[Federal Register Volume 86, Number 130 (Monday, July 12, 2021)]
[Rules and Regulations]
[Pages 36598-36631]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-14696]



[[Page 36597]]

Vol. 86

Monday,

No. 130

July 12, 2021

Part II





Pension Benefit Guaranty Corporation





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29 CFR Parts 4000 and 4262





Special Financial Assistance by PBGC; Interim Final Rule

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

[[Page 36598]]


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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.

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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:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the online instructions for submitting comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#700215175e131f1d1d151e040330001217135e171f06"><span class="__cf_email__" data-cfemail="c9bbacaee7aaa6a4a4aca7bdba89b9abaeaae7aea6bf">[email protected]</span></a>.
    <bullet> 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 
(<a href="/cdn-cgi/l/email-protection#5f33363a3d323e31713b3e31363a331f2f3d383c71383029"><span class="__cf_email__" data-cfemail="fd9194989f909c93d3999c93949891bd8d9f9a9ed39a928b">[email protected]</span></a>; 202-229-6510) Deputy General Counsel, Program 
Law and Policy Department, Hilary Duke (<a href="/cdn-cgi/l/email-protection#a9cddcc2cc87c1c0c5c8dbd0e9d9cbceca87cec6df"><span class="__cf_email__" data-cfemail="2c48594749024445404d5e556c5c4e4b4f024b435a">[email protected]</span></a>; 202-229-
3839), Assistant General Counsel for Regulatory Affairs, or Stephanie 
Cibinic (<a href="/cdn-cgi/l/email-protection#a7c4cec5cec9cec489d4d3c2d7cfc6c9cec2e7d7c5c0c489c0c8d1"><span class="__cf_email__" data-cfemail="2d4e444f4443444e035e59485d454c4344486d5d4f4a4e034a425b">[email protected]</span></a>; 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.
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    \1\ Multiemployer plan guaranteed benefits are primarily 
nonforfeitable benefits and the maximum guarantee is set by law 
under section 4022A of ERISA.
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    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.

[[Page 36599]]

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.
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    \2\ A 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).
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    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.
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    \3\ Plans with suspended benefits pursuant to sections 305(e)(9) 
and 4245(a) of ERISA.
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    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.
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    \4\ See sections 4262(k) and 4262(n) of ERISA.
    \5\ See sections 4262(m) and 4262(n) of ERISA.
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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

[[Page 36600]]

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 Sec.  
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 Sec.  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 
Sec.  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 Sec.  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.
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    \6\ Section 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.
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    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), 
Sec.  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 Sec.  
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.
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    \7\ All line references in this section are to the 2020 Form 
5500 and schedules.
    \8\ The 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.
    \9\ PBGC 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.''
    \10\ The 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.
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    The denominator for the plan's funded percentage under Sec.  
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

[[Page 36601]]

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 Sec.  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 Sec. Sec.  
4262.6 through 4262.8 of the regulation. PBGC's review of the 
assumptions used by a plan are described in Sec.  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.
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    \11\ Furthermore, 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.
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    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.

[[Page 36602]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 SFA-eligible 
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 short-
term 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 Sec.  4262.11(c) that the assumed interest rate 
will always be the rate used in the plan's initial application.
    Accordingly, under Sec.  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 Sec.  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

[[Page 36603]]

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, Sec.  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 Sec.  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 Sec. Sec.  
4262.6 through 4262.8 of the regulation. PBGC's review of the 
assumptions used by a plan is described in Sec.  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 Sec.  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 event-by-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.
---------------------------------------------------------------------------

    \12\ PBGC'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.
---------------------------------------------------------------------------

    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 post-receipt 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

[[Page 36604]]

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 Sec.  4262.4(f) during the period 
described in Sec.  4262.4(f)(1)(i), the amount of SFA for the merged 
plan must be determined by applying the limitation in Sec.  
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 Sec.  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).
---------------------------------------------------------------------------

    \13\ Actuarial 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.
---------------------------------------------------------------------------

    If a plan determines that one or more original assumptions are 
unreasonable and must be changed, Sec.  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

[[Page 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 time-consuming) 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 Sec.  4262.9(c) and other 
conditions particular to a partitioned plan as described under Sec.  
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 Sec. Sec.  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 Sec.  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

[[Page 36606]]

Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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.

[[Page 36607]]



------------------------------------------------------------------------
                        Description of priority    Date plans may apply
    Priority group               group                   for SFA
------------------------------------------------------------------------
1.....................  Plans already insolvent  Beginning on July 9,
                         or projected to become   2021.
                         insolvent before March
                         11, 2022.
2.....................  Plans that implemented   Beginning on January 1,
                         a benefit suspension     2022, or earlier date
                         under section            specified on PBGC's
                         305(e)(9) of ERISA as    website.
                         of March 11, 2021.
                        Plans expected to be
                         insolvent within 1
                         year of the date an
                         application for SFA is
                         filed.
3.....................  Plans in critical and    Beginning on April 1,
                         declining status that    2022, or earlier date
                         had 350,000 or more      specified on PBGC's
                         participants.            website.
4.....................  Plans projected to       Beginning on July 1,
                         become insolvent         2022, or earlier date
                         before March 11, 2023.   specified on PBGC's
                                                  website.
5.....................  Plans projected to       Date to be specified on
                         become insolvent         PBGC's website at
                         before March 11, 2026.   least 21 days in
                                                  advance of such date,
                                                  but no later than
                                                  February 11, 2023.
6.....................  Plans for which PBGC     Date to be specified on
                         computes the present     PBGC's website at
                         value of financial       least 21 days in
                         assistance under         advance of such date,
                         section 4261 of ERISA    but no later than
                         to be in excess of $1    February 11, 2023.
                         billion (in the
                         absence of SFA).
7.....................  Additional plans that    Date to be specified on
                         may be added by PBGC     PBGC's website no
                         based on other           later than March 11,
                         circumstances similar    2023.
                         to those described for
                         priority groups 1-6.
------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \14\ For instance, the value of plan assets may fluctuate during 
a deferral period and the amount of SFA will adjust based on that 
experience.
---------------------------------------------------------------------------

    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:
    <bullet> 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 Sec.  4262.10(d)(2) of the 
regulation) and posted on PBGC's website at www.pbgc.gov.
    <bullet> 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 Sec.  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 Sec.  
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

[[Page 36608]]

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, Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \15\ For 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.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 investment-grade 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.

[[Page 36609]]

    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.
---------------------------------------------------------------------------

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

    Plans may be able to access fixed-income 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.
---------------------------------------------------------------------------

    \17\ Notional 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.
---------------------------------------------------------------------------

    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 Sec.  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:
    <bullet> 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?
    <bullet> 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?
    <bullet> What are the implementation and management costs of 
investing in such vehicles?
    <bullet> Which organizations are qualified to manage and advise on 
these vehicles?
    <bullet> 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 Sec.  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

[[Page 36610]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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:
    <bullet> 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?
    <bullet> 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?
    <bullet> Could an alternative condition, or modification of the 
condition under Sec.  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, Sec.  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, Sec.  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 Sec.  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, Sec.  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 Sec.  4262.16(e) does not apply to a 
good faith allocation of contributions

[[Page 36611]]

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 Sec.  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 Sec.  
4262.16, the condition under Sec.  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 
Sec.  4231.10 and the additional actuarial and financial information 
described in Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \18\ PBGC 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.
---------------------------------------------------------------------------

    Under Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 36612]]

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\ Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \19\ Section 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 make-up 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.
---------------------------------------------------------------------------

    The plan sponsor of a plan with benefits that were suspended under 
section 305(e)(9) or 4245(a) of ERISA is required in Sec.  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 Sec.  
4262.17 of the regulation:
    <bullet> SFA must not be capped by the guarantee under section 
4022A of ERISA.
    <bullet> A plan receiving SFA is required to continue to pay 
premiums due under section 4007 of ERISA for participants and 
beneficiaries in the plan.
    <bullet> 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.
    <bullet> 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.
    <bullet> 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, Sec.  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

[[Page 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-to-be insolvent plans and already insolvent 
plans that previously suspended benefits of participants and 
beneficiaries--benefits that must be reinstated and restored through 
make-up 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

[[Page 36614]]

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.
---------------------------------------------------------------------------

    \20\ Specifically, section 9704 of ARP establishes an eighth 
fund under section 4005 of ERISA.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \21\ Congressional Budget Office Cost Estimate, February 17, 
2021, https://www.cbo.gov/system/files/2021-02/hwaysandmeansreconciliation.pdf.
---------------------------------------------------------------------------

    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 Sec.  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 
Sec.  4262.14. For plans with a large proportion of plan assets as SFA, 
this additional condition is not likely to

[[Page 36615]]

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 Sec.  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.
---------------------------------------------------------------------------

    \22\ SFA 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.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 PV amount  (3%    PV amount  (7%                                                                                                                   2027-2051
                                      rate)             rate)             2021              2022              2023              2024              2025              2026           (Total) 22
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Annual Transfer Amounts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
SFA payments to plans (total    $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.
 nominal value of $94.2
 billion).

[[Page 36616]]

 
Financial assistance loan       ($194.17)         ($186.92)         ($200.00)         $0..............  $0..............  $0..............  $0..............  $0..............  $0.
 repayment to PBGC (total        million.          million.          million.
 nominal value of $200
 million).
    Total transfer amounts      $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.
     (total nominal value of
     $94.0 billion).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Annual Cost Amounts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PBGC administrative expenses    $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.
 (total nominal value of $150
 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           $69,900.........  $66,000.........  $34,400.........  $38,700.........  $0..............  $0..............  $0..............  $0..............  $0.
 participant notices.
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 in-house 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 Sec.  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-of-magnitude financial impact.
---------------------------------------------------------------------------

    \23\ The 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/pension-insurance-modeling-system.
---------------------------------------------------------------------------

    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.

[[Page 36617]]



----------------------------------------------------------------------------------------------------------------
                                       Baseline       Benchmark scenario       Estimated
      Regulatory condition            assumption           assumption     benchmark impact *       Comments
----------------------------------------------------------------------------------------------------------------
Future Benefit Accruals.........  No assumed accrual  An immediate 10%    $5 billion to $8    Plans are already
                                   increases.          increase in         billion in          constrained on
                                                       future accruals     section 4261        increasing
                                                       followed by         Financial           accrual levels
                                                       annual increases    Assistance          based on
                                                       based on assumed    (estimated          rehabilitation
                                                       wage index          through 2070).      plan
                                                       increases (no                           requirements. The
                                                       corresponding                           estimated impact
                                                       contribution rate                       is primarily due
                                                       increases).                             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  A one-time 10%      $7 billion to $10   Plans are already
                                   increases.          increase in         billion in          constrained on
                                                       retroactive         section 4261        increasing
                                                       accrued benefits    Financial           benefit levels
                                                       for all active      Assistance          based on
                                                       participants        (estimated          rehabilitation
                                                       increases (no       through 2070).      plan
                                                       corresponding                           requirements. The
                                                       contribution rate                       estimated impact
                                                       increases).                             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            All plans that      $5 billion to $15   Plans required to
                                   stochastic          receive SFA         billion in          invest all
                                   returns under ME-   utilize an LDI      section 4261        available plan
                                   PIMS model,         strategy to match   Financial           assets in high
                                   without             assets to benefit   Assistance          quality fixed
                                   restrictions on     payments.           (estimated          income securities
                                   asset allocation.                       through 2070).      are expected to
                                                                                               attain lower
                                                                                               investment
                                                                                               returns, which
                                                                                               accelerates plan
                                                                                               insolvencies.
Reduction in Contribution Rates.  Level contribution  A one-time 20%      $20 billion to $40  The estimated
                                   rates (no assumed   decrease in the     billion in          impact includes
                                   decreases).         per-capita          section 4261        the acceleration
                                                       contribution rate   Financial           of projected plan
                                                       increases (no       Assistance          insolvencies
                                                       corresponding       (estimated          resulting from
                                                       reduction in        through 2070).      reduced
                                                       future accruals).                       contribution
                                                                                               levels, as well
                                                                                               as lower
                                                                                               contribution and
                                                                                               withdrawal
                                                                                               liability income
                                                                                               following
                                                                                               insolvency used
                                                                                               to partially
                                                                                               offset benefit
                                                                                               payments.
Allocation of Contributions and   No assumed          A one-time          $10 billion to $25  Reallocation of
 Other Practices.                  reallocation of     immediate decline   billion in          contributions to
                                   contributions to    to CBUs of 20%,     section 4261        other plans could
                                   other plans. CBUs   followed by         Financial           take the form of
                                   projected with      annual 1.3%         Assistance          plan transactions
                                   annual 1.3%         declines            (estimated          such as spinoffs
                                   decline.            (includes           through 2070).      or liability
                                                       corresponding                           transfers, which
                                                       reduction in                            are not
                                                       future accruals).                       explicitly
                                                                                               modeled.
Withdrawal Liability............  No assumed future   Employers           $15 billion to $20  Plans are assumed
                                   employer            representing 35%    billion in          to project the
                                   withdrawals         of active members   section 4262 SFA.   increased level
                                   explicitly          withdraw                                of employer
                                   factored into       immediately after                       withdrawals as
                                   modeling.           receiving SFA.                          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

[[Page 36618]]

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 long-term 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

[[Page 36619]]

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 x $30,000) and 600 (60 x 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 x $2,400) and 98 (49 x 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 x 
$2,000) and 22.66 (11.33 x 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

[[Page 36620]]

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:
    <bullet> 1.6 hours (8 hours x .2) and $5,000 ($25,000 x .2) for a 
proposed contribution change;
    <bullet> 4 hours and $12,000 for a proposed transfer or merger; and
    <bullet> 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.

----------------------------------------------------------------------------------------------------------------
                                                                                 Hour burden--
            Average number of respondents p/year                Hour burden     equivalent cost     Cost burden
                                                                   hours
----------------------------------------------------------------------------------------------------------------
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--
    <bullet> 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;
    <bullet> 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;
    <bullet> Enhance the quality, utility, and clarity of the 
information to be collected; and
    <bullet> 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

0
1. The authority citation for part 4000 continues to read as follows:

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


Sec.  4000.3   [Amended]

0
2. In Sec.  4000.3, amend paragraph (b)(4) by adding ``4262,'' after 
``4245,''.

0
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.


Sec.  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.

[[Page 36621]]

Sec.  4262.2   Definitions.

    The following terms are defined in Sec.  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 Sec.  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 Sec.  4231.2 of this 
chapter.


Sec.  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 Sec.  
4262.5.


Sec.  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 
Sec.  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 Sec.  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 Sec.  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

[[Page 36622]]

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 Sec.  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 pre-existing 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 Sec.  
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

[[Page 36623]]

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.


Sec.  4262.5   PBGC review of plan assumptions.

    (a) In general. (1) As set forth in Sec.  4262.3(d)(1), PBGC will 
accept the assumptions used by a plan to determine eligibility for 
special financial assistance under Sec.  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 Sec.  4262.3(d)(2) 
or to determine the amount of special financial assistance under Sec.  
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 Sec.  4262.3(d)(2) or Sec.  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.


Sec.  4262.6   Information to be filed.

    (a) In general. An application for special financial assistance 
must include the information specified in this section and Sec. Sec.  
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 Sec.  
4262.15(a)(1), and make payments of previously suspended benefits, 
described in Sec.  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

[[Page 36624]]

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.


Sec.  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 
three-digit 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 Sec.  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 Sec.  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 Sec.  
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 
Sec.  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 Sec.  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 Sec.  4262.6(e)(1).
    (2) A copy of the proposed plan amendment required under Sec.  
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.


Sec.  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 Sec.  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

[[Page 36625]]

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 Sec.  4262.4(b)(1) attributable to the reinstatement of 
benefits under Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  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 
Sec.  4262.4.
    (c) Information required for certain events. An application for a 
plan with respect to which an event described in Sec.  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.


Sec.  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 Sec.  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 Sec. Sec.  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 Sec.  4262.6(a) when the information 
was filed.
    (c) Rescission of partition order. Effective when special financial 
assistance is paid under Sec.  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.


Sec.  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 Sec.  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

[[Page 36626]]

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.


Sec.  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 Sec.  
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 Sec.  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

[[Page 36627]]

PBGC's website at www.pbgc.gov, including all additional information 
that PBGC requires under Sec.  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 Sec.  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 Sec.  4003.22(b) of this chapter for purposes of judicial 
review under the Administrative Procedure Act (5 U.S.C. 701 et seq.).


Sec.  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 
Sec.  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 Sec.  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 Sec.  
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.


Sec.  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 Sec.  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 investment-grade bonds or other investments 
as permitted by PBGC in Sec.  4262.14.


Sec.  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

[[Page 36628]]

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.


Sec.  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.


Sec.  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 Sec.  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 Sec.  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

[[Page 36629]]

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 Sec.  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

[[Page 36630]]

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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
4000.4 of this chapter.


Sec.  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

[[Page 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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