

Contributions and Other Practices 

Under the interim final rule, during 

the SFA coverage period, a decrease in 

the proportion of income (contributions, 

investment returns, etc.) or an increase 

in the proportion of expenses allocated 

to a plan that receives SFA is 

prohibited. This prohibition applies to 

written or oral agreements or practices 

(other than a written agreement in 

existence on March 11, 2021, to the 

extent not subsequently amended or 

modified) under which income or 

expenses are divided or to be divided 

between a plan that receives SFA and 

one or more other employee benefit 

plans. However, the prohibition does 

not apply to a good faith allocation of 

contributions pursuant to a reciprocity 

agreement. (If the principal purpose of 

entering into, amending, or modifying a 

reciprocity agreement after March 11, 

2021, is to circumvent this condition, 

any allocation made pursuant to such 

reciprocity agreement will not be 

considered as made in good faith.) The 

prohibition also does not apply to a 

good faith allocation of contributions 

where the contributions to a plan that 

receives SFA required for each base unit 

are not reduced (except if the reduction 

is approved by PBGC). It also does not 

apply to a good faith allocation of the 

costs of securing shared space, goods, or 

services, where such allocation does not 

constitute a prohibited transaction 

under ERISA or is otherwise exempt 

from the prohibited transaction 

provisions pursuant to section 408(b)(2), 

408(c)(2), or 408(a) of ERISA, or of the 

actual cost of services provided to the 

plan by an unrelated third party. 

This condition is to ensure that plans 

do not inappropriately reallocate 

contributions away from the plan to 

other benefit programs or 

inappropriately reallocate expenses 

from other benefit programs to the plan. 

In addition, during the SFA coverage 

period, a plan receiving SFA must not 

engage in a transfer of assets or 

liabilities (including a spinoff) or merger 

except with PBGC’s approval. PBGC 

will approve a proposed transfer or 

merger if: (1) The transaction complies 

with section 4231(a)–(d), (2) the transfer 

or merger, or the larger transaction of 

which the transfer or merger is a part, 

does not unreasonably increase PBGC’s 

risk of loss respecting any plan involved 

in the transaction and (3) the transfer or 

merger is not reasonably expected to be 

adverse to the overall interests of the 

participants and beneficiaries of any of 

the plans involved in the transaction. 

This condition is to ensure that plans 

that receive taxpayer-funded assistance 

do not subsequently engage in 

transactions that may allocate 

contributions away from the plan in a 

manner that is projected to accelerate 

insolvency. 

Conditions Related to Withdrawal 

Liability 

Under the interim final rule, a plan 

must use the interest assumptions under 

§ 4281.13(a) to determine withdrawal 

liability beginning for withdrawals after 

the plan year in which the plan receives 

SFA. This condition continues to apply 

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 segregated 

SFA asset account is fully depleted. 

The interim final rule also provides 

that, during the SFA coverage period, 

plans that receive SFA cannot enter into 

a negotiated settlement agreement with 

a withdrawing employer that is in 

excess of $50 million without first 

obtaining approval from PBGC. It is 

important to ensure that any negotiated 

settlements of material size are not 

projected to be harmful to participants 

in the plan or harmful to PBGC’s 

multiemployer insurance program. 

The interim final rule would prevent 

the payment of SFA from resulting in 

decreases in withdrawal liability 

assessments and thereby reduce the 

incentive for employers to withdraw 

from these plans. The purpose of SFA 

is to help plans pay for benefits and 

plan expenses and not to indirectly 

subsidize employers to exit these plans. 

(4) Estimated Impact of Regulatory 

Action 

The following table summarizes the 

estimated transfers and costs expected 

as a result of implementation of the SFA 

program. 

PV amount 

(3% rate) 

PV amount 

(7% rate) 2021 2022 2023 2024 2025 2026 2027–2051 (Total) 22

Annual Transfer Amounts 

SFA payments to plans 

(total nominal value of 

$94.2 billion).

$86.35 billion.$77.33 billion.$1.46 billion $43.68 billion.$23.03 billion.$13.32 billion.$8.89 billion $3.33 billion $0.47 billion. 


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I I I I I I 
36616 Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 

23The following web page on PBGC’s website 

provides more detailed information about PBGC’s 

Multiemployer Program Pension Insurance 

Modeling System (ME–PIMS): https://

www.pbgc.gov/about/projections-report/pensioninsurance-modeling-system. 

PV amount 

(3% rate) 

PV amount 

(7% rate) 2021 2022 2023 2024 2025 2026 2027–2051 (Total) 22

Financial assistance loan 

repayment to PBGC 

(total nominal value of 

$200 million).

($194.17) 

million.

($186.92) 

million.

($200.00) 

million.

$0 ............... $0 ............... $0 ............... $0 ............... $0 ............... $0. 

Total transfer 

amounts (total 

nominal value of 

$94.0 billion).

$86.16 billion.$77.14 billion.$1.26 billion $43.68 billion.$23.03 billion.$13.32 billion.$8.89 billion $3.33 billion $0.47 billion. 

Annual Cost Amounts 

PBGC administrative expenses (total nominal 

value of $150 million).

$129.57 million.$108.41 million.$20.50 million.$17.50 million.$15.75 million.$15.00 million.$14.75 million.$14.00 million.$52.50 million. 

SFA applications ............... $8,091,600 $7,232,400 $1,199,300 $2,121,800 $2,183,300 $1,998,800 $1,260,800 $78,800 ...... $0. 

Benefit reinstatement participant notices.$69,900 ...... $66,000 ...... $34,400 ...... $38,700 ...... $0 ............... $0 ............... $0 ............... $0 ............... $0. 

Annual compliance filings $12,495,000 $7,231,200 $0 ............... $99,500 ...... $275,400 .... $456,500 .... $622,200 .... $726,800 .... $18,168,750. 

Condition exemption filings $354,000 .... $209,900 .... $0 ............... $0 ............... $19,600 ...... $19,600 ...... $19,600 ...... $19,600 ...... $489,250. 

Total cost amounts .... $150.58 million.$123.15 million.$21.73 million.$19.76 million.$18.23 million.$17.47 million.$16.65 million.$14.83 million.$71.16 million. 

Filing and Issuance Requirements 

As discussed in this interim final rule, 

to request SFA for a multiemployer 

plan, a plan sponsor must, under 

section 4262 of ERISA and part 4262, 

file an application with PBGC. The 

applications for SFA must include 

information about the plan, plan 

documentation, and actuarial 

information. The information is 

necessary for PBGC to verify a plan’s 

eligibility for SFA, amount of requested 

SFA, and if applicable, inclusion in a 

priority group. In addition, under part 

4262, a plan that has received SFA is 

required to file a compliance notice 

with PBGC once every year until 2051. 

As discussed further in the Paperwork 

Reduction Act section, the estimated 

average cost (dollar equivalent of the inhouse hour burden + contractor costs) to 

prepare the one-time application to 

PBGC is $30,750, and the estimated 

average cost to prepare the annual 

statement of compliance is $2,550. 

PBGC estimates that over the next 3 

years (2021–2023) it will receive 

annually an average of 60 applications 

for SFA at an aggregate average annual 

cost of $1,845,000 and 49 annual 

statements of compliance at an aggregate 

average annual cost of $124,950. 

In addition, certain plan sponsors that 

receive SFA are subject to participant 

disclosure and reporting requirements. 

A plan sponsor of a plan with benefits 

that were suspended under sections 

305(e)(9) or 4245(a) of ERISA must issue 

a notice of reinstatement to participants 

and beneficiaries whose benefits were 

previously suspended and then 

reinstated. PBGC estimates that over the 

next 3 years (2021–2023) an average of 

11.33 plans annually (34 total plans) 

will issue the notice of reinstatement to 

an average of 3,050 participants and 

beneficiaries at an aggregate average 

annual cost of $24,367. 

A plan sponsor that receives SFA also 

is required to administer the plan in 

accordance with conditions prescribed 

by PBGC in § 4262.16. A plan sponsor 

may request approval from PBGC for an 

exception under certain circumstances 

for conditions relating to reductions in 

contributions, transfers or mergers, and 

settlement of withdrawal liability. PBGC 

expects these determination requests to 

be infrequent. PBGC estimates that it 

will receive an average of 2.2 requests 

per year beginning in 2023 at a cost of 

$19,570 per year (averaged over 2021– 

2023 = $6,523). 

Over the next 3 years (2021–2023), the 

total average annual cost for the 

information collection is $2,000,840 

($1,845,000 + $124,950 + $24,367 + 

$6,523). 

Conditions for Plans That Receive SFA 

The following table provides 

estimated financial impacts under a 

benchmark scenario analysis for each of 

the 6 areas for conditions listed under 

section 4262(m)(1) of ERISA. The 

estimated results were produced by 

ME–PIMS, PBGC’s stochastic modeling 

tool used to project the future solvency 

and potential financial assistance under 

section 4261 for each plan in the U.S. 

multiemployer pension plan system.23

The level of complexity and the lack of 

availability of complete plan-level data 

needed to program the specifications 

under the range of alternative regulatory 

actions under section 4262(m) are 

barriers to producing precise financial 

estimates for each potential action. 

Instead, PBGC conducted a single 

benchmark scenario for each regulatory 

condition that illustrates the order-ofmagnitude financial impact. 

The baseline assumptions represent 

PBGC’s best-estimate assumptions for 

determining the aggregate amounts of 

SFA under section 4262 of ERISA and 

financial assistance under section 4261 

based on employer and plan behavior 

that remains consistent before and 

following the distribution of SFA. The 

benchmark scenario assumptions 

represent a single scenario that was 

used to estimate each alternative 

regulatory action that was considered. 


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Regulatory condition Baseline assumption Benchmark scenario 

assumption Estimated benchmark impact * Comments 

Future Benefit Accruals.No assumed accrual increases An immediate 10% increase in 

future accruals followed by 

annual increases based on 

assumed wage index increases (no corresponding 

contribution rate increases).

$5 billion to $8 billion in section 

4261 Financial Assistance 

(estimated through 2070).

Plans are already constrained on increasing accrual levels based on 

rehabilitation plan requirements. 

The estimated impact is primarily 

due to accelerated plan insolvencies. Most increases to benefit accrual rates would not be covered 

under PBGC guaranteed benefit 

limits. 

Retroactive Benefit 

Accruals.

No assumed accrual increases A one-time 10% increase in retroactive accrued benefits for 

all active participants increases (no corresponding 

contribution rate increases).

$7 billion to $10 billion in section 4261 Financial Assistance (estimated through 

2070).

Plans are already constrained on increasing benefit levels based on rehabilitation plan requirements. The 

estimated impact is primarily due to 

accelerated plan insolvencies. Most 

increases to accrued benefits would 

not be covered under PBGC guaranteed benefit limits. 

Allocation of Plan Assets.Baseline stochastic returns 

under ME–PIMS model, without restrictions on asset allocation.

All plans that receive SFA utilize an LDI strategy to match 

assets to benefit payments.

$5 billion to $15 billion in section 4261 Financial Assistance (estimated through 

2070).

Plans required to invest all available 

plan assets in high quality fixed income securities are expected to attain lower investment returns, which 

accelerates plan insolvencies. 

Reduction in Contribution Rates.Level contribution rates (no assumed decreases).A one-time 20% decrease in 

the per-capita contribution 

rate increases (no corresponding reduction in future accruals).

$20 billion to $40 billion in section 4261 Financial Assistance (estimated through 

2070).

The estimated impact includes the acceleration of projected plan insolvencies resulting from reduced contribution levels, as well as lower 

contribution and withdrawal liability 

income following insolvency used to 

partially offset benefit payments. 

Allocation of Contributions and Other 

Practices.

No assumed reallocation of 

contributions to other plans. 

CBUs projected with annual 

1.3% decline.

A one-time immediate decline 

to CBUs of 20%, followed by 

annual 1.3% declines (includes corresponding reduction in future accruals).

$10 billion to $25 billion in section 4261 Financial Assistance (estimated through 

2070).

Reallocation of contributions to other 

plans could take the form of plan 

transactions such as spinoffs or liability transfers, which are not explicitly modeled. 

Withdrawal Liability .... No assumed future employer 

withdrawals explicitly factored 

into modeling.

Employers representing 35% of 

active members withdraw immediately after receiving SFA.

$15 billion to $20 billion in section 4262 SFA.Plans are assumed to project the increased level of employer withdrawals as part of assumption setting for SFA determination purposes. 

* The estimated impacts that increase the $94 billion of SFA amounts under section 4262 of ERISA occur from 2021 through 2027. The estimated impacts for all 

‘‘Section 4261 Financial Assistance’’ represent the aggregate nominal amount of this assistance provided through 2070. ‘‘Section 4261 Financial Assistance’’ is the 

multiemployer insurance program financial assistance PBGC provides in periodic payments upon plan insolvency under section 4261 of ERISA, which is limited to 

PBGC guarantee amounts. 

(5) Regulatory Alternatives Considered 

Conditions Related to Future Benefit 

Accruals 

PBGC first considered the 

implications of foregoing any regulatory 

authority provided under section 

4262(m) of ERISA to impose reasonable 

conditions related to future benefit 

accruals. The primary factor in support 

of the option to not regulate is that 

additional constraints on benefit 

improvements may be unnecessary and 

may be considered onerous. Plans that 

receive SFA will be deemed to be in 

critical status through the plan year 

ending in 2051 and will be subject to 

the terms of their applicable 

rehabilitation plan. A rehabilitation 

plan generally restricts a plan from 

increasing benefits unless the plan is 

able to provide additional contribution 

income that is not already contemplated 

with the rehabilitation plan. 

Although this may be applicable for 

many plans, there may be additional 

benefits to imposing a secondary 

restriction on benefit increases as 

permitted under section 4262(m) of 

ERISA. A secondary condition may 

eliminate some existing flexibility but 

could prevent plans from adopting 

benefit improvements that prove 

ultimately to be unaffordable for the 

plan. If a plan that receives SFA were 

able to subsequently implement 

significant increases to the future 

accrual rate, it would likely accelerate 

the plan’s insolvency date which would 

jeopardize participant benefits and 

impose financial strain on PBGC’s 

multiemployer insurance program. 

PBGC estimates that a one-time 10 

percent increase in the future accrual 

rate accompanied by annual increases 

based on the national average wage 

index, for all active participants, could 

increase the aggregate nominal amount 

of future financial assistance under 

section 4261 of ERISA by approximately 

$5 billion to $8 billion. Absent 

regulatory action, it is unknown the 

extent to which employers can and 

would increase future accrual rates. 

PBGC would generally expect the 

financial impact to be less than this 

estimated range due to the existing 

rehabilitation plan constraints, but the 

true impact is unknown and subject to 

a great deal of uncertainty. 

Another regulatory alternative was 

considered under which PBGC would 

limit levels of future increases based on 

wage indexation. This alternative would 

allow plans with limited flexibility to 

adopt increases but would prevent 

significant improvements that may 

prove unaffordable. PBGC considered 

that certain eligible plans may have 

recently imposed substantial reductions 

in the accrual level to forestall 

insolvency, such that the current level 

of accruals are not sufficient to retain 

active members. Although this 

alternative would have helped to limit 

the financial impact below the $5 

billion to $8 billion range modeled in 

the sensitivity scenario, it was 

determined to be too restrictive. 

Yet another regulatory alternative was 

considered under which PBGC would 

strictly prohibit any increases in future 

benefit accruals until 2051. Under this 

approach, the value of plan accrual rates 

could erode significantly due to 

inflation. As the benefits lose value, it 

would likely become increasingly 


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difficult for plans to retain their active 

members. Plans could suffer irreparable 

harm to the contribution base as a 

result, which would likely guarantee 

that plans would go insolvent. As a 

result, PBGC determined that this 

regulatory alternative would harm plan 

participants and the multiemployer 

insurance program. 

Conditions Related to Retroactive 

Benefit Improvements 

PBGC first considered the implication 

of foregoing any regulatory authority 

provided under section 4262(m) of 

ERISA to impose reasonable conditions 

related to retroactive benefit 

improvements. The primary support for 

not regulating is that additional 

constraints on benefit improvements 

may be unnecessary and may be 

considered onerous. Plans that receive 

SFA are deemed to be in critical status 

through the plan year ending in 2051 

and will be subject to the terms of their 

applicable rehabilitation plan. A 

rehabilitation plan generally restricts a 

plan from increasing benefits unless the 

plan is able to provide additional 

contribution income that is not already 

contemplated with the rehabilitation 

plan. 

However, as with the advantages of a 

condition on future benefit accruals 

discussed earlier, a secondary condition 

on retroactive benefit increases could 

prevent plans from adopting benefit 

improvements that ultimately prove to 

be unaffordable for the plan. PBGC 

estimates that a one-time 10 percent 

increase in retroactive accrued benefits 

for all active participants could increase 

the aggregate nominal amount of future 

financial assistance under section 4261 

by approximately $7 billion to $10 

billion. Absent regulatory action, the 

extent to which employers can and 

would increase retroactive benefits is 

unknown. PBGC would generally expect 

the financial impact to be less than this 

estimated range due to existing 

rehabilitation plan constraints, but the 

true impact is unknown and subject to 

a great deal of uncertainty. 

Another regulatory alternative 

considered would allow for retroactive 

benefit improvements, subject to 

rehabilitation plan constraints, but only 

up to a specified limit. The alternative 

would provide plans with limited 

flexibility to increase benefits, but also 

prevent excessive improvements that 

would impair a plan’s financial 

position. Yet another alternative would 

be to limit the amount of retroactive 

benefit increases to a restoration of 

accrued benefits to levels available 

before reductions applied pursuant to 

rehabilitation plan requirements in 

recent years. The benefit of this 

approach would be to improve 

potentially the retirement security of 

active plan participants, who have 

experienced the disproportionate 

impact of benefit reductions. However, 

increases to future accrual rates more 

effectively bolster the future engagement 

of active participants than retroactive 

benefit improvements. By prohibiting 

all retroactive benefit improvements, 

plans will remain on a more favorable 

financial path and any surplus income 

would be better utilized by improving 

future accruals to help attract and retain 

active members. 

Conditions Related to Allocation of Plan 

Assets 

PBGC first considered the 

implications of foregoing any regulatory 

authority provided under section 

4262(m) of ERISA to impose reasonable 

conditions related to asset allocation. 

There were two primary factors in 

support of this approach. First, section 

4262(l) already restricts the investment 

of SFA to investment-grade bonds and 

other investments as permitted by 

PBGC. This condition alone serves as a 

significant constraint on a plan’s ability 

to pursue higher returns in risk-seeking 

assets, particularly for plans that had 

previously been insolvent or close to 

insolvency and received an amount of 

SFA that is large in proportion to the 

amount of existing plan assets. Second, 

imposing conditions that severely 

restrict the level of return-seeking assets 

may impair a plan’s ability to achieve 

greater investment returns and forestall 

insolvency. Although a higher 

proportion of return-seeking assets 

exposes plans to greater losses in the 

event of adverse market conditions, the 

long-term investment horizon affords 

plans the risk capacity to recoup these 

losses. 

The primary risk to foregoing any 

regulatory action to impose conditions 

on asset allocation is the potential for a 

scenario under which plans that receive 

SFA invest heavily in highly risky, 

speculative assets and the market 

experiences a severe, prolonged 

downturn. Plans may choose to pay all 

benefits and administrative expenses 

from the SFA account before exhausting 

any existing plan assets. Following the 

depletion of SFA, plans would then 

experience no constraints on their asset 

allocation and could seek to invest in 

highly risky assets. Although the longterm investment horizon does afford 

plans with time to recoup losses, a 

severe and prolonged downturn could 

cause irreparable harm to the plan’s 

financial position. PBGC is unable to 

measure a precise financial impact for 

foregoing any regulatory condition with 

respect to asset allocation. However, 

under most economic scenarios, PBGC 

expects a more favorable outcome both 

to plan solvencies and future PBGC 

program outlays by imposing less 

restrictive conditions related to asset 

allocation, such as the condition in the 

interim final rule. 

A separate regulatory alternative was 

considered under which PBGC would 

require all plan assets to be invested in 

accordance with the restrictions for SFA 

under section 4262(l) of ERISA (i.e., 

investment-grade bonds or other 

investments as permitted by PBGC). 

This condition would effectively require 

plans to pursue a liability-driven 

investment strategy under which fixed 

income assets are matched to expected 

benefit payments to immunize the 

portfolio from risk. This condition 

would be highly restrictive on a plan’s 

ability to select plan assets. It would 

mitigate year-to-year volatility in plan 

funded status and would severely 

restrict a plan’s attainable investment 

returns and thus potentially accelerate 

the insolvency of the plan. Because 

available fixed income yields are 

expected to be lower than the interest 

rate limit defined under section 

4262(e)(3), plans would generally 

become insolvent before the 2051 plan 

year. Based on modeling using ME– 

PIMS, PBGC estimates that this 

regulatory alternative could increase 

future financial assistance payments 

under section 4261 by $5 billion to $15 

billion over the next four decades. Due 

to the increased financial impact of this 

option and the adverse impact to plan 

participants resulting from accelerated 

plan insolvencies, PBGC did not choose 

to pursue this alternative. 

Conditions Related to Reductions in 

Employer Contribution Rates 

PBGC first considered the 

implications of foregoing any regulatory 

authority provided under section 

4262(m) of ERISA to impose reasonable 

conditions related to reductions in 

employer contribution rates. The 

primary benefit of this option is that it 

could provide plans with flexibility to 

reduce contribution rates if it is 

expected to attract or retain employers 

in the plan. Any mechanism that allows 

plans to bolster their active membership 

could help to improve their funded 

status through increased contribution 

levels. A plan’s authority to allow for 

reduced contribution rates during the 

collective bargaining process is already 

constrained by the terms of their 

rehabilitation plan, which is mandated 

for plans certified in critical status. 

However, if plans are able to allow for 


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reductions in employer contribution 

rates, the contribution income into the 

plan may decrease if the reduced rates 

do not effectively increase plan 

participation. Plans may view SFA as a 

windfall that will allow for contribution 

rate relief that benefits employers at the 

expense of the plan’s financial health. 

Although the financial impact is likely 

to be significantly less than the $23 

billion to $36 billion range estimated 

under the ME–PIMS benchmark 

scenario for a 20 percent universal 

reduction in assumed contribution rates 

(primarily due to the aforementioned 

rehabilitation plan constraints), PBGC 

expects there to be a material (albeit 

unknown) impact. 

A separate regulatory alternative was 

considered under which PBGC would 

strictly prohibit plans from accepting 

any collective bargaining agreement 

under which there was a reduction in 

the contribution rate. This alternative is 

similar to the provision in the interim 

final rule but does not allow for any 

exceptions to the prohibition. PBGC 

recognizes that employers that are on 

the brink of insolvency may be able to 

avoid bankruptcy by reducing the 

contribution rate to the pension plan. 

Although this exception reduces short 

term contribution income to the plan, it 

may increase long-term contribution 

levels by enabling the contributing 

employer to stay solvent and have the 

resources available to contribute to the 

plan. 

Conditions Related to the Allocation of 

Contributions and Other Practices 

PBGC considered the implications of 

foregoing any regulatory action under 

section 4262(m) of ERISA to impose 

reasonable conditions related to the 

allocation of contributions and other 

practices. The primary benefit of this 

option is that the bargaining parties 

would retain full discretion over how to 

allocate contributions to benefit 

programs that align with their desired 

preferences. Regulatory action by PBGC 

could be considered onerous. 

However, PBGC recognizes that 

absent any regulations the bargaining 

parties could take actions that allocate 

contributions away from the pension 

plan and allow it to fail and become 

covered under PBGC’s insurance 

program. PBGC used ME–PIMS to 

estimate the financial impact of a 25 

percent one-time reduction in CBUs for 

all plans that receive SFA. This would 

reflect the efforts that may be made by 

some plans to shift hours away from the 

plan to increase contribution allocations 

to other programs. The 25 percent 

reduction percentage was set as an 

average to reflect that some bargaining 

parties may not allocate any 

contributions away from the plan 

whereas other bargaining parties may 

allocate a substantive portion of 

contributions away from the plan. 

Under this benchmark scenario, 

financial assistance under section 4261 

of ERISA would increase by 

approximately $10 billion to $25 billion 

over the following decades. However, 

the extent to which bargaining parties 

would engage in these types of strategies 

is highly uncertain. 

Conditions Related to Withdrawal 

Liability 

PBGC first considered the 

implications of foregoing any regulatory 

authority provided under section 

4262(m) of ERISA to impose reasonable 

conditions related to withdrawal 

liability. Absent any conditions, plans 

may anticipate a potential surge of 

employer withdrawal upon receipt of 

the SFA. Plans would account for this 

anticipated outcome by requesting a 

greater amount of SFA in their 

applications to PBGC (plans would do 

so by setting the actuarial assumptions 

accordingly). The extent to which the 

aggregate amount of SFA provided 

under section 4262 is impacted is 

unknown, but PBGC estimates that it 

could range from 10% to 30%. The 

greater the amount of SFA that is 

provided to plans, the greater the 

reduction in the employers’ unfunded 

vested benefit obligations and therefore 

the greater the incentive for employers 

to withdraw from the plans. This 

outcome could materially increase the 

amounts of SFA provided under section 

4262. 

A separate regulatory alternative was 

considered under which PBGC would 

mandate that, during the SFA coverage 

period, SFA assets are disregarded in 

the determination of unfunded vested 

benefits for the assessment of 

withdrawal liability. This alternative 

would prevent a decrease in the value 

of employer unfunded benefit 

obligations due to receipt of SFA and 

thereby block an incentive from arising 

that may cause employers to withdraw 

from these plans. This would mitigate 

against a change in plan assumptions for 

increased employer withdrawals within 

the application for SFA that would in 

turn increase the aggregate transfers of 

SFA across all plans under section 4262. 

This alternative was determined to be 

more administratively complex and 

therefore less desirable. 

Regulatory Flexibility Act 

Because PBGC is not publishing a 

general notice of proposed rulemaking 

under 5 U.S.C. 553(b), the regulatory 

flexibility analysis requirements of the 

Regulatory Flexibility Act do not apply. 

See 5 U.S.C. 601(2). 

Paperwork Reduction Act 

This interim final rule contains a 

collection of information that PBGC has 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval under the Paperwork 

Reduction Act. OMB’s decision 

regarding this information collection 

request will be available at http://

www.Reginfo.gov. An agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a 

currently valid OMB control number. 

PBGC estimates that over the next 3 

years an annual average of 60 plan 

sponsors will file applications for SFA 

(39 in 2021, 69 in 2022, and 71 in 2023). 

PBGC needs the information in the 

application to review a plan’s eligibility 

for SFA, priority group status, and 

amount of requested SFA, and to make 

payment of SFA. PBGC estimates that 

each application requires $30,000 in 

contractor cost and 10 hours of in-house 

fund time. Thus, the application 

imposes estimated annual burdens of 

$1,800,000 (60 × $30,000) and 600 (60 

× 10) hours. 

PBGC estimates that over the next 3 

years an annual average of 49 plan 

sponsors will file Annual Statements of 

Compliance (0 in 2021, 39 in 2022, and 

108 in 2023). PBGC needs the 

information in this statement to ensure 

that a plan is compliant with the 

conditions imposed upon its receiving 

SFA. PBGC estimates that each Annual 

Statement of Compliance requires 

$2,400 in contractor cost and 2 hours of 

in-house fund time. The Annual 

Statement of Compliance imposes 

estimated annual burdens of $117,600 

(49 × $2,400) and 98 (49 × 2) hours. 

Over the next 3 years an average of 

11.33 plans per year (16 plans in 2021, 

18 plans in 2022, and 0 in 2023) will be 

required to send notices to participants 

with suspended benefits. This notice is 

intended to ensure participants 

understand the calculation and dates of 

their reinstated benefits and, if 

applicable, make-up payments. PBGC 

estimates that the burden for each plan 

to prepare required notices is $2,000 in 

contractor cost and 2 hours of in-house 

fund time. Thus, these notices impose 

estimated annual burdens of $22,667 

(11.33 × $2,000) and 22.66 (11.33 × 2) 

hours. PBGC is considering issuing a 

model notice and hereby solicits public 

comment on whether a model notice 

would be helpful. 

Also, PBGC estimates that beginning 

in 2023, PBGC will receive an average 


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of 2.2 requests per year (averaged over 

2021–2023 = 0.73 per year) for 

determinations concerning a transfer of 

assets or liabilities (including a spinoff) 

or merger (1 per year); a withdrawal 

liability settlement greater than $50 

million (1 per year); or a contribution 

decrease (.2 (1 every 5 years)) (0 plans 

in 2021, 0 plans in 2022, and 2.2 plans 

in 2023). PBGC needs the information 

requested to make a determination on 

the proposed transaction, withdrawal 

liability settlement, or contribution 

decrease. PBGC estimates an average 

annual hour burden (employer and fund 

office hours) and average annual cost 

burden (contractor costs) per request of: 

• 1.6 hours (8 hours × .2) and $5,000 

($25,000 × .2) for a proposed 

contribution change; 

• 4 hours and $12,000 for a proposed 

transfer or merger; and 

• 2 hours and $2,000 for a proposed 

settlement of withdrawal liability. 

PBGC estimates that, beginning in 

2023, for 2.2 determination requests, the 

aggregated average annual hour burden 

will be 7.6 hours (1.6+4+2 employer and 

fund office hours) and the aggregated 

average annual cost burden will be 

$19,000 ($5,000 + $12,000 + $2,000 in 

contractor costs). For 2021–2023, PBGC 

estimates an average annual hour 

burden of 2.53 hours (7.6/3) and average 

annual cost burden of $6,333 ($19,000/ 

3). 

The estimated aggregate average 

annual hour burden for 2021–2023 for 

the information collection in part 4262 

is 723.20 hours (600 + 98 + 22.67 + 

2.53), which means a cost equivalent of 

$54,240 assuming a blended hourly rate 

of $75 for employer and fund office 

administrative, clerical, and supervisory 

time. The estimated aggregate average 

annual cost burden for 2021–2023 for 

the information collection in part 4262 

is $1,946,600 ($1,800,000 + $117,600 + 

$22,667 + $6,333), which means 

approximately 4,867 contract hours 

assuming an average hourly rate of $400 

for work done by outside actuaries and 

attorneys. The actual hour burden and 

cost burden per plan will vary 

depending on plan size and other 

factors. 

The estimated average annual burden 

figures for 2021–2023 are shown in the 

following chart. 

Average number of respondents p/year Hour burden 

hours 

Hour burden— 

equivalent cost Cost burden 

Applications for SFA: 60 .............................................................................................................. 600 $45,000 $1,800,000 

Annual compliance statements: 49 ............................................................................................. 98 7,350 117,600 

Notice of reinstatement: 11.33 .................................................................................................... 22.67 1,700 22,667 

Requests for determination: 1 (0.73) ........................................................................................... 2.53 190 6,333 

Totals: 121 ............................................................................................................................ 723.20 54,240 1,946,600 

Plan sponsors of multiemployer plans 

applying for SFA are required to file an 

application with PBGC with the 

required information under part 4262. 

For payment of SFA, they are required 

to include with an application for SFA, 

common form SF 3881, ACH Vendor/ 

Miscellaneous Payment Enrollment, 

OMB control no. 1530–0069. 

Written comments and 

recommendations for the information 

requirements under this interim final 

rule should be sent to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Attention: Desk Officer for Pension 

Benefit Guaranty Corporation through 

www.reginfo.gov/public/do/PRAMain. 

Find this particular information 

collection by selecting ‘‘Currently under 

Review—Open for Public Comments’’ or 

by using the search function. To be 

assured of consideration, comments 

must be submitted by August 11, 2021. 

PBGC is soliciting public comments 

to— 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including the use of 

appropriate automated, electronic, 

mechanical, or other technological 

collection techniques or other forms of 

information technology, e.g., permitting 

electronic submission of responses. 

List of Subjects 

29 CFR Part 4000 

Employee benefit plans, Pension 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 4262 

Employee benefit plans, Pension 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

For the reasons given above, PBGC is 

amending 29 CFR chapter XL as follows: 

PART 4000—FILING, ISSUANCE, 

COMPUTATION OF TIME, AND 

RECORD RETENTION 

■ 1. The authority citation for part 4000 

continues to read as follows: 

Authority: 29 U.S.C. 1083(k), 1302(b)(3). 

§ 4000.3 [Amended] 

■ 2. In § 4000.3, amend paragraph (b)(4) 

by adding ‘‘4262,’’ after ‘‘4245,’’. 

■ 3. Add part 4262 to read as follows: 

PART 4262—SPECIAL FINANCIAL 

ASSISTANCE BY PBGC 

Sec. 

4262.1 Purpose. 

4262.2 Definitions. 

4262.3 Eligibility for special financial 

assistance. 

4262.4 Amount of special financial 

assistance. 

4262.5 PBGC review of plan assumptions. 

4262.6 Information to be filed. 

4262.7 Plan information. 

4262.8 Actuarial and financial information. 

4262.9 Application for a plan with a 

partition. 

4262.10 Processing applications. 

4262.11 PBGC action on applications. 

4262.12 Payment of special financial 

assistance. 

4262.13 Restrictions on special financial 

assistance. 

4262.14 Permissible investments of special 

financial assistance. 

4262.15 Reinstatement of benefits 

previously suspended. 

4262.16 Conditions for special financial 

assistance. 

4262.17 Other provisions. 

Authority: 29 U.S.C. 1302(b)(3), 1432. 

§ 4262.1 Purpose. 

The purpose of this part is to 

prescribe rules governing applications 

for special financial assistance under 

section 4262 of ERISA and related 

requirements. 


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§ 4262.2 Definitions. 

The following terms are defined in 

§ 4001.2 of this chapter: Code, ERISA, 

fair market value, IRS, multiemployer 

plan, PBGC, plan, and plan sponsor. In 

addition, for purposes of this part: 

Form 5500 means the Annual Return/ 

Report of Employee Benefit Plan 

required to be filed for employee benefit 

plans under sections 104 and 4065 of 

ERISA and sections 6057(b) and 6058(a) 

of the Code. 

Merger means merger as defined in 

§ 4231.2 of this chapter. 

SFA coverage period means the 

period beginning on the plan’s SFA 

measurement date and ending on the 

last day of the last plan year ending in 

2051. 

SFA measurement date means the last 

day of the calendar quarter immediately 

preceding the date the plan’s 

application was filed. 

Special financial assistance or SFA 

means special financial assistance from 

PBGC under section 4262 of ERISA. 

Transfer and transfer of assets or 

liabilities means transfer and transfer of 

assets or liabilities as defined in 

§ 4231.2 of this chapter. 

§ 4262.3 Eligibility for special financial 

assistance. 

(a) In general. Subject to all the 

provisions of this section, a 

multiemployer plan is eligible for 

special financial assistance in any of the 

following cases: 

(1) Critical and declining status plans. 

The plan is in critical and declining 

status within the meaning of section 

305(b)(6) of ERISA for the specified 

year; or 

(2) Plans with a suspension of 

benefits. A suspension of benefits has 

been approved with respect to the plan 

under section 305(e)(9) of ERISA as of 

March 11, 2021; or 

(3) Critical status plans. The plan: 

(i) Is certified to be in critical status 

within the meaning of section 305(b)(2) 

of ERISA for a specified year; and 

(ii) The percentage calculated under 

paragraph (c)(2) of this section was less 

than 40 percent; and 

(iii) The ratio of the total number of 

active participants at the end of the plan 

year required to be entered on the Form 

5500 that was required to be filed for a 

specified year to the sum of inactive 

participants (retired or separated 

participants receiving benefits, other 

retired or separated participants entitled 

to future benefits, and deceased 

participants whose beneficiaries are 

receiving or are entitled to receive 

benefits) required to be entered on such 

Form 5500 was less than 2 to 3. 

(4) Insolvent plans. The plan became 

insolvent for purposes of section 418E 

of the Code after December 16, 2014, has 

remained insolvent, and has not 

terminated under section 4041A of 

ERISA as of March 11, 2021. 

(b) Specified year. For purposes of 

this section, the term specified year 

means a plan year specified by the plan 

sponsor beginning in 2020, 2021, or 

2022. The specified years for paragraphs 

(a)(3)(i), (ii), and (iii) of this section 

need not be the same. 

(c) Additional rules for critical status 

plans—(1) Elected status. Election of 

critical status under section 305(b)(4) of 

ERISA does not satisfy the requirement 

for the certification of critical status by 

the plan’s actuary under paragraph 

(a)(3)(i) of this section. 

(2) Percentage. The percentage 

calculated as— 

(i) The current value of net assets as 

of the first day of the plan year that was 

required to be entered on the Form 5500 

Schedule MB that was required to be 

filed for a specified year; plus 

(ii) The current value of withdrawal 

liability due to be received by the plan 

on an accrual basis, reflecting a 

reasonable allowance for amounts 

considered uncollectible, as of the first 

day of the plan year for the specified 

year in paragraph (c)(2)(i) of this section 

(if not already included in the current 

value of net assets in paragraph (c)(2)(i) 

of this section); divided by 

(iii) The current liability attributable 

to all benefits as of the first day of the 

plan year required to be entered on the 

Form 5500 Schedule MB specified in 

paragraph (c)(2)(i) of this section. 

(d) Actuarial assumptions. 

Determinations of eligibility under 

paragraph (a)(1) or (3) of this section 

must be made in accordance with the 

provisions in this paragraph (d). 

(1) Certifications completed before 

January 1, 2021. For certifications of 

plan status completed before January 1, 

2021, PBGC will accept assumptions 

incorporated in the determination of 

whether a plan is in critical status or 

critical and declining status as 

described in section 305(b) of ERISA 

unless such assumptions are clearly 

erroneous. 

(2) Certifications completed after 

December 31, 2020. For certifications of 

plan status completed after December 

31, 2020, the determination of whether 

a plan is in critical status or critical and 

declining status for purposes of 

eligibility for special financial 

assistance must be made using the 

assumptions that the plan used in its 

most recently completed certification of 

plan status before January 1, 2021, 

unless such assumptions (excluding the 

plan’s interest rate assumption) are 

unreasonable. 

(3) Changes in assumptions. If a plan 

determines that use of the assumptions 

under paragraph (d)(2) of this section is 

unreasonable, the plan’s application 

may include a proposed change in the 

assumptions (excluding the plan’s 

interest rate assumption), as described 

in § 4262.5. 

§ 4262.4 Amount of special financial 

assistance. 

(a) In general. Subject to paragraph (f) 

of this section, the amount of special 

financial assistance for a plan is the 

amount (if any), subject to adjustment 

for the date of payment as described in 

§ 4262.12, by which— 

(1) The value, as of the plan’s SFA 

measurement date, of all SFA-eligible 

plan obligations; exceeds 

(2) The value, as of the plan’s SFA 

measurement date, of all SFA-eligible 

plan resources. 

(b) SFA-eligible plan obligations. The 

value of SFA-eligible plan obligations as 

of the plan’s SFA measurement date, is 

the sum of— 

(1) The present value of benefits 

expected to be paid by the plan during 

the SFA coverage period including any 

reinstatement of benefits attributable to 

the elimination of reductions in a 

participant’s or beneficiary’s benefit due 

to a suspension of benefits under 

sections 305(e)(9) or 4245(a) of ERISA as 

required under § 4262.15 and any 

restoration of benefits under 26 CFR 

1.432(e)(9)–1(e)(3), and assuming such 

reinstatements are paid beginning as of 

the SFA measurement date; and 

(2) The present value of 

administrative expenses expected to be 

paid by the plan using plan assets 

during the SFA coverage period, 

excluding the amount owed to PBGC 

under section 4261 of ERISA (which is 

added to the amount of special financial 

assistance in § 4262.12 determined as of 

the date special financial assistance is 

paid). 

(c) SFA-eligible plan resources. The 

value of SFA-eligible plan resources as 

of the plan’s SFA measurement date, is 

the sum of— 

(1) The fair market value of plan 

assets on the SFA measurement date; 

and 

(2) The present value of future 

contributions, withdrawal liability 

payments, and other payments expected 

to be made to the plan (excluding the 

amount of financial assistance under 

section 4261 of ERISA and special 

financial assistance to be received by 

the plan) during the SFA coverage 

period. 

(d) Deterministic basis. The 

projections in paragraphs (b)(1) and (2) 

and (c)(2) of this section must be 


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performed on a deterministic basis 

using a single set of assumptions as 

described in paragraph (e) of this 

section. The projections must be based 

on participant census data as of the first 

day of the plan year in which the plan’s 

initial application for special financial 

assistance is filed, or, if the date on 

which the plan’s initial application for 

special financial assistance is filed is 

less than 270 days after the beginning of 

the current plan year and the actuarial 

valuation for the current plan year is not 

complete, the projections may instead 

be based on the participant census data 

as of the first day of the plan year 

preceding the year in which the plan’s 

initial application for special financial 

assistance is filed. 

(e) Actuarial assumptions. The 

amount of special financial assistance 

must be determined in accordance with 

generally accepted actuarial principles 

and practices and the provisions in this 

paragraph (e). 

(1) The assumed interest rate is the 

lesser of the rate in paragraph (e)(1)(i) or 

(ii) of this section. 

(i) The interest rate in this paragraph 

(e)(1)(i) is the interest rate used for 

funding standard account purposes as 

projected in the plan’s most recently 

completed certification of plan status 

before January 1, 2021. 

(ii) The interest rate in this paragraph 

(e)(1)(ii) is the interest rate that is 200 

basis points higher than the rate 

specified in section 303(h)(2)(C)(iii) of 

ERISA (disregarding modifications 

made under clause (iv) of such section) 

for the month in which the plan’s 

application for special financial 

assistance is filed or one of the 3 

preceding months, as selected by the 

plan. 

(2) The assumptions other than the 

interest rate are those used for the plan’s 

most recently completed certification of 

plan status before January 1, 2021, 

unless such assumptions are 

unreasonable. 

(3) If a plan determines that use of the 

assumptions under paragraph (e)(2) of 

this section is unreasonable, the plan’s 

application may include a proposed 

change in the assumptions (excluding 

the plan’s interest rate assumption 

under paragraph (e)(1) of this section), 

as described in § 4262.5. 

(f) Certain events—(1) General rules. 

(i) The special financial assistance of a 

plan that experiences one or more of the 

events described in paragraphs (f)(2), 

(3), and (4) of this section during the 

period beginning on July 9, 2021, and 

ending on the SFA measurement date is 

limited to the amount of special 

financial assistance that would have 

applied to the plan on the SFA 

measurement date if the events had not 

occurred, as determined in a reasonable 

manner. 

(ii) The special financial assistance of 

a plan that experiences a merger event 

during the period described in 

paragraph (f)(1)(i) of this section is 

limited to the sum of the amounts of 

special financial assistance that would 

have applied to the plans involved in 

the merger on the SFA measurement 

date if the merger had not occurred, as 

determined in a reasonable manner. If 

any of the plans involved in the merger 

also experiences one or more of the 

events described in paragraph (f)(2), (3), 

or (4) of this section during the period 

described in paragraph (f)(1)(i) of this 

section, the amount of special financial 

assistance for that plan on the SFA 

measurement date, determined as if the 

merger had not occurred, must be 

determined in accordance with 

paragraph (f)(1)(i) of this section. 

(2) Transfers. The event described in 

this paragraph (f)(2) is a transfer of 

assets or liabilities (including a spinoff). 

(3) Benefit increases. The event 

described in this paragraph (f)(3) is the 

execution of a plan amendment 

increasing accrued or projected benefits 

under a plan, other than a restoration of 

suspended benefits that satisfies the 

requirements of 26 CFR 1.432(e)(9)– 

1(e)(3). 

(4) Contribution reductions. The event 

described in this paragraph (f)(4) is the 

execution of a document reducing a 

plan’s contribution rate (including any 

reduction in benefit accruals adopted 

simultaneously or arising from a preexisting linkage between benefit 

accruals and contributions), but only if 

the plan does not demonstrate (in 

accordance with the special financial 

assistance instructions on PBGC’s 

website at www.pbgc.gov) that the risk 

of loss to participants and beneficiaries 

is reduced (disregarding special 

financial assistance) by execution of the 

document. The document referred to in 

this paragraph (f)(4) is either— 

(i) A collective bargaining agreement 

not rejected by the plan; or 

(ii) A document reallocating 

contribution rates. 

(5) Effect of pre-event ineligibility. In 

determining the amount of special 

financial assistance that would have 

applied to a plan if an event described 

in this paragraph (f) had not occurred, 

if the plan would have been ineligible 

for special financial assistance under 

§ 4262.3 in the absence of the event, 

then the amount of special financial 

assistance is deemed to be $0 (zero). 

(6) Examples. The following examples 

illustrate the provisions of paragraph (f) 

of this section. 

(i) Example 1. Plan A applies for 

special financial assistance. If the 

limitation in paragraph (f)(1)(i) of this 

section did not apply, Plan A would be 

entitled to special financial assistance in 

the amount of $20X. Before the SFA 

measurement date, but on or after July 

9, 2021, Plan A transferred a portion of 

its assets and liabilities to Plan B. If the 

transfer had not occurred, Plan A 

would, as of the SFA measurement date, 

be entitled to special financial 

assistance in the amount of $40X. 

Although an event described in 

paragraph (f)(2) of this section occurred 

with respect to Plan A, Plan A’s special 

financial assistance is unaffected by the 

limitation in paragraph (f)(1)(i) of this 

section and is $20X. Plan B also applies 

for special financial assistance. If the 

limitation in paragraph (f)(1)(i) of this 

section did not apply, Plan B would be 

entitled to special financial assistance in 

the amount of $30X. If the transfer from 

Plan A had not occurred, Plan B would, 

as of the SFA measurement date, be 

ineligible for special financial 

assistance. As a result of the event 

described in paragraph (f)(2) of this 

section, the limitation in paragraph 

(f)(1)(i) of this section reduces Plan B’s 

special financial assistance from $30X 

to $0. 

(ii) Example 2. Plan C applies for 

special financial assistance. If the 

limitation in paragraph (f)(1)(ii) of this 

section did not apply, Plan C would be 

entitled to special financial assistance in 

the amount of $40X. Before the SFA 

measurement date, but on or after July 

9, 2021, Plans A and B were merged into 

existing Plan C. If the mergers had not 

occurred, Plan A would not be eligible 

for special financial assistance, and Plan 

B and Plan C would be entitled, 

respectively, to $10X and $5X of special 

financial assistance as of the SFA 

measurement date. As a result of the 

merger event described in paragraph 

(f)(1)(ii) of this section, the limitation in 

paragraph (f)(1)(ii) of this section 

reduces Plan C’s special financial 

assistance from $40X to $15X. 

(iii) Example 3. Plan A applies for 

special financial assistance. If the 

limitation in paragraph (f)(1)(i) of this 

section did not apply, Plan A would be 

entitled to special financial assistance in 

the amount of $10X. Before the SFA 

measurement date, but on or after July 

9, 2021, projected benefits under Plan A 

were increased. If the increase had not 

occurred, Plan A would, as of the SFA 

measurement date, be ineligible for 

special financial assistance. As a result 

of the event described in paragraph 

(f)(3) of this section, applying the 

limitation in paragraph (f)(1)(i) of this 

section and in accordance with 


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paragraph (f)(5) of this section, Plan A 

is treated as being entitled to special 

financial assistance of $0. 

(iv) Example 4. Plan A applies for 

special financial assistance. If the 

limitation in paragraph (f)(1)(i) of this 

section did not apply, Plan A would be 

entitled to special financial assistance in 

the amount of $10X. Before the SFA 

measurement date, but on or after July 

9, 2021, Plan A’s contribution rate was 

reduced. Plan A’s benefit formula states 

that the monthly benefit accrual for a 

participant for a plan year is 2.0% of the 

contributions paid on behalf of the 

participant for that plan year. Since 

there is a pre-existing linkage between 

benefit accruals and contributions, the 

event described in paragraph (f)(4) of 

this section includes both the reduction 

in benefit accruals and the reduction in 

the contribution rate. If the contribution 

rate reduction and the reduction in 

benefit accruals had not occurred, Plan 

A would, as of the SFA measurement 

date, be entitled to special financial 

assistance of $8X. Plan A does not 

provide a demonstration that the risk of 

loss to participants and beneficiaries is 

reduced (disregarding special financial 

assistance) due to the reduction in 

contribution rate and the reduction in 

benefit accruals. As a result of the 

events described in paragraph (f)(4) of 

this section, the limitation in paragraph 

(f)(1)(i) of this section reduces Plan A’s 

special financial assistance from $10X 

to $8X. 

§ 4262.5 PBGC review of plan 

assumptions. 

(a) In general. (1) As set forth in 

§ 4262.3(d)(1), PBGC will accept the 

assumptions used by a plan to 

determine eligibility for special 

financial assistance under § 4262.3(d)(1) 

unless PBGC determines that such 

assumptions are clearly erroneous. 

(2) PBGC will accept the assumptions 

used by a plan to determine eligibility 

for special financial assistance under 

§ 4262.3(d)(2) or to determine the 

amount of special financial assistance 

under § 4262.4(e)(2) unless PBGC 

determines that an assumption is 

unreasonable. 

(3) PBGC will accept a plan’s changes 

in assumptions under paragraph (c) of 

this section except to the extent that 

PBGC determines that an assumption is 

individually unreasonable, or the 

proposed changed assumptions are 

unreasonable in the aggregate. 

(b) Reasonableness of assumptions. 

(1) Each of the actuarial assumptions 

and methods used for the actuarial 

projections (excluding the interest rate 

assumption) must be reasonable in 

accordance with generally accepted 

actuarial principles and practices, 

taking into account the experience of 

the plan and reasonable expectations. 

The actuary’s selection of assumptions 

about future covered employment and 

contribution levels (including 

contribution base units and contribution 

rates) may be based on information 

provided by the plan sponsor, which 

must act in good faith in providing the 

information. 

(2) If a plan has a change in 

assumptions under paragraph (c) of this 

section, each of the actuarial 

assumptions and methods (other than 

the interest rate) must be reasonable and 

the combination of those actuarial 

assumptions and methods (excluding 

the interest rate) must also be 

reasonable. 

(c) Changes in assumptions. If a plan 

determines that use of an assumption 

described in § 4262.3(d)(2) or 

§ 4262.4(e)(2) is unreasonable, the plan’s 

application may include a proposed 

change in the assumptions (excluding 

the plan’s interest rate assumption). 

(1) The application for special 

financial assistance must— 

(i) Describe why the original 

assumption is no longer reasonable; 

(ii) Propose to use a different 

assumption (the changed assumption); 

and 

(iii) Demonstrate that the changed 

assumption is reasonable. 

(2) PBGC will provide guidelines for 

changed assumptions on PBGC’s 

website at www.pbgc.gov. 

§ 4262.6 Information to be filed. 

(a) In general. An application for 

special financial assistance must 

include the information specified in this 

section and §§ 4262.7 (plan information) 

and 4262.8 (actuarial and financial 

information); a copy of the executed 

plan amendment required under 

paragraph (e)(1) of this section; a copy 

of the proposed plan amendment 

required under paragraph (e)(2) of this 

section; a completed checklist; and 

other information as described in the 

special financial assistance instructions 

on PBGC’s website at www.pbgc.gov. If 

any of the information required for an 

application for special financial 

assistance under this part is not 

accurately completed or not filed with 

the application, the application will not 

be considered complete. 

(b) Required trustee signature. An 

application for special financial 

assistance must— 

(1) Be signed and dated by an 

authorized trustee, who is a current 

member of the board of trustees and 

who is authorized to sign on behalf of 

the board of trustees, or by another 

authorized representative of the plan 

sponsor; and 

(2) Include the following statements 

signed by an authorized trustee who is 

a current member of the board of 

trustees: ‘‘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.’’ 

(c) Actuarial calculations. All 

calculations that are required in an 

application for special financial 

assistance under this part must include 

a certification by the plan’s enrolled 

actuary. 

(d) Clarifying information. PBGC may 

require a plan sponsor to file additional 

information to clarify or verify 

information provided in the plan’s 

application. The plan sponsor must 

promptly file any such information with 

PBGC upon request. 

(e) Duty to amend and supplement 

application. The plan sponsor of a plan 

applying for special financial assistance 

must— 

(1) Amend the plan to include the 

following special financial assistance 

provision effective through the end of 

the last plan year ending in 2051: 

‘‘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.’’ 

(2) Amend the plan to reinstate 

benefits, as described in § 4262.15(a)(1), 

and make payments of previously 

suspended benefits, described in 

§ 4262.15(a)(2), in accordance with 

guidance issued by the Secretary of the 

Treasury under section 432(k)(2) of the 

Code. 

(3) During any time in which an 

application is pending approval by 

PBGC, the plan sponsor must promptly 

notify PBGC in writing as soon as the 

plan sponsor becomes aware that any 

material fact or representation contained 

in or relating to the application, or in 

any supporting documents, is no longer 

accurate, or that any material fact or 

representation was omitted from the 

application or supporting documents. 

(f) Disclosure of information. Unless 

confidential under the Privacy Act, all 

information that is filed with PBGC for 


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an application for special financial 

assistance under this part may be made 

publicly available, at PBGC’s sole 

discretion, on PBGC’s website at 

www.pbgc.gov or otherwise publicly 

disclosed. Except to the extent required 

by the Privacy Act, PBGC provides no 

assurance of confidentiality in any 

information or documentation included 

in an application for special financial 

assistance. 

§ 4262.7 Plan information. 

(a) Basic information. An application 

for special financial assistance must 

include all of the following information 

with respect to the plan and amount of 

special financial assistance requested: 

(1) Name of the plan, Employer 

Identification Number (EIN), and threedigit Plan Number (PN). 

(2) Name of the individual filing the 

application and role of the individual 

with respect to the plan. 

(3) Name, address, email, and 

telephone number of the plan sponsor 

and the plan sponsor’s authorized 

representatives, if any. 

(4) The total amount of special 

financial assistance requested. 

(b) Eligibility. An application must 

identify the eligibility requirements in 

§ 4262.3 that the plan satisfies to be 

eligible for special financial assistance. 

An application for a plan that is eligible 

under section 4262(b)(1)(C) of ERISA 

must include a demonstration to 

support that the plan meets the 

eligibility requirements. 

(c) Priority group identification. An 

application must identify any priority 

group under § 4262.10(d)(2) that the 

plan is in. An application must include 

a demonstration to support the plan’s 

inclusion in a priority group, unless the 

plan is insolvent under section 4245(a) 

of ERISA, has implemented a 

suspension of benefits under section 

305(e)(9) of ERISA as of March 11, 2021, 

is in critical and declining status (as 

defined in section 305(b)(6) of ERISA) 

and had 350,000 or more participants, 

or is listed on PBGC’s website at 

www.pbgc.gov as a plan in priority 

group 6, as defined under 

§ 4262.10(d)(2)(vi). 

(d) Plans with a suspension of 

benefits. If a plan previously suspended 

benefits under sections 305(e)(9) or 

4245(a) of ERISA, its application must 

include a description of how the plan 

will reinstate the benefits that were 

previously suspended and a proposed 

schedule showing aggregate amount and 

timing of payments (in accordance with 

§ 4262.15) to participants and 

beneficiaries under the plan. The 

proposed schedule should be prepared 

assuming the effective date for 

reinstatement is the SFA measurement 

date and that payments for previously 

suspended benefits described in 

§ 4262.15(a)(2) are paid or commence on 

the SFA measurement date. If the plan 

restored benefits under 26 CFR 

1.432(e)(9)–1(e)(3) before the SFA 

measurement date, the proposed 

schedule should reflect the amount and 

timing of payments of restored benefits 

and the effect of the restoration on the 

benefits remaining to be reinstated. 

(e) Plan documentation. An 

application must include all of the 

following plan documentation: 

(1) Most recent plan document or 

restatement of the plan document and 

all subsequent amendments adopted (if 

any), including a copy of the executed 

plan amendment required under 

§ 4262.6(e)(1). 

(2) A copy of the proposed plan 

amendment required under 

§ 4262.6(e)(2) and certification by the 

plan sponsor that the plan amendment 

will be timely adopted. 

(3) Most recent trust agreement or 

restatement of the trust agreement and 

all subsequent adopted amendments (if 

any). 

(4) Most recent IRS determination 

letter. 

(5) Actuarial valuation report 

completed for the 2018 plan year and 

each subsequent actuarial valuation 

report completed before the date the 

plan’s application was filed. 

(6) Most recent rehabilitation plan (or 

funding improvement plan, if 

applicable), including all subsequent 

amendments and updates, and the 

percentage of total contributions 

received under each schedule of the 

rehabilitation plan for the most recent 

plan year available. If the most recent 

rehabilitation plan does not include 

historical documentation of 

rehabilitation plan changes (if any) that 

occurred in calendar year 2020 and 

later, these details must be provided in 

a supplemental document. 

(7) Most recent Form 5500 and all 

schedules and attachments (including 

the audited financial statement). 

(8) Plan actuary’s certification of plan 

status required under section 305(b)(3) 

of ERISA completed for the 2018 plan 

year and each subsequent annual 

certification completed before the date 

the plan’s application was filed, with 

documentation supporting each 

certification, which must include the 

projections and information required in 

the special financial assistance 

instructions on PBGC’s website at 

www.pbgc.gov. 

(9) Most recent statement for each of 

the plan’s cash and investment 

accounts. 

(10) Most recent plan financial 

statement (audited, or unaudited if 

audited is not available). 

(11) Bank account and other 

information necessary for electronic 

payment of funds. 

(12) All written policies and 

procedures governing withdrawal 

liability determination, assessment, 

collection, settlement, and payment. 

§ 4262.8 Actuarial and financial 

information. 

(a) Required information. An 

application for special financial 

assistance must include all of the 

following actuarial and financial 

information: 

(1) For each plan year from the 2018 

plan year until the most recent plan year 

for which the Form 5500 is required to 

be filed, the projection of expected 

benefit payments as required to be 

attached to the Form 5500 Schedule MB 

if the response to the question at line 

8b(1) of the Form 5500 Schedule MB is 

‘‘Yes’’. 

(2) For a plan that has 10,000 or more 

participants as required to be entered on 

line 6f of the plan’s most recently filed 

Form 5500, a listing of the 15 largest 

contributing employers and the 

contribution amounts for each for the 

most recently completed plan year. 

(3) Historical plan financial 

information for each of the most recent 

10 plan years immediately preceding 

the date the plan’s application was filed 

that separately identifies: Total 

contributions; total contribution base 

units; average contribution rates; 

number of active participants at the 

beginning of each plan year; and other 

sources of non-investment income, 

including, if applicable, withdrawal 

liability payments collected, 

contributions from reciprocity 

agreements, and other sources of 

contributions or income not already 

identified. 

(4) Information used to determine the 

amount of the requested special 

financial assistance, based on a 

deterministic projection, including all of 

the following information— 

(i) Interest rate required under 

§ 4262.4(e)(1), including supporting 

details on how it was determined. 

(ii) Fair market value of plan assets 

determined as of the SFA measurement 

date; a certification from the plan 

sponsor with respect to the accuracy of 

this amount, including information that 

substantiates the asset value and any 

projections to the SFA measurement 

date (including details and supporting 

rationale); and a reconciliation of the 

fair market value of plan assets from the 

date of the most recent plan financial 


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statement to the SFA measurement date 

showing contributions, withdrawal 

liability payments, benefit payments, 

administrative expenses, and 

investment income. 

(iii) Special financial assistance 

determined as a lump sum as of the SFA 

measurement date. 

(iv) For each plan year in the SFA 

coverage period: The projected amount 

of contributions, projected withdrawal 

liability payments, and other payments 

expected to be made to the plan. 

(v) For each plan year in the SFA 

coverage period: Benefit payments 

described in § 4262.4(b)(1) attributable 

to the reinstatement of benefits under 

§ 4262.15 that were previously 

suspended through the SFA 

measurement date and any benefits 

restored under 26 CFR 1.432(e)(9)– 

1(e)(3). 

(vi) For each plan year in the SFA 

coverage period: Benefit payments 

described in § 4262.4(b)(1) (excluding 

the payments in paragraph (a)(4)(v) of 

this section), separately for current 

retirees and beneficiaries in pay status, 

terminated participants not yet in pay 

status, current active participants, and 

new entrants. 

(vii) For each plan year in the SFA 

coverage period: Administrative 

expenses expected to be paid using plan 

assets, excluding the amount owed 

PBGC under section 4261 of ERISA. 

(viii) For each plan year in the SFA 

coverage period: The projected 

investment income based on the interest 

rate required under § 4262.4(e)(1) and 

the projected fair market value of plan 

assets at the end of each plan year. 

(ix) The present value as of the SFA 

measurement date of each of the items 

provided under paragraph (a)(4)(iv) 

through (viii) of this section. 

(5) Projected contributions and 

withdrawal liability payments used to 

calculate the requested special financial 

assistance amount in § 4262.4, including 

total contributions, contribution base 

units, average contribution rate(s), 

reciprocal contributions (if applicable), 

additional contributions from the 

rehabilitation plan, and any other 

contributions, and number of active 

participants at the beginning of each 

plan year. For withdrawal liability, 

separate projections for withdrawn 

employers and for future assumed 

withdrawals. 

(6) A description of the development 

of the assumed future contributions and 

future withdrawal liability payments in 

paragraph (a)(5) of this section. 

(7) For a plan that has 350,000 or 

more participants reported on line 6f of 

its most recently filed Form 5500, the 

participant census data utilized by the 

plan actuary in developing the cash 

flow projections included in the 

application. 

(b) Information required for changed 

assumptions. An application for a plan 

that proposes to change any assumption 

used in the plan’s most recently 

completed certification of plan status 

before January 1, 2021, must include all 

of the following information: 

(1) A table identifying which 

assumptions used in demonstrating the 

plan’s eligibility for special financial 

assistance or in calculating the amount 

of special financial assistance differ 

from those assumptions used in the 

plan’s most recently completed 

certification of plan status before 

January 1, 2021, and detailed narrative 

explanations (with supporting rationale 

and information) as to why any 

assumption used in the certification is 

no longer reasonable and why the 

changed assumption is reasonable. 

(2) Deterministic cash flow projection 

(‘‘Baseline’’) in accordance with the 

special financial assistance instructions 

on PBGC’s website at www.pbgc.gov that 

shows the amount of special financial 

assistance that would be determined if 

all underlying assumptions used in the 

projection were the same as those used 

in the actuarial certification of plan 

status last completed before January 1, 

2021 (excluding the plan’s interest rate, 

which must be the same as the interest 

rate required under § 4262.4(e)(1)). For 

purposes of this paragraph (b)(2), certain 

changes in assumptions as described in 

the special financial assistance 

instructions on PBGC’s website at 

www.pbgc.gov should be reflected in the 

Baseline projection. 

(3) In accordance with the special 

financial assistance instructions on 

PBGC’s website at www.pbgc.gov, a 

reconciliation of the change in the 

requested special financial assistance 

due to each changed assumption from 

the Baseline to the requested special 

financial assistance amount in 

paragraph (a)(4)(iii) of this section, 

showing, for each assumption change 

from the Baseline, a deterministic 

projection calculated in the same 

manner as the requested amount in 

§ 4262.4. 

(c) Information required for certain 

events. An application for a plan with 

respect to which an event described in 

§ 4262.4(f) occurs on or after July 9, 

2021, must include the applicable 

information related to the event 

specified in special financial assistance 

instructions on PBGC’s website at 

www.pbgc.gov. 

§ 4262.9 Application for a plan with a 

partition. 

(a) In general. This section applies to 

plans partitioned under section 4233 of 

ERISA. A partitioned plan is in priority 

group 2 for purposes of § 4262.10(d). 

(b) Filing requirements. A plan 

sponsor of a partitioned plan filing an 

application for special financial 

assistance must— 

(1) File one application for the 

original plan and successor plan. 

(2) Include in the application— 

(i) A statement that the plan was 

partitioned under section 4233 of 

ERISA; 

(ii) A copy of the plan document and 

other amendments required under 

paragraph (c)(2) of this section; and 

(iii) The information required in 

§§ 4262.6 through 4262.8. 

(3) If a plan sponsor has already filed 

with PBGC any of the required 

information described in paragraph 

(b)(2)(iii) of this section, the plan 

sponsor is not required to file that 

information with its application for 

special financial assistance. For any 

such information not filed with the 

application, the plan sponsor must note 

on the checklist described under 

§ 4262.6(a) when the information was 

filed. 

(c) Rescission of partition order. 

Effective when special financial 

assistance is paid under § 4262.12, and 

in a manner consistent with the 

application procedure determined 

under paragraph (b) of this section— 

(1) PBGC will rescind the partition 

order; and 

(2) The plan sponsor must amend the 

plan to remove any provisions or 

amendments that were required to be 

adopted under the partition order. 

§ 4262.10 Processing applications. 

(a) In general. Any application for 

special financial assistance for an 

eligible multiemployer plan must be 

filed by the plan sponsor in accordance 

with the provisions of this part and the 

special financial assistance instructions 

on PBGC’s website at www.pbgc.gov. 

(b) Method of filing. An application 

filed with PBGC under this part must be 

made electronically in accordance with 

the rules in subpart A of part 4000 of 

this chapter. The time period for filing 

an application under this part must be 

computed under the rules in subpart D 

of part 4000 of this chapter. 

(c) Where to file. (1) An application 

filed with PBGC under this part must be 

filed as described in § 4000.4 of this 

chapter. 

(2) Section 432(k)(1)(D) of the Code 

requires an application in a priority 

category under paragraph (d)(2) of this 


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section to be submitted to the Secretary 

of the Treasury. If the requirement in 

the preceding sentence applies to an 

application, PBGC will transmit the 

application to the Department of the 

Treasury on behalf of the plan. 

(d) When to file. Any initial 

application for special financial 

assistance must be filed by December 

31, 2025, and any revised application 

must be filed by December 31, 2026. 

Any application other than a plan’s 

initial application is a revised 

application regardless of whether it 

differs from the initial application. 

(1) Processing system. To 

accommodate expeditious processing of 

many special financial assistance 

applications in a limited time period: 

(i) The number of applications 

accepted for filing will be limited in 

such manner that, in PBGC’s estimation, 

each application can be processed 

within 120 days. 

(ii) Plans specified in paragraph (d)(2) 

of this section will be given priority to 

file an application before plans not 

specified in paragraph (d)(2) of this 

section. 

(iii) Notices on PBGC’s website at 

www.pbgc.gov will apprise potential 

filers of the current priority group(s) for 

which applications are being accepted 

and whether PBGC is accepting 

applications for filing as well as other 

information about priority groups and 

filing. 

(2) Priority groups. Until not later 

than March 11, 2023, the plan sponsor 

of an eligible multiemployer plan will 

be given priority to file an application 

if the plan is in one of the priority 

groups in paragraphs (d)(2)(i) through 

(vii) of this section, listed in order of 

higher priority group to lower priority 

group. When applications for plans in a 

priority group are accepted for filing, 

PBGC will continue to accept 

applications for plans in a higher 

priority group, subject to paragraph 

(d)(1) of this section. 

(i) Priority group 1. A plan is in 

priority group 1 if the plan is insolvent 

or is projected to become insolvent 

under section 4245 of ERISA by March 

11, 2022. A plan in priority group 1 may 

file an application beginning on July 9, 

2021. 

(ii) Priority group 2. A plan is in 

priority group 2 if the plan has 

implemented a suspension of benefits 

under section 305(e)(9) of ERISA as of 

March 11, 2021; or the plan is expected 

to be insolvent under section 4245 of 

ERISA within 1 year of the date the 

plan’s application was filed. A plan in 

priority group 2 may file an application 

beginning on January 1, 2022, or such 

earlier date specified on PBGC’s website 

at www.pbgc.gov. 

(iii) Priority group 3. A plan is in 

priority group 3 if the plan was in 

critical and declining status (as defined 

in section 305(b)(6) of ERISA) and had 

350,000 or more participants. A plan in 

priority group 3 may file an application 

beginning on April 1, 2022, or such 

earlier date specified on PBGC’s website 

at www.pbgc.gov. 

(iv) Priority group 4. A plan is in 

priority group 4 if the plan is projected 

to become insolvent under section 4245 

of ERISA by March 11, 2023. A plan in 

priority group 4 may file an application 

beginning on July 1, 2022, or such 

earlier date specified on PBGC’s website 

at www.pbgc.gov. 

(v) Priority group 5. A plan is in 

priority group 5 if the plan is projected 

to become insolvent under section 4245 

of ERISA by March 11, 2026. The date 

a plan in priority group 5 may file an 

application will be specified on PBGC’s 

website at www.pbgc.gov at least 21 

days in advance of such date, and such 

date will be no later than February 11, 

2023. 

(vi) Priority group 6. A plan is in 

priority group 6 if the plan is projected 

by PBGC to have a present value of 

financial assistance payments under 

section 4261 of ERISA that exceeds 

$1,000,000,000 if special financial 

assistance is not ordered. PBGC will list 

the plans in priority group 6 on its 

website at www.pbgc.gov. The date a 

plan in priority group 6 may file an 

application will be specified on PBGC’s 

website at www.pbgc.gov at least 21 

days in advance of such date, and such 

date will be no later than February 11, 

2023. 

(vii) Additional priority groups. PBGC 

may add additional priority groups 

based on other circumstances similar to 

those described for the groups listed in 

paragraphs (d)(2)(i) through (vi) of this 

section. If added, additional priority 

groups and the date PBGC will begin 

accepting applications for such 

additional priority groups will be posted 

in guidance on PBGC’s website at 

www.pbgc.gov. 

(e) Filing date. An application will be 

considered filed on the date it is 

submitted to PBGC if it meets the 

applicable requirements in paragraph 

(d) of this section and can be 

accommodated in accordance with the 

processing system described in 

paragraph (d)(1) of this section or the 

emergency filing process described in 

paragraph (f) of this section. Otherwise, 

the application will not be considered 

filed and PBGC will notify the applicant 

that the application was not properly 

filed and that the application must be 

filed in accordance with the processing 

system and instructions on PBGC’s 

website at www.pbgc.gov. 

(f) Emergency filing. Beginning when 

PBGC accepts applications in priority 

group 2 described in paragraph (d)(2)(ii) 

of this section, and notwithstanding the 

processing system described in 

paragraph (d)(1) of this section, an 

application may be accepted for filing 

if— 

(1) It is an application for a plan that 

either— 

(i) Is insolvent or expected to be 

insolvent under section 4245 of ERISA 

within 1 year of the date the plan’s 

application was filed; or 

(ii) Has suspended benefits under 

section 305(e)(9) of ERISA as of March 

11, 2021; and 

(2) The filer notifies PBGC before 

submitting the application that the 

application qualifies as an emergency 

filing under this paragraph (f) in 

accordance with instructions on PBGC’s 

website at www.pbgc.gov. 

(g) Informal consultation. Nothing in 

this section prohibits a plan sponsor 

from contacting PBGC informally to 

discuss a potential application for 

special financial assistance. 

§ 4262.11 PBGC action on applications. 

(a) In general. Within 120 days after 

the date an initial or revised application 

for special financial assistance is 

properly and timely filed, PBGC will— 

(1) Approve the application and 

notify the plan sponsor of the payment 

of special financial assistance in 

accordance with § 4262.12; or 

(2) Deny the application because— 

(i) The application is incomplete, and 

notify the plan sponsor of the missing 

information; or 

(ii) An assumption is unreasonable, a 

proposed change in assumption is 

individually unreasonable, or the 

proposed changed assumptions are 

unreasonable in the aggregate, and 

notify the plan sponsor of the reasons 

for the determination; or 

(iii) The plan is not an eligible 

multiemployer plan, and notify the plan 

sponsor of the reasons the plan fails to 

be eligible for special financial 

assistance; or 

(3) Fail to act on the application, in 

which case the application is deemed 

approved, and notify the plan sponsor 

of the payment of special financial 

assistance in accordance with § 4262.12. 

(b) Incomplete application. PBGC will 

consider an application incomplete 

under paragraph (a)(2)(i) of this section 

unless the application accurately 

includes the information required to be 

filed under this part and the special 

financial assistance instructions on 


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PBGC’s website at www.pbgc.gov, 

including all additional information that 

PBGC requires under § 4262.6(d). 

(c) Application base data. (1) A plan’s 

base data are— 

(i) The plan’s SFA measurement date 

as required to be reported in the plan’s 

initial application for special financial 

assistance; 

(ii) The plan’s participant census data 

used in the plan’s initial application for 

special financial assistance; and 

(iii) The plan’s interest rate required 

under § 4262.4(e)(1). 

(2) A plan’s base data are fixed by the 

filing of the plan’s initial application 

and must be reported on any revised 

application for the plan. 

(d) Withdrawn applications. (1) A 

plan’s application for special financial 

assistance may be withdrawn at any 

time before or after PBGC denies the 

application but not after PBGC has 

approved the application. 

(2) Any withdrawal of a plan’s 

application must be by written notice to 

PBGC submitted by any person 

authorized to submit an application for 

the plan and in accordance with the 

special financial assistance instructions 

on PBGC’s website at www.pbgc.gov. 

(3) An application submitted for a 

plan after the withdrawal of an 

application is a revised application and 

must comply with the requirements in 

this part for an initial application except 

that it must use the base data required 

in paragraph (c) of this section for the 

initial application. 

(e) Denied applications. If PBGC 

denies a plan’s application, and the 

denied application is not withdrawn, 

any revised application must not differ 

from the denied application except to 

the extent necessary to address the 

reasons cited by PBGC for the denial. 

(f) Revised applications. A plan’s 

revised application is processed in the 

same way as an initial application. 

(g) Final agency action. PBGC’s 

decision on an application for special 

financial assistance under this section is 

a final agency action under § 4003.22(b) 

of this chapter for purposes of judicial 

review under the Administrative 

Procedure Act (5 U.S.C. 701 et seq.). 

§ 4262.12 Payment of special financial 

assistance. 

(a) Amount of special financial 

assistance. (1) The amount of special 

financial assistance to be paid to or for 

a plan by PBGC will be the total of— 

(i) The amount required as 

demonstrated by the plan sponsor on 

the application for such special 

financial assistance, determined under 

§ 4262.4 as of the SFA measurement 

date; plus 

(ii) Interest on the amount in 

paragraph (a)(1)(i) of this section from 

the SFA measurement date to the date 

PBGC sends payment (not the bank 

settlement date) at a rate equal to the 

interest rate required under 

§ 4262.4(e)(1); plus 

(iii) The amount owed to PBGC under 

section 4261 of ERISA determined as of 

the date PBGC sends payment of special 

financial assistance; minus 

(iv) Financial assistance payments 

under section 4261 of ERISA received 

by the plan between the SFA 

measurement date and the date PBGC 

sends payment of special financial 

assistance, with interest on each such 

financial assistance payment from the 

date thereof to the date PBGC sends 

payment as described in paragraph 

(a)(1)(ii) of this section calculated at a 

rate equal to the interest rate required 

under § 4262.4(e)(1). 

(2) The plan must include in its 

application payment instructions in 

accordance with the special financial 

instructions on PBGC’s website at 

www.pbgc.gov. Payment will be 

considered made by PBGC when, in 

accordance with the payment 

instructions in the application, PBGC no 

longer has ownership of the amount 

being paid. Any adjustment for delay 

will be borne by PBGC only to the 

extent that it arises while PBGC has 

ownership of the funds. 

(b) Repayment of traditional financial 

assistance. If a plan has an obligation to 

repay financial assistance under section 

4261 of ERISA, PBGC will— 

(1) Issue a written demand for 

repayment of financial assistance when 

the application is approved; and 

(2) Deduct the amount of financial 

assistance, including interest, that the 

plan owes PBGC from the special 

financial assistance before payment to 

the plan. 

(c) Date of payment of special 

financial assistance. Special financial 

assistance issued by PBGC will be paid 

as soon as practicable upon approval of 

the plan’s special financial assistance 

application but not later than the earlier 

of— 

(1) Ninety days after a plan’s special 

financial assistance application is 

approved by PBGC or deemed approved; 

or 

(2) September 30, 2030. 

(d) Manner of payment. The payment 

of special financial assistance to a plan 

will be made by PBGC in a lump sum 

or substantially so and is not a loan 

subject to repayment obligations. 

Notwithstanding the foregoing, the 

following payment obligations apply: 

(1) Special financial assistance is 

subject to recalculation or adjustment to 

correct a clerical or arithmetic error. 

PBGC will, and plans must, make 

payments as needed to reflect any such 

recalculation or adjustment in a timely 

manner. 

(2) If PBGC determines that a payment 

for special financial assistance to a plan 

exceeded the amount to which the plan 

was entitled, any excess payment 

constitutes a debt to the Federal 

Government. If not paid within 90 

calendar days after demand, PBGC may 

reduce the debt by any action permitted 

by Federal statute. Except where 

otherwise provided by statutes or 

regulations, PBGC will charge interest 

and other amounts permitted on an 

overdue debt in accordance with the 

Federal Claims Collection Standards (31 

CFR parts 900 through 999). The date 

from which interest is computed is not 

extended by litigation or the filing of 

any form of appeal. 

§ 4262.13 Restrictions on special financial 

assistance. 

(a) In general. A plan that receives 

special financial assistance must be 

administered in accordance with the 

restrictions in this section and in 

§ 4262.14. 

(b) Restrictions. Special financial 

assistance received, and any earnings 

thereon— 

(1) May be used by the plan only to 

make benefit payments and pay 

administrative expenses; 

(2) Must be segregated from other plan 

assets; 

(3) May be used before other plan 

assets are used to make benefit 

payments and pay administrative 

expenses; and 

(4) Must be invested in investmentgrade bonds or other investments as 

permitted by PBGC in § 4262.14. 

§ 4262.14 Permissible investments of 

special financial assistance. 

(a) In general. A plan that receives 

special financial assistance may invest 

amounts attributable to such assistance 

monies only in fixed income securities 

denominated in U.S. dollars and in 

accordance with this section. For 

purposes of this section, such securities 

are referred to as permissible 

investments. 

(b) Other definitions. For purposes of 

this section— 

(1) Adequate capacity to meet 

financial commitments means that the 

risk of default by the obligor is low and 

the full and timely repayment of 

principal and interest on the security is 

expected. 

(2) Permissible fund vehicles mean 

exchange traded funds, mutual funds, 

pooled trusts, or other commingled 


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securities whose investible assets are 

invested solely in fixed income 

securities denominated in U.S. dollars, 

with an average credit quality, weighted 

by market value, that meets the 

definition of investment grade. 

(3) Investment grade means publicly 

traded securities for which the issuer 

has at least adequate capacity to meet 

the financial commitments under the 

security for the projected life of the asset 

or exposure. 

(4) Leverage means the right to a 

return on a capital base that exceeds the 

investment which was contributed to 

the entity or instrument achieving a 

return. 

(c) Holdings. A plan must hold 

permissible investments in either— 

(1) Individual bonds, securities, or 

other debt securities; or 

(2) Permissible fund vehicles. 

(d) Quality of permissible 

investments. Permissible investments 

must be considered investment grade by 

a fiduciary, within the meaning of 

section 3(21) of ERISA, who is or seeks 

the advice of an experienced investor 

(such as an Investment Advisor 

registered under section 203 of the 

Investment Advisor’s Act of 1940), 

except that up to 5 percent of the 

aggregate market value of a plan’s assets 

attributable to special financial 

assistance may be invested in securities 

or permissible fund vehicles that were 

investment grade at the time of purchase 

but are no longer investment grade. 

(e) Leverage and derivative limitations 

on permissible fund vehicles or portfolio 

of individual securities held by the plan. 

(1) Permissible investments, whether 

held through permissible fund vehicles 

or directly through a portfolio of 

individual securities may not be 

supplemented by derivatives or 

otherwise leveraged in a way that could 

increase the interest rate risk or credit 

risk in the fund vehicle or portfolio 

beyond the risk in a portfolio of 

physical securities, meeting the 

definition of permissible investments in 

paragraph (a) of this section, equal to 

the market value of the portfolio; and 

(2) Any notional derivative exposure, 

other than exposure gained through a 

permissible fund vehicle, must be 

supported by liquid assets that are cash 

or cash equivalents denominated in U.S. 

dollars. 

§ 4262.15 Reinstatement of benefits 

previously suspended. 

(a) In accordance with guidance 

issued by the Secretary of the Treasury 

under section 432(k) of the Code, a plan 

with benefits that were suspended 

under sections 305(e)(9) or 4245(a) of 

ERISA must: 

(1) Reinstate any benefits that were 

suspended for participants and 

beneficiaries effective as of the first 

month in which the special financial 

assistance is paid to the plan; and 

(2) Make payments equal to the 

amounts of benefits previously 

suspended to any participants or 

beneficiaries who are in pay status as of 

the date that the special financial 

assistance is paid. 

(b) A plan must make the payments in 

paragraph (a)(2) of this section either in: 

(1) A single lump sum no later than 

3 months after the date that the special 

financial assistance is paid to the plan; 

or 

(2) Equal monthly installments over a 

period of 5 years, with the first 

installment paid no later than 3 months 

after the date that the special financial 

assistance is paid to the plan, with no 

installment payment adjusted for 

interest. 

(c) The plan sponsor of a plan with 

benefits that were suspended under 

sections 305(e)(9) or 4245(a) of ERISA 

must issue a notice of reinstatement to 

participants and beneficiaries whose 

benefits were previously suspended and 

then reinstated in accordance with 

section 4262(k) of ERISA. The 

requirements for the notice are in notice 

of reinstatement instructions available 

on PBGC’s website at www.pbgc.gov. 

§ 4262.16 Conditions for special financial 

assistance. 

(a) In general. A plan that receives 

special financial assistance must be 

administered in accordance with the 

conditions in this section. 

(b) Benefit increases. This paragraph 

(b) applies to benefits and benefit 

increases described in section 

4022A(b)(1) of ERISA without regard to 

the time the benefit or benefit increase 

has been in effect. This paragraph (b) 

does not apply to the reinstatement of 

benefits that were suspended under 

sections 305(e)(9) or 4245(a) of ERISA 

(as provided under § 4262.15) or a 

restoration of benefits under 26 CFR 

1.432(e)(9)–1(e)(3). 

(1) Retrospective. A benefit or benefit 

increase must not be adopted during the 

SFA coverage period if it is in whole or 

in part attributable to service accrued or 

other events occurring before the 

adoption date of the amendment. 

(2) Prospective. A benefit or benefit 

increase must not be adopted during the 

SFA coverage period unless— 

(i) The plan actuary certifies that 

employer contribution increases 

projected to be sufficient to pay for the 

benefit increase have been adopted or 

agreed to; and 

(ii) Those increased contributions 

were not included in the determination 

of the special financial assistance. 

(c) Allocation of plan assets. During 

the SFA coverage period, plan assets, 

including special financial assistance, 

must be invested in permissible 

investments as described in § 4262.14 

sufficient to pay for at least 1 year (or 

until the date the plan is projected to 

become insolvent, if earlier) of projected 

benefit payments and administrative 

expenses. 

(d) Contribution decreases. (1) During 

the SFA coverage period, the 

contributions to a plan that receives 

special financial assistance required for 

each contribution base unit must not be 

less than, and the definition of the 

contribution base units used must not 

be different from, those set forth in 

collective bargaining agreements or plan 

documents (including contribution 

increases to the end of the collective 

bargaining agreements) in effect on 

March 11, 2021, unless the plan sponsor 

determines that the change lessens the 

risk of loss to plan participants and 

beneficiaries and, if the contribution 

reduction affects annual contributions 

over $10 million and over 10 percent of 

all employer contributions, PBGC also 

determines that the change lessens the 

risk of loss to plan participants and 

beneficiaries. 

(2) A request for PBGC approval of a 

proposed contribution change that 

affects annual contributions over $10 

million and over 10 percent of all 

employer contributions must be 

submitted by the plan sponsor or its 

duly authorized representative and must 

contain all of the following information: 

(i) Name, address, email, and 

telephone number of the plan sponsor 

and the plan sponsor’s authorized 

representatives, if any. 

(ii) The nine-digit employer 

identification number (EIN) assigned to 

the plan sponsor by the IRS and the 

three-digit plan identification number 

(PN) assigned to the plan by the plan 

sponsor, and, if different, the EIN and 

PN last filed with PBGC. If an EIN or PN 

has not been assigned, that should be 

indicated. 

(iii) Name, address, email, and 

telephone number of the contributing 

employer for which the proposed 

contribution change is being submitted, 

and the employer’s authorized 

representatives, if any. 

(iv) Names and addresses of each 

controlled group member, along with a 

chart depicting the structure of the 

controlled group by entity and its 

ownership with ownership percentage. 

(v) Audited financial statements 

(income statement, balance sheet, cash 


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flow statement, and notes) for the 

contributing employer and the 

consolidated group including the 

contributing employer, if available, for 

the most recent 4 years, or, if audited 

financial statements were not prepared, 

unaudited financial statements, a 

statement explaining why audited 

statements are not available, and tax 

returns with all schedules for the most 

recent 4 years available. The financial 

statement submissions must: 

(A) Identify the cash contributions to 

the multiemployer plan for which the 

contributing employer is seeking 

contribution relief; 

(B) Identify all outstanding 

indebtedness, including the name of the 

lender, the amount of the outstanding 

loan, scheduled repayments interest 

rate, collateral, significant covenants, 

and whether the loan is in default; 

(C) Identify and explain any material 

changes in financial position since the 

date of the last financial statement; 

(D) To the extent that the contributing 

employer has undergone or is in the 

process of undergoing a partial 

liquidation, estimate the sales, gross 

profit, and operating profit that would 

have been reported for each of the 3 

years covered by the financial statement 

for only that portion of the business that 

is currently expected to continue; and 

(E) State the estimated liquidation 

values for any assets related to 

discontinued operations or operations 

that are not expected to continue, along 

with the sources for the estimates. 

(vi) Projected financial statements 

(income statement, balance sheet, cash 

flow statement) for the current year and 

the following 4 years as well as the key 

assumptions underlying those 

projections and a justification for the 

reasonableness for each of those key 

assumptions. The projections must 

include: 

(A) All business or operating plans 

prepared by or for management, 

including all explanatory text and 

schedules; 

(B) All financial submissions, if any, 

made within the prior 3 years to a 

financial institution, government 

agency, or investment banker in support 

of possible outside financing or sale of 

the business; 

(C) All recent financial analyses done 

by an outside party with a certification 

by the employer’s chief executive officer 

that the information on which each 

analysis is based is accurate and 

complete; and 

(D) Any other relevant information. 

(vii) Description of events leading to 

the current financial distress. 

(viii) Description of financial and 

operational restructuring actions taken 

to address financial distress, including 

cost cutting measures, employee count 

or compensation reductions, creditor 

concessions obtained, and any other 

restructuring efforts undertaken; also, 

indicate whether any new profit-sharing 

or other retirement plan has been or will 

be established or if benefits under such 

existing plan will be increased. 

(e) Allocating contributions and other 

practices. During the SFA coverage 

period, a decrease in the proportion of 

income or an increase in the proportion 

of expenses allocated to a plan that 

receives special financial assistance 

pursuant to a written or oral agreement 

or practice (other than a written 

agreement in existence on March 11, 

2021, to the extent not subsequently 

amended or modified) under which the 

income or expenses are divided or to be 

divided between a plan that receives 

special financial assistance and one or 

more other employee benefit plans is 

prohibited. The prohibition in the 

preceding sentence does not apply to a 

good faith allocation of: 

(1) Contributions pursuant to a 

reciprocity agreement; 

(2) Costs of securing shared space, 

goods, or services, where such 

allocation does not constitute a 

prohibited transaction under ERISA or 

is exempt from such prohibited 

transaction provisions pursuant to 

section 408(b)(2) or 408(c)(2) of ERISA, 

or pursuant to a specific prohibited 

transaction exemption issued by the 

Department of Labor under section 

408(a) of ERISA; 

(3) The actual cost of services 

provided to the plan by an unrelated 

third party; or 

(4) Contributions where the 

contributions to a plan that receives 

special financial assistance required for 

each base unit are not reduced, except 

as otherwise permitted by paragraph (d) 

of this section. 

(f) Transfer or merger. During the SFA 

coverage period, a plan must not engage 

in a transfer of assets or liabilities 

(including a spinoff) or merger except 

with PBGC’s approval. Notwithstanding 

anything to the contrary in 29 CFR part 

4231, the plans involved in the 

transaction must request approval from 

PBGC. 

(1) PBGC will approve a proposed 

transfer of assets or liabilities (including 

a spinoff) or merger if PBGC determines 

that the transaction complies with 

section 4231(a)–(d) of ERISA and that 

the transaction, or the larger transaction 

of which the transfer or merger is a part, 

does not unreasonably increase PBGC’s 

risk of loss with respect to any plan 

involved in the transaction, and is not 

reasonably expected to be adverse to the 

overall interests of the participants and 

beneficiaries of any of the plans 

involved in the transaction. 

(2) A request for approval of a 

proposed transfer of assets or liabilities 

(including a spinoff) or merger must be 

submitted by the plan sponsor or its 

duly authorized representative and must 

contain the information that must be 

submitted with a notice of merger or 

transfer and a request for a compliance 

determination under subpart A of part 

4231 of this chapter and all of the 

following actuarial and financial 

information for each of the plans 

involved in the transaction: 

(i) A certification by the enrolled 

actuary that the plan or any of its 

component parts received special 

financial assistance and the most recent 

value of special financial assistance 

assets. 

(ii) A copy of the actuarial valuation 

performed for each of the 2 plan years 

before the most recent actuarial 

valuation filed in accordance with 

§ 4231.9(f) of this chapter. 

(iii) A copy of the plan actuary’s most 

recent certification under section 

305(b)(3) of ERISA, including a detailed 

description of the assumptions used in 

the certification, and the basis under 

which they were determined. The 

description must include information 

about the assumptions used for the 

projection of future contributions, 

withdrawal liability payments, and 

investment returns, and any other 

assumption that may have a material 

effect on projections. 

(iv) A detailed statement certified by 

an enrolled actuary that the transaction 

does not unreasonably increase PBGC’s 

risk of loss with respect to any plan 

involved in the transaction. The 

statement must include the basis for the 

conclusion, supporting data, 

calculations, assumptions, a description 

of the methodology, the basis for 

assumptions used, the projected date of 

insolvency, and the present value of 

financial assistance expected to be paid 

to the plan by PBGC under section 4261 

of ERISA as of the date of the 

transaction individually for each of the 

plans before and after the transaction. 

The present value of financial assistance 

must be based on the guaranteed 

benefits and administrative expenses 

presented in the cash flow projections 

under paragraph (f)(2)(v) of this section, 

discounted using interest rates 

published under section 4044 of ERISA. 

(v) The statement in paragraph 

(f)(2)(iv) of this section must include an 

exhibit showing the annual cash flow 

projections for each plan before and 

after the transaction, through the year 

that each plan pays its last dollar of 


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benefit (but not to exceed 100 years). 

The cash flow projection should use an 

open group valuation until the plan 

reaches insolvency. Annual cash flow 

projections must reflect the following 

information: 

(A) Fair market value of assets as of 

the beginning of the year, splitting the 

assets by special financial assistance 

and non-special financial assistance 

amounts. 

(B) Contributions and withdrawal 

liability payments. 

(C) Plan level benefit payments 

organized by participant type (e.g., 

active, retiree, terminated vested) for the 

projection period. 

(D) Guaranteed benefits payable post 

insolvency by participant type (e.g., 

active, retiree, terminated vested). 

(E) Administrative expenses for the 

projection period. 

(F) Assumed investment return 

separately for special financial 

assistance and non-special financial 

assistance amounts. 

(G) Fair market value of assets as of 

the end of the year. 

(vi) Any additional information PBGC 

determines it needs to review a request 

for approval of a proposed transfer of 

assets or liabilities (including a spinoff) 

or merger. 

(g) Withdrawal liability interest 

assumptions. A plan must use the 

interest assumptions under § 4281.13(a) 

of this chapter to determine withdrawal 

liability for withdrawals after the plan 

year in which the plan receives payment 

of special financial assistance under 

§ 4262.12 and until the later of— 

(1) Ten years after the end of the plan 

year in which the plan receives payment 

of special financial assistance under 

§ 4262.12; or 

(2) The last day of the plan year in 

which the plan no longer holds any 

special financial assistance or earnings 

thereon in a segregated account as 

required by § 4262.13(b)(2). 

(h) Withdrawal liability settlement. (1) 

During the SFA coverage period, a plan 

must obtain PBGC approval for a 

proposed settlement of withdrawal 

liability if the amount of the liability 

settled is greater than $50 million 

calculated as the lesser of— 

(i) The allocation of unfunded vested 

benefits to the employer under section 

4211 of ERISA; or 

(ii) The present value of withdrawal 

liability payments assessed for the 

employer discounted using the interest 

assumptions under § 4281.13(a) of this 

chapter. 

(2) PBGC will approve a proposed 

settlement of withdrawal liability if it 

determines— 

(i) Implementation of the settlement is 

in the best interests of participants and 

beneficiaries; and 

(ii) The settlement does not create an 

unreasonable risk of loss to PBGC. 

(3) A request for approval of a 

proposed settlement of withdrawal 

liability must be submitted by the plan 

sponsor or its duly authorized 

representative and must contain all of 

the following information: 

(i) Name, address, email, and 

telephone number of the plan sponsor 

and the plan sponsor’s authorized 

representatives, if any. 

(ii) The nine-digit employer 

identification number (EIN) assigned to 

the plan sponsor by the IRS and the 

three-digit plan number (PN) assigned to 

the plan by the plan sponsor, and, if 

different, the EIN and PN last filed with 

PBGC. If an EIN or PN has not been 

assigned, that should be indicated. 

(iii) A copy of the proposed 

settlement agreement. 

(iv) A description of the facts leading 

up to the proposed settlement, 

including— 

(A) The date the employer withdrew 

from the plan; 

(B) The calculation of the withdrawal 

liability amount, including payment 

dates and amounts listed in the 

schedule for liability payments 

provided to the withdrawn employer in 

accordance with section 4291(b)(1)(A) of 

ERISA; 

(C) The amount(s) and date(s) of 

withdrawal liability payments made; 

and 

(D) How the proposed settlement 

amount was determined (discount rate 

used, financial condition of the 

employer, and other factors, as 

applicable). 

(v) Most recent 3 years of audited 

financial statements and a 5-year cash 

flow projection for the employer with 

which the plan proposes to settle. 

(vi) A copy of the most recent 

actuarial valuation report of the plan. 

(vii) A statement certifying the 

trustees have determined that the 

proposed settlement is in the best 

interest of the plan and the plan’s 

participants and beneficiaries. 

(viii) Any additional information 

PBGC determines it needs to review a 

request for approval of a proposed 

withdrawal liability settlement. 

(i) Reporting. In accordance with the 

statement of compliance instructions on 

PBGC’s website at www.pbgc.gov, a plan 

sponsor must file with PBGC each plan 

year, beginning with the plan year after 

the payment of special financial 

assistance and through the last day of 

the last plan year ending in 2051, a 

statement of compliance with the terms 

and conditions of the special financial 

assistance under this part and section 

4262 of ERISA. The statement must be— 

(1) Filed no later than 90 days after 

the end of the plan year; and 

(2) Signed and dated by a trustee who 

is a current member of the board of 

trustees and authorized to sign on behalf 

of the board of trustees, or by another 

authorized representative of the plan 

sponsor. 

(j) Audit. As authorized under section 

4003 of ERISA, PBGC may conduct 

periodic audits of a plan that has 

received special financial assistance to 

review compliance with the terms and 

conditions of the special financial 

assistance under this part and section 

4262 of ERISA. 

(k) Filing rules. The filing rules in this 

paragraph (k) apply to a request for 

PBGC approval under paragraph (d), (f), 

or (h) of this section and a statement of 

compliance under paragraph (i) of this 

section. 

(1) Method of filing. A filing described 

under paragraph (d), (f), (h), or (i) of this 

section must be made electronically in 

accordance with the rules in subpart A 

of part 4000 of this chapter. The time 

period for filing a request or statement 

of compliance must be computed under 

the rules in subpart D of part 4000 of 

this chapter. 

(2) Where to file. A filing described 

under paragraph (d), (f), (h), or (i) of this 

section must be submitted as described 

in § 4000.4 of this chapter. 

§ 4262.17 Other provisions. 

(a) Special financial assistance is not 

capped by the guarantee under section 

4022A of ERISA. 

(b) A plan that receives special 

financial assistance must continue to 

pay premiums due under section 4007 

of ERISA for participants and 

beneficiaries in the plan. 

(c) A plan that receives special 

financial assistance is deemed to be in 

critical status within the meaning of 

section 305(b)(2) of ERISA until the last 

day of the last plan year ending in 2051. 

(d) A plan that receives special 

financial assistance and subsequently 

becomes insolvent under section 4245 

of ERISA will be subject to the rules and 

guarantee for insolvent plans in effect 

when the plan becomes insolvent. 

(e) A plan that receives special 

financial assistance is not eligible to 

apply for a suspension of benefits under 

section 305(e)(9) of ERISA. 

(f) A plan that receives special 

financial assistance and meets the 

eligibility requirements for partition of 

the plan under section 4233(b) of ERISA 

may apply for partition. 

(g) If any provision in this part is held 

to be invalid or unenforceable by its 


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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations 36631 

terms, or as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision will be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

will be one of utter invalidity or 

unenforceability, in which event the 

provision will be severable from this 

part and will not affect the remainder 

thereof. 

Issued in Washington, DC. 

Gordon Hartogensis, 

Director, Pension Benefit Guaranty 

Corporation. 

[FR Doc. 2021–14696 Filed 7–9–21; 11:15 am] 

BILLING CODE 7709–02–P 


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