40968 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

1The rule was published in the Federal Register 

on July 12, 2021, at 86 FR 36598. 

2Under section 4002(a) of ERISA, PBGC is 

administered in accordance with policies 

established by the Board of Directors, which is 

made up of the Secretaries of the Department of 

Labor, the Department of the Treasury, and the 

Department of Commerce. 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Part 4262 

RIN 1212–AB53 

Special Financial Assistance by PBGC 

AGENCY: Pension Benefit Guaranty 

Corporation. 

ACTION: Final rule with request for 

comment. 

SUMMARY: On July 9, 2021, PBGC issued 

an interim final rule setting forth the 

requirements for special financial 

assistance applications and related 

restrictions and conditions pursuant to 

the American Rescue Plan Act of 2021. 

PBGC is making changes to its 

regulation in response to public 

comments received on the interim final 

rule, with an additional opportunity for 

comment solely on the condition 

requiring a phased recognition of 

special financial assistance in a plan’s 

determination of withdrawal liability. 

DATES: 

Effective date: This final rule is 

effective on August 8, 2022. 

Applicability dates: This final rule is 

applicable to plans that apply or have 

applied for special financial assistance. 

For a plan that received special 

financial assistance under part 4262 in 

effect before August 8, 2022, § 4262.14 

will not apply unless and until the plan 

files a supplemented application under 

this part. Before the date that the plan 

files a supplemented application under 

this part, the rules under § 4262.14 in 

effect before August 8, 2022 apply to the 

plan. 

For a plan that received special 

financial assistance under part 4262 in 

effect before August 8, 2022, 

§ 4262.16(g)(2) will not apply unless the 

plan files a supplemented application 

under this final rule. If the plan files a 

supplemented application, 

§ 4262.16(g)(2) applies to the plan in 

determining withdrawal liability for 

withdrawals occurring on or after the 

date the plan files the supplemented 

application. 

Comment date for withdrawal liability 

condition in § 4262.16(g)(2): Comments, 

which should address only the 

withdrawal liability condition in 

§ 4262.16(g)(2), must be received on or 

before August 8, 2022 to be assured of 

consideration. 

ADDRESSES: Comments on 

§ 4262.16(g)(2) of this final rule may be 

submitted by any of the following 

methods: 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

• Email: reg.comments@pbgc.gov. 

• Mail or Hand Delivery: Regulatory 

Affairs Division, Office of the General 

Counsel, Pension Benefit Guaranty 

Corporation, 1200 K Street NW, 

Washington, DC 20005–4026. 

Commenters are strongly encouraged 

to submit public comments 

electronically. PBGC expects to have 

limited personnel available to process 

public comments that are submitted on 

paper through mail. Until further notice, 

any comments submitted on paper will 

be considered to the extent practicable. 

All submissions must include the 

agency’s name (Pension Benefit 

Guaranty Corporation, or PBGC) and 

title for this rulemaking (Special 

Financial Assistance by PBGC) and the 

Regulation Identifier Number for this 

rulemaking (RIN 1212–AB53). 

Comments received will be posted 

without change to PBGC’s website, 

www.pbgc.gov, including any personal 

information provided. Do not submit 

comments that include any personally 

identifiable information or confidential 

business information. 

Copies of comments may also be 

obtained by writing to Disclosure 

Division, Office of the General Counsel, 

Pension Benefit Guaranty Corporation, 

1200 K Street NW, Washington, DC 

20005–4026 or calling 202–229–4040 

during normal business hours. If you are 

deaf, hard of hearing, or have a speech 

disability, please dial 7–1–1 to access 

telecommunications relay services. 

FOR FURTHER INFORMATION CONTACT: 

Daniel S. Liebman (liebman.daniel@

pbgc.gov; 202–229–6510), Deputy 

General Counsel, Program Law and 

Policy Department, Hilary Duke 

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

Assistant General Counsel for 

Regulatory Affairs, or Stephanie Cibinic 

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

6352), Deputy Assistant General 

Counsel for Regulatory Affairs, Office of 

the General Counsel, Pension Benefit 

Guaranty Corporation, 1200 K Street 

NW, Washington, DC 20005–4026. If 

you are deaf, hard of hearing, or have a 

speech disability, please dial 7–1–1 to 

access telecommunications relay 

services. 

SUPPLEMENTARY INFORMATION: 

Executive Summary 

Purpose and Authority 

On July 9, 2021, the Pension Benefit 

Guaranty Corporation (PBGC) issued an 

interim final rule adding to its 

regulations 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.’’ 1 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. In 

consultation with, and with the 

approval of, PBGC’s board of directors 

(Board of Directors or Board), PBGC is 

making changes to part 4262 of its 

regulations in response to public 

comments received on the interim final 

rule, including changes to the 

methodology to calculate SFA, 

permissible investments for SFA funds 

(SFA received and any earnings 

thereon), the application of conditions 

on a plan that merges with a plan that 

receives SFA, and the withdrawal 

liability conditions that apply to a plan 

that receives SFA.2

PBGC’s legal authority for this 

rulemaking comes from 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, 

permits PBGC to provide for how SFA 

and earnings thereon are to be invested, 

and permits PBGC, in consultation with 

the Secretary of the Treasury, 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 

Part 4262 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. 

The regulation identifies which plans 

will be given priority to file applications 

before March 11, 2023, and provides for 

a processing system to accommodate the 

filing and review of many applications 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40969 

3Multiemployer plan guaranteed benefits are 

primarily nonforfeitable benefits and the maximum 

guarantee is set by law under section 4022A of 

ERISA. 

4Amultiemployer plan is incritical and declining 

status if the plansatisfies the criteria for critical 

statusunder section 305(b)(2) of ERISA and is 

projectedto become insolvent within the meaningof 

section 4245 during the current planyear or any of 

the 14 succeeding planyears (or 19succeeding plan 

years if theplan has a ratio of inactive participantsto 

active participants thatexceeds 2 to 1 or if the 

funded percentage of theplan is less than 80 

percent). 

5Plans with suspended benefits pursuant to 

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

in a limited amount of time. This part 

also establishes permissible investments 

of SFA funds and other restrictions and 

conditions on plans that receive SFA. 

PBGC is making changes in this final 

rule that revise part 4262, including 

changes to the SFA measurement date, 

the methodology to calculate SFA, 

permissible investments of SFA funds, 

the application of conditions on a plan 

that merges with a plan that receives 

SFA, and the withdrawal liability 

conditions that apply to a plan that 

receives 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 plan which is 

maintained pursuant to one or more 

collective bargaining agreements 

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 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.3 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 under 

the plan when due during the current 

plan year. 

The Multiemployer Pension Reform 

Act of 2014 (MPRA) created pathways 

under ERISA to enable certain 

distressed plans to avoid insolvency. 

Plans that are in critical and declining 

status 4 may apply to the U.S. 

Department of the Treasury (Treasury 

Department) for a suspension of benefits 

under section 305(e)(9) of ERISA, which 

requires plans to show that the 

proposed suspension would enable 

them to avoid insolvency. Without such 

a showing, the Treasury Department 

cannot approve the application for a 

suspension of benefits. Generally, under 

this process, plans may propose a 

reduction of benefits to no less than 110 

percent of PBGC’s guaranteed benefit 

amount. A plan that has taken all 

reasonable measures, including 

applying for a suspension of benefits, 

may also request partition assistance 

from PBGC (under section 4233 of 

ERISA). A partition 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. All 

plans approved for benefit suspensions 

under MPRA as of March 11, 2021, 

certified—and Treasury confirmed 

through review of plan applications— 

that the proposed suspensions (in 

combination with any partition) would 

enable the plans to avoid insolvency 

indefinitely, as set forth in the Treasury 

Department’s implementing regulations. 

MPRA also allows critical and 

declining plans to request financial 

assistance from PBGC upon merging 

with another multiemployer plan 

(‘‘facilitated mergers’’ under section 

4231(e) of ERISA) if such financial 

assistance is necessary for the 

multiemployer plan to become or 

remain solvent. 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. 

Many of the prominent efforts to 

address issues facing the multiemployer 

pension system included ideas to 

effectively reverse MPRA benefit 

suspensions and provide for 

reinstatement of the suspended benefits. 

On March 11, 2021, the President signed 

into law the American Rescue Plan 

(ARP) Act of 2021 (Pub. L. 117–2), 

which amended title IV of ERISA 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 

Section 4262 of ERISA creates a 

program to enhance retirement security 

for millions of Americans by providing 

SFA to financially troubled 

multiemployer plans. Under current 

conditions, the SFA program is 

expected to assist about 200 financially 

troubled plans. The SFA provided to 

these plans will forestall their 

insolvency for many years into the 

future and includes funds to reinstate 

suspended monthly benefits going 

forward, and for make-up payments to 

restore previously suspended benefits. 

In addition, the SFA program improves 

the financial outlook for PBGC’s 

multiemployer insurance program. 

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 

pursuant to 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. 

Section 4262 of ERISA sets forth the 

provisions for SFA, including which 

plans are eligible to apply, the cutoff 

date for applications, rules relating to 

actuarial assumptions and PBGC’s 

determinations on applications, 

restrictions on the use of SFA, and that 

certain plans with suspended benefits 5

must reinstate those benefits 

prospectively 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, 

a plan receiving SFA under section 4262 

has no obligation to repay SFA. 

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 


jspears on DSK121TN23PROD with RULES3
40970 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

6See section 4262(n) of ERISA. 

7See sections 4262(m) and 4262(n) of ERISA. 

8PBGC considered comments received up to 1 

week after the 30-day comment period as timely 

received during the comment period. 

partition under section 4233 of ERISA. 

In addition, PBGC may prioritize 

applications during the first 2 years after 

March 11, 2021, prescribe how SFA 

funds are to be invested, and impose 

reasonable conditions on plans that 

receive SFA. 

Although PBGC’s rulemakings 

generally involve coordination and 

consultation with two other 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 

coordination and consultation with the 

Treasury Department, particularly on 

SFA applications involving a plan’s 

reinstatement of benefits suspended 

under section 305(e)(9) of ERISA.6 The 

statute also provides for consultation 

with the Treasury Department with 

respect to a plan that proposes in its 

application to change certain 

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.7 This final rule is a result 

of that coordination and consultation, 

which will continue during the SFA 

program’s operation as plans apply for 

SFA. 

Interim Final Rule 

On July 9, 2021, PBGC issued an 

interim final rule on Special Financial 

Assistance by PBGC. Before the interim 

final rule was issued, PBGC held 

listening sessions with interested parties 

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 the interim final rule. 

PBGC provided a 30-day comment 

period 8 for the interim final rule and 

received over 100 comment letters from 

multiemployer plans and associations 

representing multiemployer plans, 

contributing employers and associations 

representing employers, labor 

organizations, actuarial consulting firms 

and practitioners, financial services 

firms, other plan professionals, 

participants, members of Congress, and 

other individuals. The comments, 

PBGC’s responses to the comments, and 

a summary of changes made to the 

interim final rule are discussed in the 

next section. 

Section-by-Section Discussion of Public 

Comments 

Overview and Purpose 

The final rule amends part 4262, 

including changes from the interim final 

rule regarding the SFA measurement 

date, the determination of eligibility and 

the amount ofSFA (including interest 

rate assumptions and the calculation of 

SFA for plans with an approved MPRA 

benefit suspension as of March 11, 

2021), the content of an application for 

SFA, the process of applying, PBGC’s 

review of applications,and restrictions 

(including permissible investment of 

SFA funds) and conditions on plans 

receiving SFA. The final rule also makes 

other clarifying and editorial changes to 

part 4262. 

In this document, PBGC is providing 

for a 30-day comment period solely on 

the condition requiring a phased 

recognition of SFA in a plan’s 

determination of withdrawal liability in 

§ 4262.16(g)(2), because it is an area of 

complexity that may benefit from 

additional public comment. This will 

provide an opportunity for additional 

public comment on the condition and 

will allow PBGC to assess the 

effectiveness of this withdrawal liability 

condition, consider adjustments or 

changes, and determine whether more 

clarification is needed regarding the 

condition or the mechanics of 

implementation. To the extent PBGC 

determines that adjustments or changes 

to this withdrawal liability condition 

are appropriate and authorized, or that 

further clarification is needed, PBGC 

may revise the condition accordingly. 

Broadly, PBGC is interested in hearing 

from commenters about whether the 

condition requiring a phased 

recognition of SFA in a plan’s 

determination of withdrawal liability 

strikes the correct balance among 

stakeholders, or if a different condition 

might work better. Additionally, PBGC 

is interested in hearing from 

stakeholders about what the expected 

impact of such a condition is likely to 

be, and whether additional clarification 

or guidance would be useful. 

PBGC also requests comments about 

whether the phased recognition of SFA, 

which reflects projected rather than 

actual market earnings and losses, 

expenses, and benefit payments, strikes 

the correct balance. If commenters 

disagree with this condition, PBGC is 

interested in comments that articulate 

the rationale supporting such 

disagreement. PBGC requests comments 

on whether the determination of the 

timeline under the final rule 

appropriately balances the interests of 

various stakeholders, or whether a 

shorter (or longer) phase-in period 

might protect the financial security of 

plan participants and beneficiaries 

without placing an undue burden on 

withdrawing employers. PBGC is also 

interested in comments about a partial 

phase-in condition, including how such 

a condition might work, and whether a 

partial phase-in condition has any 

benefits or drawbacks as compared to 

the phase-in condition in this rule. 

Finally, should there be a different 

phase-in rule for plans that will receive 

a large amount of SFA compared to their 

non-SFA assets than for plans that will 

receive a relatively small amount of SFA 

compared to their non-SFA assets (so 

that the SFA account is projected to be 

exhausted after a relatively short 

period)? 

Definitions—SFA Measurement Date 

The SFA measurement date used in 

calculating the amount of SFA under 

§ 4262.4 was defined in § 4262.2 of the 

interim final rule as the last day of the 

calendar quarter immediately preceding 

the date the plan’s application was filed. 

This date was established by the filing 

of the plan’s initial application for SFA. 

A few commenters raised general 

concerns about the uncertainty of the 

plan’s SFA measurement date and 

having to change the SFA measurement 

date immediately after the end of the 

calendar quarter because of PBGC’s 

metering system described in § 4262.10. 

One of the commenters recommended 

that PBGC consider adjusting the SFA 

measurement date to allow plans 

intending to file, but unable to file 

during a temporary closure of the filing 

window, to use the plan’s original 

intended SFA measurement date. A 

suggestion was made to allow plans to 

submit a notice of intent to file. Another 

commenter recommended that nonpriority group plans be given the option 

to freeze the SFA measurement date as 

of the earliest date a plan in priority 

group 6 could apply or the end of the 

calendar quarter before the date PBGC 

begins to accept applications for nonpriority group plans. The commenters 

stated this would save plans the burden 

and expense of having to re-do their 

applications if the applications cannot 

be filed until the following calendar 

quarter. 

PBGC understands that some 

commenters would like greater certainty 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40971 

9A multiemployer plan is regarded as insolvent 

as of the first day of the plan year in which it is 

projected to have insufficient resources to pay all 

benefits under the plan when due during the plan 

year. 

10Section 412(a)(1) of 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 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 to 

a multiemployer plan 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 

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 Secretary 

of the Treasury has interpretive jurisdiction 

pursuant to section 101 of Reorganization Plan No. 

4 of 1978 (5 U.S.C. App.)), 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. 

about when an initial application may 

be filed to establish the plan’s SFA 

measurement date. To address timing 

concerns related to preparing a plan’s 

application, in the final rule, PBGC is 

changing the definition of the SFA 

measurement date in § 4262.2 from ‘‘the 

last day of the calendar quarter 

immediately preceding the date the 

plan’s application was filed’’ to ‘‘the last 

day of the third calendar month 

immediately preceding the date the 

plan’s initial application for special 

financial assistance was filed.’’ For 

example, if the plan’s initial application 

was filed on March 15, 2023, its SFA 

measurement date would be December 

31, 2022; if the plan’s initial application 

was filed on July 1, 2023, its SFA 

measurement date would be April 30, 

2023. 

In addition, based on a commenter 

suggestion, PBGC is adding a provision 

in § 4262.10 to provide a mechanism for 

plans to file a ‘‘lock-in application.’’ If 

a plan files a lock-in application, it will 

be considered the plan’s initial 

application for SFA, establishing the 

filing date for a plan’s initial application 

and the plan’s base data (SFA 

measurement date, census data, nonSFA interest rate assumption, and SFA 

interest rate assumption). This provision 

is described in more detail later in the 

preamble under the subheading Lock-in 

Application. 

Eligible Multiemployer Plans 

There are four types of multiemployer 

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

ERISA that are eligible to apply for SFA 

under § 4262.3 of PBGC’s regulation. 

This list is in section 4262(b)(1)(A) 

through (D) of ERISA and 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 in solvent 9 for 

purposes of section 418E of the Internal 

Revenue Code (the Code) after 

December 16, 2014 (the date MPRA 

became law) and has remained 

insolvent and has not terminated under 

section 4041A of ERISA as of March 11, 

2021. 

In its interim final rule, PBGC noted 

that a plan that terminated by mass 

withdrawal in a plan year that ended 

before January 1, 2020, is not eligible for 

SFA under section 4262(b)(1)(A) of 

ERISA and § 4262.3(a)(1) (plans that are 

in critical and declining status in any 

plan year beginning in 2020, 2021, or 

2022). This is because the rules under 

section 432 of the Code, for plans in 

endangered, critical, and critical and 

declining status, do not apply to such a 

plan in any of those plan years.10 The 

interim final rule provided as an 

example that, if a plan that was in 

critical and declining status in 2019 

terminated by mass withdrawal in that 

year, the plan would not be eligible for 

SFA under § 4262.3(a)(1) because it was 

not in critical and declining status in 

2020, 2021, or 2022. To provide further 

clarification, PBGC notes that for the 

same reason, a plan that terminated by 

mass withdrawal in a plan year 

beginning before 2020 cannot be eligible 

for SFA under section 4262(b)(1)(C) of 

ERISA or under § 4262.3(a)(3) (plans 

that are in critical status in any plan 

year beginning in 2020, 2021, or 2022). 

Two commenters stated that plans 

terminated by mass withdrawal should 

be eligible to apply for SFA. In 

particular, one commenter suggested 

that if a plan terminated by mass 

withdrawal, but is not currently 

insolvent, it should be eligible to apply 

for SFA, arguing that section 4262 of 

ERISA does not state that any plan 

terminated before 2020 through mass 

withdrawal is not eligible for relief. 

Section 4262(b)(1) of ERISA provides a 

list of four types of plans that are 

eligible to apply for SFA, and PBGC 

cannot extend eligibility for SFA 

through its regulation to a plan that is 

not included in that list. As noted 

above, a plan that is terminated by mass 

withdrawal in a plan year beginning 

before 2020 does not meet the eligibility 

requirements under section 

4262(b)(1)(A) or (C) of ERISA or 

§ 4262.3(a)(1) or (3). 

Section 4262.3(c)(1) of the regulation 

provides that aplan 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. In response to a 

commenter, PBGC is further clarifying 

that a plan is an eligible multiemployer 

plan if it is certified to be in critical 

status under section 305(b)(2) of ERISA 

during the 2020, 2021, or 2022 plan 

years (and otherwise meets the other 

criteria for an eligible critical status plan 

under § 4262.3(a)(3)), regardless of 

whether the plan made an election 

under section 305(b)(4) of ERISA to be 

in critical status in a previous year. 

In addition, a commenter requested 

clarification as to how an election under 

section 9701(a) of ARP affects SFA 

eligibility. Section 9701(a) of ARP 

permits a multiemployer plan sponsor 

to make an election relating to the plan’s 

status under section 432(b) of the Code 

and section 305(b) of ERISA (section 

432 status) for certain plan years. If the 

plan sponsor makes the election under 

section 9701(a) of ARP for a plan year, 

then, notwithstanding the actuarial 

certification of the plan’s status for the 

plan year, the plan will have the same 

status as it had for the preceding plan 

year. IRS Notice 2021–57, 2021–44 IRB 

706, refers to an election under section 

9701(a)(1) of ARP as a ‘‘freeze election,’’ 

and a multiemployer plan sponsor may 

make a freeze election for the first plan 

year beginning on or after March 1, 

2020, or the next succeeding plan year. 

That guidance also provides that if a 

freeze election applies for a plan year, 

then the plan has an elected section 432 

status, which may be different than the 

plan’s section 432 status as certified by 

the plan’s actuary under section 

432(b)(3) of the Code for that plan year. 

Accordingly, if a plan is certified to be 

in critical status (within the meaning of 

section 305(b)(2) of ERISA) in any plan 

year beginning in 2020 through 2022 

and meets the other criteria for an 


jspears on DSK121TN23PROD with RULES3
40972 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

11All line references in this section are to the 

2021 Form 5500 and schedules. 

12The 2021 Form 5500 instructions provide that, 

with certain exceptions, assets reported on line 2a 

of Form 5500 Schedule MB should be the same as 

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

13PBGC 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.’’ 

14The withdrawal liability payments due to be 

received by the plan are not included in the 

actuarial value of assets or the fair market value of 

assets for purposes of sections 431 and 432 of the 

Code and the corresponding sections 304 and 305 

of ERISA. 

15The Departments of Labor, the Treasury, and 

Commerce. 

eligible critical status plan under 

§ 4262.3(a)(3), the plan would be 

eligible to apply for SFA regardless of 

whether the plan has made a freeze 

election. 

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) 

of ERISA, § 4262.3(a)(3) and (c)(2) of the 

final rule specify the data that is used 

for this purpose on the Form 5500 

Schedule MB to determine the 

‘‘modified funded percentage,’’ and the 

data on either the Form 5500 or the 

Form 5500 Schedule MB to determine 

the ratio of active to inactive 

participants. 

Section 4262(b)(2) of ERISA defines 

‘‘modified funded percentage’’ to mean 

the percentage equal to a fraction the 

numerator of which is the current value 

of plan assets (as defined in section 

3(26) of ERISA) and the denominator of 

which is current liabilities (as defined 

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

The numerator for the plan’s funded 

percentage under § 4262.3(c)(2) is 

calculated using the current value of 

assets on line 2a of Form 5500 Schedule 

MB,11 which is also required to be 

reported on line 1l, column (a) of the 

Schedule H,12 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 13 (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.14 The current value of assets 

includes total cash contributions due to 

be received on an accrual basis. One 

commenter suggested that the inclusion 

of withdrawal liability receivables in the 

asset value may cause some plans to be 

ineligible and that, due to the uncertain 

nature of future withdrawal liability 

payments, PBGC should consider 

excluding these payments from the 

determination of the plan’s eligibility 

for SFA. PBGC considered the comment 

but is not making the suggested change. 

The inclusion of withdrawal liability 

payments due to be received by the plan 

is consistent with the meaning of 

current value of assets under section 

3(26) of ERISA, and the provision, as 

drafted, recognizes the uncertain nature 

of future withdrawal liability payments 

by providing for an allowance for 

amounts of withdrawal liability 

considered uncollectible. 

As explained earlier in this section of 

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

ERISA requires, as one of the conditions 

of eligibility, that critical status plans 

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 

interim final rule referred to end-of-year 

participant counts on the Form 5500. 

On the 2021 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). One 

commenter suggested that plans be 

permitted to use either the participant 

counts from the Form 5500 or the 

participant counts reported on the Form 

5500 Schedule MB, which the 

commenter noted may be different for a 

variety of reasons from the counts 

reported on the Form 5500. PBGC 

considered the comment and decided to 

permit plans to use either the 

participant counts from the Form 5500, 

as described above, or the beginning-ofthe-year participant counts on the Form 

5500 Schedule MB. On the Form 5500 

Schedule MB, these are the number of 

participants identified on line 2b(3)(c) 

(for total number of active participants) 

and the sum of lines 2b(1) and 2b(2) (for 

inactive participants: retired 

participants and beneficiaries receiving 

payment and terminated vested 

participants). 

In the final rule, PBGC makes changes 

to § 4262.3(a)(4) to clarify that an 

eligible insolvent plan must have 

become insolvent after December 16, 

2014, and remained insolvent and not 

terminated as of March 11, 2021. In 

order to have remained insolvent as of 

March 11, 2021, the plan must have 

become insolvent before that date. 

Summary of Changes Affecting the 

Amount of Special Financial Assistance 

The calculation of the amount of SFA 

under section 4262 of ERISA has 

multiple interacting and technical 

components, including factors that the 

statute does not define and leaves to 

PBGC’s reasonable interpretation. 

Congress’ instruction to PBGC under 

section 4262(c) of ERISA to ‘‘issue 

regulations or guidance setting forth 

requirements for special financial 

assistance applications’’ therefore 

requires PBGC, in coordination with its 

Board agencies,15 to apply its expertise 

in, and responsibility for, the 

administration of title IV of ERISA to 

promulgate regulations and application 

instructions that comport with the 

statutory requirements. 

Many commenters argued that PBGC 

should exercise its discretion to 

interpret various components of the 

calculation of the amount of SFA 

differently than in the interim final rule. 

PBGC has considered these comments 

and assessed whether any proposed 

changes to the interim final rule would 

better achieve the statutory purpose 

evidenced by the text of the statute, 

which is discussed later in the 

preamble. Following extensive analysis, 

including projections of various 

proposed changes on long-term plan 

solvency and funded status through 

2051, as well as implementing the 

statutory instruction that PBGC consult 

with the Treasury Department regarding 

considerations specific to the 

calculation of the amount of SFA for 

plans with approved suspensions of 

benefits under section 305(e)(9) of 

ERISA as of March 11, 2021 (MPRA 

plans), PBGC has decided to adjust 

some of the interpretive choices set 

forth in the interim final rule on which 

PBGC received comments. Among the 

adjustments in this final rule are the 

expected rate of return on SFA assets to 

be used in determining the amount of 

SFA and the calculation of the amount 

of SFA for MPRA plans. 

1. Pay All Benefits Due Through 2051 

Section 4262(j) of ERISA sets certain 

requirements for how much SFA an 

eligible plan is to receive. Section 

4262(j)(1) provides that ‘‘[t]he amount of 

financial assistance provided to a 

multiemployer plan eligible for 

financial assistance under this section 

shall be such 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 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40973 

16Sections 4262(i)(1) and 4262(n)(1)(B) of ERISA. 

17For purposes of determining the amount of SFA 

under § 4262.4, the final rule defines a MPRA plan 

under § 4262.4(a)(3)(ii) as a plan that is eligible for 

SFA under § 4262.3(a)(2). 

of the plan year ending in 2051, with no 

reduction in’’ benefits. Section 

4262(j)(2) provides that ‘‘the funding 

projections for purposes of this section 

shall be performed on a deterministic 

basis.’’ 

Many commenters argued that the 

mandatory language of section 4262(j)(1) 

of ERISA, which states that the amount 

of SFA ‘‘shall’’ be such amount 

‘‘required for the plan to pay all benefits 

due’’ through the end of 2051, means 

that if an eligible plan does not receive 

SFA sufficient to project solvency 

through 2051, taking into account the 

amount that SFA assets can reasonably 

be expected to earn given the statutory 

investment restrictions imposed by 

section 4262(l), then the statute has not 

been implemented properly. Section 

4262(j)(1) clearly requires an eligible 

plan’s SFA to be the amount necessary 

for the plan to pay all benefits through 

2051. In addition to the use of the term 

‘‘shall’’ in section 4262(j)(1) itself, other 

provisions of section 4262 refer to 

section 4262(j) as ‘‘required’’ or a 

‘‘requirement.’’ 16

2. Interest Rates for SFA and Non-SFA 

Assets 

Plans will necessarily invest—and 

pay benefits out of—two separate pools 

of assets between the date of SFA 

payment and the end of 2051. This is 

because section 4262(l) of ERISA 

requires plans to ‘‘segregate’’ SFA assets 

from ‘‘other plan assets’’ and 

circumscribes investment of SFA assets. 

For a plan to project accurately how 

much SFA is ‘‘required’’ for the plan ‘‘to 

pay all benefits due’’ through the end of 

the plan year ending in 2051, it must 

project the SFA assets, adjusted for 

earnings, needed to cover each year’s 

benefit payments and expenses until 

exhausted, and the non-SFA ‘‘other plan 

assets,’’ adjusted for contributions and 

earnings, needed to cover each year’s 

benefit payments and expenses after the 

SFA assets are exhausted through the 

end of the SFA coverage period. Thus, 

an amount of SFA that accounts for 

existing plan assets under section 

4262(j), and the segregation and separate 

investment of those assets from SFA 

assets under section 4262(l), requires 

two asset projections: one for a plan’s 

SFA assets, and one for a plan’s nonSFA assets. 

To make these two projections, plans 

must make assumptions about future 

events—including expected returns on 

investments—for each pool of assets to 

calculate that pool’s projected value. 

Differences in expected investment 

returns for each pool of assets affect the 

amount of SFA needed to meet 

projected liabilities through 2051. Using 

an accurate projected rate of return for 

each pool is critical for determining 

whether SFA paid now is in the amount 

projected to ‘‘pay all benefits due’’ 

through the end of 2051, as required by 

section 4262(j)(1) of ERISA. 

In the interim final rule, PBGC 

concluded that the same investmentreturn assumption should be used to 

project both pools of assets. In reaching 

this conclusion, PBGC gave substantial 

weight to section 4262(e)(2) of ERISA 

which, as noted in the preamble to the 

interim final rule, requires a plan to use 

an interest rate that is based on the rate 

used in the plan’s most recent 

certification of plan status before 

January 1, 2021, subject to an interest 

rate limit. PBGC also gave substantial 

weight to section 4262(e)(4), which 

provides that if a ‘‘prior assumption is 

unreasonable,’’ a plan may propose to 

change that assumption if it explains 

why the assumption ‘‘is no longer 

reasonable,’’ except that the plan ‘‘may 

not propose a change to the interest rate 

otherwise required under this 

subsection.’’ 

Many commenters raised concerns 

with PBGC’s approach. If the interest 

rate in section 4262(e) of ERISA (which, 

for many plans would be close to 5.3 

percent based on pension funding 

segment rates in December 2021), were 

used to project the value of both SFA 

and non-SFA assets, but SFA 

investments are limited to investment 

grade bonds under section 4262(l) 

(which would likely result in an actual 

rate of return close to 2 percent as of 

December 2021, assuming that PBGC 

permitted no investments other than 

investment grade bonds and that current 

yields on such bonds continued through 

2051), the SFA amount would be 

insufficient to meet the requirement of 

section 4262(j)(1) that it be the ‘‘amount 

required for the plan to pay all benefits 

due’’ through the end of 2051. There is 

thus, asserted the commenters, an 

inconsistency between these two 

provisions of the statute. Providing a 

separate investment-return assumption 

for SFA assets that reflects the 

investment restrictions under section 

4262(l) of ERISA would avoid this 

inconsistency. PBGC recognizes that the 

interim final rule, without giving more 

weight to the requirement of section 

4262(j)(1), did not sufficiently address 

this inconsistency. PBGC agrees with 

commenters that this concern would be 

alleviated by giving more weight to the 

language of section 4262(j) than was 

given in the interim final rule. 

PBGC is therefore adjusting the rules 

set forth in the interim final rule to 

account for the fact that section 4262(l) 

of ERISA requires plans receiving SFA 

to have two separate pools of assets and 

expressly contemplates that they will be 

invested separately—with different 

expected rates of return. PBGC also 

believes that this approach better 

harmonizes sections 4262(e), (j), and (l) 

with each other. The statute must be 

read as a whole, and each section 

construed in a manner that renders 

them compatible, not contradictory. 

3. SFA for MPRA Plans 

As described earlier in the preamble, 

the interim final rule provided a method 

for eligible multiemployer plans to 

calculate the amount of SFA based on 

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 . . .’’ under 

section 4262(j)(1) of ERISA. The interim 

final rule provided only one way to 

calculate the ‘‘amount required’’ for 

both MPRA plans and plans that are not 

MPRA plans.17 PBGC received several 

comments that raised issues with how 

this calculation would work for MPRA 

plans. The commenters stated that the 

final rule should treat MPRA plans 

differently when calculating the amount 

of SFA. 

Commenters raised several issues that 

were unique to MPRA plans. For 

example, as part of the MPRA process, 

all MPRA plans now eligible for SFA 

were required statutorily to demonstrate 

that a proposed benefit suspension 

would improve their funded status such 

that the plan would avoid insolvency 

‘‘indefinitely.’’ To accept SFA, MPRA 

plans must permanently reinstate those 

suspended benefits. Under the interim 

final rule, however, MPRA plans would 

not receive more SFA than an amount 

necessary to avoid insolvency through 

2051. Thus, commenters described 

MPRA plan trustees as facing an 

unenviable choice between retaining the 

existing benefit suspensions (enabling 

the plan to avoid insolvency 

indefinitely at the cost of forgoing SFA) 

or applying for and receiving SFA and 

reinstating the suspended benefits 

(potentially jeopardizing the long-term 

financial health of the plan which 

MPRA was originally intended to 

promote). Either choice would involve 

favoring one set of participants over 


jspears on DSK121TN23PROD with RULES3
40974 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

18 In July of 2021, the Department of Labor issued 

the ‘‘Statement on PBGC ‘Special Financial 

Assistance’ Interim Final Rule for Eligible 

Multiemployer Plans.’’ In that Statement, the 

Department said that in its ‘‘view, ARP’s inclusion 

of plans that suspended benefits under MPRA and 

the prohibition against a future MPRA suspension 

for a plan receiving SFA reflects a clear legislative 

objective to allow plan fiduciaries to restore 

benefits that were previously suspended and to 

encourage all eligible plans to apply for SFA 

without raising potential fiduciary liability 

concerns about undoing current or precluding 

future MPRA suspensions.’’ The Department has 

advised PBGC that in its view the approach of the 

final rule removes the risk that receipt of SFA will 

harm the projected status of a MPRA plan at the end 

of 2051 more than not applying for and receiving 

SFA. Accordingly, the Department takes the view 

that a plan sponsor’s decision to apply for SFA 

would not violate section 404 of ERISA and the 

Department will bring no enforcement action with 

respect to such decision. The implementation of 

such decision, however, will be subject to the 

fiduciary and other requirements of title I of ERISA. 

another.18 A discussion of the 

comments on determining the amount 

of SFA, including for plans that 

implemented MPRA benefit 

suspensions, is presented later in this 

preamble under the subheading 

Comments on Amount of Special 

Financial Assistance. 

Section 4262(n) of ERISA requires 

PBGC to coordinate with the Secretary 

of Treasury in prescribing the 

application process for eligible 

multiemployer plans, and the amount of 

SFA needed by a plan that has 

suspended benefits under section 

305(e)(9) of ERISA that takes into 

account the projected funded status of 

the plan at the end of 2051, the payment 

of previously suspended benefits, and 

other relevant factors. Following 

consideration of the issues raised by 

commenters, and as determined after 

consultation with the Treasury 

Department, the final rule provides a 

methodology for determining an amount 

of SFA for MPRA plans that considers 

these factors. PBGC’s consultation with 

the Treasury Department and the 

methodology for MPRA plans are 

discussed later in the preamble under 

the subheading Calculating the Amount 

of SFA. 

4. Permissible Investments 

One explicit avenue under the statute 

that could assist plans in being able to 

pay all benefits due through 2051 is 

through PBGC’s authority under section 

4262(l) of ERISA to allow SFA assets to 

be invested in types of investments 

other than investment grade bonds. 

Such other investments, for example, 

could have both a higher potential for 

reward and a higher risk than 

investment grade bonds, though the 

higher risk of these investments may 

raise different concerns about a plan’s 

likelihood of paying all benefits due 

through 2051. 

As noted in the interim final rule, 

PBGC shares the concerns expressed by 

some commenters that overly 

conservative limits on investment of 

SFA could adversely impact plans’ 

financial health. Permitting a wider 

range of investments could help plans 

be able to pay all benefits due through 

2051. But the language of section 4262(l) 

of ERISA also evinces an intent that 

SFA investments be relatively safe. 

Allowing SFA assets to be invested 

predominantly in return-seeking assets 

risks plans not being able to pay all 

benefits due through 2051 given the 

potential for severely adverse market 

events. It could also put taxpayerfunded assistance at significant risk of 

loss. 

As discussed later in the preamble, in 

consideration of comments received in 

response to PBGC’s specific request, 

PBGC has amended in the final rule the 

investment limitations set forth in the 

interim final rule. Given PBGC’s 

intention that the investment choices 

provided under the interim final rule 

were always only a starting point for 

discussion to find 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 examined 

how to adjust permissible investments 

in light of the feedback from 

commenters. In the final rule, PBGC is 

allowing plans that have received SFA 

to invest a percentage of SFA assets and 

earnings thereon in certain ‘‘returnseeking assets,’’ with the remainder 

invested in investment grade fixed 

income securities to help ensure that 

risk of investment losses is mitigated. 

While expanding the range of 

permissible investments to include a 

percentage of return-seeking assets eases 

the path for the plans to be able to pay 

all benefits due through 2051, PBGC’s 

modeling showed that it alone is 

unlikely to close the gap between the 

interest rate assumption to calculate the 

amount of SFA and the expected rate of 

return on investment of SFA. Thus, 

PBGC and its Board examined other 

approaches that, in combination with 

greater flexibility in investments, could 

fulfill the expectation of being able to 

pay all benefits due through 2051 for all 

eligible plans. Alternatives are 

described in the Regulatory Impact 

Analysis section later in this preamble. 

PBGC and its Board have considered 

the commenters’ views and the 

alternative approaches for assisting 

plans to be able to pay all benefits due 

through 2051. As noted earlier in the 

preamble, the final rule allows plans to 

use a separate, specified interest rate 

assumption for projecting SFA assets 

that is more closely aligned with the 

rate of return estimated to be achievable 

on the permitted investments of SFA 

assets. PBGC determined that this 

change, together with the change in 

permitted investments, was necessary to 

help enable eligible plans to pay all 

benefits due through 2051, while 

limiting the risk that plans would incur 

significant losses through the 

investment of SFA dollars. This is 

supported by PBGC modeling and 

analysis. The changes to the interest rate 

assumption and to permissible 

investments are discussed later in this 

preamble under the subheadings 

Interest Rates for SFA and Non-SFA 

Assets and Permissible Investments, 

respectively. 

Comments on Amount of Special 

Financial Assistance 

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

PBGC is to provide SFA to an eligible 

multiemployer plan upon application. 

As discussed earlier in the preamble, 

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.’’ Section 4262.4(a) of the 

interim final rule implemented section 

4262(j)(1) by providing that the amount 

of SFA for a plan is the amount (if any), 

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). 

PBGC received numerous comments 

on this section of the rule, as noted 

earlier in the preamble. Many of the 

commenters on the interim final rule 

argued that PBGC’s implementation of 

section 4262(j)(1) was contrary to 

Congressional intent and the statutory 

direction for plans to receive SFA in an 

amount required for the plan to pay all 

benefits due through 2051. 

Many commenters disagreed with 

PBGC that the statute should be 

interpreted to require all plan assets and 

future income (together, a plan’s 

resources) to be considered when 

determining the amount of SFA. 

Several commenters raised the 

concern that some critical status plans 

that meet statutory eligibility 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40975 

requirements and that may apply under 

§ 4262.3 will not receive SFA or will 

receive only minimal SFA under 

§ 4262.4 of the interim final rule. 

Commenters said this is because many 

of these plans will have assets and other 

resources that equal or exceed the 

present value of benefit obligations 

through 2051, although insolvency may 

be projected after that date. Some 

commenters also noted that the outcome 

of some eligible plans receiving zero or 

minimal SFA is inequitable and will 

penalize plans whose trustees and 

associated bargaining parties have been 

proactive under collective bargaining 

agreements or rehabilitation plans to 

improve plan finances. Commenters 

suggested this outcome would be 

contrary to Congress’ intent in including 

these plans as eligible for SFA. Without 

SFA, these critical status plans will 

remain ‘‘financially vulnerable’’ 

according to the commenters. 

One commenter described SFA as an 

important tool to address the current 

crisis, but the commenter said that it 

does not address the structural issues 

that created the need for SFA. Another 

commenter expressed support for the 

interim final rule’s implementation of 

the amount of SFA. The commenter said 

to exclude current assets and future 

contributions from the calculation of 

SFA would be irresponsible. 

Some commenters suggested there is 

support in the statute for alternatives to 

§ 4262.4(a) of the interim final rule. 

Suggested alternatives include 

disregarding certain plan resources, 

such as future contributions and future 

accruals, or carving out a portion of 

current assets or future contributions to 

fund benefits after 2051. Others 

suggested that the interim final rule’s 

standard based on a projection of 

sufficiency to the last day of the plan 

year ending in 2051 should be replaced 

with one consistent with MPRA’s 

standard to avoid insolvency 

indefinitely. One commenter suggested 

this can be accomplished by 

interpreting section 4262(j)(1) of ERISA 

as providing SFA in an amount required 

for a deterministic projection of plan 

assets to be increasing during the last 

plan year ending in 2051. Under one 

suggested approach, the present value of 

plan resources needed to increase plan 

funding post-2051 would not be 

included in SFA-eligible plan resources. 

Other commenters suggested 

disregarding all plan resources in 

determining the amount of SFA. 

Some MPRA plans commented that 

the receipt of SFA in the amount 

provided for under the interim final rule 

will put their long-term solvency 

projections at risk. They noted that the 

interim final rule would result in these 

plans receiving less in SFA than the 

present value of the benefits the plans 

would be required to restore. Some of 

these commenters suggested excluding 

from the calculation of SFA that portion 

of existing assets or future contributions 

to fund post-2051 benefit obligations. 

Others suggested providing an amount 

of SFA sufficient to pay the reinstated 

benefits beyond the plan year ending in 

2051. Commenters said the rule should 

allow MPRA plans to receive SFA and 

continue to meet the MPRA solvency 

standard. 

As explained in the preamble to the 

interim final rule, 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.’’ The 

statutory text provides not merely that 

the amount of SFA be what is 

‘‘required’’ in the abstract to pay 

benefits due through the end of 2051, 

but specifies that SFA be in the amount 

required ‘‘for the plan’’ to pay all 

benefits due during this period. PBGC 

believes that Congress’ choice to modify 

the term ‘‘required’’ with ‘‘for the plan’’ 

indicates that the amount of SFA should 

take into account what resources the 

plan already has to pay benefits through 

the end of 2051. 

Moreover, since the statute requires 

deterministic projections to be made 

through the end of the last plan year 

ending in 2051, the resources to be 

considered must include plan assets and 

income. If Congress had contemplated a 

different approach from accepted 

actuarial practice, Congress would have 

explicitly excluded the resources that it 

did not intend to be included in the 

determination of the amount of SFA 

‘‘required for the plan.’’ Accordingly, 

the additional funding necessary for the 

plan to pay benefits depends on what 

funding—plan assets, contributions, 

investment returns, etc.—the plan 

already has available to pay those 

benefits. To the extent that a plan has 

other means available to pay benefits, it 

does not require or need SFA for that 

purpose. 

According to PBGC’s modeling, not 

accounting for plan’s non-SFA assets 

would easily enable all eligible plans to 

pay all benefits due through 2051, as 

SFA would cover the entirety of plans’ 

projected liabilities from ‘‘benefits due’’ 

over the next 3 decades. However, 

PBGC’s modeling also shows that this 

approach could potentially triple the 

cost of the SFA program. 

One exception added to the final rule 

in § 4262.4(c)(3) permits plans to 

exclude from plan resources certain 

contribution rate increases agreed to on 

or after July 9, 2021. This change is 

being made in response to comments 

PBGC received on assumptions 

guidance it issued on July 9, 2021— 

specifically, on the acceptable changes 

to a plan’s contribution rate assumption. 

An example provided in the 

assumptions guidance showed 

contribution rate increases negotiated 

before March 11, 2021, being included 

in the plan’s contribution rate 

assumption. Practitioners asked whether 

the example meant that contribution 

rate increases negotiated after March 11, 

2021, could be excluded. PBGC is 

providing in the final rule that 

contribution rate increases agreed to on 

or after July 9, 2021, the date PBGC’s 

interim final rule and initial 

assumptions guidance were issued, are 

excluded from employer contributions 

paid and expected to be paid to the plan 

during the SFA coverage period (and, if 

applicable, any benefit increases that 

result from the contribution increases 

are excluded from plan obligations 

under § 4262.4(b)(1) and (c)(1)). PBGC 

does not expect that excluding these 

negotiated contribution rate increases 

will result in an increase in the amount 

of SFA that a plan would receive 

without the new provision. This is 

because, without the provision, PBGC 

expects that bargaining parties would 

wait until after the plan applies for SFA 

to negotiate contribution rate increases 

(so as to exclude the contribution 

increases from plan resources in the 

calculation of SFA). However, this 

practice would be detrimental to the 

plan’s financial health. PBGC expects 

that the new provision will eliminate 

this reason for delaying negotiation of 

contribution rate increases. 

Except for excluding the contribution 

rate increases described directly above, 

the final rule does not adopt the 

suggestions from commenters to exclude 

some or all of a plan’s resources. 

However, the final rule changes the 

methodology for calculating the amount 

of SFA in § 4262.4, by specifying the 

interest rate assumption used to project 

returns on SFA assets and by providing 

a methodology for determining SFA for 

MPRA plans that are eligible for SFA 

under § 4262.3(a)(2), and changes 

§ 4262.14 to allow more flexibility in 

permissible investments of SFA. PBGC’s 

modeling shows that these provisions 

are expected to enable plans to pay 

benefits due through the plan year 

ending in 2051 if future experience is in 

line with plan assumptions. The 

provisions are discussed in detail in the 

preamble under the subheadings 

Calculating the Amount of SFA, Interest 

Rates for SFA and Non-SFA Assets, and 

Permissible Investments. 


jspears on DSK121TN23PROD with RULES3
40976 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

19 29 U.S.C. 1432(j)(1). 

20 26 CFR 1.432(e)(9)–1(d)(5)(ii). 

Calculating the Amount of SFA 

Section 4262.4(a) of the interim final 

rule provided that the amount of SFA 

for a plan is the amount (if any), subject 

to adjustment for the date of payment as 

described in § 4262.12, by which the 

value of all plan obligations exceeds the 

value of all plan resources, determined 

as of the plan’s SFA measurement date 

and limited to the SFA coverage period 

(the period ending on the last day of the 

last plan year ending in 2051). Under 

the interim final rule, the value of plan 

obligations was the sum of the present 

value of specified benefit payments and 

administrative expenses. The value of 

plan resources was 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. 

Two commenters stated that the 

present value approach to determine the 

amount of SFA in the interim final rule 

does not properly take into account the 

timing of cash flows. The commenters 

were concerned that under the present 

value approach, plans with positive 

cash flow toward the end of the 

projection period could receive an 

amount of SFA that results in a 

projected plan asset value below zero 

before the end of the SFA coverage 

period. However, the commenters 

acknowledged that plans eligible for 

SFA are not expected to have a positive 

cash flow during the projection period. 

In addition, as described in detail in 

other sections of the preamble, PBGC 

received many comments related to the 

interest rate assumption a plan was 

required to use under the interim final 

rule to calculate the amount of SFA in 

the plan’s application. To address these 

comments and to meet the statutory 

requirements of section 4262(j) of 

ERISA, in the final rule, PBGC is 

changing the methodology that a plan 

must use to determine the amount of 

SFA from a present value approach to 

a projection approach that ensures that 

plan assets cannot go below zero before 

the end of the SFA coverage period. 

In addition, the final rule, in 

§ 4262.4(a)(1) and (2), prescribes 

methodologies to determine SFA for 

plans that are not MPRA plans and for 

plans that are MPRA plans. Section 

4262(n) of ERISA requires PBGC to 

coordinate with the Secretary of 

Treasury in prescribing the application 

process for eligible multiemployer plans 

and the amount of SFA needed by a 

plan that has suspended benefits under 

section 305(e)(9) of ERISA. To 

determine the amount of SFA under 

§ 4262.4, the final rule defines a MPRA 

plan under § 4262.4(a)(3) as a plan that 

is eligible for SFA under § 4262.3(a)(2) 

(a plan with an approved MPRA benefit 

suspension as of March 11, 2021). Thus, 

a plan that is eligible for SFA under 

§ 4262.3(a)(1), (3), or (4) and has 

implemented a suspension of benefits 

that has been approved under section 

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

is not eligible for the amount of SFA 

determined under § 4262.4(a)(2) for a 

MPRA plan. 

1. Calculation of SFA for MPRA Plans 

Following consideration of the issues 

raised by commenters described earlier 

in the preamble and of the 

harmonization of the statutory text and 

structure, and after consultation with 

the Treasury Department regarding the 

administration of the MPRA program, 

this final rule provides a different 

methodology for the calculation of SFA 

for MPRA plans than was provided in 

the interim final rule. Section 

4262(n)(1)(B) of ERISA requires PBGC to 

consult with the Treasury Department 

regarding the amount of SFA needed for 

a MPRA plan based on the projected 

funded status of the plan at the end of 

2051, the payment of previously 

suspended benefits, and other relevant 

factors. These factors are distinct from 

the generally applicable provision in 

section 4262(j)(1) of ERISA and reflect 

that Congress sought to ensure that 

PBGC accounts for MPRA plans’ unique 

circumstances. 

As described earlier in the preamble, 

under the interim final rule, MPRA 

plans faced the predicament where 

either accepting or not accepting SFA 

could raise fiduciary concerns. In 

deciding whether to apply for and 

accept SFA, MPRA plans must consider 

not only the positive impact of 

reinstated benefits on participants and 

beneficiaries currently receiving 

benefits, particularly current retirees 

receiving benefits, but also consider 

whether the plan may put the future 

benefits of active participants at risk if 

it cannot project to avoid insolvency 

indefinitely. 

Under the final rule, a MPRA plan can 

apply for the greatest of: (1) the amount 

of SFA calculated for a plan that is not 

a MPRA plan; (2) the lowest amount of 

SFA that is sufficient to ensure that the 

plan will project rising assets at the end 

of the 2051 plan year; and (3) an amount 

of SFA equal to the present value of 

reinstated benefits (accounting for both 

make-up payments needed, as well as 

payments of the reinstated portion of 

benefits through 2051, and any 

restoration of benefits under 26 CFR 

1.432(e)(9)–1(e)(3)). These additional 

SFA calculations in (2) and (3), set forth 

in the final rule, accord with 

requirements and considerations that 

are unique to MPRA plans. 

Under the second calculation, the 

amount of SFA is the lowest amount 

necessary for actuarial projections to 

show the plan’s assets are increasing as 

of the last day of the plan year ending 

in 2051. In calculating the amount of 

SFA for plans that are not MPRA plans, 

the statute requires that the amount of 

SFA ‘‘shall be such amount required for 

the plan to pay all benefits’’ due through 

the end of the coverage period.19 The 

statutory text in section 4262(n)(1)(B) of 

ERISA, which applies specifically and 

only to MPRA plans, adds a further 

consideration—the plan’s ‘‘projected 

funded status.’’ The final rule draws 

upon the demonstrations of ‘‘projected 

funded status’’ that current MPRA plans 

made as part of the MPRA process, 

which distinguishes them from other 

SFA-eligible plans. As discussed earlier, 

all SFA-eligible MPRA plans 

demonstrated to the Treasury 

Department that their proposed 

suspensions of benefits under MPRA 

would be sufficient for the plan to avoid 

insolvency indefinitely. Thus, the 

methodology under the final rule 

provides the amount of SFA projected to 

be necessary to ensure that a MPRA 

plan’s projected funded status at the end 

of the plan year ending in 2051 

continues to correspond to avoiding 

insolvency indefinitely, which the plan 

demonstrated as a requirement of 

suspending benefits under MPRA. In 

particular, MPRA plans will be able to 

accept SFA without harming their 

projected funded status at the end of the 

2051 plan year. 

PBGC has consulted with the 

Treasury Department as required by 

section 4262(n)(1)(B) of ERISA. The 

final rule aligns with the standard for 

avoiding insolvency indefinitely in the 

Treasury Department’s final regulations 

on the suspension of benefits under 

MPRA. This requirement generally is 

satisfied under the Treasury 

Department’s MPRA regulations if the 

value of plan assets is projected to 

increase at the end of the relevant 

measurement period.20 This approach 

in the final rule, based on the Treasury 

Department’s MPRA regulations, takes 

into account Congress’ direction in 

section 4262(n)(1)(B) of ERISA that 

PBGC consult with the Treasury 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40977 

21Section 4262(n)(1)(B) of ERISA. 

Department regarding the amount of 

SFA needed ‘‘based on the projected 

funded status of the plan as of the last 

day of the plan year ending in 2051.’’ 

Under the third calculation, the 

amount of SFA is the amount equal to 

the present value of reinstated benefits, 

including make-up payments and the 

reinstated portion of future benefits 

through 2051. Section 4262(n)(1)(B) of 

ERISA requires PBGC to consult with 

the Treasury Department to consider the 

‘‘projected funded status’’ of MPRA 

plans and ‘‘any other relevant factors’’ 

and that ‘‘the amount of assistance . . . 

is sufficient to pay benefits as required 

in subsection (j)(1).’’ The determination 

of the amount of SFA under section 

4262(j)(1) of ERISA must take into 

account ‘‘the reinstatement of benefits 

required under subsection (k).’’ The 

‘‘benefits required under subsection (k)’’ 

include both make-up payments to 

account for previously suspended past 

benefits, i.e., those benefits described in 

section 4262(k)(2), and the reinstated 

portion of future payments effective as 

of the month SFA is paid to the plan, 

i.e., those benefits described in section 

4262(k)(1). Thus, the statute requires 

MPRA plans that receive SFA to 

reinstate benefits and requires the 

amount of SFA to take into account the 

‘‘reinstatement of benefits’’ by MPRA 

plans. This present value approach does 

that by providing MPRA plans an 

amount of SFA that is sufficient to pay 

reinstated benefits. The ‘‘amount of 

assistance’’ is sufficient only if a MPRA 

plan takes into account the 

reinstatement of suspended benefits 

under both section 4262(k)(1) and (k)(2) 

of ERISA. The present value approach is 

consistent with Congress’ direction that 

PBGC should consult with the Treasury 

Department regarding the amount of 

SFA needed ‘‘to ensure the amount of 

assistance is sufficient . . . to pay 

benefits as required in subsection 

(j)(1).’’ 21

Following PBGC’s consultation with 

the Treasury Department, this final rule 

provides a MPRA plan the amount of 

SFA that is the greatest of these three 

calculations, which take into account 

the enumerated considerations the 

statute sets forth in section 

4262(n)(1)(B). 

2. Calculation of SFA for a Plan That Is 

Not a MPRA Plan 

The amount of SFA for a plan that is 

a not a MPRA plan is calculated under 

§ 4262.4(a)(1) of the final rule as the 

lowest whole dollar amount (not less 

than $0) for which, as of the last day of 

each plan year during the SFA coverage 

period, projected SFA assets and 

projected non-SFA assets are both 

greater than or equal to zero. 

The projected SFA assets for a plan 

are determined by projecting SFA 

forward annually until fully exhausted, 

using the annual cash flows specified in 

§ 4262.4(b) of the final rule, including 

benefits and administrative expenses 

paid and expected to be paid by the 

plan during the SFA coverage period 

(excluding benefit increases resulting 

from certain contribution increases and 

excluding the amount owed to PBGC 

under section 4261 of ERISA), and 

investment returns expected to be 

earned on the SFA assets (calculated 

using the SFA interest rate described in 

new § 4262.4(e)(2)). 

The projected non-SFA assets for a 

plan are determined by projecting the 

fair market value of plan assets on the 

SFA measurement date forward 

annually, using the annual cash flows 

specified in § 4262.4(c) of the final rule, 

including: the benefits and 

administrative expenses paid and 

expected to be paid by the plan during 

the SFA coverage period (excluding 

benefit increases resulting from certain 

contribution increases and excluding 

the amount owed to PBGC under section 

4261 of ERISA) after the projected SFA 

assets are fully exhausted; employer 

contributions (excluding certain 

contribution rate increases), withdrawal 

liability payments reflecting a 

reasonable allowance for amounts 

considered uncollectible, and other 

payments expected to be made to the 

plan (excluding the amount of financial 

assistance under section 4261 of ERISA 

and SFA) during the SFA coverage 

period; and investment returns expected 

to be earned on the non-SFA assets 

(calculated using the non-SFA interest 

rate described in new § 4262.4(e)(1)). 

Under § 4262.4, the deterministic 

projections must be based on recent 

participant census data. Section 

4262.4(d) of the interim final rule 

provided that 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. PBGC received one comment 

stating that some plans may be unable 

to complete the actuarial valuation 

report within 270 days due to reporting 

delays and plan complexity. The 

commenter recommended extending the 

270 days to 1 year to enable these plans 

to apply without having to wait until 

the current valuation is completed. 

PBGC considered this comment and has 

concluded that a simpler rule will 

provide for data that are adequately up 

to date. Under § 4262.4(d), as revised by 

the final rule, projections must be based 

on participant census data used to 

prepare the plan’s actuarial valuation 

report for the plan year that includes the 

plan’s SFA measurement date, or, if 

there is no such report for that plan 

year, for the preceding plan year. 

If a plan experiences a significant 

change in plan experience between the 

date of the plan’s participant census 

data used to prepare the SFA 

projections and the plan’s SFA filing 

date, PBGC’s assumptions guidance 

(issued on PBGC’s website at 

www.pbgc.gov/guidance) provides 

guidelines on how to reflect that 

significant change. Plans may, but are 

not required to, use the guidelines if 

they are reasonable for the plan. 

Interest Rates for SFA and Non-SFA 

Assets 

As discussed earlier in the preamble, 

PBGC interprets the requirement in 

section 4262(j)(1) of ERISA that SFA be 

provided in the ‘‘amount required for 

the plan to pay all benefits due’’ through 

the end of 2051 to mean the amount 

required in addition to the plan’s nonSFA assets. This means that plans will 

pay benefits from two separate pools of 

assets which, under the statute, must be 

segregated and invested separately. 

Therefore, to calculate the amount of 

SFA ‘‘necessary for the plan to pay all 

benefits due’’ through the end of 2051, 

plans must perform separate 

calculations to project the value of each 

pool of assets, each of which requires 

the use of an interest rate assumption to 

reflect expected returns on that pool of 

assets. 

Section 4262(e)(2)(A) of ERISA 

provides an interest rate that plans must 

use as part of the determination of the 

amount of SFA under section 4262(j)(1). 

This rate 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. The interest rate limit 

specified in section 4262(e)(3) is 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 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, 

which is any permissible rate for a 


jspears on DSK121TN23PROD with RULES3
40978 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

month during the 4-month period 

ending with the month in which the 

plan’s initial application was filed. 

The interim final rule provided that a 

plan must use this interest rate as an 

assumption for the expected rate of 

return for both the SFA and the nonSFA assets. Under § 4262.4(e)(1) of the 

interim final rule, the ‘‘assumed interest 

rate’’ was 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). 

Many commenters discussed the 

difference between the interest rate 

assumption used to calculate SFA under 

§ 4262.4(e)(1) of the interim final rule, 

and the expected lower return on SFA 

assets invested in permissible 

investments under § 4262.14. These 

commenters argued that the approach of 

applying a single interest rate to each 

pool of plan assets would be at odds 

with the statutory language in section 

4262(j) of ERISA that the amount of SFA 

‘‘shall be such amount required for the 

plan to pay all benefits due during the 

period beginning on the date of payment 

of [SFA] and ending on the last day of 

the plan year ending in 2051’’ (emphasis 

added). As noted earlier, commenters 

argued that, under the interim final rule 

approach, many, if not most, SFAeligible plans would not receive the 

SFA amount ‘‘required’’ to enable the 

plans to pay benefits through the 2051 

plan year. These commenters suggested 

that an interest rate assumption required 

to be used to calculate the amount of 

SFA under section 4262(e) and the 

expected rate of return on permissible 

investments under section 4262(l), 

which were limited in the interim final 

rule primarily to investment grade 

bonds, would make it impossible for 

plans to receive the amount of SFA 

required to pay benefits through 2051. 

Some commenters illustrated this point 

by noting that their modeling showed 

that their plans would run out of money 

before 2051, a conclusion that PBGC has 

confirmed through its own additional, 

more detailed modeling performed since 

issuance of the interim final rule. 

Commenters argued that plans therefore 

should not be required to use the rate 

in section 4262(e) to project both SFA 

and non-SFA assets, given their 

different expected rates of return, and 

that allowing plans to apply a different 

reasonable rate to SFA assets would be 

a permissible exercise of PBGC’s 

discretion that would better achieve the 

statute’s requirements. 

In contrast, a few commenters stated 

that the interest rate set forth in section 

4262(e) of ERISA and the investment 

restrictions in section 4262(l) are plain 

directives of the statute. These 

commenters instead asked PBGC to 

reinterpret section 4262(j)(1) to change 

the determination of the amount of SFA 

by, for example, disregarding certain 

categories of plan resources (or all plan 

resources) in determining the amount of 

SFA required by a plan. 

Other commenters provided a number 

of suggestions regarding what interest 

rate assumptions plans should be 

permitted to use for SFA and non-SFA 

assets. The most common suggestion 

was that the interest rate required under 

section 4262(e) of ERISA should apply 

only to non-SFA assets and that PBGC 

should allow a separate rate to apply to 

SFA assets. Many commenters 

contended that the statute did not 

specify an interest rate for SFA assets, 

providing several arguments in support 

of these contentions. Some pointed out 

that although section 4262(e) requires 

plans to use the rate identified in that 

section in calculating the amount of 

SFA, the statute does not specify how it 

is to be used, nor require that such rate 

be used for all purposes. Commenters 

also argued that using the rate under 

section 4262(e) to project returns on 

SFA assets would not make sense given 

that section 4262(l) provides that SFA 

assets will be invested separately and 

likely at lower rates of return than nonSFA assets, and because section 

4262(j)(1) cannot be satisfied without 

SFA assets being projected—for most 

plans—using an investment-return 

assumption lower than the interest rate 

in section 4262(e). Thus, many 

commenters argued that PBGC should 

allow plans to use a different interest 

rate for SFA assets so that plans will 

receive sufficient SFA to pay full 

benefits through 2051, as required by 

section 4262(j)(1). These commenters 

argued that PBGC has the authority and 

the mandate to harmonize the various 

provisions of section 4262 in this 

manner. 

Some commenters further argued that, 

because the 2020 certifications of plan 

status did not include an interest rate 

assumption for projecting investment 

returns on SFA assets, the interest rate 

should be a newly established 

assumption and reflect expected returns 

on SFA assets. A few other commenters 

suggested that PBGC should provide a 

rate equal to the IRS’ third segment rate, 

without adding the 200 basis points. 

One commenter requested allowing 

plans to submit two calculations, with 

one calculation based on the interest 

rate assumption in the interim final rule 

and a second calculation using interest 

rate assumptions that would more 

reasonably project actual returns for 

SFA and non-SFA assets. PBGC would 

then provide the plan an amount of SFA 

to make up any discrepancy between 

the two calculations. 

In the interim final rule, PBGC 

explained that to determine eligibility 

for SFA, for certifications of plan status 

completed after December 31, 2020, 

section 4262(e)(1) of ERISA requires a 

plan to use assumptions from its most 

recently completed certification of plan 

status before January 1, 2021, unless 

such assumptions (excluding the plan’s 

interest rate) are unreasonable. To 

determine the amount of SFA, the 

interim final rule noted that section 

4262(e)(2) provides 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.’’ 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. Section 4262(e)(4) also 

provides that, notwithstanding this 

language, plans cannot propose a 

change to the interest assumption. In the 

interim final rule, PBGC interpreted 

these subsections of 4262(e), read 

together, to mean that plans should use 

the section 4262(e) interest rate to 

determine the amount of SFA, without 

a separate interest rate assumption for 

projecting SFA assets. In interpreting 

section 4262(e), PBGC, in the interim 

final rule, stated that it does not have 

authority to provide a different rate or 

bifurcate the statutorily mandated 

interest rate. 

After further review of the statute, 

PBGC observes that section 4262(e) of 

ERISA is general in its language 

regarding the determination of the 

amount of SFA and does not speak 

directly to the precise question of the 

use of an interest rate to project returns 

on SFA assets. Thus, PBGC has, after 

this further review of the statute, 

additional consultation with its Board 

agencies, consideration of comments, 

and extensive actuarial modeling, 

determined that an alternative 

interpretation of section 4262(e) that 

addresses the limitations imposed by 

the statute and PBGC on permissible 

investments, is reasonable and more 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40979 

22See section 4262(e)(2) of ERISA. 

23PBGC determined that the average of the first 

and second segment rates specified in sections 

303(h)(2)(C)(i) and (ii) of ERISA (disregarding 

modifications made under clause (iv) of such 

section) is likely to reasonably represent the yield 

and therefore the expected return at any point in 

time on the portion of the SFA required to be 

invested in investment grade fixed income. As 

discussed later in the preamble under the 

subheading Permissible Investments, up to 33 

percent of SFA may be invested in return-seeking 

assets and the expected return on SFA assets is the 

weighted average of the expected returns for the 

component parts. Using the interest rate cap 

applicable to plan assets that are not subject to an 

investment limitation (200 basis points above the 

third segment rate) as a cap for return-seeking assets 

and an allocation of 33 percent of SFA to those 

assets, the cap on the SFA interest rate—the 

weighted average of the caps for the component 

Continued 

likely to result in the SFA an eligible 

plan receives being sufficient for the 

plan to pay full benefits through 2051, 

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

ERISA, than the interpretation adopted 

in the interim final rule. This result 

would not be possible solely by the 

increased flexibility in the investment of 

SFA assets under revised § 4262.14. 

Therefore, after considering section 

4262(e) together with sections 4262(j)(1) 

and 4262(l) of ERISA, and in order to 

harmonize these provisions of the 

statute more effectively than in the 

interim final rule, PBGC is providing for 

two interest rate assumptions in the 

final rule. 

PBGC has considered, but does not 

agree with, comments that argued that 

PBGC has discretion to permit plans to 

not use in any manner the interest rate 

identified in section 4262(e) of ERISA 

when calculating the amount of SFA. 

The text of section 4262(e)(2) states that 

‘‘[i]n determining the amount of special 

financial assistance in its application, 

an eligible multiemployer plan shall 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’’ (emphasis 

added). Because the statute speaks 

directly to whether plans must use this 

rate, PBGC does not have discretion to 

allow plans not to use the interest rate 

in section 4262(e)(2) at all. Although 

plans may be able to forgo using other 

assumptions from their most recently 

completed certification of plan status 

before January 1, 2021, if they 

demonstrate to PBGC that those 

assumptions ‘‘are no longer reasonable,’’ 

section 4262(e)(4) makes clear that plans 

cannot propose to change the 

requirement to use the interest rate in 

section 4262(e)(2). This final rule 

therefore maintains the requirement that 

plans use the section 4262(e) rate when 

calculating the amount of SFA. Under 

the final rule, plans must use this rate 

as the assumed rate of return on nonSFA plan assets. 

PBGC has considered arguments from 

commenters that the statute does not 

expressly speak to whether the section 

4262(e) rate must also be used as the 

assumed rate of return on SFA assets, 

which did not exist at the time of a 

plan’s most recent certification of plan 

status before January 1, 2021, and which 

will be invested separately, and under 

different statutory restrictions, from 

non-SFA assets. As explained earlier in 

the preamble, the final rule maintains 

that at least one of the components of 

this overall calculation must be 

projected using the rate specified in 

section 4262(e)(2) of ERISA because of 

the statute’s instruction that plans 

‘‘shall’’ use that rate in determining the 

amount of SFA.22

However, after further statutory 

analysis and consideration of 

comments, PBGC recognizes that the 

statute does not specify the pool of 

assets for which that rate must be used 

as the assumed rate of return. In light of 

this statutory silence, PBGC is 

exercising discretion to make a 

reasonable choice, consistent with 

section 4262(j)(1), about the pool of 

assets for which the interest rate 

assumption in section 4262(e)(2) shall 

be used. As discussed earlier in the 

preamble, PBGC has interpreted the 

requirement in section 4262(j) that SFA 

shall be the amount ‘‘required for the 

plan’’ to pay all benefits due through the 

end of the plan year 2051 to mean that 

plans must consider existing assets in 

calculation of the SFA amount. Plans 

receiving SFA will therefore pay these 

benefits from two pools of assets: SFA 

assets and non-SFA assets. Section 

4262(l) expressly contemplates that the 

SFA assets may have a different 

expected rate of return than non-SFA 

assets. In addition, as many commenters 

noted, a mismatch between the 

investment restrictions in section 

4262(l) and the interest rate identified in 

section 4262(e)(2) also supports the 

reasonableness of allowing plans to 

apply a different and more realistic rate 

to SFA assets, including to meet the 

requirements of section 4262(j)(1). 

Given the investment restrictions under 

section 4262(l), if the section 4262(e)(2) 

interest rate assumption were required 

to be used in projecting SFA assets, 

PBGC would not be providing the 

amount of SFA reasonably projected to 

be ‘‘required for the plan to pay all 

benefits due’’ through the plan year 

ending in 2051. 

Requiring plans to use the section 

4262(e) rate for projecting the value of 

non-SFA assets, while providing for a 

different rate for projecting the value of 

SFA assets, is a reasonable 

interpretation of the statute that 

harmonizes sections 4262(e), (j), and (l). 

Accordingly, to calculate the amount 

of SFA for a plan under § 4262.4, the 

plan must use two interest rate 

assumptions: (1) the plan’s non-SFA 

interest rate used for calculating 

investment returns expected to be 

earned on the plan’s non-SFA assets, 

and (2) the plan’s SFA interest rate used 

for calculating the investment return 

expected to be earned on the plan’s SFA 

assets. 

The first interest rate, defined in 

§ 4262.4(e)(1) of the final rule, is the 

plan’s ‘‘non-SFA interest rate.’’ This rate 

replaces the ‘‘assumed interest rate’’ 

under the interim final rule. The 

‘‘assumed interest rate’’ was defined as 

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 interest rate 

‘‘cap’’ 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). PBGC recognizes 

that it is always to a plan’s advantage to 

use the rate for the month in which the 

rate is lowest. For simplicity, therefore, 

in the final rule PBGC is revising 

§ 4262.4(e)(1)(ii) by specifying that the 

non-SFA interest rate ‘‘cap’’ 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 

that rate is the lowest among the 4 

calendar months ending with the month 

in which the plan’s initial application 

for special financial assistance is filed, 

taking into account only rates that have 

been issued by the Internal Revenue 

Service as of the day that is the day 

before the date the plan’s initial 

application is filed. 

The second interest rate, defined in 

§ 4262.4(e)(2) of the final rule, is the 

plan’s ‘‘SFA interest rate.’’ The SFA 

interest rate 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, and an 

interest rate cap that is lower than the 

non-SFA interest rate cap. This lower 

cap reflects the restrictions on 

investment of SFA funds and the 

investment returns plans can reasonably 

expect to earn on SFA funds.23 The SFA 


jspears on DSK121TN23PROD with RULES3
40980 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

parts—is the average of the three segment rates plus 

67 basis points. 

24PBGC’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. 

interest rate cap is the interest rate that 

is 67 basis points higher than the 

average of the rates specified in section 

303(h)(2)(C)(i), (ii), and (iii) of ERISA 

(disregarding modifications made under 

clause (iv) of such section) for the 

month in which such average is the 

lowest among the 4 calendar months 

ending with the month in which the 

plan’s initial application for special 

financial assistance is filed, taking into 

account only rates that have been issued 

by the Internal Revenue Service as of 

the day that is the day before the date 

the plan’s initial application is filed. 

Section 4262(f) of ERISA suggests that 

a plan may have multiple filing dates by 

providing two application deadlines: 

One for initial applications and one for 

revised applications. Until an 

application is approved, there is no 

limit to the number of times that a plan 

sponsor may file a revised application 

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 different interest rate assumptions. 

To prevent multiple filings for purposes 

of changing the interest rate 

assumptions, if a plan’s application is 

revised as provided under § 4262.11, the 

non-SFA interest rate and SFA interest 

rate used for any revised application 

must be the same as the non-SFA 

interest rate and SFA interest rate 

required to be used for the plan’s initial 

application for SFA. 

Calculating the Amount of SFA With 

Respect to Certain Events 

Section 4262.4(f) of the regulation 

addresses the possibility that a plan may 

implement certain changes to obtain 

more SFA than was intended by section 

4262 of ERISA. In these situations, the 

amount of SFA that would apply to a 

plan is limited to the amount of SFA 

determined as if the events described in 

§ 4262.4(f) had not occurred. These 

events include mergers, transfers of 

assets or liabilities (including spinoffs), 

certain increases in accrued or projected 

benefits, and certain reductions in 

contribution rates. The limitation 

applies to events that occur between 

July 9, 2021, and the SFA measurement 

date. To accommodate the possibility of 

multiple events, the limitation does not 

apply on an 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. PBGC included 

these provisions in the interim final rule 

in consultation with the Treasury 

Department. 

With respect to mergers, 

§ 4262.4(f)(1)(ii) of the regulation 

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. A 

plan eligible for SFA may remain 

eligible after the merger; however, a 

plan may not increase the amount of 

SFA to which it is entitled by merging 

with another plan or plans on or after 

July 9, 2021. 

PBGC considered two comments it 

received related to these provisions and 

decided not to make any changes to 

§ 4262.4(f) in the final rule. One 

commenter stated generally that PBGC 

should not limit SFA or access to SFA 

because the protections already in place 

under the Pension Protection Act of 

2006, MPRA, and ARP are sufficient to 

avoid abuse. A second commenter 

suggested that the amount of SFA 

available to merged plans should not be 

limited to the amount each plan would 

have been separately eligible to receive. 

The commenter argued that PBGC does 

not have authority to make rules 

limiting SFA for two or more plans that 

are merged, that a prohibition is not a 

reasonable condition regarding 

diversion of contributions, and that the 

rule denies needed assistance to plans 

that are facing insolvency. 

PBGC disagrees with the commenter’s 

assertion that PBGC does not have 

authority to address possible abuse of 

the SFA program or to limit SFA, in the 

case of a merger, to the amount each 

plan would have been separately 

eligible to receive. As explained in the 

interim final rule, 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. It is appropriate 

for PBGC, with its responsibility for 

carrying out the purposes of the title IV 

insurance program,24 to impose 

conditions on plans receiving SFA 

designed to ensure that plans do not 

receive more than the amount of SFA to 

which they are entitled. As provided in 

the interim final rule, 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 would either 

artificially inflate the amount of SFA to 

which a plan is entitled or convert an 

ineligible plan into an eligible plan. 

Informing this conclusion, section 

4262(e)(2)(B) of ERISA 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 

section 4262(e)(4), those assumptions 

may not be changed. A manipulation of 

those rates via a merger would not be 

consistent with that prohibition. 

Although the statute does not directly 

address plan mergers, in the case of 

merged plans, each plan’s assumptions 

from the most recently completed pre2021 certification of plan status must be 

maintained in order for section 4262(e) 

to be given effect with respect to the 

plans that merged. PBGC’s rule fills the 

gap left in the statute for the calculation 

of SFA for plans that have been 

involved in a merger occurring on or 

after July 9, 2021. 

In addition, 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, 

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. 

PBGC is authorized to impose 

conditions on a plan that ‘‘receives’’ 

SFA. PBGC’s authority is not limited to 

imposing conditions on a plan that has 

received SFA. That understanding of 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40981 

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) were limited to imposing 

only post-receipt conditions. 

The condition respecting mergers 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, 

each predecessor plan has diverted its 

contributions and allocated its expenses 

to the merged plan and thereby to each 

other merging plan. A merged plan, 

which combines assets and liabilities of 

two or more plans, each with its own set 

of participants and beneficiaries, 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 (the 

participants in the plan that received 

SFA) to another (the participants in 

each other merging benefit plan). 

Accordingly, under section 4262(m) 

of ERISA, in conjunction with section 

4002(b)(3), PBGC is authorized to 

impose reasonable conditions that 

ensure that SFA is provided to plans in 

an amount that is not artificially inflated 

by plan mergers. Conditions regarding 

events other than mergers are discussed 

in the preamble of the interim final rule 

and examples illustrating the provisions 

are included in § 4262.4(f)(6). 

Calculating the Amount of SFA for 

Plans That Applied for SFA Under the 

Interim Final Rule 

Pursuant to its authority under 

section 4262(c) of ERISA, PBGC in the 

final rule adds new § 4262.4(g) to 

provide guidance on the requirements 

for SFA applications for plans that 

applied for SFA under the interim final 

rule. 

If a plan’s application for SFA was 

approved under the regulation as in 

effect before August 8, 2022 (meaning 

under the interim final rule), the plan 

should look to the rules set forth under 

§ 4262.4(g)(1) for ‘‘approved 

applications.’’ Those rules provide that 

the plan may supplement its application 

after SFA is paid under the terms of the 

interim final rule. When a plan files a 

supplemented application, the 

amendments in this final rule to 

permissible investments in § 4262.14 

and to the withdrawal liability 

condition in § 4262.16(g)(2) become 

applicable upon the date the 

supplemented application is filed even 

if the supplemented application is not 

approved. A supplemented application 

may be filed even if a plan would not 

receive additional SFA as the result of 

the filing. If the plan chooses to 

supplement, the plan will file a 

supplemented application with the 

changes and information specified in 

the SFA supplemented application 

instructions on PBGC’s website at 

www.pbgc.gov to implement the 

provisions of the final rule for 

determining the amount of the plan’s 

SFA, including the interest rate 

assumptions under § 4262.4(e). A 

supplemented application, like a 

revised application, must be filed by 

December 31, 2026, and in accordance 

with the processing system (including 

priority groups) described in § 4262.10. 

PBGC must review a supplemented 

application within 120 days of the filing 

date. The plan cannot change the plan’s 

SFA measurement date, fair market 

value of assets, or participant census 

data used in the plan’s application 

approved under the interim final rule. 

The plan also cannot propose a change 

in assumptions, except to propose a 

change to the plan’s employer 

contribution assumption to exclude 

contribution rate increases agreed to on 

or after July 9, 2021, as permitted under 

§ 4262.4(c)(3) (in which case, the plan 

must exclude any benefit increases 

resulting from those contribution 

increases). A plan may withdraw the 

plan’s supplemented application and 

file a new supplemented application at 

any time before the supplemented 

application is denied or approved. If 

PBGC denies a plan’s supplemented 

application, the plan may file a new 

supplemented application. Any new 

supplemented application filed by the 

plan must address the reasons cited by 

PBGC for the denial. Any SFA paid to 

the plan under the provisions of the 

final rule will be adjusted as described 

in § 4262.12, including to reflect the 

prior receipt of SFA. 

If a plan applied for SFA under the 

interim final rule and the plan’s 

application was not approved, 

withdrawn, or denied, and was pending, 

as of August 8, 2022, the plan should 

look to the rules set forth under 

§ 4262.4(g)(2) for ‘‘pending 

applications.’’ They provide that the 

plan’s pending application may be 

withdrawn (as described in 

§ 4262.11(d)) and a revised application 

filed, or not withdrawn and determined 

under terms of the interim final rule. 

Any revised application must use the 

plan’s base data defined in 

§ 4262.4(g)(5). Base data include the 

plan’s SFA measurement date, 

determined under the interim final rule 

as the last day of the calendar quarter 

immediately preceding the date the 

plan’s initial application for SFA was 

filed; the plan’s participant census data 

required to be used in the plan’s initial 

application for SFA under the interim 

final rule; and the plan’s non-SFA 

interest rate and SFA interest rate 

determined under § 4262.4(e)(1) and (2) 

of the final rule. Any SFA paid to the 

plan under the provisions of the final 

rule will be adjusted as described in 

§ 4262.12. A plan with a ‘‘pending 

application’’ that chooses not to 

withdraw and revise its application will 

be paid the amount of SFA as 

determined under the interim final rule. 

The plan is not precluded from later 

filing a supplemented application. 

If a plan applied for SFA under the 

interim final rule and it was not 

pending as of August 8, 2022, because 

the plan’s application was denied or the 

filer withdrew the plan’s application in 

accordance with § 4262.11(d), the plan 

may file a revised application (see the 

provisions for a ‘‘withdrawn 

application’’ and a ‘‘denied application’’ 

under § 4262.4(g)(3) and (4) 

respectively). Any revised application 

must use the plan’s base data defined in 

§ 4262.4(g)(5). Base data include the 

plan’s SFA measurement date, 

determined under the interim final rule 

as the last day of the calendar quarter 

immediately preceding the date the 

plan’s initial application for SFA was 

filed; the plan’s participant census data 

required to be used in the plan’s initial 

application for SFA under the interim 

final rule; and the plan’s non-SFA 

interest rate and SFA interest rate 

determined under § 4262.4(e)(1) and (2) 

of the final rule. Any SFA paid to the 

plan under the provisions of the final 

rule will be adjusted as described in 

§ 4262.12. 

PBGC Review of Plan Assumptions 

PBGC’s review of an application for 

SFA focuses on the reasonableness of 

the plan’s demonstration regarding the 

amount of SFA for the plan. Section 

4262.5 sets forth how PBGC reviews 

plan 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. 

Under section 4262 of ERISA, 

actuarial assumptions generally are 


jspears on DSK121TN23PROD with RULES3
40982 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

25Actuarial Standards of Practice (ASOPs) are 

issued by the Actuarial Standards Board and are 

available at http://

www.actuarialstandardsboard.org/standards-ofpractice. 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. 

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. Accordingly, as provided in 

the interim final rule, PBGC expects to 

give less intensive scrutiny to ‘‘original’’ 

assumptions than to changed 

assumptions. 

Section 4262(e)(1) of ERISA requires 

PBGC to accept actuarial assumptions 

incorporated in a plan’s certification of 

plan status completed before 2021 for 

purposes of eligibility unless PBGC 

determines that such assumptions are 

‘‘clearly erroneous.’’ For all other 

purposes (including determining the 

amount of SFA), the statute requires 

PBGC to accept the assumptions used 

unless PBGC determines that they are 

unreasonable. 

Several commenters recommended 

that PBGC take a deferential approach 

when reviewing assumptions used by a 

plan’s actuary in the most recent 

certification of plan status completed 

before 2021. These commenters argued 

that if a plan sponsor does not propose 

a change, PBGC should refrain from 

challenging the plan’s assumptions 

because the intent of the statute is to 

allow those assumptions to serve as 

default assumptions. They argue that 

this would allow SFA applications, in 

comparison to MPRA applications, to be 

expeditiously reviewed by avoiding the 

level of scrutiny that was imposed when 

reviewing actuarial assumptions for 

MPRA applications. These commenters 

requested guidance from PBGC stating 

that the pre-2021 assumptions are 

deemed acceptable. One commenter 

requested that PBGC accept the plan’s 

assumptions unless they are clearly 

erroneous or unreasonable. Another 

suggested that PBGC not challenge pre2021 assumptions unless clearly 

unreasonable. Yet another commenter 

requested that PBGC clarify that pre2021 assumptions that were reasonable 

for purposes of the pre-2021 

certification of plan status will not be 

deemed unreasonable for purposes of 

the SFA application because of the 

passage of time, subsequent events, or 

the different purpose of measurement. 

PBGC agrees that, in comparison to a 

plan’s changed assumptions, for the 

reasons discussed earlier in the 

preamble, PBGC should take a more 

deferential approach in reviewing a 

plan’s use of pre-2021 assumptions. 

However, given the language in section 

4262(e)(2)(B) of ERISA that a plan shall 

use the pre-2021 assumptions ‘‘unless 

such assumptions are unreasonable,’’ 

PBGC disagrees that a lesser standard, 

such as clearly erroneous or clearly 

unreasonable, should be used by PBGC 

when reviewing a plan’s assumptions 

used to determine the amount of SFA 

for the plan. In addition, PBGC 

disagrees with the one commenter’s 

assertion that the passage of time, 

subsequent events, or the different 

purpose of the measurement should not 

be considered by the plan’s actuary. As 

described later in this section of the 

preamble, the statute provides a 

mechanism for changing prior 

assumptions that are no longer 

reasonable (excluding the interest rate 

assumption). This indicates that the 

passage of time, subsequent events, and 

the purpose of the measurement should 

be considered by the plan’s actuary. If 

the plan’s actuary does not determine 

that one or more of the pre-2021 

assumptions are unreasonable for the 

purpose of determining the amount of 

SFA, PBGC will defer to the plan’s use 

of those assumptions unless PBGC finds 

the assumptions unreasonable. PBGC, 

however, may request additional 

information from the plan to determine 

whether a pre-2021 assumption is 

unreasonable. 

Each of the actuarial assumptions and 

methods used for the actuarial 

projections (excluding the interest rate 

assumptions) must be reasonable in 

accordance with generally accepted 

actuarial principles and practices,25

taking into account the experience of 

the plan and reasonable expectations. 

To be reasonable, an actuarial 

assumption or method generally must, 

among other things, 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 overly optimistic 

or pessimistic). 

The statute provides a mechanism for 

changing prior assumptions (other than 

the interest rate assumption) that are no 

longer reasonable. If a plan actuary 

determines that one or more original 

assumptions are unreasonable and must 

be changed, § 4262.5(c) provides that 

the plan’s application must describe 

why the original assumption is no 

longer reasonable, propose to use a 

different assumption (the changed 

assumption), and demonstrate that the 

changed assumption is reasonable. If 

there is a change in assumptions, each 

of the actuarial assumptions and 

methods (other than the interest rate 

assumptions) must be reasonable, and 

the combination of actuarial 

assumptions and methods (excluding 

the interest rate assumptions) also must 

be reasonable. Plans are required to 

provide detailed information about any 

changed assumptions, and PBGC will 

perform a less deferential analysis of 

those assumptions than of the original 

pre-2021 assumptions. 

Concurrent with the interim final 

rule, PBGC issued assumptions 

guidance containing 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. Plans 

that do not use the guidelines may 

demonstrate that the change is 

reasonable by providing additional 

information beyond what would be 

required under the guidelines. 

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. In 

addition, for various reasons, a plan 

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. To assist applicants and aid in the 

review of a plan’s CBU assumption and 

administrative expense assumption, 

PBGC developed standard extensions 

that plans can use to complete the 

assumption set for a plan that otherwise 

can use its original assumptions. With 

respect to the § 4262.5(c)(1)(iii) 

requirement to demonstrate that the 

changed assumption is reasonable, it is 

sufficient to include a statement to that 

effect in the application instead of a 

detailed demonstration if the plan uses 

standard extensions described in the 

assumptions guidance. 

Two commenters suggested that PBGC 

could permit MPRA plans to use 

projected CBUs consistent with their 

approved MPRA applications as a safeharbor assumption. One of these 

commenters also suggested a safe harbor 

for MPRA plans to use other actuarial 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40983 

assumptions from their approved MPRA 

application. If an assumption used in a 

plan’s approved MPRA application is 

the same as an assumption used in the 

plan’s last pre-2021 certification of plan 

status, and the plan’s actuary 

determines that the assumption is not 

unreasonable for the purpose of 

determining the amount of SFA, PBGC 

will provide deference to the actuary’s 

determination unless PBGC finds the 

assumption unreasonable. If an 

assumption used in a plan’s approved 

MPRA application is not the same as an 

assumption used in the plan’s last pre2021 certification of plan status, the 

plan actuary may propose to change the 

assumption to the assumption used in 

the plan’s approved MPRA application 

in accordance with § 4262.5(c). PBGC is 

amending its assumptions guidance to 

provide that PBGC will generally accept 

a change in assumption to an 

assumption used in a plan’s approved 

MPRA application, including projected 

CBUs, if the plan includes the 

information required by § 4262.5(c) in 

the application and the demonstration 

provided by the plan shows the 

assumption is reasonable for the 

purpose of determining the amount of 

SFA. 

Several commenters requested that 

PBGC’s guidance provide more 

flexibility in contribution assumptions 

or recommended specific changes, such 

as eliminating the requirement that a 

change in CBU assumption be 

adequately supported by historical data. 

The commenters stated that historical 

data is not necessarily predictive of 

future changes. One commenter 

explained that the historical data 

requirement defies economic trends in 

many industries, is inconsistent with 

the reasonableness standard in the 

statute, and may contravene actuarial 

standards which require actuaries to 

consider factors that may affect future 

experience, such as economic 

conditions for the industry and the 

availability of alternative employment 

due to automation. Another commenter 

asked for guidance, or clarifications of 

PBGC’s guidance, on various 

assumptions, including mortality, new 

entrant assumptions, and employer 

withdrawals. 

PBGC has updated its assumptions 

guidance to address some of the 

comments received, provisions of this 

final rule, and to provide more clarity 

and additional guidance based on 

experience in reviewing applications. In 

addition to the change described earlier 

in the preamble for plans with approved 

MPRA applications, PBGC added 

guidelines on acceptable changes to a 

plan’s disabled life mortality 

assumption and on the acceptable 

adoption of or update to a plan’s 

mortality improvement projection scale. 

PBGC specified the information needed 

to show that a plan’s assumed new 

entrant profile and administrative 

expenses assumption are based on the 

acceptable methodology as indicated by 

the guidance. For a plan that reflects 

significant plan experience between the 

participant census date and the 

application filing date, PBGC added that 

the plan should provide a rationale for 

how it determined that the plan 

experience was significant, and made 

other updates to the related example. 

PBGC added examples and other 

clarifications to acceptable assumption 

changes. 

PBGC also added guidelines on 

projecting future receipt of employer 

withdrawal liability payments, noting 

that the projection should reflect the 

actuary’s best estimate of future plan 

experience and that the plan’s actuary 

should consider reflecting a reasonable 

allowance for amounts considered 

uncollectible. PBGC added guidelines 

for plans where all the assumptions 

required to be used for projections in 

the pre-2021 certification of plan status 

were not identified. The assumptions 

guidance also provides guidelines on 

acceptable changes for the exclusion of 

terminated vested participants over a 

certain age. Finally, PBGC added 

information about how applicants can 

schedule an informal pre-application 

conference with PBGC. 

PBGC considered the comments on 

CBU assumptions and, except for some 

clarifying changes, did not adopt the 

suggestion of commenters to eliminate 

the guideline that a change in CBU 

assumption be adequately supported by 

historical data. Instead, PBGC included 

examples in the guidelines to illustrate 

how historical data and industry trends 

can be used to project future changes in 

CBUs under the guidelines. 

PBGC’s guidance on CBUs and other 

assumptions may not be reasonable for 

all plans and is not binding on plans. A 

plan should follow the assumptions 

guidance only if it is reasonable for the 

plan to do so. As explained earlier in 

the preamble, applicants may propose 

changes to the plan’s assumptions by 

following § 4262.5(c), including 

describing why the original assumption 

is no longer reasonable, disclosing the 

changed assumption, and demonstrating 

that the changed assumption is 

reasonable. 

Information To Be Filed 

Sections 4262.6 through 4262.8 of the 

interim final rule described the 

information that must be included in a 

plan’s SFA application. Section 4262.6 

summarized 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 statement under 

penalty of perjury; 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; if the plan suspended 

benefits under sections 305(e)(9) or 

4245(a) of ERISA, a copy of the 

proposed plan amendment to reinstate 

suspended benefits and pay make-up 

payments and a certification by the plan 

sponsor that the plan amendment will 

be adopted timely; and any information 

required by PBGC to clarify or verify the 

information in a filed application. If any 

of the information required under the 

regulation and in the SFA instructions 

is missing from the filed application, the 

application will not be considered 

complete. 

The SFA instructions (on PBGC’s 

website at www.pbgc.gov), 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 period provided under section 

4262(g) of ERISA. 

PBGC in the final rule is amending 

the information required to be filed as 

described in §§ 4262.6 through 4262.8 to 

reflect the new methodology in § 4262.4 

for determining the amount of a plan’s 

SFA and making other clarifying 

changes. 

Based on its experience reviewing 

applications, in the final rule, PBGC is 

amending § 4262.6(a) to provide that, if 

information is not accurately completed 

or not filed with the application, PBGC 

may, in its discretion, either require the 

plan sponsor to file additional 

information to correct the error or 

omission or consider the application 

incomplete. If correction of any error or 

omission requires a change to the 

amount of SFA requested, the 

application will be considered 

incomplete. This provision is intended 


jspears on DSK121TN23PROD with RULES3
40984 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

to provide some flexibility in the 

application review process to enable 

some errors to be corrected without 

plans having to file revised applications. 

In addition, PBGC is modifying the 

language of the required statement 

under penalty of perjury in § 4262.6(b) 

to make the language more precise and 

is modifying the language of the 

required amendments to the plan in 

§ 4262.6(e). In the final rule, clarifying 

language, ‘‘notwithstanding anything to 

the contrary in this or in any other 

governing document’’ is added to 

§ 4262.6(e)(1) so that the required 

language for the amendment reads, 

‘‘Beginning with the SFA measurement 

date selected by the plan in the plan’s 

application for special financial 

assistance, notwithstanding anything to 

the contrary in this or any other 

governing document, 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.’’ PBGC is also providing 

model language for the benefit 

reinstatement amendments under 

§ 4262.6(e)(2) to assist filers in 

complying with the amendment 

requirements. In addition, PBGC is 

amending § 4262.7(e)(2) to require that 

the certification by the plan sponsor that 

the benefit reinstatement amendments 

will be timely adopted must be signed 

either by all members of the plan’s 

board of trustees or by one or more 

trustees duly authorized to sign the 

certification on behalf of the entire 

board of trustees. 

As described in the Paperwork 

Reduction Act section of the interim 

final rule, the application instructions 

and checklist were submitted to the 

Office of Management and Budget 

(OMB) for review and approval under 

the Paperwork Reduction Act. PBGC 

received approval for this information 

collection on an emergency basis for a 

period of 180 days, expiring on January 

31, 2022, under control number 1212– 

0074. Subsequently, OMB extended its 

approval for the information collection 

for an additional 3 years, expiring on 

January 31, 2025. 

With the final rule, PBGC is 

submitting this information collection, 

with the described modifications, to 

OMB and its decision will be available 

at 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. 

Section 4262.9 does not provide 

eligibility for SFA. As explained earlier 

in the preamble under the subheading 

Eligible Multiemployer Plans, section 

4262(b)(1) of ERISA lists four categories 

of plans that are eligible for SFA, and 

PBGC cannot extend eligibility for SFA 

through its regulation to a plan that is 

not included in any of those categories. 

In the case of a partitioned plan, the 

original and successor plans must each 

be separately eligible. Each must have 

been approved for a suspension of 

benefits under section 305(e)(9) of 

ERISA as of March 11, 2021, to be 

eligible for SFA under section 

4262(b)(1)(B) of ERISA and 

§ 4262.3(a)(2). To avoid any confusion 

about the eligibility of a partitioned 

plan, PBGC is clarifying this 

requirement in § 4262.9(a) of the final 

rule. 

The plan sponsor of a partitioned plan 

where the original and successor plans 

are each eligible to apply for SFA must 

apply for SFA using the alternative 

application, which contemplates 

PBGC’s rescission of the partition order 

as prescribed under § 4262.9(c) and 

other conditions particular to a 

partitioned plan as described under 

§ 4262.9(b). One of these conditions is 

that the plan sponsor must file a single 

application for SFA, consisting of 

information about the original plan and 

the successor plan. The combined 

information must reflect that, on the 

date SFA is transferred to the plan, 

PBGC will rescind the order that created 

the successor plan, and the plan sponsor 

will remove plan provisions and 

amendments that were required to be 

adopted under the order. 

Another condition is that the 

application must include a statement 

that the plan was partitioned and a copy 

of the provisions or amendments that 

the plan was required to adopt under 

the partition order. A partitioned plan’s 

application must include all the 

required information described in 

§§ 4262.6 through 4262.8 for 

applications generally. However, if the 

plan sponsor of a partitioned plan has 

already filed any of the required 

information with PBGC, the sponsor is 

not required to include that information 

again with its SFA application. Instead, 

the sponsor need only note on the 

checklist described under § 4262.6(a) 

that the information was already filed. 

Partitioned plans also have benefit 

suspensions that must be reinstated if 

the plan is approved for SFA. Under 

§ 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 in Notice 2021– 

38, 2021–30 IRB 155. This requirement 

applies to both the original plan and the 

successor plan created by a partition. 

Having the original and successor plans 

apply as one will ensure coordinated 

benefit reinstatements for all 

participants in the partitioned plan. 

The filing of an application for a 

partitioned plan falls under priority 

group 2 for purposes of § 4262.10(d) 

(explained in this preamble under the 

subheading 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. 

Successor plans created in a partition 

have also been receiving financial 

assistance from PBGC with repayment 

obligations under section 4261 of 

ERISA. How financial assistance under 

section 4261 is repaid is prescribed 

under § 4262.12. 

Processing Applications 

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 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40985 

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. 

Section 4262.10 of the regulation sets 

forth the system for processing 

applications within 120 days, as 

required by section 4262(g) of ERISA 

and § 4262.11 of the regulation. The 

processing system will provide every 

prospective submitter a fair opportunity 

to file its application by December 31, 

2025 (or December 31, 2026, for a 

revised or supplemented application). 

This electronic filing system 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 second mechanism is a priority 

system permitted by section 4262(d) of 

ERISA. 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 applications 

from plans in their priority group. The 

statutory authority and rationale behind 

these mechanisms are fully explained in 

the preamble to the interim final rule. 

PBGC received several comment 

letters on this section of the interim 

final rule. Most of these commenters 

focused on allowing more plans to 

apply earlier during the 2-year prioritygroup period to speed up the provision 

of SFA to eligible plans. These 

commenters wanted plans eligible to file 

in a later priority group to be given the 

opportunity to file in an earlier priority 

group—e.g., allow plans projected to 

become insolvent within 1 year of filing 

an application and designated to file in 

priority group 2 to file in priority group 

1, or allow plans that implemented 

benefit suspensions under MPRA and 

also able to file in priority group 2 to file 

in priority group 1. Some of these 

commenters explained that the plans in 

priority group 2 that are projected to 

become insolvent in 2022 should be 

able to apply earlier to avoid the 

complexity of preparing for insolvency 

or even becoming insolvent before 

receiving SFA, and to avoid the 

disruption this would cause plan 

participants. Commenters who are 

participants in MPRA plans (i.e., plans 

that implemented benefit suspensions) 

described the reduction in their benefits 

as a life-altering loss. They asked that 

their plans be able to apply in priority 

group 1 along with insolvent plans 

because the impact of benefit cuts on 

plan participants is the same. 

Other commenters wanted PBGC to 

move up the beginning date identified 

in the interim final rule for a plan in a 

priority group to file—e.g., priority 

group 6 plans should be permitted to 

file before priority group 5. 

The filing dates provided in the 

interim final rule are the latest dates 

PBGC expects to begin accepting 

applications from plans in each group. 

A plan in a priority group may file an 

application beginning on that date, or an 

earlier date as processing capacity 

permits, as updated on PBGC’s website 

at www.pbgc.gov. 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. 

The final rule does not make changes 

to the filing dates for plans in a priority 

group under § 4262.10(d)(2), but using 

its discretion under the regulation, 

PBGC has updated its website at 

www.pbgc.gov to allow a plan in priority 

group 2 that is expected to become 

insolvent within 1 year of the date the 

plan’s application for SFA is filed, to 

file an application earlier. PBGC agrees 

with comments that this would lessen 

the disruption for plans and 

participants. In November 2021, the 

earliest date of filing for these plans was 

changed from January 1, 2022, to 

December 27, 2021, enabling these plans 

to prepare and file their applications 

earlier. PBGC will continue to monitor 

the flow of applications to consider 

earlier filing dates as processing 

capacity permits. PBGC will inform 

prospective applicants of any earlier 

dates through updates on its website at 

www.pbgc.gov. 

Taking into account the previously 

described change, the following table 

describes each priority group and the 

date that it is currently scheduled to 

open: 

Priority group Description of priority group—date plans may apply for SFA Description of priority group—date plans may apply for SFA 

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

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

application for SFA is filed.

Beginning on December 27, 2021. 

......................... Plans that implemented a benefit suspension under ERISA 

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

Beginning on January 1, 2022. 

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

participants.

Beginning on April 1, 2022. 

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

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

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

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

assistance under section 4261 of ERISA to be in excess of 

$1 billion (in the absence of SFA).

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

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

Other commenters suggested 

expanding the priority categories to 

include other similar plans or to expand 

the number of priority groups by 

identifying plans for a priority group 7. 

The final rule does not change the 

composition of priority groups as 

commenters suggested, such as by 

including in priority group 2 plans that 

had or still have a benefit suspension 

application under section 305(e)(9) of 

ERISA pending before the Treasury 

Department (and so had not 

implemented a benefit suspension as of 

March 11, 2021) or plans that had 

applied for a benefit suspension but had 

their application withdrawn or denied. 


jspears on DSK121TN23PROD with RULES3
40986 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

A plan in any of the four priority 

categories identified in section 4262(d) 

of ERISA will have a fair opportunity to 

file an application under § 4262.10(d)(2) 

of the regulation during the 2-year 

priority period ending on March 11, 

2023. As noted in the interim final rule, 

PBGC’s 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—and no 

later than March 11, 2023—the 

submission process will be opened to all 

eligible plans (whether or not in a 

statutory priority category) to ensure 

that every prospective applicant has a 

fair opportunity to file its application 

during the statutory period. 

Other commenters wanted more 

certainty about which plans fall into the 

final priority group 6 under the interim 

final rule, or groups 6 and 7, and when 

the plans could begin applying. 

Commenters recommended that PBGC 

identify and post as quickly as possible 

the names of the plans it determines to 

be in priority group 6 to provide 

certainty to plans expecting to apply in 

priority group 6. Under 

§ 4262.10(d)(2)(vi), 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 billion if SFA 

is not ordered. PBGC will list the plans 

in priority group 6 on its website at 

www.pbgc.gov well in advance of the 

first date filings may be accepted, but 

not later than the earlier of November 

15, 2022, or 30 days before opening the 

filing period for priority group 6. The 

date a plan in priority group 6 may file 

an application will be posted at least 21 

days in advance of such filing date, 

which will be no later than February 11, 

2023. 

A commenter also recommended 

including plans with unfunded vested 

benefits (UVBs) over $1 billion in a 

priority group 7, with UVBs determined 

using current liability assumptions 

reported in the plan’s last Form 5500 

Schedule MB filed before 2021. The 

commenter suggested defining this 

group so that a plan with the 

expectation of being in priority group 6, 

but not named to priority group 6, could 

know that it could apply shortly 

thereafter and not have to significantly 

revise its application. 

Commenters also reasoned that 

providing SFA to these large plans 

earlier (by allowing them to apply 

earlier) means the plans will have 

expended less of their assets to meet 

obligations, and therefore need less 

SFA, which in turn may result in less 

cost to the SFA program overall. 

Another commenter argued that plans 

that do not meet the $1 billion threshold 

are likely plans that cover workers in 

lower wage industries, and that these 

workers also are entitled to know when 

their plans may apply for SFA. 

PBGC considered commenter requests 

to define a new priority group 7. Section 

4262.10(d)(2)(vii) of the interim final 

rule provides that PBGC may add 

additional priority groups based on 

other circumstances similar to those 

described for priority groups 1 through 

6. While PBGC has not made changes to 

§ 4262.10(d)(2) to add additional 

priority groups, PBGC will continue 

monitoring its application processing to 

determine whether additional priority 

groups should be added. Any additional 

priority groups added and the date 

PBGC will begin accepting applications 

for such groups will be posted in 

guidance on PBGC’s website at 

www.pbgc.gov. 

The final rule makes some clarifying 

changes in § 4262.10(d), including to 

clarify that an application filed by a 

plan to which benefit liabilities were 

transferred (by merger or otherwise) 

from a plan that filed an initial 

application for SFA will be treated as a 

revised application and not an initial 

application. 

Lock-in Application 

Section 4262.10(d)(1) of the interim 

final rule provides that SFA 

applications are processed based on 

capacity to allow for sufficient review 

and processing by PBGC within the 

short period of time required by the 

statute. Once the number of applications 

reaches that level, the filing window 

will temporarily close until PBGC has 

capacity to process more applications. 

An application will be considered filed 

on the date it is submitted electronically 

to PBGC if the application meets 

applicable filing requirements, 

including authorized signatures, 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 maintains 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. 

One commenter remarked that an 

effect of the ‘‘metering system’’ is that 

a plan preparing its initial application 

for submission on a particular date, with 

the plan’s SFA measurement date and 

other base data aligned with that date, 

may nonetheless be prevented from 

filing on that date because the filing 

window has closed temporarily. If a 

temporary closure extends into the next 

calendar quarter, a plan’s application 

may have to be significantly revised to 

include a new SFA measurement date 

and possibly new census data. The 

commenter suggested that PBGC could 

allow plans that were ready to file an 

application, but that were unable to do 

so because the filing window closed 

temporarily, to submit a ‘‘notice of 

intent to file’’ that would lock in the 

plan’s SFA measurement date and other 

base data. The suggested notice would 

allow the plan to apply on a different 

date when the filing window re-opened 

but with the same application. 

PBGC considered the comment and, 

to address the problem described by the 

commenter, has created in § 4262.10(g) 

of the final rule a simple process for 

‘‘locking in’’ a plan’s SFA measurement 

date and other base data, which is 

available for all plans that file after 

March 11, 2023, and on or before 

December 31, 2025. The process also is 

available for plans in priority groups 5, 

6, and any additional priority group 

PBGC may add before March 11, 2023, 

if PBGC temporarily closes the filing 

window when it is otherwise accepting 

applications for plans in those priority 

groups. A lock-in application is a pro 

forma initial application submitted via 

email and containing the plan’s 

identifying information, priority group 

information (if applicable), a statement 

of intent to lock in the plan’s base data, 

a certification signed by an authorized 

trustee, and other information as 

described in the lock-in application 

instructions on PBGC’s website at 

www.pbgc.gov. If the lock-in application 

satisfies the requirements for a lock-in 

application, it will be considered filed 

and immediately denied for 

incompleteness. 

PBGC may learn, during its review of 

a plan’s revised application, that the 

plan is not eligible for SFA. In that 

situation, the lock-in application will 

not establish the plan’s base data. If the 

plan subsequently becomes eligible for 

SFA, the plan may file a revised 

application to demonstrate that the plan 

is eligible for SFA and establish the 

plan’s base data. 

Emergency Filings 

Section 4262.10(f) of the interim final 

rule provides for an emergency filing 

process for 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 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40987 

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 is accepting emergency filings 

from these plans during periods when 

PBGC would not otherwise accept such 

applications because the filing window 

is closed. 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. 

One commenter suggested that 

another option for advancing the date 

that a plan in priority group 2 may 

apply would be to allow emergency 

filings beginning with PBGC’s 

acceptance of applications from plans in 

priority group 1. PBGC has not made a 

change to the emergency filing process, 

but as discussed earlier, has advanced to 

December 27, 2021, the earliest filing 

date for a plan projected to be insolvent 

within 1 year of the date the plan’s 

application is filed. Accordingly, 

insolvent plans and any plan projected 

to be insolvent within 1 year of the date 

the plan’s application is filed are also 

eligible to submit emergency 

applications beginning December 27, 

2021. PBGC will continue to monitor 

application processing and will 

continue to update its website to 

advance filing dates as capacity permits. 

PBGC Action on Applications 

Section 4262(g) of ERISA provides 

that PBGC can either approve or deny 

an application for SFA and establishes 

a 120-day review period during which 

PBGC must act or an application is 

deemed approved. PBGC is given 

authority to manage the application 

review process by issuing regulations or 

guidance under section 4262(c) of 

ERISA setting forth requirements for 

SFA applications. Pursuant to that 

authority, § 4262.11 provides 

requirements for plan applications that 

are denied by PBGC or withdrawn by a 

plan. 

As described under § 4262.11, PBGC 

must act on an application within 120 

days after the date an initial, revised, or 

supplemented application is properly 

and timely filed. If PBGC approves an 

application, it will notify the plan 

sponsor of the payment of SFA in 

accordance with § 4262.12. 

If PBGC denies an application, it will 

notify the plan sponsor in writing of the 

reasons for the denial. An application 

may be denied because it is incomplete 

(it does not accurately include the 

information required to be filed); 

because an assumption is unreasonable, 

a proposed change in assumption is 

individually unreasonable, or the 

proposed changed assumptions are 

unreasonable in the aggregate; or 

because the plan is not an eligible 

multiemployer plan. For example, 

pending approval of an application, if 

PBGC determines that documentation 

supporting a certification of critical and 

declining status is missing, or if the plan 

sponsor has not responded to a PBGC 

request for information to clarify an 

item in that documentation, PBGC’s 

notice will identify the missing 

information or documentation required 

to complete the application. If PBGC 

denies an application, the plan sponsor 

may submit a revised application. If the 

plan sponsor submits a revised 

application following a denial, the 

revised application must address the 

reasons for denial stated in PBGC’s 

notification. 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. However, 

the plan sponsor may address other 

matters provided that the revised 

application addresses the reasons for the 

denial. 

The plan sponsor may withdraw an 

application (in writing and in 

accordance with the SFA instructions 

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

any time before PBGC denies or 

approves the application. If an 

application is withdrawn or denied, the 

plan sponsor may refile the application 

as a revised application. As explained 

earlier in the preamble, under section 

4262(f) of ERISA, and until the plan’s 

application is approved, there is no 

limit to the number of times that a plan 

sponsor may file a revised application 

(after the application is withdrawn or 

denied) as long as the last revised 

application is filed by the statutory 

deadline of December 31, 2026. 

For any revised application, PBGC 

requires that the base data remain the 

same as required to be used in the plan’s 

initial application to guard against 

multiple filings for purposes of 

changing this data. In the final rule, 

PBGC clarifies that the base data defined 

in § 4262.11(c) for an eligible plan 

includes the plan’s SFA measurement 

date, participant census data, non-SFA 

interest rate assumption, and SFA 

interest rate assumption. Once PBGC 

has accepted an initial application for 

processing, it is in the best interest of all 

parties to avoid the duplicative work 

and delays associated with changes to 

the base data. Accordingly, if the 

application is denied or the plan 

sponsor withdraws an application, and 

the plan sponsor submits a revised 

application, it must use the base data 

required to be used in its initial 

application, but it may make other 

changes. However, in the final rule, 

PBGC clarifies that if the plan was not 

eligible for SFA on the date the plan 

filed its initial application, the plan’s 

base data will not be fixed. Instead, if 

the plan is able to demonstrate 

eligibility for SFA at a later date in a 

revised application, the revised 

application will establish the plan’s 

base data. 

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. 

701–706). 

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. However, because 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 as of 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 recomputing the amount of 

SFA would be significant. Instead, 

§ 4262.12 provides that PBGC will pay 

a plan the amount demonstrated under 

the plan’s application, determined as of 

the SFA measurement date, plus interest 

on that amount for the time between the 

SFA measurement date and the date 

PBGC sends payment (not the bank 

settlement date). 

The final rule clarifies the interest rate 

applied on the amount of SFA 

demonstrated under the plan’s 

application from the time between the 

SFA measurement date and the date 

PBGC sends payment. For initial or 

revised applications filed on or after the 

effective date of the final rule, the 

interest rate applied is the SFA rate 

under § 4262.4(e)(2). For applications 

filed under the interim final rule where 

the plan has not filed an initial or 

revised application on or after the 

effective date of the final rule and there 

has not been any previous payment of 

SFA, and where the plan’s application 

is not supplemented, the interest rate 

applied is the non-SFA rate under 

§ 4262.4(e)(1). 

For a supplemented application, 

where the plan received a previous 


jspears on DSK121TN23PROD with RULES3
40988 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

26For example, if a plan’s SFA payment exceeds 

the statutory limitation for a Federal wire of $10 

billion, the plan will receive multiple federal wire 

payments that will equal the approved lump sum 

amount. 

payment of SFA, the interest rate 

applied is the SFA rate required under 

§ 4262.4(e)(2) from the SFA 

measurement date to the payment date 

of the additional SFA. Interest is 

applied on the excess of the amount of 

SFA determined under § 4262.4 of the 

final rule as of the SFA measurement 

date (demonstrated on the plan’s 

supplemented application) over the SFA 

amount determined under § 4262.4 of 

the interim final rule as of the SFA 

measurement date. 

Section 4262.12(g) otherwise remains 

unchanged in substance from the 

interim final rule by providing that 

PBGC will pay SFA to a plan in a lump 

sum or substantially so 26 as soon as 

practicable upon approval of the plan’s 

SFA application. As stated in the 

interim final rule, PBGC expects 

payment to be made usually within 60 

days, and no later than 90 days after the 

plan’s SFA application is approved or 

deemed approved (and in any event not 

later than September 30, 2030). Payment 

will be made in accordance with 

payment instructions provided by the 

plan in its application. Payment will be 

considered made when, in accordance 

with the plan’s payment instructions, 

PBGC no longer has ownership of the 

amount being paid. Any adjustment for 

delay will be borne by PBGC only to the 

extent that it arises while PBGC has 

ownership of the funds. 

For a plan with an obligation to repay 

financial assistance under section 4261 

of ERISA, the process for that repayment 

is described in § 4262.12(e). 

Unlike assistance under section 4261, 

section 4262(a)(2) of ERISA provides 

that payment of SFA is not a loan 

subject to repayment. However, under 

§ 4262.12(g)(1), SFA is subject to 

recalculation or adjustment to correct 

any 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(g)(2) provides 

the rules for payment of a debt owed to 

the Federal Government. 

Restrictions on Special Financial 

Assistance 

Section 4262(l) of ERISA places 

restrictions on the use of SFA. These 

restrictions are described in § 4262.13 of 

the regulation. SFA received, and any 

earnings thereon, must be segregated 

from other plan assets and may only be 

used to make benefit payments and pay 

plan expenses (but SFA may be used 

before other plan assets are used for 

these purposes). In addition, SFA (and 

earnings) must be invested by plans in 

investment grade bonds or other 

investments as permitted by PBGC in 

§ 4262.14. These limitations on the use 

of SFA reflect the purpose of SFA. As 

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

ERISA and in § 4262.4, SFA is the 

amount required for the plan to pay all 

benefits due during the SFA coverage 

period taking into account all plan 

resources and obligations. SFA should 

not be used in a manner that would 

divert SFA funds to other purposes—for 

instance, reducing sources of plan 

income, such as employer contributions 

or withdrawal liability, or increasing 

plan obligations, such as to pay for 

additional future increases in benefits 

(that are not exempted under § 4262.16). 

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 (‘‘SFA funds’’ or ‘‘amounts 

attributable to special financial 

assistance’’) 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 statutory constraints and the 

likelihood that SFA funds will be paid 

out before non-SFA funds, PBGC 

believes that SFA funds should be 

invested conservatively, in broad, liquid 

markets. 

While the allowance under section 

4262(l) for ‘‘other investments permitted 

by the corporation’’ could provide some 

flexibility (and limited exposure to 

other assets), in the interim final rule 

PBGC did not allow for investments 

with fundamentally different 

characteristics than investment grade 

bonds. Section 4262.14 of the interim 

final rule permitted SFA funds to be 

invested only in fixed income securities 

that are publicly traded, denominated in 

U.S. dollars, and that must be 

considered investment grade except for 

a 5 percent allowance for a plan to hold 

investments that were considered 

investment grade at the time of purchase 

but are no longer of that credit quality. 

Recognizing that the interim final rule 

took a conservative approach for 

permissible investments, PBGC 

specifically requested comment from 

the public on how to arrive at an 

appropriate balance between 

predictability of returns and safety of 

investments on the one hand, and the 

flexibility to pursue greater asset returns 

and the opportunity to extend plan 

solvency on the other. 

PBGC received many comments on 

§ 4262.14 of the interim final rule and 

in response to its specific request for 

comment on the issue of appropriate 

risk level. Commenters generally 

favored allowing plans to have more 

flexibility in their options for investing 

SFA funds. They stated that increased 

flexibility in investment decisions 

would not necessarily create an 

excessive level of risk to plans and 

would enable plans to remain solvent 

longer. 

Other commenters expressed the view 

that the investment restrictions in the 

interim final rule do not allow plans to 

invest SFA funds in a diversified 

portfolio. They stated that not allowing 

for diversification will increase overall 

risk to the plans. Commenters also 

stated that other investments, some lowrisk, likely would yield higher returns 

and allow plans to remain solvent 

longer. These commenters suggested 

various types of fixed income that have 

higher yields. 

As to which investments PBGC 

should permit, many commenters 

suggested that PBGC allow plans to 

invest SFA funds in a manner that 

targets a specific rate of return. Some 

commenters recommended permitting 

plans to target a rate of return close to 

an interest rate used to calculate the 

amount of SFA—e.g., the interest rate 

limit under section 4262(e)(3) of ERISA 

or approximately 5.3 percent based on 

pension funding segment rates in 

December 2021. 

Other commenters recommended that 

PBGC allow specific investment 

vehicles and approaches. Suggestions 

included the allowance for various 

types of fixed income investments, real 

estate and infrastructure, and risk 

transfer buy-in contracts offered by life 

insurers. 

Some commenters suggested that 

PBGC set restrictions for plans 

individually. They said that PBGC 

should consider the unique 

circumstances of each plan and vary the 

permissible investment options based 

on the assumptions applicable to the 

plan. 

Some commenters recommended that 

PBGC allow a percentage of SFA funds 

in investments other than fixed income. 

Suggestions ranged from 10 percent to 

50 percent. Other commenters 

recommended having no delineations 

between SFA and non-SFA assets, 

meaning that SFA funds could be 

invested without restriction and would 

not need to be segregated from non-SFA 

funds. One commenter suggested that 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40989 

27The term ‘‘foreign issuer’’ is as defined in 17 

CFR 240.3b–4(b) (Rule 3b–4(b) under the Securities 

Exchange Act of 1934), i.e., any issuer which is a 

foreign government, a national of any foreign 

country or a corporation or other organization 

incorporated or organized under the laws of any 

foreign country. 

removing all restrictions would 

eliminate the incentive to assume added 

risk in investing non-SFA funds. 

Another commenter said the restrictions 

are cumbersome and that, to develop an 

appropriate investment strategy for a 

plan, a fiduciary must consider all of the 

plan’s assets. 

Finally, two commenters agreed with 

the investment restrictions on SFA 

funds in the interim final rule. They 

stated that allowing additional 

investment options would lead to an 

excessive level of risk-taking for 

taxpayer funds. 

PBGC stated in the interim final rule 

that it was reluctant to allow for 

investment vehicles with fundamentally 

different characteristics than investment 

grade bonds without public input. 

Although public comments reflected 

both sides of this issue, the comments 

largely suggested that the final rule 

should permit greater flexibility in 

investments with the objective of 

extending potential solvency. After 

considering the comments, and to 

support projected plan solvency through 

the plan year ending in 2051 as 

provided in section 4262(j)(1) of ERISA, 

PBGC is making changes to § 4262.14 to 

allow for a wider range of investments 

for SFA assets. 

As provided in § 4262.14(i), the 

changes to permissible investments in 

this final rule are applicable to a plan 

that applies or has applied for SFA. 

However, for a plan that received SFA 

under the terms of the interim final rule, 

the changes to permissible investments 

under this final rule will not apply 

unless and until the plan files a 

supplemented application. Until that 

date, the provisions of § 4262.14 under 

the interim final rule apply to the plan. 

The changes in the final rule permit 

plans to invest a specified percentage— 

up to 33 percent—of their SFA funds in 

return-seeking assets (RSA) as described 

in § 4262.14(c) of the final rule. That 

leaves 67 percent or more of SFA funds 

to be invested in investment grade fixed 

income securities (IGFI). PBGC believes 

this ratio (67 percent IGFI to 33 percent 

RSA) appropriately considers the need 

to protect SFA assets to pay projected 

benefits of the participants and 

expenses of the plan. The 33 percent 

that may be invested in RSA as defined 

in the final rule will enable plans to 

grow SFA funds and increase the 

potential to pay benefits through 2051 

while limiting the total risk exposure of 

taxpayer-funded assistance. 

The final rule provides that the 

permissible allocation in RSA of SFA 

funds is no more than 33 percent 

measured each time RSA are purchased 

(other than through the reinvestment of 

fund distributions) and at least once in 

any rolling period of 12 consecutive 

months. A purchase of RSA includes a 

fair market value exchange of 

investments between a plan’s SFA and 

non-SFA segregated accounts. Portfolio 

allocations also naturally get out of 

balance due to cash flow and as prices 

of investments fluctuate over time, so 

the percentage of SFA funds in RSA 

could at times be greater than 33 

percent. The rule provides clear 

guidance to plans on when the 

percentage allocation in RSA is 

determined, and that it does not mean, 

for example, no greater than 33 percent 

in RSA on each and every day. 

Requiring the 33 percent cap on RSA to 

be met at purchase and at least one day 

during any rolling 12-month period 

reflects acceptable deviation from the 

basic restriction. While there may be 

some drift during a year above the 33 

percent, it would be very limited, and 

the burden of frequent rebalancing or 

inopportune forced sales of assets is 

minimized. A plan will be required to 

attest in the plan’s annual statement of 

compliance (under § 4262.16(i)) that the 

plan has met the allocation restriction 

on RSA at purchase and at least once in 

every rolling period of 12 consecutive 

months beginning from the date the 

plan receives SFA. 

The final rule describes permissible 

RSA to include equity securities limited 

to common stock that is denominated in 

U.S. dollars and publicly traded 

(registered with the U.S. Securities and 

Exchange Commission (SEC) under the 

Securities Exchange Act of 1934); as 

well as in ‘‘permissible fund vehicles’’ 

described in § 4262.14(g), which include 

mutual funds and exchange-traded 

funds (ETFs) registered with the SEC 

under the Investment Company Act of 

1940 (including ETFs organized as unit 

investment trusts), and collective trusts 

that operate under a statutory 

exemption from registration. 

Permissible fund vehicles abide by an 

investment policy that limits investment 

predominantly to publicly traded equity 

securities (and short-term U.S. Treasury 

securities, cash or cash equivalents, and 

investments in money market funds). 

The permissible RSA funds are intended 

to include equity funds that track broadbased U.S. indexes, such as the 

Standard & Poor’s 500 Index (S&P 500). 

Permissible RSA also includes certain 

debt instruments (e.g., bonds) that are 

excluded from the definition of fixed 

income securities under the final rule. 

These include debt instruments that pay 

a fixed amount or fixed rate of interest, 

are denominated in U.S. dollars, are 

investment grade, and have been resold 

in an offering pursuant to 17 CFR 

230.144A (SEC Rule 144A under the 

Securities Act of 1933). However, the 

final rule explicitly excludes such debt 

securities issued by a foreign issuer.27

Permissible RSA also include high-yield 

(‘‘junk’’) corporate bonds that were 

considered investment grade at the time 

of purchase by the SFA segregated 

account for the IGFI portfolio but are no 

longer of that credit quality. This list of 

permissible RSA facilitates some 

diversification and eliminates the 

potential for investment in aggressive or 

exotic investments that would clearly be 

at odds with section 4262(l) of ERISA. 

PBGC considered suggestions for 

expanding permissible investments that 

are RSA to include real estate and 

infrastructure. Inclusion of these assets 

would allow for more diversified 

portfolios of return-seeking SFA funds 

with significant return potential, but 

most plans will achieve this 

diversification through their non-SFA 

assets. Also, the complexity of these 

investment categories and the lack of 

recognized passive index funds that 

invest directly in real estate and 

infrastructure make these assets less 

suitable as permissible investments. 

Real estate investment trusts (REITs) 

that issue publicly traded equity are 

included within the RSA that are 

allowed as permissible investments and 

exposure to infrastructure is also 

available through permissible equity 

investments. 

PBGC also considered commenters’ 

suggestions for expanding the types of 

fixed income allowable as permissible 

IGFI to include various fixed income 

securities that have higher yields. In 

general, investments that do not share 

the low risk and relatively high liquidity 

characteristics of IGFI are not 

considered appropriate to meet the 67 

percent floor for that type of investment. 

Bonds that were rated investment grade 

at the time of purchase must be 

considered RSA if they no longer meet 

the criteria for being considered 

investment grade. As noted earlier, the 

final rule also allows for bonds resold in 

an offering pursuant to Rule 144A under 

the Securities Act of 1933 to be 

considered permissible RSA as long as 

they meet the investment grade 

criterion. 

PBGC views investments such as 

leveraged loans, collateralized loan 

obligations, convertible bonds, preferred 

stock, and private credit as not 


jspears on DSK121TN23PROD with RULES3
40990 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

28Section 4262(k) of ERISA includes rules that 

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

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

Treasury has interpretive jurisdiction over the rules 

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

plan receiving SFA, for purposes of ERISA as well 

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

of Labor, in coordination with the Secretary of the 

Treasury, must ensure benefits are reinstated and 

previously suspended benefits are paid. 

appropriate to include as IGFI because 

they tend to trade in relatively small, 

illiquid markets that generally require 

active management. Collateralized loan 

obligations, collateralized mortgage 

obligations and other collateralized debt 

obligations are complex instruments 

and are only permitted as RSA to the 

extent they pay a fixed rate of interest. 

Convertible bonds may have significant 

liquidity risk. 

The final rule clarifies that 

permissible IGFI securities considered 

to meet the 67 percent floor must be a 

bond or other debt instrument that pays 

a fixed amount or fixed rate of interest, 

denominated in U.S. dollars, sold in an 

offering registered under the Securities 

Act of 1933, and investment grade, and 

includes such securities held in 

permissible fund vehicles (defined in 

§ 4262.14(g)). These IGFI funds must 

abide by an investment policy that 

limits investment primarily to securities 

that are denominated in U.S. dollars and 

are investment grade. Permissible IGFI 

includes securities issued or guaranteed 

by the U.S. government or its designated 

agencies, such as U.S. Savings Bonds, 

Treasury Bonds, Treasury Bills, and 

GNMA (‘‘Ginnie Mae’’), and 

government-sponsored enterprise (GSE)- 

issued debt securities (e.g., by ‘‘Fannie 

Mae,’’ ‘‘Freddie Mac,’’ etc.), that are 

reported on line 1c(2) of the Form 5500 

Schedule H. It also includes municipal 

bonds defined under the Securities Act 

of 1933 that are investment grade. 

Dollar-denominated emerging market 

bonds that are rated as investment grade 

are viewed as meeting the definition of 

IGFI. 

The final rule clarifies that cash and 

cash equivalents required to be reported 

on the Form 5500 Schedule H are 

permissible investments within the 67 

percent floor. These are noninterestbearing cash on line 1a of Form 5500 

Schedule H (total noninterest-bearing 

cash which includes, among other 

things, cash on hand or cash in a 

noninterest-bearing checking account), 

and interest-bearing cash equivalents on 

line 1c(1) of Form 5500 Schedule H (all 

assets that earn interest in a financial 

institution account such as interestbearing checking accounts, passbook 

savings accounts, or in money market 

accounts). Also permissible are 

investments in money market funds 

regulated pursuant to rule 2a-7 under 

the Investment Company Act of 1940. 

PBGC determined not to include as 

permissible investments insurance 

contracts, such as risk transfer buy-in 

contracts described by a commenter. 

There may be an inherent inequity with 

this type of investment unless it covers 

all the benefits for all participants, as 

suggested by another commenter. 

The substance of the definition of 

investment grade with respect to fixed 

income securities in the interim final 

rule is unchanged in the final rule 

except for removing the words ‘‘publicly 

traded’’ which is evident in the final 

rule requirement that fixed income 

securities are sold in an offering 

registered under the Securities Act of 

1933. As described in the interim final 

rule preamble, investment grade means 

securities for which the issuer (or 

obligor) 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 

issuer (or 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 

refer to investment grade securities in 

compliance with Section 939A of the 

Dodd Frank Act of 2010. Further, the 

securities must be considered 

investment grade by a fiduciary who is, 

or seeks the advice of, an experienced 

investor. 

Like the interim final rule, the final 

rule acknowledges that securities (IGFI 

or RSA) held in permissible fund 

vehicles (ETFs, mutual funds, or 

collective trusts), 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 final 

rule permits investment in vehicles 

allowing for such strategies so long as 

any derivative or leveraging strategy 

does not increase the risk of the 

investments beyond the risk in a similar 

portfolio of physical securities (i.e., nonderivative securities) with the same 

market value. Further, any notional 

derivative exposure on permissible 

investments that are held in separate 

accounts (i.e., not through permissible 

fund vehicles), 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 funds. This provision 

remains substantively unchanged from 

the interim final rule and applies to 

investments in permissible IGFI and 

RSA. 

Lastly, the final rule clarifies that the 

requirement in section 4262(l) of ERISA 

and § 4262.13 that SFA funds ‘‘shall be 

segregated from other plan assets’’ 

means that SFA funds must be held in 

an account separate from the remaining 

assets of the plan and invested 

consistent with the requirements in 

§ 4262.14. PBGC expects that if there is 

any investment policy or investment 

management agreement governing such 

account, that it would be consistent 

with such investment requirements. 

Custody and accounting of SFA funds 

should be clearly separated to properly 

track and account for SFA funds. 

Reinstatement of Benefits Previously 

Suspended 

Section 4262(k) of ERISA imposes two 

conditions on a plan that receives SFA 

and had previously suspended benefits 

in accordance with section 305(e)(9) or 

4245(a) of ERISA.28 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, § 4262.15 of the interim final 

rule 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 previously suspended benefits to 

participants or beneficiaries in pay 

status as of the date that SFA is paid, 

in accordance with guidance issued by 

the Secretary of the Treasury. Section 

4262(k) and § 4262.15 give the plan 

sponsor flexibility to design payment of 

make-up amounts as a single lump sum, 

with no interest, 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. PBGC 

notes that IRS has advised that a late 

make-up payment should be adjusted to 

account for the delay, and that the 

correction method described in section 

6.02(4)(d) of Revenue Procedure 2021– 

30, 2021–31 IRB 172 (which sets forth 

the current version of the IRS Employee 

Plans Compliance Resolution System 

(EPCRS)), with respect to correction of 

a late distribution from a defined benefit 

plan is a reasonable method for 

computing the adjustment. 

Several commenters expressed views 

on the payment of make-up amounts to 

participants and beneficiaries in pay 

status. Some of those commenters 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40991 

preferred that make-up payments be 

made in a lump sum, while others 

expressed concerns about the tax 

implications of lump sums and 

suggested that retirees and beneficiaries 

should be able to choose the form for 

their make-up payments. In addition, 

some commenters expressed concern 

that, if a participant who had received 

reduced benefits because of a 

suspension dies before the SFA is paid 

to the plan, then the participant’s estate 

or beneficiary would not receive makeup payments for the benefits the 

participant lost because of suspension. 

PBGC consulted with the IRS, which 

pursuant to section 432(k) of the Code 

and section 4262(k) of ERISA provided 

guidance in Notice 2021–38 on the 

make-up payments for benefits 

previously suspended and the tax 

treatment of those payments. With 

respect to the form of payment, the IRS 

advised PBGC that while section 

432(k)(2)(A)(ii) of the Code (which 

governs the repayment obligation) 

expressly provides for the plan to 

determine whether make-up payments 

are paid as a lump sum or in equal 

monthly installment payments over 5 

years, there is no requirement that the 

same form of payment must be used for 

all recipients. With respect to the 

payment of make-up payments to 

deceased participants, the IRS advised 

PBGC that section 432(k)(2)(A)(ii) of the 

Code requires that make-up payments 

be made to participants and 

beneficiaries who are in ‘‘pay status’’ on 

the effective date of the SFA. Because a 

participant who died before the SFA is 

paid is not in pay status as of the 

effective date of the SFA, no make-up 

payments are made for reductions that 

applied to that participant and, 

accordingly, make-up payments are 

limited to the total amount of benefits 

that would have been paid to the 

beneficiary in the absence of the 

suspension but that were not paid to the 

beneficiary because of the suspension. 

However, if a participant dies after the 

SFA is paid to the plan but before all of 

the make-up payments are paid to the 

participant, the unpaid portion of the 

make-up payments must be made to the 

participant’s beneficiary. 

Section 4262.15(c) of the interim final 

rule requires the plan sponsor of a plan 

with benefits that were suspended 

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

ERISA 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 the notice of 

reinstatement instructions, in an 

addendum to the SFA instructions, 

available on PBGC’s website at 

www.pbgc.gov. PBGC received no 

comment on the requirement to provide 

notice and did not make changes to 

§ 4262.15(c) in the final rule. 

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 records, 

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 is 

considering issuing guidance to address 

the records and information that plans 

that receive SFA will need to maintain 

and retain to comply with title I of 

ERISA. 

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, PBGC used its authority 

under section 4262(m)(1) of ERISA, after 

consulting with the Secretary of the 

Treasury, to impose reasonable 

conditions on an eligible multiemployer 

plan that receives SFA. These 

conditions are described in § 4262.16 of 

the regulation and relate to increases in 

future accrual rates and 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. 

Under certain circumstances, a plan 

sponsor may request approval from 

PBGC for an exception from the 

conditions relating to reductions in 

employer contribution rates, transfers or 

mergers, and settlement of withdrawal 

liability. PBGC solicited public 

comment on whether there are other 

circumstances relating to the conditions 

described under § 4262.16 where PBGC 

should consider providing approval for 

exceptions. Commenters suggested 

adding exceptions to conditions on 

retrospective benefit increases and 

mergers, which are discussed under the 

sections on Benefit Increases and 

Transfers or Mergers. 

(a) Benefit Increases 

Section 4262(m) provides authority to 

impose conditions relating to increases 

in future accrual rates (prospective 

benefit increases) and any retroactive 

benefit improvements (retrospective 

benefit increases). Section 4262.16(b) of 

the regulation imposes reasonable 

conditions on a plan that receives SFA 

with respect to the types 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 to participants beyond 

the payment of benefits at the level they 

had been 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 section 305(e)(9) or 4245(a) of 

ERISA or any restoration of benefits 

under 26 CFR 1.432(e)(9)–1(e)(3). 

The condition in § 4262.16(b)(1) 

restricts retrospective benefit increases 

(also referred to in this preamble as 

retroactive benefit increases or 

retroactive benefit improvements) by 

providing that a benefit or benefit 

increase must not be adopted during the 

SFA coverage period (defined in 

§ 4262.2) if it is in whole or in part 

attributable to service accrued or other 

events occurring before the adoption 

date of the amendment. PBGC said in 

the interim final rule that this condition 

is needed because retroactive increases 

in benefits harm the funded position of 

the plan without improving expected 

future plan income. 

Commenters recommended that PBGC 

provide some flexibility for retroactive 

benefit increases if they are paid for by 

additional contributions without 

endangering the plan’s ability to pay all 

benefits. Some commenters said that 

PBGC was wrong in its assertion that 

retroactive increases in benefits harm 

the funded position of the plan, and that 

the prohibition is likely to be 

counterproductive and reduce the 

likelihood of plans achieving their longterm contribution assumptions. The 

prospect of benefit restorations, they 

stated, could provide an incentive for 

active participants to remain in their 

plans and to seek increased contribution 

rates. The commenters made various 

suggestions, including permitting 

retroactive increases if the financial 

condition of the plan improves, 

permitting de minimis increases, 


jspears on DSK121TN23PROD with RULES3
40992 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

allowing an alternative pension 

arrangement for active workers, and 

providing a procedure under which a 

plan may apply for an exception from 

the condition restricting retrospective 

benefit increases. 

PBGC considered whether to permit 

retroactive benefit increases, similar to 

its condition on prospective benefit 

increases, but remains concerned that 

retroactive benefit increases are more 

expensive and riskier than prospective 

benefit increases. A plan amendment 

that increases benefits for prior service 

has the effect of immediately increasing 

the plan’s liability. Its cost is amortized 

over a future period of years and can 

significantly add to the employers’ 

financial obligation with respect to 

funding the plan. In this situation, if the 

plan experiences actuarial losses in the 

future, the plan’s funding costs could 

become unsustainable. In contrast, the 

cost of a prospective benefit increase, 

such as an increase in the benefit 

accrual rate, generally is paid for in the 

year the service is rendered and can be 

reduced or eliminated for future years if 

the plan’s funding costs become 

excessive. 

In consideration of the comments, 

however, PBGC is adding 

§ 4262.16(b)(3) to provide a process by 

which a plan may request a 

determination from PBGC for an 

exception from the condition relating to 

retrospective benefit increases if future 

plan circumstances permit the plan to 

provide benefit increases without 

endangering the plan’s ability to pay all 

benefits. This determination process 

will also apply to an exception from the 

condition relating to prospective benefit 

increases (discussed below). Under the 

new provision, beginning 10 years after 

the end of the plan year in which a plan 

receives payment of SFA, the plan may 

apply for an exception by demonstrating 

to the satisfaction of PBGC that, taking 

into account the value of any proposed 

benefit increase, the plan will avoid 

insolvency. PBGC considers the 10-year 

period necessary for the plan to 

demonstrate that its actuarial 

assumptions for a favorable long-term 

outlook, such as steadily solid 

projections of year-by-year contribution 

income, are being realized. Moreover, 

the agency believes that limiting the use 

of SFA initially to the protection of 

accrued benefits is essential to sound 

fiscal stewardship. The final rule 

specifies the information that a plan is 

required to file with its application for 

an exception. 

The condition in § 4262.16(b)(2) of the 

regulation 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. 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 plans are able to 

afford them. 

One commenter requested 

clarification of the conditions on benefit 

improvements stating that the interim 

final rule implies that prospective 

increases are possible during the SFA 

coverage period while the plan is 

deemed to be in critical status. The 

commenter stated that section 

305(f)(1)(B) of ERISA includes a 

requirement that no benefit increase is 

permissible during a rehabilitation 

period unless the plan is on track to 

emerge from critical status by the end of 

the rehabilitation period, a date that 

may be decades earlier than the end of 

the SFA coverage period. The 

conditions on benefit increases 

provided under § 4262.16(b) 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. PBGC is unable to opine on the 

requirements of section 305(f)(1)(B) of 

ERISA as the funding rules are under 

the Treasury Department’s interpretive 

jurisdiction. 

(b) Allocation of Plan Assets 

Section 4262.16(c) of the regulation 

imposes a condition on a plan that 

receives SFA relating to the allocation of 

plan assets. This condition requires that, 

during the SFA coverage period, plan 

assets, including SFA, must be invested 

in permissible investments as described 

in § 4262.14 sufficient to pay for at least 

1 year (or until the date the plan is 

projected to become insolvent, if earlier) 

of projected benefit payments and 

administrative expenses. Under 

§ 4262.14 of the interim final rule, 

permissible investments were limited to 

fixed income. 

PBGC set the condition in § 4262.16(c) 

under the authority provided to it in 

sections 4262(l) and 4262(m) of ERISA, 

which PBGC interprets as intending 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. Nonetheless, PBGC 

wanted feedback from the public on 

whether this condition is seen as 

preventing plans from achieving 

reasonable investment objectives. 

Accordingly, in the interim final rule, 

PBGC requested responses, with 

supporting data, to the following 

questions: 

(1) 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? 

(2) 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? 

(3) Could an alternative condition, or 

modification of the condition under 

§ 4262.16(c), better achieve the objective 

of preventing excessive risk-taking by 

plans while allowing plans to meet their 

investment objectives? 

Several commenters offered answers 

to these questions and provided other 

comments about allocation of plan 

assets. Two commenters generally 

agreed with the condition stating that it 

would impact allocations only for a 

brief period of time and would not make 

a significant difference in the overall 

investment allocation. Another 

commenter recommended that PBGC 

base any restrictions on individual 

plans’ net cash flow positions taking 

contributions into account, rather than 

just benefit payments. PBGC considered 

this comment but determined that 

factoring in contributions would 

introduce more administrative 

complexity. Other commenters 

disagreed with the condition stating that 

it would cause plans to become 

insolvent earlier than they would 

otherwise. After considering the 

comments, PBGC decided to retain the 

condition in the final rule to prevent 

excessive risk taking. PBGC concluded 

that the condition is unlikely to have a 

significant impact on plans, except in 

years when they are approaching 

insolvency. 

Due to the expansion of permissible 

investments under § 4262.14 of the final 

rule, as described earlier in the 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40993 

preamble under the subheading 

Permissible Investments, PBGC has 

made conforming changes to 

§ 4262.16(c) to reflect that the condition 

is tied to fixed income. Accordingly, the 

final rule amends § 4262.16(c) to 

provide that during the SFA coverage 

period, plan assets, including SFA, must 

be invested in permissible investments 

that are fixed income as described in 

§ 4262.14(d) 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. Additionally, 

the investments used to meet this 

condition are also subject to the 

limitations on derivatives and leverage 

described in § 4262.14(h). 

(c) Contribution Decreases and 

Allocating Contributions 

Section 4262.16(d) 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. 

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). PBGC received 

one comment strongly supporting the 

condition on contribution decreases, 

stating that employers must continue to 

pay for promised benefits under the 

terms that they have agreed to in their 

collective bargaining agreements. 

Another commenter requested 

clarification of the exception to this 

condition and the threshold for PBGC 

approval. 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. PBGC clarifies in the final 

rule that the threshold for the 

requirement that PBGC (in addition to 

the plan sponsor) must determine that 

the changes lessen the risk of loss to 

participants and beneficiaries is where 

the proposed reduction affects over $10 

million of annual contributions and 

over 10 percent of all employer 

contributions. Except for this 

clarification in § 4262.16(d) and an 

addition in paragraph (d)(2)(ix) that 

PBGC may request additional 

information that it determines it needs 

to review a request for approval of a 

proposed contribution change, the final 

rule does not make any changes to this 

condition. 

Section 4262.16(e) of the regulation 

imposes reasonable conditions relating 

to allocation of contributions and 

expenses between a plan that received 

SFA and another employee benefit plan 

and other practices. The condition 

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. 

The Department of Labor brought to 

PBGC’s attention that there may be 

circumstances arising after March 11, 

2021, beyond the control of the plan 

sponsor and the bargaining parties (e.g., 

health benefit cost increases due to 

legislative changes) that would justify a 

good faith reallocation of income or 

expenses between employee benefit 

plans. To address this narrow 

circumstance, PBGC is adding an 

exception to § 4262.16(e). Under the 

new provision, beginning 5 years after 

the end of the plan year in which a plan 

receives payment of SFA, a plan may 

apply for an exception by demonstrating 

to the satisfaction of PBGC that, taking 

into account the value of any proposed 

reallocation, the plan that received SFA 

will avoid insolvency and that the 

reallocation is needed due to a 

significant increase in health benefit 

costs due to a change in Federal law. 

The reallocation would be required to 

be no more than a 10 percent reduction 

in the amount of the contribution rate 

negotiated on or before March 11, 2021, 

going to the pension plan and would be 

required to be temporary (no more than 

5 years for a reallocation request relating 

to any single change in Federal law and 

no more than 10 years cumulatively for 

all reallocation requests during the 

plan’s SFA coverage period). For 

example, if the negotiated contribution 

rate was $60 per CBU, with 50 percent 

($30) allocated to the pension plan and 

50 percent ($30) to the group health 

plan, the pension contribution rate 

could be reduced to $27 ($30 x 10 

percent = $3) during the 5-year period. 

This temporary reallocation would give 

the bargaining parties time to negotiate 

contributions for the health plan under 

a collective bargaining agreement. For 

example, consistent with the 

requirement in § 4262.16(e)(1)(iv), by 

the end of the 5-year period, the 

bargaining parties could negotiate, 

without the approval of PBGC, a new 

contribution rate of $100 per CBU with 

an allocation of 30 percent to the 

pension plan and 70 percent to the 

group health plan, which would 

reinstate the $30 contribution rate for 

the pension plan. The final rule 

specifies the information that a plan is 

required to file with its application for 

an exception. 

Except with respect to a merged plan, 

discussed in the section on Transfers or 

Mergers, PBGC did not receive any 

comments on this condition and did not 

make any other changes to this 

condition in the final rule. 

(d) Transfers or Mergers 

Section 4262.16(f) provides that 

during the SFA coverage period, a plan 

must not engage in a transfer of assets 

or liabilities (including a spinoff) or 

merger except with PBGC’s approval. 

Notwithstanding anything to the 

contrary in PBGC’s regulation on 

mergers and transfers between 

multiemployer plans (29 CFR part 

4231), the plans involved in the 

transaction must request approval from 

PBGC. A request for approval must 

contain information that would be 

required to be submitted under 

§ 4231.10 and the additional actuarial 

and financial information described in 

§ 4262.16(f)(2). PBGC will approve a 

proposed transfer or merger if: (1) the 

transaction complies with section 

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

merger, or the larger transaction of 

which the transfer or merger is a part, 

does not unreasonably increase PBGC’s 

risk of loss respecting any plan involved 

in the transaction, and (3) the transfer or 

merger is not reasonably expected to be 

adverse to the overall interests of the 

participants and beneficiaries of any of 

the plans involved in the transaction. 

An example of a larger transaction is 

where the trustees of a plan receiving 

SFA arrange a transfer of assets and 

liabilities from the plan and amend the 

plan to substantially or completely end 

benefit accruals in connection with the 

plan’s active participants beginning to 

accrue benefits under another existing 

or newly formed plan. PBGC is unlikely 

to approve a transfer of assets and 

liabilities (that is not a merger) from a 

plan that receives SFA to another plan. 

If a transfer of assets and liabilities (that 

is not a merger) is approved, the 

application of the restrictions and 

conditions to the transferee plan will be 

determined as a condition of the 

approval. Also, generally, PBGC will not 


jspears on DSK121TN23PROD with RULES3
40994 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

29Section 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. 

Unless, waived, the prohibition on a decrease in the 

proportion of income will continue to apply to the 

merged plan. 

30All line references in this section are to the 

2021 Form 5500 and schedules. 

approve a transfer from a singleemployer plan to a plan that receives 

SFA, nor a merger of a single-employer 

plan with a plan that receives SFA. 

Several commenters requested 

additional guidance on how the plan 

that received SFA before the merger (the 

‘‘SFA plan’’) should be administered 

after the merger and whether the 

restrictions and conditions that applied 

to the SFA plan also will apply to the 

merged plan. One commenter suggested 

that the final rule should include a 

mechanism for PBGC to waive 

restrictions and conditions on the 

merger of an SFA plan into another plan 

and that such waivers could be 

considered as part of PBGC’s review and 

approval of mergers. 

In response to the commenters, PBGC 

is amending § 4262.16(f) to provide, as 

part of the reasonable conditions 

relating to plan mergers, rules on the 

restrictions and conditions that apply to 

the merged plan, the conditions that do 

not apply to the merged plan, the 

conditions that may be waived if certain 

criteria are met, and rules for the 

calculation of withdrawal liability. For 

purposes of § 4262.16(f), a merged plan 

means a plan that is the result of the 

merger of two or more multiemployer 

plans. These rules on the applicable 

restrictions and conditions apply even 

if, under the terms of the merger, the 

plan that did not receive SFA is 

designated as the merged plan. 

Under section 4262(l) of ERISA and 

§ 4262.13(b), SFA received by a plan 

and any earnings thereon must be 

segregated from other plan assets, may 

be used by the plan only to make benefit 

payments and pay administrative 

expenses, and must be invested in 

investment grade bonds or other 

permissible investments under 

§ 4262.14. These statutory restrictions 

on the use of SFA and earnings continue 

to apply after the merger to the merged 

plan. Consistent with that requirement, 

the Treasury Department and the IRS 

have informed PBGC that the 

prohibition under section 432(k)(2)(D)(i) 

of the Code on taking SFA assets into 

account in determining minimum 

required contributions under section 

431 of the Code continues to apply after 

the merger to the merged plan. 

PBGC has determined that some of the 

regulatory conditions under § 4262.16 

will continue to apply, as conditions of 

the merger, to the merged plan. If the 

merged plan engages in a future transfer 

or merger, the plan would be required 

to obtain PBGC’s approval of the 

transaction under § 4262.16(f). The 

merged plan also would be subject to 

the condition on withdrawal liability 

requiring approval of certain settlements 

of withdrawal liability under 

§ 4262.16(h). In addition, the merged 

plan will be required to demonstrate 

continued compliance with the 

restrictions and conditions by filing an 

annual statement of compliance under 

§ 4262.16(i) through the last day of the 

last plan year ending in 2051 and will 

be subject to periodic compliance audits 

under § 4262.16(j). PBGC believes these 

are reasonable conditions for a plan that 

receives SFA that should continue to 

apply to the merged plan and will not 

create a significant impediment to plan 

mergers. 

PBGC agrees that some of the 

conditions under § 4262.16 either 

should not apply or should be waived 

for certain mergers so that the 

conditions do not unduly impede 

beneficial mergers. 

After considering comments received, 

PBGC is clarifying in § 4262.16(f) that 

the conditions relating to prospective 

benefit increases under § 4262.16(b)(2), 

allocation of plan assets under 

§ 4262.16(c), and allocating expenses 

under § 4262.16(e) 29 will not continue 

to apply after the merger to the merged 

plan. A few commenters suggested that 

a large plan could not operate efficiently 

if the condition with respect to 

prospective benefit increases applied 

and every merged plan was required to 

retain its own benefit design. Another 

commenter explained that there would 

be a reasonable expectation that two 

participants under the same plan 

working with the same or similar 

contribution rates would have the same 

or similar benefit accrual for service 

after the merger. With respect to 

allocating expenses, a commenter stated 

that an SFA plan that has merged is not 

legally separate from the merged plan 

for this purpose and should not be 

treated differently than any other 

portion of the merged plan. 

In addition, PBGC is amending 

§ 4262.16(f) in the final rule to provide 

that, as part of a request for approval of 

a merger between plans where one or 

more of the plans are SFA plans and one 

or more of the plans are non-SFA plans, 

PBGC will provide a waiver of the 

conditions relating to retroactive benefit 

increases under § 4262.16(b)(1), 

contribution decreases under 

§ 4262.16(d), and allocating 

contributions and other income under 

§ 4262.16(e) if three requirements are 

met. First, the total current value of 

assets of the SFA plans pre-merger must 

be 25 percent or less of the total current 

value of assets of the merged plan, 

calculated using the current value of 

assets most recently required to be 

reported by the plans before the merger 

on line 2a of Form 5500 Schedule MB.30

Second, the total current liability of the 

SFA plans pre-merger must be 25 

percent or less of the total current 

liability of the merged plan, calculated 

using the current liability most recently 

required to be reported by the plans 

before the merger on line 2b(4) column 

(2) of Form 5500 Schedule MB. Third, 

in the most recent certification of plan 

status for the non-SFA plan, the plan 

actuary must have certified that the plan 

is not in endangered or critical status 

(including critical and declining status) 

and is not projected to be in critical 

status within 5 years from the date of 

the plan’s request for approval, and the 

plan must not be a plan described in 

section 432(b)(5) of the Code. If any of 

the plans involved in the merger engage 

in multiple transactions in any 1-year 

period, the transactions will be 

considered in the aggregate. 

Some commenters suggested that if 

PBGC retains certain conditions after 

the merger, the conditions should apply 

to participants in (and employers 

contributing to) the SFA plan part of the 

merged plan only and not to all 

participants in (and employers 

contributing to) the merged plan. PBGC 

is adopting this suggestion for 

conditions relating to retrospective 

benefit increases under § 4262.16(b)(1), 

contribution decreases under 

§ 4262.16(d), allocating contributions 

and other income under § 4262.16(e), 

and withdrawal liability under 

§ 4262.16(g). The condition relating to 

retrospective benefit increases, absent a 

waiver, will continue to apply to 

participants in the SFA plan 

immediately before the merger and not 

to other participants after the merger in 

the merged plan. For the condition 

relating to contribution decreases, 

absent a waiver, the condition will 

apply only to the employers who had an 

obligation to contribute to the SFA plan 

immediately before the merger. For the 

condition relating to allocating 

contributions and other income, absent 

a waiver, the condition will apply to 

contributions or income relative to the 

SFA plan before the date of the merger. 

With respect to the conditions relating 

to the calculation of withdrawal liability 

under § 4262.16(g) (described in the 

next section of the preamble), PBGC is 

limiting the conditions to the 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40995 

determination of unfunded vested 

benefits that arose under the SFA plan 

before the date of the merger for 

purposes of allocating unfunded vested 

benefits under subpart D of part 4211 

and determining withdrawal liability. 

PBGC agrees with a comment that this 

approach avoids the use of SFA assets 

to reduce the withdrawal liability of a 

withdrawing employer without unduly 

increasing the withdrawal liability of 

other employers who were never 

contributing employers to the SFA plan. 

The following table summarizes the 

application of the restrictions and 

conditions in the event of a merger: 

APPLICATION OF RESTRICTIONS AND CONDITIONS AFTER A MERGER

Applies to merged plan Does not apply to merged 

plan Other 

• Restrictions 

(§ 4262.13(b)).

• Transfer or merger 

(§ 4262.16(f)).

• Withdrawal liability settlement (§ 4262.16(h)).

• Annual compliance statement (§ 4262.16(i)).

• Audit (§ 4262.16(j)) ..........

• Prospective benefit increase (§ 4262.16(b)(2)).

• Allocation of plan assets 

(§ 4262.16(c)).

• Allocating expenses 

(§ 4262.16(e)).

• Retrospective benefit increase (§ 4262.16(b)(1)): plan may apply for a waiver, 

and, absent a waiver, continues to apply to participants in the SFA plan. 

• Contribution decreases (§ 4262.16(d)): plan may apply for a waiver, and, absent a 

waiver, continues to apply to employers who had an obligation to contribute to 

the SFA plan. 

• Allocating contributions and other income (§ 4262.16(e)): plan may apply for a 

waiver, and, absent a waiver, continues to apply to contributions or income relative to the SFA plan before the date of the merger. 

• Withdrawal liability calculation (§ 4262.16(g)): no waiver; conditions required to be 

applied to determine unfunded vested benefits (UVBs) that arose under the SFA 

plan before the date of the merger for purposes of allocating UVBs under subpart 

D of part 4211 and determining withdrawal liability. 

Commenters asked for clarification of 

whether the merged plan’s certification 

of plan status will be affected by 

merging with a plan that receives SFA. 

Under section 4262(m)(4) of ERISA, 

section 432(b)(7) of the Code, and 

§ 4262.17(c), an eligible multiemployer 

plan that receives SFA 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. 

The rules for critical status plans under 

section 305 of ERISA are under the 

jurisdiction of the Treasury Department. 

Commenters also asked for 

clarification of whether a merged plan 

would be able to apply for a suspension 

of benefits under MPRA in the future. 

Under section 432(k)(2)(E) of the Code, 

section 4262(m)(6) of ERISA, and 

§ 4262.17(e) an eligible multiemployer 

plan that receives SFA is not eligible to 

apply for a new suspension of benefits 

under section 305(e)(9) of ERISA. This 

statutory condition would apply to the 

SFA plan. Eligibility of a merged plan 

to apply for a suspension of benefits is 

under the jurisdiction of the Treasury 

Department. 

(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, or as 

otherwise provided under section 4211, 

and (2) annual withdrawal liability 

payment and amortization period under 

section 4219. 

Interest Assumptions for Determining 

UVBs 

Under § 4262.16(g) of the interim final 

rule, for withdrawals that occur after the 

plan year in which the plan receives 

SFA, the interest assumptions used in 

determining unfunded vested benefits 

(UVBs) for purposes of determining 

withdrawal liability must be the 

‘‘Interest Rates Used To Value Benefits’’ 

in appendix B to 29 CFR part 4044. The 

interim final rule provided that 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 is similar to 

the time period over which special 

statutory withdrawal liability rules 

apply to plans that suspend benefits or 

are partitioned under MPRA. 

Several commenters recommended 

changes related to the condition 

requiring plans to use the prescribed 

interest assumptions. Two commenters 

suggested that PBGC provide only a 

fixed period for the requirement to use 

mass withdrawal interest assumptions 

to eliminate a plan’s ability to prolong 

application of the condition by keeping 

a small SFA balance. Other suggestions 

to avoid plans prolonging the 

application of the condition were to 

require that SFA funds be used first and 

to eliminate the reference to earnings on 

SFA. Other commenters agreed that 

requiring the use of the mass 

withdrawal interest assumptions is a 

reasonable condition and recommended 

that PBGC extend the requirement 

through 2051. 

PBGC is retaining the ‘‘later of’’ 

structure for the period to which the 

condition applies. However, in 

consideration of comments suggesting 

the condition apply for a fixed period to 

prevent plans from holding a de 

minimis amount of SFA to prolong 

application of the condition, PBGC is 

modifying the period so that it ends 

after the later of 10 years or the 

projected life of the SFA assets. 

Specifically, the prescribed interest 

assumptions must be used until the later 

of: (1) 10 years after the end of the plan 

year in which the plan first receives 

payment of SFA, and (2) the last day of 

the plan year by which the plan projects 

that it will exhaust any SFA assets as 

determined under § 4262.4(b) (under 

which benefits and expenses are 

assumed to be paid exclusively from 

SFA assets until exhausted), extended 

by the number of years, if any, that the 

first plan year of payment is after the 

plan year that includes the SFA 

measurement date. For example, if a 

calendar year plan’s SFA measurement 

date is in 2022, the plan receives 

payment of SFA in 2023, and had 

projected that it will exhaust SFA assets 

in 2051, the exhaustion year for the plan 

to use the prescribed interest 

assumptions would be 2052 (29 years + 

1 year). Under this example, employers 


jspears on DSK121TN23PROD with RULES3
40996 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

withdrawing before 2054 would have 

UVBs determined using the prescribed 

interest rate under the final rule. 

Eliminating a plan’s ability to prolong 

application of the condition requiring 

use of mass withdrawal interest 

assumptions beyond the specified 

period does not preclude the use of 

settlement rates thereafter to determine 

withdrawal liability, as otherwise 

permitted by ERISA. 

In addition, the final rule clarifies that 

the beginning of the 10-year period is 

the last day of the plan year in which 

the plan receives payment of SFA, 

renumbers § 4262.16(g) as 

§ 4262.16(g)(1), and clarifies that the 

condition in § 4262.16(g)(1) for 

determining the value of UVBs also 

applies for determining the amortization 

schedule under section 4219(c)(1)(A) of 

ERISA. Section 4219(c)(1)(A)(ii) 

provides that ‘‘[t]he determination of the 

amortization period described in clause 

[4219(c)(1)(A)](i) shall be based on the 

assumptions used for the most recent 

actuarial valuation for the plan.’’ What 

is meant by ‘‘the most recent actuarial 

valuation of the plan’’ for amortization 

purposes is unclear. One reading would 

require that the amortization period be 

determined using the interest rate used 

for funding purposes, but that could 

have the odd result of, e.g., valuing 

UVBs for withdrawal liability purposes 

as of 2020 calculated in 2023 using the 

interest rate used for the 2022 valuation 

as the ‘‘most recent’’ assumption used 

for the actuarial valuation. PBGC 

believes that a better reading would 

require that the amortization period be 

determined using the same assumptions 

that were used in the valuation of UVBs 

for withdrawal liability purposes. 

Providing in the final rule that the 

interest assumption required to be used 

for withdrawal liability purposes in 

§ 4262.16(g)(1) is also to be used for 

amortization purposes, clarifies for plan 

actuaries what interest rate to use in 

determining the amortization period 

when this condition applies. 

The final rule also clarifies that a plan 

cannot use SFA as a receivable as of the 

end of the plan year before the plan year 

in which the plan receives SFA. 

Phased Recognition of SFA Assets 

PBGC received a number of comment 

letters that discussed conditioning SFA 

on a disregard of SFA in a plan’s 

withdrawal liability calculations. While 

one comment letter expressed 

opposition to excluding any amount of 

SFA from the calculation, other 

commenters requested that PBGC 

exercise its authority under section 

4262(m) of ERISA to impose a condition 

requiring plans to exclude SFA from 

plan assets in calculating withdrawal 

liability, either instead of or in addition 

to requiring the use of mass withdrawal 

interest assumptions. One commenter 

suggested that an administratively 

simple approach would be to require 

plans to exclude the remaining amount 

of SFA from each year’s determination 

of UVBs. Another stated that the 

condition under the interim final rule to 

use mass withdrawal interest 

assumptions would not ensure for all 

plans that SFA is preserved for payment 

of benefits and expenses. The 

commenter recommended that PBGC 

impose three additional withdrawal 

liability conditions: that SFA be 

disregarded in calculating withdrawal 

liability, that conservative assumptions 

be used for a 5-year period after SFA is 

exhausted, and that, for a 15-year 

period, withdrawal liability be no less 

than it would have been as of the date 

a plan applied for SFA. Most of the 

commenters were concerned that not 

including a condition to exclude SFA 

from plan assets for purposes of 

calculating withdrawal liability will 

incentivize employers to withdraw after 

the plan receives SFA. 

As discussed in the preamble of the 

interim final rule, PBGC considered a 

condition requiring exclusion of SFA 

from plan assets in calculating 

withdrawal liability, but did not include 

such a condition in the interim final 

rule. However, PBGC has given further 

consideration to the impact of SFA on 

an employer’s incentive to withdraw 

based on commenters’ concerns about 

the effectiveness of the prescribedinterest-assumptions condition alone in 

disincentivizing employer withdrawals 

after a plan’s receipt of SFA. Since 

publication of the interim final rule, 

rising interest rates, and corresponding 

increases in the prescribed interest 

assumptions, have further highlighted 

the limitation of the effectiveness of the 

condition in the interim final rule to 

achieve its purpose. 

If a plan immediately recognizes the 

entire amount of SFA as a plan asset 

upon receipt, the plan’s UVBs for 

purposes of determining withdrawal 

liability—and thus employers 

prospective withdrawal liability—will 

likely decline. Section 4262(l) of ERISA, 

which Congress titled ‘‘Restrictions on 

the Use of Special Financial 

Assistance,’’ and which sets forth such 

restrictions, requires that ‘‘[SFA] 

received under this section and any 

earnings thereon may be used by an 

eligible multiemployer plan to make 

benefit payments and pay plan 

expenses.’’ Section 4262(m)(1) also 

expressly grants PBGC authority, in 

consultation with the Secretary of the 

Treasury, to ‘‘impose . . . reasonable 

conditions on an eligible multiemployer 

plan that receives special financial 

assistance relating to . . . withdrawal 

liability.’’ To ensure that SFA is not 

used to subsidize employer withdrawals 

rather than to make benefit payments 

and pay plan expenses, a condition 

relating to the recognition of SFA as an 

asset in calculating UVBs is needed in 

addition to the condition prescribing the 

interest assumptions to be used in 

valuing plan liabilities. 

After consideration of comments and 

analysis of the effectiveness of the 

interim final rule’s withdrawal liability 

condition, PBGC declined to adopt the 

approach of fully disregarding SFA that 

was discussed in the interim final rule 

and suggested by some commenters. 

Instead, PBGC has concluded that a 

better approach to addressing 

commenters’ concerns would be to 

phase in the recognition of SFA for 

purposes of withdrawal liability in a 

manner that is a more accurate and 

reasonable reflection of the period over 

which SFA is likely to be spent down 

by plans. Thus, under § 4262.16(g)(2) of 

the final rule, pursuant to PBGC’s 

authority under section 4262(m) of 

ERISA, PBGC imposes an additional 

condition relating to withdrawal 

liability on a plan that receives SFA. 

This condition requires plans to 

recognize over time the amount of SFA 

received by the plan for the purpose of 

determining the plan’s UVBs for 

calculating withdrawal liability. 

Section 4262.16(g)(2) provides the 

procedures for determining the amount 

of SFA that is phased in for withdrawal 

liability purposes each year over the 

projected life of the SFA assets 

(determined as if SFA assets, i.e., SFA 

and earnings thereon, are exhausted 

before other plan assets are used to pay 

benefits and expenses). The applicable 

phase-in period is from the first plan 

year in which the plan receives payment 

of SFA through the end of the plan year 

by which, according to the plan’s 

projections, it will exhaust any SFA 

assets. For a plan that received payment 

of SFA under the terms of the interim 

final rule and files a supplemented 

application, the first plan year of 

payment is the year in which it received 

SFA under the terms of the interim final 

rule. Where a plan’s first plan year of 

payment is not the plan year that 

includes the plan’s SFA measurement 

date, the exhaustion year is deferred by 

the number of years the first plan year 

of payment is after the plan year that 

includes the SFA measurement date. 

To calculate the amount of SFA assets 

excluded for each plan year during the 

phase-in period, the plan must take the 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40997 

total amount of SFA paid to the plan 

and multiply that by a fraction, the 

numerator of which is the number of 

years remaining in the phase-in period 

as of the date that the UVBs are being 

determined, and the denominator is the 

total number of years in the phase-in 

period. For a plan that receives payment 

of SFA under the interim final rule and 

receives a supplemental payment under 

the final rule, the total amount (payment 

under the interim final rule and 

supplemental payment) will be 

included in the phased recognition of 

SFA assets in determining UVBs for 

withdrawals occurring in plan years 

after the plan year the supplemental 

payment is received by the plan. For 

withdrawals that occur after the date the 

supplemented application is filed and 

before the plan year after the plan year 

in which the supplemental payment is 

made, only the payment of SFA under 

the interim final rule is included in the 

phased recognition of SFA assets. 

As provided in § 4262.16(g)(2)(xv), 

this condition is applicable to a plan in 

determining withdrawal liability for 

withdrawals occurring after the plan 

year in which the plan receives payment 

of SFA. However, for a plan that 

received SFA under the terms of the 

interim final rule, this condition will 

not apply unless the plan files a 

supplemented application under the 

final rule. If the plan files a 

supplemented application, this 

condition applies to the plan in 

determining withdrawal liability for 

withdrawals occurring on or after the 

date the plan files the supplemented 

application. A plan may choose to file 

a supplemented application if it has 

already received SFA. 

Three examples are included in 

§ 4262.16(g)(2) to illustrate the 

procedures for the phased recognition of 

SFA assets. 

Requiring phased recognition of SFA 

as a plan asset is a reasonable condition 

because SFA does not result from 

employer contributions, but is a transfer 

of taxpayer funds to eligible financially 

distressed plans for the purpose of 

enabling these plans to pay benefits and 

expenses. That purpose is reflected in 

sections 4262(j)(1) and 4262(l) of ERISA. 

Without the condition, the payment of 

SFA could instead result in indirect 

transfers of SFA to withdrawing 

employers from plans by reducing their 

withdrawal liability. For a majority of 

plans that receive SFA, all SFA will be 

recognized as a plan asset for 

withdrawal liability purposes within 10 

years, and because additional SFA will 

be incorporated into the determination 

of withdrawal liability each year, the 

effect of the condition will lessen over 

time. 

The phased recognition of SFA as a 

plan asset is consistent with ERISA, the 

Code, and actuarial practice. It is 

conceptually similar to the smoothed 

recognition of plan assets for purposes 

of calculating a plan’s minimum 

funding requirements. The Treasury 

regulation at 26 CFR 1.412(c)(2)–1(b) 

permits multiemployer plans to 

‘‘smooth’’ plan asset values when 

determining minimum funding by 

averaging the value of plan assets over 

up to five years rather than using the 

current fair market value of plan assets. 

It is also roughly comparable to the 

gradual recognition of SFA in 

determining minimum funding. Section 

432(k)(2)(D) of the Code requires that 

SFA be disregarded in determining 

required contributions. IRS Notice 

2021–38 provides that SFA is 

recognized in the plan’s funding 

standard account over time, in that any 

benefit or plan expense paid from the 

SFA account generates an actuarial gain 

that is amortized over 15 years. 

In listening sessions with interested 

parties before the issuance of the 

interim final rule, some interested 

parties representing employers argued 

that PBGC does not have authority to 

require that SFA be disregarded for 

purposes of calculating withdrawal 

liability and that, if Congress had 

intended for SFA to be disregarded, it 

would have expressly required that it be 

disregarded. For example, they cited 

provisions in MPRA for special 

withdrawal liability disregard rules in 

section 4233(d)(3) of ERISA regarding 

partitions and in section 305(g)(1) 

regarding benefit suspensions. PBGC 

does not agree that the absence of a 

statutory requirement that SFA be 

disregarded in determining withdrawal 

liability proves Congressional intent 

that SFA be immediately recognized in 

its entirety as a plan asset. Here, in 

contrast to MPRA, Congress chose to 

expressly delegate authority in section 

4262(m) of ERISA to PBGC to impose 

reasonable conditions on a plan that 

receives SFA relating to withdrawal 

liability. This grant by Congress 

expands PBGC’s authority beyond its 

existing authority under section 

4002(b)(3) and sections 4201 through 

4225 of ERISA to regulate withdrawal 

liability and authorizes PBGC to provide 

rules that define how SFA should be 

treated in the calculation of withdrawal 

liability. The final rule reflects the 

authority Congress delegated to PBGC to 

oversee the SFA program and ensure 

that SFA is preserved for the payment 

of benefits and expenses. 

Settlement of Withdrawal Liability 

An additional condition related to 

withdrawal liability is under 

§ 4262.16(h) and requires that any 

settlement of withdrawal liability 

during the SFA coverage period must be 

made only with PBGC approval if the 

present value of the liability settled is 

greater than $50 million (calculated as 

described under § 4262.16(h)(1)). 

Approval ensures that any negotiated 

settlements of material size are in the 

best interests of the participants in the 

plan and do not create an unreasonable 

risk of loss to PBGC. One commenter 

stated that requiring approval of 

transactions over $50 million is a 

reasonable application of PBGC’s 

oversight authority. PBGC did not make 

any changes to this provision in the 

final rule. 

(f) Reporting and Audit 

In order to monitor compliance with 

the conditions imposed on plans that 

receive SFA, the final rule requires 

under § 4262.16(i) that plan sponsors 

file with PBGC an annual statement of 

compliance with the terms and 

conditions of SFA for plan years 

through the last plan year ending in 

2051. Under the interim final rule, each 

annual statement of compliance was 

required to be filed with PBGC no later 

than 90 days after the end of the plan 

year and in accordance with the 

statement of compliance instructions on 

PBGC’s website at www.pbgc.gov. 

Except for questions related to mergers 

discussed earlier, PBGC did not receive 

comments on the statement of 

compliance. 

Under the final rule, PBGC clarifies 

that the first annual statement of 

compliance must be filed with PBGC no 

later than 90 days after the end of the 

plan year in which a plan received 

payment of SFA and in accordance with 

the statement of compliance 

instructions on PBGC’s website at 

www.pbgc.gov. However, based on 

PBGC’s experience in processing 

applications, the final rule provides that 

a plan would defer reporting to the next 

plan year if six months or fewer remain 

in its plan year after the month in which 

the plan first received SFA. The first 

statement of compliance in this case 

must cover the period from the date the 

plan received payment of SFA through 

the last day of the plan year following 

the plan year in which the plan received 

payment of SFA. The statement must be 

filed no later than 90 days after the end 

of such plan year. For example, if a 

calendar year plan received payment of 

SFA on November 15, 2023, the plan’s 

first statement of compliance would be 


jspears on DSK121TN23PROD with RULES3
40998 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

due by March 31, 2025, covering the 

period from November 15, 2023, 

through December 31, 2024. This would 

be less administratively burdensome to 

the plan and provide a more meaningful 

statement of compliance after receipt of 

SFA. 

As described in the interim final rule, 

PBGC may conduct periodic audits of 

plans that have received SFA to review 

compliance with the terms and 

conditions of the SFA program. 

Other Provisions 

Section 4262 of ERISA contains other 

provisions that apply to SFA and plans 

receiving SFA. These provisions are 

enumerated under § 4262.17 of the 

regulation: 

• SFA is not capped by the guarantee 

under section 4022A of ERISA. 

• A plan receiving SFA is required to 

continue to pay premiums due under 

section 4007 of ERISA for participants 

and beneficiaries in the plan. 

• A plan that receives SFA is deemed 

to be in critical status within the 

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

until the last plan year ending in 2051. 

• A plan that receives SFA and 

subsequently becomes insolvent under 

section 4245 of ERISA will be subject to 

the rules and guarantee for insolvent 

plans in effect when the plan becomes 

insolvent. 

• A plan that receives SFA is not 

eligible to apply for a suspension of 

benefits under section 305(e)(9) of 

ERISA. 

Section 4262.17 also provides that a 

plan that receives SFA and meets the 

eligibility requirements for partition of 

the plan under section 4233(b) of ERISA 

may apply for partition under section 

4233. One of those requirements, in 

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

multiemployer plan is eligible for 

partition if ‘‘the corporation determines, 

after consultation with the Participant 

and Plan Sponsor Advocate . . ., that 

the plan sponsor has taken (or is taking 

concurrently with an application for 

partition) all reasonable measures to 

avoid insolvency, including the 

maximum benefit suspensions under 

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

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

that receives SFA is not eligible to apply 

for a subsequent suspension of benefits 

under MPRA. Therefore, for a plan that 

receives 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. Accordingly, PBGC will not reject 

a partition application from a plan that 

received SFA solely because the plan 

did not suspend the benefits of 

participants and beneficiaries under 

section 305(e)(9). 

Finally, § 4262.17(g) includes a 

severability provision that provides that 

if any of the provisions of this final rule 

are found to be invalid or stayed 

pending further agency action, the 

remaining portions of the rule would 

remain operative. Although PBGC 

received no comments that directly 

addressed severability, in the final rule, 

PBGC makes a non-substantive 

clarifying change to delete the phrase 

‘‘and will not affect the remainder 

thereof’’ from the provision in the 

interim final rule. PBGC does not intend 

the severability provision to be read to 

suggest that provisions of the regulation 

are only severable if the remainder of 

the rule is not affected by the severed 

provision. To the contrary, PBGC 

intends the regulation to operate either 

with or without the severed provision. 

The severability clause applies in the 

same way whether a provision is 

invalidated ‘‘facially’’ or ‘‘as applied.’’ 

The modified severability clause reads 

as follows: ‘‘If any provision in this part 

is held to be invalid or unenforceable by 

its 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 the remaining provisions given 

effect without regard to the severed 

provision.’’ 

PBGC received no comments on 

§ 4262.17 and made no changes in the 

final rule except, as described, to 

§ 4262.17(g). 

Compliance With Rulemaking 

Guidelines 

Administrative Procedure Act 

As described in the interim final rule, 

under new section 4262(c) of ERISA, 

PBGC was required to issue regulations 

or guidance setting forth the 

requirements for eligible plans to apply 

for special financial assistance (SFA) 

within 120 days of the date of 

enactment of ARP (March 11, 2021). 

Congress authorized PBGC to prioritize 

the filing of applications for eligible 

plans with the greatest need, during the 

first two years after March 11, 2021, and 

PBGC provided for such a process. 

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, 

particularly for prioritized plans, 

expressed a clear urgency to get 

appropriate assistance to eligible plans 

as quickly as possible. 

In light of the compressed timeline, 

PBGC issued an interim final rule 

without prior notice and comment. The 

Administrative Procedure Act provides 

at 5 U.S.C. 553(b) 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 

promulgated an interim final rule 

effective on publication, with a request 

for public comment, to allow for 

immediate implementation of this 

program and because of the need to get 

financial assistance to eligible plans as 

quickly as possible. Any delay in the 

effective date of the interim final rule 

would have been contrary to the public 

interest. See the ‘‘Compliance With 

Rulemaking Guidelines’’ section of the 

July 12, 2021, interim final rule for the 

applicability of the requirements of 5 

U.S.C. 553. 

In this final rule, after consideration 

of the comments received, PBGC is 

adopting changes to provisions of the 

interim final rule on the methodology to 

determine the amount of a plan’s SFA, 

permissible investments of SFA funds, 

and the application of conditions on a 

plan that receives SFA. As discussed 

earlier in the preamble, PBGC in the 

interim final rule considered fully 

disregarding SFA for withdrawal 

liability purposes, and explained why it 

did not adopt that alternative. Interested 

persons submitted comments on that 

issue, and PBGC is now adopting a 

condition requiring a phased 

recognition of SFA in a plan’s 

determination of withdrawal liability in 

§ 4262.16(g)(2) in response to those 

comments. The withdrawal liability 

condition adopted is consistent with 

PBGC’s statutory authority to impose 

reasonable conditions on plans that 

receive SFA under section 4262(m) of 

ERISA. It is also more effective, along 

with the other conditions, for achieving 

the intended purpose of that statutory 

authority—to help enable plans that 

receive SFA to pay benefits due through 

2051 and to preclude or disincentivize 

plans and employers from taking actions 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 40999 

31Specifically, section 9704 of ARP establishes an 

eighth fund under section 4005 of ERISA. 

32The latest version of the ME–PIMS model 

reflects asset return information through December 

31, 2021. Actual SFA amounts will depend on plan 

asset performance through an application’s SFA 

measurement date. 

that have the potential to accelerate plan 

insolvencies. 

PBGC is also providing for a comment 

period of 30 days, solely on this 

withdrawal liability condition in 

§ 4262.16(g)(2), because it is an area of 

complexity that may benefit from 

additional public comment. This will 

provide an opportunity for additional 

public comment on the condition, and 

will allow PBGC to assess the 

effectiveness of this withdrawal liability 

condition, consider adjustments or 

changes, and determine whether more 

clarification is needed regarding the 

condition or the mechanics of 

implementation. To the extent PBGC 

determines that adjustments or changes 

to this withdrawal liability condition 

are appropriate and authorized, or that 

further clarification is needed, PBGC 

may revise the condition accordingly. 

PBGC is making this rule effective on 

August 8, 2022. 

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 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. 

Because of the urgent need for the 

SFA program and to get appropriate 

financial assistance to eligible plans 

quickly, PBGC has determined that this 

final rule must take effect August 8, 

2022. This effective date allows eligible 

plans to apply for and receive SFA 

under the terms of the final rule without 

unnecessary delay. Plans that already 

applied for, or received, SFA before the 

effective date of the final rule will be 

able to apply for any greater amount of 

SFA under the final rule. Plans that 

have not yet applied will be able to 

submit applications using the 

methodology provided under the final 

rule. Under the circumstances, PBGC 

has determined that public interest is 

best served by making this final rule 

effective on August 8, 2022. 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 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 the final rule. 

(2) Introduction and Need for 

Regulation 

As discussed earlier in the preamble, 

PBGC published an interim final rule 

adding to its regulations a new part 

4262 to implement the requirements 

under section 9704 of the American 

Rescue Plan (ARP) Act of 2021, ‘‘Special 

Financial Assistance Program for 

Financially Troubled Multiemployer 

Plans.’’ It is through this program that 

PBGC is providing special financial 

assistance (SFA) to eligible 

multiemployer pension plans from a 

fund established by ARP for SFA 

purposes and credited with transfers 

from the general fund of the Treasury 

Department.31

In the Regulatory Impact Analysis of 

the interim final rule, PBGC provided 

estimates of the transfer amounts of the 

SFA program using the MultiemployerPension Insurance Modeling System 

(ME–PIMS), PBGC’s stochastic modeling 

tool. The aggregate SFA was estimated 

to be approximately $94 billion in 

assistance payments paid to more than 

200 plans and $150 million to PBGC to 

administer the SFA program. PBGC 

further estimated 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. 

Following consideration of comments 

on the interim final rule’s methodology 

for determining the amount of SFA, this 

final rule makes changes to the 

regulation that impact that 

methodology. As a result, the aggregate 

SFA paid out under the program is 

expected to differ from the $94 billion 

estimated under the interim final rule. 

Additionally, since publication of the 

interim final rule PBGC has made 

updates to the ME–PIMS stochastic 

model, including incorporating more 

recent plan and economic data. PBGC 

now estimates that if the final rule had 

not included any changes to the 

provisions of the interim final rule, the 

aggregate SFA would have been $76.7 

billion. The decrease of $17.3 billion is 

primarily attributed to incorporating 

more recent plan data, which reflects 

subsequent asset returns that were more 

favorable than expected in the prior 

estimate.32 In general, an increase in the 

initial value of existing plan assets 

reduces the calculated amount of SFA. 

Under the final rule, when reflecting the 

changes to the determination of the 

amount of SFA, the aggregate SFA is 

expected to be approximately $82.3 

billion. The expected cost to administer 

the SFA program remains unchanged 

from the $150 million estimate under 

the interim final rule, and total loan 

repayments under section 4261 of 

ERISA are estimated to be $385 million 

(an increase of $185 million compared 

to the previous estimate). The estimate 

of aggregate SFA under the program 

continues to be subject to significant 

uncertainty, and the actual aggregate 


jspears on DSK121TN23PROD with RULES3
41000 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

33Actual experience could deviate outside this 

projected range. 

SFA will depend on plan experience 

prior to applying for SFA, particularly 

for asset returns. As such, the estimate 

is highly sensitive to the date of 

estimation. While the current estimate 

of SFA is based on investment returns 

through the end of 2021, capital market 

experience in early 2022 was 

characterized by equity losses and rising 

interest rates. As a result, plans are 

likely to have incurred asset losses, and 

it is expected that SFA amounts for 

many plans will increase from the 

current estimates. However, a rise in the 

SFA and non-SFA interest rates may 

cause SFA amounts for many plans to 

decrease from the current estimates. 

Future experience is uncertain and 

further changes to capital markets and 

interest rates prior to the time many 

plans submit their SFA applications 

will impact the final payment amounts. 

Based on PBGC’s stochastic modeling, a 

range of projected outcomes spans from 

$74.3 billion at the 15th percentile to 

$90.8 billion at the 85th percentile.33

The final rule also makes changes to 

permissible investments under 

§ 4262.14. Section 4262(l) of ERISA 

provides PBGC with specific regulatory 

authority to permit plans to invest SFA 

assets in investments other than 

investment grade bonds. The interim 

final rule did not permit a wide range 

of investments for SFA assets, and 

PBGC sought public feedback on 

whether to permit investment of SFA 

assets in investment vehicles with 

different characteristics from investment 

grade bonds. The investment portfolio 

of SFA assets can have a significant 

impact on a plan’s future solvency 

projections, particularly for plans with a 

high proportion of SFA assets relative to 

non-SFA plan assets. The SFA asset 

allocation also impacts a plan’s 

investment risk exposure. Use of the 

regulatory authority under section 

4262(l) to expand permissible 

investments strikes a balance between 

the risk and potential reward of 

allowing plans to use taxpayer-funded 

SFA assets to purchase return-seeking 

investments. 

Section 4262(m) of ERISA provides 

PBGC with 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). The final rule includes 

certain changes to the regulatory 

conditions in the interim final rule, 

based on consideration of public 

comments. The conditions in the final 

rule are more effective at achieving the 

intended purpose of not enabling plans 

that receive SFA to take actions that 

have the potential to accelerate plan 

insolvencies, which would bring about 

participant benefit cuts and increased 

future claims on PBGC’s multiemployer 

insurance program. 

(3) Regulatory Action 

PBGC considered the public 

comments received in response to its 

interim final rule. The regulatory 

changes made in the final rule reflect 

feedback provided in these comments 

and align with key objectives described 

in the interim final rule: (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; (4) 

stewardship of taxpayer-funded 

appropriations for SFA; (5) maintaining 

the security of pension benefits (current 

accrued benefits and future accruals) of 

participants in plans that receive SFA; 

and (6) preservation of the solvency of 

the PBGC multiemployer insurance 

program. A detailed description of the 

rationale for each regulatory change 

made is included earlier in the preamble 

to this final rule, including applicable 

public comments. 

A summary of the regulatory changes 

under the final rule and related 

economic considerations for each 

change are described as follows. 

Expansion of SFA Permissible 

Investments 

The final rule amends § 4262.14 to 

allow plans to invest up to 33 percent 

of SFA assets in return-seeking assets, 

e.g., U.S. equities. Comments on the 

interim final rule were received in 2021 

at a time when high quality fixed 

income provided yields below two 

percent. While fixed income yields have 

risen significantly in early 2022, prices 

on U.S. equities have dropped at the 

same time (which would increase their 

potential for higher future returns after 

the markets level off), thereby 

maintaining the expected advantage of 

allowing some investment in returnseeking assets. As a result, SFA assets 

generally are expected to achieve higher 

investment returns than under the 

provisions of the interim final rule and 

thus better enable plans to project to pay 

benefits through 2051. The impact of 

this change on plans’ projected future 

solvency is greater for plans that are 

expected to have a large proportion of 

SFA assets to non-SFA plan assets, such 

as plans that are insolvent or nearly 

insolvent at the time of application for 

SFA. 

Allowing plans to invest a portion of 

SFA in return-seeking assets increases 

expected investment returns, but also 

increases the risk of loss. Under adverse 

market scenarios, plans could incur 

losses in their SFA assets that would 

accelerate the future date of plan 

insolvency. The outcome may be 

particularly adverse if there is a severe, 

protracted market downturn shortly 

after plans receive SFA. The increased 

investment risk due to the allowance of 

return-seeking investments in SFA 

assets may be mitigated by the longerterm investment horizon for total plan 

assets following receipt of SFA. 

Determination of the Amount of SFA: 

Use of a Separate Interest Rate Applied 

for the Projection of SFA Assets 

The final rule amends § 4262.4 to 

include a separate interest rate 

assumption applicable for the projected 

SFA assets in the calculation used to 

determine a plan’s SFA amount. The 

SFA interest rate is a more appropriate 

assumed rate of return for SFA assets 

that reflects the investment restrictions 

for these assets under § 4262.14, 

including allowing plans to invest up to 

33 percent of the segregated SFA assets 

in return-seeking assets. The SFA 

interest rate also comports with the 

statutory requirements that the amount 

of SFA be the amount projected for 

plans to pay all benefits due through 

2051. The deterministic projection used 

to determine the amount of SFA under 

§ 4262.4 was also changed to assume 

that the SFA assets would be spent 

down by the plan before non-SFA plan 

assets are used. Although the final rule 

does not require SFA assets to be used 

before other plan assets to pay benefits 

and expenses, this assumption in the 

final rule reflects plans’ expected 

behavior to minimize the impact of 

investment restrictions on SFA assets 

and applies even if a plan does not 

follow that behavior. 

Use of a separate, lower interest rate 

in the deterministic projection increases 

the amount of SFA. For plans with a 

low proportion of SFA assets to nonSFA plan assets, the increase is minor 

because the SFA assets will not earn 

significant returns before they are 

projected to be spent down within a few 

years. For plans with a large proportion 

of SFA assets to non-SFA plan assets, 

such as plans that are insolvent or 

nearly insolvent at the time of 

application for SFA, the increase in the 

final SFA amount attributable to the 

separate lower interest rate is more 

significant. 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41001 

Determination of the Amount of SFA: 

Calculation Methodology for Plans With 

an Approved MPRA Benefit Suspension 

as of March 11, 2021 

The final rule amends § 4262.4 to 

specify a revised methodology for the 

calculation of SFA for plans with an 

approved suspension of benefits under 

MPRA as of March 11, 2021. This 

change provides that the amount of SFA 

is the greatest of: (1) the amount of SFA 

calculated for a plan that is not a MPRA 

plan; (2) the lowest amount of SFA that 

is sufficient to ensure that the plan will 

project rising assets at the end of the 

2051 plan year; and (3) an amount of 

SFA equal to the present value of 

reinstated benefits (accounting for both 

make-up payments needed, as well as 

payments of the reinstated portion of 

benefits through 2051, and any 

restoration of benefits under 26 CFR 

1.432(e)(9)–1(e)(3)). These additional 

SFA calculations in (2) and (3), set forth 

in the final rule, accord with 

requirements and considerations that 

are unique to MPRA plans. 

The calculation will increase the 

amount of SFA for plans that had an 

approved suspension of benefits under 

MPRA as of March 11, 2021, and 

thereby increase the total amount of 

SFA distributed under the program. 

There are 18 plans expected to benefit 

from this change in the final rule. 

Conditions Relating to Benefit 

Improvements 

The final rule amends § 4262.16(b) to 

add a process by which a plan may 

request a determination from PBGC for 

an exception from the conditions 

prohibiting prospective and 

retrospective benefit increases if future 

plan circumstances permit the benefit 

increases without endangering the 

plan’s ability to pay all benefits. Under 

the new provision, beginning 10 years 

after the end of the plan year in which 

a plan receives payment of SFA, the 

plan may apply for an exception by 

demonstrating to the satisfaction of 

PBGC, taking into account the proposed 

benefit increase, that the plan will avoid 

insolvency. 

This provision is intended to provide 

plans with very limited flexibility to 

improve benefits in the future while 

preventing certain benefit increases that 

could imperil a plan’s ability to remain 

solvent in the future. Because plans will 

have to demonstrate to PBGC that any 

proposed benefit increases will not lead 

to a projected date of insolvency, PBGC 

expects there to be little to no impact on 

projected future financial assistance 

under section 4261 of ERISA. 

Conditions Relating to Allocation of 

Contributions and Other Income 

The final rule amends § 4262.16(e) to 

add a process by which a plan may 

request a determination from PBGC for 

a limited exception from the condition 

prohibiting a decrease in the proportion 

of contributions allocated to a plan that 

receives SFA if future plan 

circumstances permit the reallocation of 

contributions without endangering the 

plan’s ability to pay all benefits. Under 

the new provision, beginning 5 years 

after the end of the plan year in which 

a plan receives payment of SFA, the 

plan may apply for an exception by 

demonstrating to the satisfaction of 

PBGC, taking into account the proposed 

reallocation of contributions, that the 

plan will avoid insolvency and that the 

reallocation is needed due to a 

significant increase in health benefit 

costs due to a change in Federal law. 

The reallocation would be required to 

be no more than a 10 percent reduction 

in the amount of the contribution rate 

negotiated on or before March 11, 2021, 

going to the pension plan and would be 

required to be temporary (no more than 

5 years for a reallocation request relating 

to any single change in Federal law and 

no more than 10 years cumulatively for 

all reallocation requests during the 

plan’s SFA coverage period). 

This provision is intended to provide 

plan sponsors with very limited 

flexibility to reallocate contributions 

temporarily to use for unexpected 

changes in Federal law. This temporary 

reallocation would give the bargaining 

parties time to negotiate contributions 

for the health plan under a collective 

bargaining agreement. Because plans 

will have to demonstrate to PBGC that 

any proposed reallocation of 

contributions will not lead to projected 

plan insolvency and because the 

reallocation will be temporary, PBGC 

expects there to be no impact on 

projected future financial assistance 

under section 4261 of ERISA. 

Condition Related to Withdrawal 

Liability 

The final rule amends § 4262.16(g) to 

modify the period of time for which a 

plan must use the interest assumptions 

in appendix B to 29 CFR part 4044 of 

PBGC’s regulations in determining the 

UVBs of the plan under section 4213(c) 

of ERISA for purposes of determining an 

employer’s withdrawal liability. Under 

§ 4262.16(g) of the interim final rule, the 

interest assumptions in appendix B to 

part 4044 are applicable until the later 

of 10 years and the last day of the plan 

year in which the plan no longer holds 

any SFA assets. The final rule revises 

the latter date to the last day of the plan 

year in which the plan projects that it 

will exhaust any SFA assets (extended 

by the number of years, if any, that the 

first plan year of payment is after the 

plan year that includes the SFA 

measurement date). 

The final rule under § 4262.16(g)(2) 

adds a condition relating to withdrawal 

liability for a plan that receives SFA. 

This condition requires plans to 

recognize over time the amount of SFA 

received by the plan for the purpose of 

determining the plan’s UVBs for 

calculating withdrawal liability. The 

amount of SFA is phased in for 

withdrawal liability purposes each year 

over the projected life of SFA assets 

(determined as if SFA assets and 

earnings thereon are exhausted before 

other plan assets are used to pay 

benefits and expenses). 

As stated in the Regulatory Impact 

Analysis of the interim final rule, 

conditions on withdrawal liability are 

intended to prevent SFA payments from 

leading to significant decreases in 

withdrawal liability assessments that 

would incentivize 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 and encourage 

them to exit these plans. As discussed 

in the interim final rule, PBGC 

considered a condition requiring 

exclusion of SFA from plan assets in 

calculating withdrawal liability, but did 

not include such a condition in the 

interim final rule. However, PBGC has 

given further consideration to the 

impact of SFA on incentives to 

withdraw based on commenters’ 

concerns about the effectiveness of the 

prescribed-interest-assumptions 

condition alone in disincentivizing 

employer withdrawals after a plan’s 

receipt of SFA. Since publication of the 

interim final rule, rising interest rates, 

and corresponding increases in the 

prescribed interest assumptions, have 

further highlighted the limitation of the 

effectiveness of the condition in the 

interim final rule to achieve its purpose. 

To ensure that SFA is not used for a 

purpose other than to make benefit 

payments and pay plan expenses, a 

condition relating to the phased 

recognition of SFA assets for purposes 

of calculating withdrawal liability is 

needed in addition to the interest rate 

condition on the measurement of 

liabilities. 

Conditions Applicable to Merged Plans 

The final rule amends § 4262.16(f) to 

provide that the conditions relating to 

prospective benefit increases under 

§ 4262.16(b)(2), allocation of plan assets 


jspears on DSK121TN23PROD with RULES3
41002 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

34SFA payments to plans are expected to be $416 

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. The costs relating to annual 

compliance filings are expected to be $726,800 per 

year from 2027 through 2051. The costs relating to 

condition exemption filings are expected to be 

$19,600 per year from 2027 through 2051. 

under § 4262.16(c), and allocating 

expenses under § 4262.16(e) will not 

apply after the merger to the merged 

plan. In addition, as part of a request for 

approval of a merger between plans 

where one or more plans are SFA plans, 

PBGC will provide a waiver of the 

conditions on retroactive benefit 

increases and contribution decreases in 

§ 4262.16(b)(1) and (d) if prescribed 

requirements are met. If the 

requirements for a waiver are not met, 

the final rule provides that these two 

conditions will apply, as applicable, to 

participants in, or employers that have 

an obligation to contribute to, the SFA 

plan immediately before the merger. 

The withdrawal liability conditions in 

§ 4262.16(g) will not be waived. Those 

conditions, however, are limited to the 

determination of UVBs that arose under 

the SFA plan before the date of the 

merger for purposes of allocating UVBs 

under subpart D of part 4211 and 

determining withdrawal liability for 

employers that participated in the SFA 

plan. Finally, the restrictions on SFA in 

§ 4262.13(b), conditions in § 4262.16(f) 

(merger or transfer), § 4262.16(h) 

(withdrawal liability settlement), 

§ 4262.16(i) (statement of compliance), 

and § 4262.16(j) (audit) continue to 

apply to the merged plan. 

The clarifications in the final rule on 

the application of conditions after a 

merger are intended to prevent the 

conditions that are not required by 

statute from creating an impediment to 

the consideration of a merger that would 

otherwise be beneficial to the plan and 

plan participants. The extent to which 

the final rule does not create an 

impediment to mergers is uncertain, but 

PBGC expects these clarifications on 

conditions applicable to merged plans 

to have no material impact on projected 

future financial assistance under section 

4261 of ERISA. 

(4) Estimated Impact of Regulatory 

Action 

The following table summarizes the 

estimated transfers and costs expected 

as a result of implementation of the SFA 

program. 

PV amount 

(3% rate) 

PV amount 

(7% rate) 2021 2022 2023 2024 2025 2026 2027–2051 (total) 34

Annual Transfer Amounts 

Total transfer 

amounts based 

on Interim Final 

Rule (total nominal value of 

$93.98 billion).

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

Change based on 

updated model 

data (plan & economic data) 

(total nominal 

value of $17.30 

billion).

(15.91) billion (14.28) billion (1.26) billion (7.13) billion .. (4.19) billion .. (2.42) billion .. (1.61) billion (0.60) billion (0.08) billion. 

Change based on 

updated provisions of Final 

Rule (total nominal value of 

$5.64 billion).

5.17 billion .... 4.63 billion .... 0.00 billion .. 2.71 billion .... 1.38 billion .... 0.80 billion .... 0.53 billion .. 0.19 billion .. 0.03 billion. 

Total transfer 

amounts based 

on Final Rule 

(total nominal 

value of $82.32 

billion).

75.42 billion .. 67.49 billion .. 0.00 billion .. 39.26 billion .. 20.22 billion .. 11.70 billion .. 7.81 billion .. 2.92 billion .. 0.42 billion. 

Annual Cost Amounts 

Anticipated PBGC 

administrative 

expenses (total 

nominal value of 

$150 million).

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

SFA applications ... 8,693,400 ...... 7,781,400 ...... 922,500 ...... 3,075,000 ...... 2,152,500 ...... 1,998,800 ...... 1,260,800 ... 78,800 ........ 0. 

Lock-in applications.54,800 ........... 48,400 ........... 0 ................. 0 .................... 43,750 ........... 16,625 ........... 0 ................. 0 ................. 0. 

Benefit reinstatement participant 

notices.

68,900 ........... 63,800 ........... 0 ................. 73,100 ........... 0 .................... 0 .................... 0 ................. 0 ................. 0. 

Annual compliance 

filings.

12,473,400 .... 7,211,100 ...... 0 ................. 76,500 ........... 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.

151.21 million 123.72 million 21.42 million 20.72 million 18.24 million 17.49 million 16.65 million 14.83 million 71.16 million. 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41003 

35The latest version of the ME–PIMS model 

reflects asset return information through December 

31, 2021. Actual SFA amounts will depend on plan 

asset performance through an application’s SFA 

measurement date. 

Change to the Estimated Amount of SFA 

In support of the development of the 

final rule, PBGC conducted modeling of 

the impact of changes to the calculation 

procedures for SFA under § 4262.4 and 

changes to permissible investments 

under § 4262.14. These provisions 

directly impact both the total estimated 

cost of the SFA program as well as the 

projected solvency of plans after receipt 

of SFA. The modeling is subject to 

significant limitations, including 

limited available data, uncertainty 

regarding the number of plans 

ultimately eligible to apply, uncertainty 

regarding future asset returns, and other 

factors. However, despite the future 

uncertainty, the modeling shows that 

under the final rule, eligible plans are 

significantly more likely to meet the 

statutory direction in section 4262(j)(1) 

of ERISA to project to be able to pay 

benefits due through plan year 2051, 

without incurring excessive investment 

risk exposure. The cost estimates in the 

table above also reflect general updates 

made to PBGC’s ME–PIMS model to 

reflect more recent plan and economic 

data. These updates decreased the total 

nominal SFA estimate by $17.3 billion, 

primarily due to the incorporation of 

more recent plan asset return 

information that was more favorable 

than expected.35

Filing and Issuance Requirements 

As discussed in this 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. Also, under the final 

rule, a plan sponsor may, but is not 

required to, file a lock-in application as 

a plan’s initial application. The lock-in 

application contains basic information 

about the plan and a statement of intent 

to lock-in base data. In addition, under 

part 4262, a plan that receives SFA is 

required to file a compliance notice 

with PBGC once every year through the 

plan year ending in 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, the estimated average cost to 

prepare the lock-in application is $875, 

and the estimated average cost to 

prepare the annual statement of 

compliance is $2,550. PBGC estimates 

that over the next 3 years (2022–2024) 

it will receive annually an average of 78 

applications for SFA at an aggregate 

average annual cost of $2,398,500, 23 

lock-in applications at an aggregate 

average annual cost of $20,125, and 106 

annual statements of compliance at an 

aggregate average annual cost of 

$270,300. 

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 section 

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. The estimated average cost 

(dollar equivalent of the in-house hour 

burden + contractor costs) to prepare the 

notice of reinstatement is $2,150. PBGC 

estimates that over the next 3 years 

(2022–2024) an average of 11.33 plans 

annually (34 total plans) will issue the 

notice of reinstatement to an average of 

3,050 participants and beneficiaries at 

an aggregate average annual cost of 

$24,367. 

A plan sponsor that receives SFA also 

is required to administer the plan in 

accordance with conditions prescribed 

by PBGC in § 4262.16. A plan sponsor 

may request approval from PBGC for an 

exception under certain circumstances 

for conditions relating to benefit 

increases, reductions in contributions, 

transfers or mergers, and settlement of 

withdrawal liability, prospective and 

retrospective benefit increases 

beginning 10 years after the date a plan 

receives SFA, and allocation of 

contributions beginning 5 years after the 

date a plan receives SFA. PBGC expects 

these determination requests to be 

infrequent. PBGC estimates that it will 

receive an average of 2.2 requests per 

year in 2023 and 2024 at a cost of 

$19,570 per year (averaged over 2022– 

2024 = $13,047). 

The total average annual cost for the 

information collection is $2,724,614 

($2,398,500 + $18,400 + $270,300 + 

$24,367 + $13,047). 

Conditions for Plans That Receive SFA 

As discussed above, the changes made 

to § 4262.16 in the final rule are not 

expected to have a significant impact on 

future plan solvency experience. To the 

extent that the provisions in § 4262.16(f) 

setting forth which conditions continue 

to apply to a merged plan encourage 

mergers between healthier ‘‘green zone’’ 

plans and plans that receive SFA, there 

may be a decrease in projected future 

financial assistance under section 4261 

of ERISA. The actual impact will 

depend on plan behavior and future 

experience, particularly future 

investment returns. Overall, PBGC does 

not expect a material impact as a result 

of the changes made in the final rule to 

the conditions. 

(5) Regulatory Alternatives Considered 

Expansion of SFA Permissible 

Investments 

PBGC considered the implications of 

making no change to permissible 

investments under § 4262.14 in the final 

rule. In one alternative, if the regulation 

for permissible investments and for the 

applicable interest rate (§ 4262.4) both 

remained unchanged from the interim 

final rule, many plans would not be 

projected to pay all benefits due through 

2051. Because of the investment 

restrictions, it would be unlikely that 

the SFA portion of assets would achieve 

a rate of return as high as the interest 

rate used to determine SFA. This issue, 

described in many public comment 

letters, is more pronounced for plans 

with a large proportion of SFA assets to 

existing plan assets, such as plans that 

are insolvent or nearly insolvent at the 

time of application for SFA. 

In another alternative, if no change 

were made to expand permissible 

investments but the final rule allowed 

for a separate interest rate based 

exclusively on the expected return of 

investment grade bonds to be applied to 

the SFA portion of plan assets, plans 

would receive higher SFA payments 

enabling them to pay all benefits due 

through 2051 on a projected basis. 

However, this alternative would require 

using a lower interest rate for SFA assets 

under § 4262.4 than provided in the 

final rule, which would further increase 

the aggregate cost of the SFA program. 

PBGC projects that this alternative could 

have increased the total amount of SFA 

by a range of approximately $5 billion 

to $10 billion over the interim final rule. 

PBGC also considered the 

implications of an even less restrictive 

definition of permissible investments 

than under the final rule, including an 

option to allow plans to invest all (not 

just a portion) of SFA funds in returnseeking assets and/or in other 

investments not included in the final 

rule’s definition of permissible 

investments. Although an average 

projection scenario shows favorable 

outcomes that could allow plans to 

realize even greater investment returns 

to support being sufficiently funded to 


jspears on DSK121TN23PROD with RULES3
41004 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

be able to pay plan benefits through 

2051, and in fact, effectively extending 

plan solvencies beyond 2051, there is an 

overall increase in investment risk that 

adverse market conditions could put 

plans in greater jeopardy of becoming 

insolvent well before the last day of the 

2051 plan year and undermine their 

potential to pay all benefits due through 

2051. The final rule is more protective 

of the taxpayer assets used to fund SFA 

and PBGC’s title IV insurance program 

and also protects plans from exposure to 

excessive investment risk and potential 

losses that may be difficult to recover. 

Determination of the Amount of SFA: 

Use of a Separate Interest Rate Applied 

for the Projection of SFA Assets 

PBGC considered making no changes 

to the SFA calculation under § 4262.4 of 

the interim final rule related to interest 

rate assumptions. Although this would 

have had a less significant impact on the 

transfer cost of the SFA program, 

PBGC’s modeling shows that under the 

interim final rule, the vast majority of 

plans, including many plans with a 

large proportion of SFA assets to 

existing plan assets, would not be 

projected to be able to pay benefits due 

through plan year 2051 as set forth in 

section 4262(j)(1) of ERISA. Further, 

though PBGC found that loosening the 

investment restrictions for SFA assets 

under § 4262.14 would provide some 

assistance in this respect, this would 

introduce greater overall investment risk 

for SFA and could undermine the 

ability of plans to remain solvent 

through the end of plan year 2051 

should particularly adverse market 

conditions occur. 

Determination of SFA: Calculation 

Methodology for Plans With Approved 

MPRA Benefit Suspensions as of March 

11, 2021 

PBGC considered making no changes 

to the SFA calculation under § 4262.4 of 

the interim final rule for plans with 

approved suspensions of benefits under 

MPRA as of March 11, 2021. Although 

this would have kept the transfer cost of 

the SFA program unchanged, it would 

have allowed for a potential dilemma 

for these plans. Some commenters 

raised a concern that some plans with 

approved benefit suspensions under 

MPRA would receive less in SFA under 

the provisions of the interim final rule 

than would be necessary for the plan to 

pay for future benefit reinstatements 

(including those payable after the year 

2051). Under the interim final rule, the 

plan’s projected insolvency would be 

accelerated by choosing to receive SFA. 

A plan that is projected to avoid 

insolvency indefinitely—which is the 

standard these plans met in order to be 

approved for MPRA benefit 

suspensions—by reinstating the benefits 

suspended under MPRA might now be 

expected to run out of money in 2051. 

In this case, plans would have to 

consider the varying interests of its 

participants (i.e., the positive impact of 

benefit reinstatements for participants 

receiving benefits in the near-term 

versus the negative impact of potential 

insolvency to participants receiving 

benefits in the long-term) in deciding 

whether to apply for SFA. The 

calculation procedures for MPRA plans 

under § 4262.4 under the final rule 

enable these plans to retain a strong 

projected funded position through 2051. 

PBGC considered a variation of the 

SFA calculation such that plan assets 

must be projected to increase during 

each of the final 5 years of the SFA 

coverage period. This variation would 

be consistent with the required period 

for which available resources must be 

projected to increase in an application 

for a proposed MPRA benefit 

suspension. While this approach would 

help to further improve the expected 

future funded position for these plans, 

PBGC estimated that it could increase 

the total transfer cost of the SFA 

program by an additional $0.5 billion. 

Conditions Related to Benefit 

Improvements and Allocation of 

Contributions and Other Income 

PBGC considered making no changes 

to the conditions related to benefit 

improvements under § 4262.16(b) and 

allocation of contributions and other 

income under § 4262.16(e). However, 

PBGC recognizes that some plans may 

enjoy favorable experience after 

receiving SFA and outperform the 

projected experience in the 

deterministic projection included in the 

SFA application. Some plans may 

achieve a relatively strong financial 

position and be projected to remain 

solvent well beyond 2051. Under 

limited circumstances, it may be 

beneficial to plan participants to 

provide some plan sponsors with 

limited flexibility to improve benefits or 

to reallocate contributions temporarily 

to another plan while not jeopardizing 

the security of future benefit promises 

under the pension plan. 

Conditions Related to Withdrawal 

Liability 

PBGC considered making no changes 

to the withdrawal liability condition 

under § 4262.16(g). However, PBGC has 

given further consideration to the 

impact of SFA on incentives to 

withdraw based on commenters’ 

concerns about the effectiveness of the 

prescribed-interest-assumptions 

condition alone in disincentivizing 

employer withdrawals after a plan 

receives SFA. Since publication of the 

interim final rule, rising interest rates, 

and corresponding increases in the 

prescribed interest assumptions, have 

further highlighted the limits to the 

effectiveness of the condition in the 

interim final rule to achieve its purpose. 

PBGC seeks to ensure that SFA is not 

used other than for its intended purpose 

of paying plan benefits and 

administrative expenses. 

PBGC considered an alternative 

condition under which the reduction in 

plan assets taken into account for 

purposes of determining UVBs under 

section 4213(c) of ERISA is the 

projected amount of SFA determined 

under § 4262.4(b), but without any 

ratable decrease in the years following 

receipt of SFA. This alternative would 

also have prevented a sharp decrease in 

withdrawal liability in the year 

following the year of receipt of SFA, but 

would result in a sharp decrease in 

withdrawal liability in the year 

following the year the condition no 

longer applies. In place of that 

condition, PBGC has added a condition 

requiring phased recognition of SFA as 

a plan asset for withdrawal liability 

purposes. It is conceptually similar to 

the smoothed recognition of plan assets 

for purposes of calculating a plan’s 

minimum funding requirements and is 

roughly comparable to the gradual 

recognition of SFA in determining 

minimum funding. For a majority of 

plans that receive SFA, all SFA will be 

recognized as a plan asset for 

withdrawal liability purposes within 10 

years, and because an additional portion 

of the SFA will be reflected in the 

determination of withdrawal liability 

each year, the effect of the condition 

will lessen over time. PBGC determined 

that a phased recognition of SFA for 

withdrawal liability purposes is a 

reasonable condition in addition to the 

condition prescribing the interest 

assumptions to be used in valuing 

liabilities. 

Conditions on Merged Plans 

PBGC considered requiring all 

restrictions and conditions to apply to a 

merged plan for the conditions related 

to mergers under § 4262.16(f), in 

response to questions in public 

comment letters, whether or which 

conditions would continue to apply to 

a merged plan. Requiring a merged plan 

to comply with all § 4262.16 conditions 

would ensure that the plan does not 

subsequently take any actions that may 

jeopardize the SFA received by one or 

more of the plans involved in the 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41005 

merger and therefore, the merged plan’s 

future solvency. However, this could 

discourage plans from entering into 

transactions that would be beneficial to 

the plan and plan participants, such as 

a small plan that received SFA merging 

with a large ‘‘green zone’’ plan. PBGC 

believes that mergers can often be an 

effective tool to lower costs and 

streamline plan administration and does 

not want to inadvertently discourage 

transactions that are in the best interest 

of plan participants. 

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 

With the final rule, PBGC is 

submitting changes to the collection of 

information, previously approved under 

control number 1212–0074, 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 

www.Reginfo.gov. Changes to the 

collection of information include 

changes to the application for SFA, 

annual statement of compliance, and 

determination requests. A new lock-in 

application form with corresponding 

instructions is added. 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 in the next 3 

years an annual average of 78 

applications for SFA (initial and 

revised) will be filed (100 in 2022, 70 

in 2023, and 65 in 2024). 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 

$2,340,000 (78 × $30,000) and 780 (78 

× 10) hours. 

An annual average of 23 plan 

sponsors are expected to file lock-in 

applications as initial applications for 

SFA (0 in 2022, 50 in 2023, and 19 in 

2024). PBGC needs the information in 

the lock-in application to ensure that a 

plan sponsor intends to lock-in the 

plan’s data. PBGC estimates that each 

application requires $800 in contractor 

cost and 1 hour of in-house fund time. 

Thus, the lock-in application imposes 

estimated annual burdens of $18,400 (23 

× $800) and 23 (23 × 1) hours. 

PBGC estimates that an annual 

average of 106 plan sponsors will file 

Annual Statements of Compliance (30 in 

2022, 108 in 2023, and 179 in 2024). 

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 $254,400 (106 × $2,400) and 

212 (106 × 2) hours. 

An average of 11.33 plans per year (34 

plans in 2022, 0 in 2023, and 0 in 2024) 

will be required to send notices to 

participants with suspended benefits. 

This notice is intended to ensure 

participants understand the calculation 

and dates of their reinstated benefits 

and, if applicable, make-up payments. 

PBGC estimates that the burden for each 

plan to prepare required notices is 

$2,000 in contractor cost and 2 hours of 

in-house fund time. Thus, these notices 

impose estimated annual burdens of 

$22,667 (11.33 × $2,000) and 22.66 

(11.33 × 2) hours. 

Also, PBGC estimates that in 2023 and 

2024, PBGC will receive an average of 

2.2 requests 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); a contribution decrease (.2 (1 

every 5 years)); (0 requests in 2022, 2.2 

requests in 2023, and 2.2 requests in 

2024). There will be no requests for 

determinations concerning prospective 

and retrospective benefit increases until 

at least 2032 and no requests for 

determinations concerning reallocation 

of contributions until at least 2027. The 

annual average for all requests for 2022– 

2024 is 1.47 requests per year. PBGC 

needs the information requested to 

make a determination on the proposed 

transaction, withdrawal liability 

settlement, contribution decrease, or 

benefit increase. PBGC estimates an 

average annual hour burden (employer 

and fund office hours) and average 

annual cost burden (contractor costs) 

per request of: 

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

($25,000 × .2) for a proposed 

contribution change; 

• 4 hours and $12,000 for a proposed 

transfer or merger; and 

• 2 hours and $2,000 for a proposed 

settlement of withdrawal liability. 

PBGC estimates that, beginning in 

2023, for 2.2 determination requests, the 

aggregated average annual hour burden 

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

fund office hours) and the aggregated 

average annual cost burden will be 

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

contractor costs). For 2022–2024, PBGC 

estimates an average annual hour 

burden of 5.07 hours ((7.6+7.6)/3) and 

an average annual cost burden of 

$12,667 (($19,000 + $19,000)/3). 

The estimated aggregate average 

annual hour burden for 2022–2024 for 

the information collection in part 4262 

is 1,042.73 hours (780 +23+ 212 + 22.66 

+ 5.07), which means a cost equivalent 

of $78,205 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 2022–2024 for 

the information collection in part 4262 

is $2,648,134 ($2,340,000 + $18,400 + 

$254,400 + $22,667 + $12,667), which 

means approximately 6,620 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 2022–2024 are shown in the 

following table. 

Information collection Average # of 

respondents 

Hour burden 

(hours) 

Hour burden— 

equivalent cost Cost burden 

Applications for SFA ........................................................................................ 78 780 $58,500 $2,340,000 

Lock-in application ........................................................................................... 23 23 1,725 18,400 

Annual compliance statement ......................................................................... 106 212 15,900 254,400 

Notice of reinstatement .................................................................................... 11(11.33) 22.66 1,700 22,667 

Requests for determination ............................................................................. 1(1.47) 5.07 380 12,667 

Totals: ....................................................................................................... 219 1,042.73 78,205 2,648,134 


jspears on DSK121TN23PROD with RULES3
41006 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

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. 

List of Subjects in 29 CFR Part 4262 

Employee benefit plans, Pension 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

■ For the reasons given above, PBGC 

adopts as final the portion of the interim 

final rule adding 29 CFR part 4262, 

which was published at 86 FR 36598 on 

July 12, 2021, and further amends 29 

CFR part 4262 by revising the part to 

read as follows: 

PART 4262—SPECIAL FINANCIAL 

ASSISTANCE BY PBGC 

Sec. 

4262.1 Purpose. 

4262.2 Definitions. 

4262.3 Eligibility for special financial 

assistance. 

4262.4 Amount of special financial 

assistance. 

4262.5 PBGC review of plan assumptions. 

4262.6 Information to be filed. 

4262.7 Plan information. 

4262.8 Actuarial and financial information. 

4262.9 Application for a plan with a 

partition. 

4262.10 Processing applications. 

4262.11 PBGC action on applications. 

4262.12 Payment of special financial 

assistance. 

4262.13 Restrictions on special financial 

assistance. 

4262.14 Permissible investments of special 

financial assistance. 

4262.15 Reinstatement of benefits 

previously suspended. 

4262.16 Conditions for special financial 

assistance. 

4262.17 Other provisions. 

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

§ 4262.1 Purpose. 

The purpose of this part is to 

prescribe rules governing applications 

for special financial assistance under 

section 4262 of ERISA and related 

requirements. 

§ 4262.2 Definitions. 

The following terms are defined in 

§ 4001.2 of this chapter: Code, 

controlled group, 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 6058(a) and 6059(b) 

of the Code. 

Merged plan means merged plan as 

defined in § 4231.2 of this chapter. 

Merger means merger as defined in 

§ 4231.2 of this chapter. 

SFA coverage period means the 

period beginning on the plan’s SFA 

measurement date and ending on the 

last day of the last plan year ending in 

2051. 

SFA measurement date for a plan 

other than a plan described in 

§ 4262.4(g) means the last day of the 

third calendar month immediately 

preceding the date the plan’s initial 

application for special financial 

assistance was filed. 

Special financial assistance or SFA 

means special financial assistance from 

PBGC under section 4262 of ERISA. 

Transfer and transfer of assets or 

liabilities means transfer and transfer of 

assets or liabilities as defined in 

§ 4231.2 of this chapter. 

§ 4262.3 Eligibility for special financial 

assistance. 

(a) In general. Subject to all the 

provisions of this section, a 

multiemployer plan is eligible for 

special financial assistance in any of the 

following cases: 

(1) Critical and declining status plans. 

The plan is in critical and declining 

status within the meaning of section 

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

year; or 

(2) Plans with a suspension of 

benefits. A suspension of benefits has 

been approved with respect to the plan 

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

March 11, 2021; or 

(3) Critical status plans. The plan: 

(i) Is certified to be in critical status 

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

of ERISA for a specified year; and 

(ii) The percentage calculated under 

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

than 40 percent; and 

(iii) The ratio of the total number of 

active participants at the end of the plan 

year required to be entered on the Form 

5500 that was required to be filed for a 

specified year to the sum of inactive 

participants (retired or separated 

participants receiving benefits, other 

retired or separated participants entitled 

to future benefits, and deceased 

participants whose beneficiaries are 

receiving or are entitled to receive 

benefits) required to be entered on such 

Form 5500 was less than 2 to 3; or, the 

ratio of the total number of active 

participants at the beginning of the plan 

year required to be entered on Form 

5500 Schedule MB that was required to 

be filed for a specified year to the sum 

of inactive participants (retired 

participants and beneficiaries receiving 

payment and terminated vested 

participants) required to be entered on 

such Form 5500 Schedule MB 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, 

and 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) through (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)); 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 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41007 

assistance must be made using the 

assumptions that the plan used in its 

most recently completed certification of 

plan status before January 1, 2021, 

unless such assumptions (excluding the 

plan’s interest rate assumption) are 

unreasonable. 

(3) Changes in assumptions. If a plan 

determines that use of the assumptions 

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

unreasonable, the plan’s application 

may include a proposed change in the 

assumptions (excluding the plan’s 

interest rate assumption), as described 

in § 4262.5. 

§ 4262.4 Amount of special financial 

assistance. 

(a) In general—(1) Plans other than 

MPRA plans. Subject to paragraph (f) of 

this section and to the adjustment for 

the date of payment as described in 

§ 4262.12, the amount of special 

financial assistance for a plan that is not 

a MPRA plan is the lowest whole dollar 

amount (not less than $0) for which, as 

of the last day of each plan year during 

the SFA coverage period, projected SFA 

assets and projected non-SFA assets are 

both greater than or equal to zero. 

(2) MPRA plans. Subject to paragraph 

(f) of this section and to the adjustment 

for the date of payment as described in 

§ 4262.12, the amount of special 

financial assistance for a MPRA plan is 

the greatest of the amount determined 

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

the amount determined under paragraph 

(a)(2)(i) of this section, and the amount 

determined under paragraph (a)(2)(ii) of 

this section. 

(i) The amount determined under this 

paragraph (a)(2)(i) is the lowest whole 

dollar amount (not less than $0) for 

which, as of the last day of each plan 

year during the SFA coverage period, 

projected SFA assets and projected nonSFA assets are both greater than or equal 

to zero, and, as of the last day of the 

SFA coverage period, the sum of 

projected SFA assets and projected nonSFA assets is greater than the amount of 

such sum as of the last day of the 

immediately preceding plan year. 

(ii) The amount determined under 

this paragraph (a)(2)(ii) is the present 

value of benefits paid and expected to 

be paid by the plan during the SFA 

coverage period attributable to the 

reinstatement of benefits under 

§ 4262.15(a)(1), payment of previously 

suspended benefits under 

§ 4262.15(a)(2), and any restoration of 

benefits under 26 CFR 1.432(e)(9)– 

1(e)(3), calculated using the SFA 

interest rate under paragraph (e)(2) of 

this section. 

(3) MPRA plan definition. For 

purposes of this section, MPRA plan 

means a plan that is eligible for special 

financial assistance under § 4262.3(a)(2). 

(b) Projected SFA assets. The amount 

of projected SFA assets for a plan is 

determined by projecting special 

financial assistance forward annually 

until the projected SFA assets are 

exhausted, using the following annual 

cash flows: 

(1) Benefits paid and expected to be 

paid by the plan during the SFA 

coverage period, including any 

reinstatement of benefits attributable to 

the elimination of reductions in a 

participant’s or beneficiary’s benefit due 

to a suspension of benefits under 

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

required under § 4262.15(a)(1), payment 

of previously suspended benefits under 

§ 4262.15(a)(2), and any restoration of 

benefits under 26 CFR 1.432(e)(9)– 

1(e)(3), assuming such reinstated 

benefits are paid beginning as of the 

SFA measurement date and excluding 

any benefit increases resulting from 

contribution increases agreed to on or 

after July 9, 2021, as demonstrated by 

the execution of a document described 

in paragraph (c)(3) of this section; 

(2) Administrative expenses paid and 

expected to be paid by the plan during 

the SFA coverage period, excluding the 

amount owed to PBGC under section 

4261 of ERISA (which is added to the 

amount of special financial assistance in 

§ 4262.12 determined as of the date 

special financial assistance is paid); and 

(3) Investment returns expected to be 

earned by amounts attributable to 

special financial assistance calculated 

using the SFA interest rate described in 

paragraph (e)(2) of this section, 

excluding investment returns for the 

plan year in which the sum of annual 

projected benefit payments and 

administrative expenses for the year 

exceeds the beginning-of-year projected 

SFA assets. 

(c) Projected non-SFA assets. The 

amount of projected non-SFA assets for 

a plan is determined by projecting the 

fair market value of plan assets on the 

SFA measurement date forward 

annually, using the following annual 

cash flows: 

(1) Benefits paid and expected to be 

paid by the plan during the SFA 

coverage period after the projected SFA 

assets described in paragraph (b) of this 

section are fully exhausted, including 

any reinstatement of benefits 

attributable to the elimination of 

reductions in a participant’s or 

beneficiary’s benefit due to a suspension 

of benefits under sections 305(e)(9) or 

4245(a) of ERISA as required under 

§ 4262.15(a)(1), payment of previously 

suspended benefits under 

§ 4262.15(a)(2), and any restoration of 

benefits under 26 CFR 1.432(e)(9)– 

1(e)(3), assuming such reinstated 

benefits are paid beginning as of the 

SFA measurement date and excluding 

any benefit increases resulting from 

contribution increases agreed to on or 

after July 9, 2021, as demonstrated by 

the execution of a document described 

in paragraph (c)(3) of this section; 

(2) Administrative expenses paid and 

expected to be paid by the plan during 

the SFA coverage period after the 

projected SFA assets described in 

paragraph (b) of this section are fully 

exhausted, excluding the amount owed 

to PBGC under section 4261 of ERISA 

(which is added to the amount of 

special financial assistance in § 4262.12 

determined as of the date special 

financial assistance is paid); 

(3) Employer contributions paid and 

expected to be paid to the plan during 

the SFA coverage period, excluding 

contribution rate increases agreed to on 

or after July 9, 2021, as demonstrated by 

the execution of a document increasing 

a plan’s contribution rate. The 

document referred to in this paragraph 

(c)(3) is either— 

(i) A collective bargaining agreement 

not rejected by the plan; or 

(ii) A document reallocating 

contribution rates; 

(4) Withdrawal liability payments 

made and expected to be made to the 

plan during the SFA coverage period 

taking into account a reasonable 

allowance for amounts considered 

uncollectible; 

(5) Other payments made and 

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; and 

(6) Investment returns expected to be 

earned by assets not attributable to 

special financial assistance calculated 

using the non-SFA interest rate 

described in paragraph (e)(1) of this 

section. 

(d) Deterministic basis. The 

projections in paragraphs (b) and (c) of 

this section must be performed on a 

deterministic basis using assumptions 

as described in paragraph (e) of this 

section. For a plan other than a plan 

described in § 4262.4(g), the projections 

must be based on the participant census 

data used to prepare the plan’s actuarial 

valuation report, either— 

(1) For the plan year in which occurs 

the plan’s SFA measurement date; or 

(2) If there is no such report for that 

plan year, for the preceding plan year. 

(e) Actuarial assumptions. The 

amount of special financial assistance 

must be determined in accordance with 


jspears on DSK121TN23PROD with RULES3
41008 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

generally accepted actuarial principles 

and practices and the provisions in this 

paragraph (e). 

(1) The non-SFA 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 section 303(h)(2)(C)(iv)) for 

the month in which such rate is the 

lowest among the 4 calendar months 

ending with the month in which the 

plan’s initial application for special 

financial assistance is filed, taking into 

account only rates that have been issued 

by the IRS as of the day that is the day 

before the date the plan’s initial 

application is filed. 

(2) The SFA interest rate is the lesser 

of the rate in paragraph (e)(2)(i) or (ii) 

of this section. 

(i) The interest rate in this paragraph 

(e)(2)(i) is the interest rate in paragraph 

(e)(1)(i) of this section. 

(ii) The interest rate in this paragraph 

(e)(2)(ii) is the interest rate that is 67 

basis points higher than the average of 

the rates specified in section 

303(h)(2)(C)(i), (ii), and (iii) of ERISA 

(disregarding modifications made under 

section 303(h)(2)(C)(iv)) for the month 

in which such average is the lowest 

among the 4 calendar months ending 

with the month in which the plan’s 

initial application for special financial 

assistance is filed, taking into account 

only rates that have been issued by the 

IRS as of the day that is the day before 

the date the plan’s initial application is 

filed. 

(3) The actuarial assumptions (other 

than the interest rate assumptions under 

paragraphs (e)(1) and (2) of this section) 

are those used for the plan’s most 

recently completed certification of plan 

status before January 1, 2021, unless 

such assumptions are unreasonable. 

(4) If a plan determines that use of the 

actuarial assumptions under paragraph 

(e)(3) of this section is unreasonable, the 

plan’s application may include a 

proposed change in the assumptions 

(excluding the interest rate assumptions 

under paragraphs (e)(1) and (2) of this 

section), as described in § 4262.5. 

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

(i) The special financial assistance of a 

plan that experiences one or more of the 

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

or (4) of this section during the period 

beginning on July 9, 2021, and ending 

on the SFA measurement date is limited 

to the amount of special financial 

assistance that would have applied to 

the plan on the SFA measurement date 

if the events had not occurred, as 

determined in a reasonable manner. 

(ii) The special financial assistance of 

a plan that experiences a merger event 

during the period described in 

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

limited to the sum of the amounts of 

special financial assistance that would 

have applied to the plans involved in 

the merger on the SFA measurement 

date if the merger had not occurred, as 

determined in a reasonable manner. If 

any of the plans involved in the merger 

also experiences one or more of the 

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

or (4) of this section during the period 

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

section, the amount of special financial 

assistance for that plan on the SFA 

measurement date, determined as if the 

merger had not occurred, must be 

determined in accordance with 

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

(2) Transfers. The event described in 

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

assets or liabilities (including a spinoff). 

(3) Benefit increases. The event 

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

execution of a plan amendment 

increasing accrued or projected benefits 

under a plan, other than a restoration of 

suspended benefits that satisfies the 

requirements of 26 CFR 1.432(e)(9)– 

1(e)(3). 

(4) Contribution reductions. The event 

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

execution of a document reducing a 

plan’s contribution rate (including any 

reduction in benefit accruals adopted 

simultaneously or arising from a preexisting linkage between benefit 

accruals and contributions), but only if 

the plan does not demonstrate (in 

accordance with the special financial 

assistance instructions on PBGC’s 

website at www.pbgc.gov) that the risk 

of loss to participants and beneficiaries 

is reduced (disregarding special 

financial assistance) by execution of the 

document. The document referred to in 

this paragraph (f)(4) is either— 

(i) A collective bargaining agreement 

not rejected by the plan; or 

(ii) A document reallocating 

contribution rates. 

(5) Effect of pre-event ineligibility. In 

determining the amount of special 

financial assistance that would have 

applied to a plan if an event described 

in this paragraph (f) had not occurred, 

if the plan would have been ineligible 

for special financial assistance under 

§ 4262.3 in the absence of the event, 

then the amount of special financial 

assistance is deemed to be $0 (zero). 

(6) Examples. The following examples 

illustrate the provisions of paragraph (f) 

of this section. 

(i) Example 1. Plan A applies for 

special financial assistance. If the 

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

section did not apply, Plan A would be 

entitled to special financial assistance in 

the amount of $20X. Before the SFA 

measurement date, but on or after July 

9, 2021, Plan A transferred a portion of 

its assets and liabilities to Plan B. If the 

transfer had not occurred, Plan A 

would, as of the SFA measurement date, 

be entitled to special financial 

assistance in the amount of $40X. 

Although an event described in 

paragraph (f)(2) of this section occurred 

with respect to Plan A, Plan A’s special 

financial assistance is unaffected by the 

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

section and is $20X. Plan B also applies 

for special financial assistance. If the 

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

section did not apply, Plan B would be 

entitled to special financial assistance in 

the amount of $30X. If the transfer from 

Plan A had not occurred, Plan B would, 

as of the SFA measurement date, be 

ineligible for special financial 

assistance. As a result of the event 

described in paragraph (f)(2) of this 

section, the limitation in paragraph 

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

special financial assistance from $30X 

to $0. 

(ii) Example 2. Plan C applies for 

special financial assistance. If the 

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

section did not apply, Plan C would be 

entitled to special financial assistance in 

the amount of $40X. Before the SFA 

measurement date, but on or after July 

9, 2021, Plans A and B were merged into 

existing Plan C. If the mergers had not 

occurred, Plan A would not be eligible 

for special financial assistance, and Plan 

B and Plan C would be entitled, 

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

financial assistance as of the SFA 

measurement date. As a result of the 

merger event described in paragraph 

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

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

reduces Plan C’s special financial 

assistance from $40X to $15X. 

(iii) Example 3. Plan A applies for 

special financial assistance. If the 

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

section did not apply, Plan A would be 

entitled to special financial assistance in 

the amount of $10X. Before the SFA 

measurement date, but on or after July 

9, 2021, projected benefits under Plan A 

were increased. If the increase had not 

occurred, Plan A would, as of the SFA 

measurement date, be ineligible for 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41009 

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 

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 percent 

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. 

(g) Filers under the interim provisions 

of this part. If a plan’s application for 

special financial assistance under the 

terms of this part as in effect before 

August 8, 2022 was filed before that 

date, the plan may choose to proceed in 

accordance with paragraph (g)(1), (2), 

(3), or (4) of this section (whichever 

applies). 

(1) Approved application. If the plan’s 

application for special financial 

assistance was approved as of August 8, 

2022, the plan may— 

(i) Supplement the plan’s application 

as described in paragraphs (g)(6) and (8) 

of this section after special financial 

assistance is paid to or for the plan 

under the terms of this part as in effect 

before August 8, 2022; or 

(ii) Not supplement the plan’s 

application. 

(2) Pending application. If the plan’s 

application for special financial 

assistance was not approved, 

withdrawn, or denied, and was pending, 

as of August 8, 2022, the plan may— 

(i) Withdraw the plan’s application in 

accordance with § 4262.11(d) and file a 

revised application as described in 

paragraph (g)(5) of this section; or 

(ii) Not withdraw the plan’s 

application and have the application 

reviewed under the terms of this part as 

in effect before August 8, 2022 as 

described in paragraph (g)(7) of this 

section. 

(3) Withdrawn application. If the 

plan’s application for special financial 

assistance was not pending as of August 

8, 2022, because the application was 

withdrawn, the plan may file a revised 

application as described in paragraph 

(g)(5) of this section. 

(4) Denied application. If the plan’s 

application for special financial 

assistance was not pending as of August 

8, 2022, because the application was 

denied, the plan may file a revised 

application as described in paragraph 

(g)(5) of this section. Any revised 

application must address the reasons 

cited by PBGC for the denial. 

(5) Revised application. Any revised 

application for special financial 

assistance filed by a plan under this 

paragraph (g) is processed in the same 

way as an initial application, and must 

demonstrate eligibility and the amount 

of the plan’s special financial assistance 

determined under the provisions of this 

part as in effect on August 8, 2022, 

subject to adjustment as described in 

§ 4262.12(a), and use the following base 

data: 

(i) The plan’s SFA measurement date 

determined as the last day of the 

calendar quarter immediately preceding 

the date the plan’s initial application for 

special financial assistance was filed; 

(ii) The plan’s participant census data 

determined under this part as in effect 

before August 8, 2022; and 

(iii) The plan’s non-SFA interest rate 

and SFA interest rate as determined 

under paragraphs (e)(1) and (2) of this 

section. 

(6) Supplemented application. Any 

supplemented application filed by a 

plan under this paragraph (g) must be 

filed in accordance with paragraph 

(g)(8) of this section and must be limited 

to the changes and information 

specified in the supplemented special 

financial assistance instructions on 

PBGC’s website at www.pbgc.gov, about 

the determination of the amount of 

special financial assistance under this 

part as of August 8, 2022 (including the 

interest rates in paragraph (e) of this 

section), and the filer must agree to be 

bound by the provisions of this part 

governing such a determination, in 

which case, special financial assistance 

is subject to adjustment as described in 

§ 4262.12(c). 

(7) No supplement or withdrawal. If 

special financial assistance has not been 

paid to or for the plan under the terms 

of this part as in effect before August 8, 

2022, and the plan has not filed a 

supplemented application as described 

in paragraphs (g)(6) and (8) of this 

section, or withdrawn the plan’s 

application in accordance with 

§ 4262.11(d), the application will be 

reviewed under the terms of this part as 

in effect before August 8, 2022. The 

amount of special financial assistance 

for the plan will be determined under 

the terms of this part as in effect before 

August 8, 2022 and be subject to 

adjustment as described in § 4262.12(b). 

(i) A plan that receives special 

financial assistance as described under 

this paragraph (g)(7) may subsequently 

file a supplemented application in 

accordance with paragraphs (g)(6) and 

(8) of this section. 

(ii) If the plan’s application is denied, 

the plan may file a revised application 

as described in paragraph (g)(5) of this 

section. 

(8) Supplemented application special 

rules. (i) Except as provided in this 

paragraph (g)(8), the rules in §§ 4262.10 

and 4262.11(a) and (b) and (f) and (g) for 

a revised application apply to a 

supplemented application. 

(ii) A supplemented application must 

not change the plan’s SFA measurement 

date, fair market value of assets, or 

participant census data, or include a 

proposed change in assumptions, except 

to propose a change to the plan’s 

employer contribution assumption to 

exclude contribution rate increases 

agreed to on or after July 9, 2021, as 

permitted under paragraph (c)(3) of this 

section (in which case, the plan must 

exclude any benefit increases resulting 

from such contribution increases as 

required under paragraphs (b)(1) and 

(c)(1) of this section). 

(iii) A supplemented application may 

be withdrawn and resubmitted at any 

time before PBGC denies or approves 

the supplemented application. Any 

withdrawal of a plan’s supplemented 

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 

supplemented special financial 

assistance instructions on PBGC’s 

website at www.pbgc.gov. 

(iv) If PBGC denies a plan’s 

supplemented application, any new 

supplemented application filed by the 

plan must address the reasons cited by 

PBGC for the denial. 


jspears on DSK121TN23PROD with RULES3
41010 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

§ 4262.5 PBGC review of plan 

assumptions. 

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

§ 4262.3(d)(1), PBGC will accept the 

assumptions used by a plan to 

determine eligibility for special 

financial assistance under § 4262.3(d)(1) 

unless PBGC determines that such 

assumptions are clearly erroneous. 

(2) PBGC will accept the assumptions 

used by a plan to determine eligibility 

for special financial assistance under 

§ 4262.3(d)(2) or to determine the 

amount of special financial assistance 

under § 4262.4(e)(3) 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 

assumptions under § 4262.4(e)(1) and 

(2)) 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 assumptions under 

§ 4262.4(e)(1) and (2)) must be 

reasonable and the combination of those 

actuarial assumptions and methods 

(excluding the interest rate assumptions 

under § 4262.4(e)(1) and (2)) must also 

be reasonable. 

(c) Changes in assumptions. If a plan 

determines that use of an assumption 

described in § 4262.3(d)(2) or 

§ 4262.4(e)(3) is unreasonable, the plan’s 

application may include a proposed 

change in the assumptions (excluding 

the plan’s interest rate assumptions 

under § 4262.4(e)(1) and (2)). 

(1) The application for special 

financial assistance must— 

(i) Describe why the original 

assumption is no longer reasonable; 

(ii) Propose to use a different 

assumption (the changed assumption); 

and 

(iii) Demonstrate that the changed 

assumption is reasonable. 

(2) PBGC will provide guidelines for 

changed assumptions on PBGC’s 

website at www.pbgc.gov. 

§ 4262.6 Information to be filed. 

(a) In general. An application for 

special financial assistance must 

include the information specified in this 

section and §§ 4262.7 (plan information) 

and 4262.8 (actuarial and financial 

information); a copy of the executed 

plan amendment required under 

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

of the proposed plan amendment 

required under paragraph (e)(2) of this 

section; and 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, PBGC may require the 

plan sponsor to file additional 

information described under paragraph 

(d) of this section or PBGC may consider 

the application incomplete. If the 

correction of an error or omission 

requires a change to the amount of 

special financial assistance requested, 

the application will be considered 

incomplete. 

(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, with such signature 

accompanied by the printed name and 

title of the signer; and 

(2) Include the following statements 

signed by an authorized trustee who is 

a current member of the board of 

trustees, with such signature 

accompanied by the printed name and 

title of the signer: ‘‘Under penalty of 

perjury under the laws of the United 

States of America, I declare that I am an 

authorized trustee who is a current 

member of the board of trustees of the 

[insert plan name] and 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; all 

statements of fact contained in the 

application are true, correct, and not 

misleading because of omission of any 

material fact; and all accompanying 

documents are what they purport to be.’’ 

(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 and additional 

information. PBGC may require a plan 

sponsor to file additional information, 

including 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 plan and notify 

PBGC. 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, notwithstanding anything to 

the contrary in this or any other 

governing document, 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) If the plan suspended benefits 

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

ERISA, amend the plan to include 

provisions substantially similar to the 

following to, in accordance with 

guidance issued by the Secretary of the 

Treasury under section 432(k) of the 

Code, {I} reinstate benefits, as required 

by § 4262.15(a)(1), and {II} make 

payments of previously suspended 

benefits, as required by § 4262.15(a)(2): 

‘‘Effective as of the first month in which 

special financial assistance is paid to 

the plan, the plan shall reinstate all 

benefits that were suspended under 

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

The plan shall pay each participant and 

beneficiary that is in pay status as of the 

date special financial assistance is paid 

to the plan the aggregate amount of the 

participant’s or beneficiary’s benefits 

that were not paid because of the 

suspension, with no actuarial 

adjustment or interest. Such payment 

shall be made [choose whichever 

applies: ‘in a lump sum no later than 3 

months after the date the special 

financial assistance is paid to the plan, 

irrespective of whether the participant 

or beneficiary dies after the date special 

financial assistance is paid’ or ‘in equal 

monthly installments over a period of 5 

years, commencing no later than 3 

months after the date the special 

financial assistance is paid to the plan, 

with all installments to be paid 

irrespective of whether the participant 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41011 

or beneficiary survives to the end of the 

5-year period’].’’ 

(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 

an application for special financial 

assistance under this part may be made 

publicly available, at PBGC’s sole 

discretion, on PBGC’s website at 

www.pbgc.gov or otherwise publicly 

disclosed. Except to the extent required 

by the Privacy Act, PBGC provides no 

assurance of confidentiality in any 

information or documentation included 

in an application for special financial 

assistance. 

§ 4262.7 Plan information. 

(a) Basic information. An application 

for special financial assistance must 

include all of the following information 

with respect to the plan and amount of 

special financial assistance requested: 

(1) Name of the plan, Employer 

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

(2) Name of the individual filing the 

application and role of the individual 

with respect to the plan. 

(3) Name, address, email, and 

telephone number of the plan sponsor 

and the plan sponsor’s authorized 

representatives, if any. 

(4) The total amount of special 

financial assistance requested under 

§ 4262.4(a)(1) or (2). 

(b) Eligibility. An application must 

identify the eligibility requirements in 

§ 4262.3 that the plan satisfies to be 

eligible for special financial assistance. 

An application for a plan that is eligible 

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

must include a demonstration to 

support that the plan meets the 

eligibility requirements. 

(c) Priority group identification. An 

application must identify any priority 

group under § 4262.10(d)(2) that the 

plan is in. An application must include 

a demonstration to support the plan’s 

inclusion in a priority group, unless the 

plan is insolvent under section 4245(a) 

of ERISA, has implemented a 

suspension of benefits under section 

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

is in critical and declining status (as 

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

and had 350,000 or more participants, 

or is listed on PBGC’s website at 

www.pbgc.gov as a plan in priority 

group 6, as defined under 

§ 4262.10(d)(2)(vi). 

(d) Plans with a suspension of 

benefits. If a plan previously suspended 

benefits under section 305(e)(9) or 

4245(a) of ERISA, its application must 

include a description of how the plan 

will reinstate the benefits that were 

previously suspended and a proposed 

schedule showing aggregate amount and 

timing of payments (in accordance with 

§ 4262.15) to participants and 

beneficiaries under the plan. The 

proposed schedule should be prepared 

assuming the effective date for 

reinstatement is the SFA measurement 

date and that payments for previously 

suspended benefits described in 

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

the SFA measurement date. If the plan 

restored benefits under 26 CFR 

1.432(e)(9)–1(e)(3) before the SFA 

measurement date, the proposed 

schedule should reflect the amount and 

timing of payments of restored benefits 

and the effect of the restoration on the 

benefits remaining to be reinstated. 

(e) Plan documentation. An 

application must include all of the 

following plan documentation: 

(1) Most recent plan document or 

restatement of the plan document and 

all subsequent amendments adopted (if 

any), including a copy of the executed 

plan amendment required under 

§ 4262.6(e)(1). 

(2) If the plan suspended benefits 

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

ERISA, a copy of the proposed plan 

amendment(s) required under 

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

plan sponsor that the plan 

amendment(s) will be timely adopted. 

Such certification must be signed either 

by all members of the plan’s board of 

trustees or by one or more trustees duly 

authorized to sign the certification on 

behalf of the entire board and to commit 

the board to timely adopting the 

amendment after the plan’s application 

for special financial assistance is 

approved, with each signature 

accompanied by the printed name and 

title of the signer. 

(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 reports 

completed for the 2018 plan year and 

each subsequent actuarial valuation 

report completed before the date the 

plan’s initial application for special 

financial assistance is 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 clearly identified 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 of plan status completed 

before the date the plan’s initial 

application was filed, with 

documentation supporting each 

certification, which must include the 

projections and information required in 

the special financial assistance 

instructions on PBGC’s website at 

www.pbgc.gov. 

(9) Most recent statement for each of 

the plan’s cash and investment 

accounts. 

(10) Most recent plan financial 

statement (audited, or unaudited if 

audited is not available). 

(11) Bank account and other 

information necessary for electronic 

payment of funds. 

(12) All written policies and 

procedures governing withdrawal 

liability determination, assessment, 

collection, settlement, and payment. 

§ 4262.8 Actuarial and financial 

information. 

(a) Required information. An 

application for special financial 

assistance must include all of the 

following actuarial and financial 

information: 

(1) For each plan year from the 2018 

plan year until the most recent plan year 

for which the Form 5500 is required to 

be filed by the date the plan’s initial 

application for special financial 

assistance is 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 required to be entered on 

line 6f of the plan’s most recently filed 

Form 5500 (as of the date the plan’s 

initial application for special financial 

assistance is filed), a listing of the 15 


jspears on DSK121TN23PROD with RULES3
41012 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

largest contributing employers and the 

contribution amounts for each such 

contributing employer for the most 

recently completed plan year (before the 

date the plan’s initial application for 

special financial assistance is filed). 

(3) Historical plan financial 

information for the 2010 plan year 

through the plan year immediately 

preceding the date the plan’s initial 

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 noninvestment 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, including all of the 

following information— 

(i) Non-SFA interest rate required 

under § 4262.4(e)(1), including 

supporting details on how it was 

determined, and SFA interest rate 

required under § 4262.4(e)(2), 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 audited plan 

financial statement to the SFA 

measurement date showing 

contributions, withdrawal liability 

payments, benefit payments, 

administrative expenses, and 

investment income. 

(iii) For the calculation method used 

to determine the requested amount of 

special financial assistance, the plan 

year in which the sum of annual 

projected benefit payments and 

administrative expenses for the year 

exceeds the beginning-of-year projected 

SFA assets. 

(5) The amount of special financial 

assistance calculated under 

§ 4262.4(a)(1) and information used to 

determine such amount, based on a 

deterministic projection, including all of 

the following information— 

(i) Special financial assistance 

calculated under § 4262.4(a)(1) 

determined as a lump sum as of the SFA 

measurement date. 

(ii) For each plan year in the SFA 

coverage period: The projected amount 

of contributions, projected withdrawal 

liability payments reflecting a 

reasonable allowance for amounts 

considered uncollectible, and other 

payments expected to be made to the 

plan. 

(iii) For each plan year in the SFA 

coverage period: Payments described in 

§ 4262.4(b)(1) attributable to the 

reinstatement of benefits under 

§ 4262.15 that were previously 

suspended through the SFA 

measurement date. 

(iv) For each plan year in the SFA 

coverage period: Benefit payments 

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

any benefits restored under 26 CFR 

1.432(e)(9)–1(e)(3) and excluding the 

previously suspended benefits 

described in paragraph (a)(5)(iii) of this 

section), separately for current retirees 

and beneficiaries in pay status, current 

terminated participants not yet in pay 

status, current active participants, and 

new entrants; and total benefit 

payments paid and expected to be paid 

from projected SFA assets separately 

from total benefit payments paid and 

expected to be paid from non-SFA 

assets after the projected SFA assets are 

fully exhausted. 

(v) For each plan year in the SFA 

coverage period: Administrative 

expenses paid and expected to be paid 

(excluding the amount owed PBGC 

under section 4261 of ERISA), 

separately for PBGC premiums and all 

other administrative expenses; and total 

administrative expenses paid and 

expected to be paid from projected SFA 

assets separately from total 

administrative expenses paid and 

expected to be paid from non-SFA 

assets after the projected SFA assets are 

fully exhausted. 

(vi) For each plan year in the SFA 

coverage period: The projected total 

participant count at the beginning of the 

year. 

(vii) For each plan year in the SFA 

coverage period: The projected 

investment income earned by assets not 

attributable to special financial 

assistance based on the interest rate 

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

projected fair market value of non-SFA 

assets at the end of each plan year. 

(viii) For each plan year in the SFA 

coverage period: The projected 

investment income earned by amounts 

attributable to special financial 

assistance based on the interest rate 

required under § 4262.4(e)(2) (excluding 

investment returns for the plan year in 

which the sum of the annual projected 

benefit payments and administrative 

expenses for the year exceeds the 

beginning-of-year projected SFA assets) 

and the projected fair market value of 

SFA assets at the end of each plan year. 

(6) For MPRA plans, the amount of 

special financial assistance calculated 

under § 4262.4(a)(2)(i) and information 

used to determine such amount, based 

on a deterministic projection, including 

all of the following information— 

(i) Special financial assistance 

calculated under § 4262.4(a)(2)(i) 

determined as a lump sum as of the SFA 

measurement date. 

(ii) All items identified in paragraphs 

(a)(5)(ii) through (viii) of this section 

that support the amount described in 

paragraph (a)(6)(i) of this section. 

(7) For MPRA plans, if the amount 

calculated under § 4262.4(a)(2)(ii) is the 

greatest amount calculated under 

§ 4262.4(a)(2), the amount of special 

financial assistance calculated under 

§ 4262.4(a)(2)(ii) and information used 

to determine the amount under 

§ 4262.4(a)(2)(ii), based on a 

deterministic projection, including all of 

the following information— 

(i) Special financial assistance 

calculated under§ 4262.4(a)(2)(ii) 

determined as a lump sum as of the SFA 

measurement date. 

(ii) For each plan year in the SFA 

coverage period: Benefit payments 

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

the previously suspended benefits 

described in paragraph (a)(5)(iii) of this 

section), separately for current retirees 

and beneficiaries in pay status, current 

terminated participants not yet in pay 

status, current active participants, and 

new entrants; and total benefit 

payments paid or expected to be paid. 

For each participant group except new 

entrants: benefit payments after 

reinstatement (excluding the previously 

suspended benefits described in 

paragraph (a)(5)(iii) of this section), the 

reduced benefit payments under the 

approved benefit suspension, and the 

difference due to the reinstatement of 

benefits. 

(iii) The present value, as of the SFA 

measurement date using the SFA 

interest rate required under 

§ 4262.4(e)(2), of the amounts described 

in paragraph (a)(5)(iii) of this section. 

(iv) The present value, as of the SFA 

measurement date using the SFA 

interest rate required under 

§ 4262.4(e)(2), of the difference in 

benefit amounts due to the 

reinstatement of benefits, as described 

in paragraph (a)(7)(ii) of this section. 

(8) Projected contributions and 

withdrawal liability payments, 

reflecting a reasonable allowance for 

amounts considered uncollectible, used 

to calculate the requested special 

financial assistance amount in § 4262.4, 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41013 

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. 

(9) A description of the development 

of the assumed future contributions 

(including assumed contribution rates) 

and future withdrawal liability 

payments described in paragraph (a)(8) 

of this section. 

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

more participants reported on line 6f of 

its most recently filed Form 5500 (as of 

the date the plan’s initial application for 

special financial assistance is filed), the 

participant census data utilized by the 

plan actuary in developing the cash 

flow projections included in the 

application. 

(11) Documentation of a death audit 

to identify deceased participants that 

was completed no earlier than 1 year 

before the plan’s SFA measurement 

date, including identification of the 

service provider conducting the audit 

and a copy of the results of the audit 

provided to the plan administrator by 

the service provider. 

(b) Information required for changed 

assumptions in initial and revised 

applications. 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 described in the 

special financial assistance instructions 

on PBGC’s website at www.pbgc.gov 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 non-SFA and 

SFA interest rates, which must be the 

same as the interest rates required under 

§ 4262.4(e)(1) and (2)). 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 § 4262.4, 

showing, for each assumption change 

from the Baseline, a deterministic 

projection calculated in the same 

manner as the requested amount in 

§ 4262.4. 

(c) Information required for certain 

events. An application for a plan with 

respect to which an event described in 

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

2021, must include the applicable 

information related to the event 

specified in special financial assistance 

instructions on PBGC’s website at 

www.pbgc.gov. 

(d) Information required for changed 

assumptions in supplemented 

applications. Any supplemented 

application filed for a plan described in 

§ 4262.4(g) must include the 

information specified in the 

supplemented special financial 

assistance instructions on PBGC’s 

website at www.pbgc.gov. 

§ 4262.9 Application for a plan with a 

partition. 

(a) In general. This section applies to 

a plan partitioned under section 4233 of 

ERISA that is eligible for special 

financial assistance under § 4262.3(a)(2). 

A partitioned plan is in priority group 

2 for purposes of § 4262.10(d)(2). 

(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 the 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 executed amendments required 

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

and 

(iii) The information required in 

§§ 4262.6 through 4262.8. 

(3) If a plan sponsor has already filed 

with PBGC any of the required 

information described in paragraph 

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

sponsor is not required to file that 

information with its application for 

special financial assistance. For any 

such information not filed with the 

application, the plan sponsor must note 

on the checklist described under 

§ 4262.6(a) when the information was 

filed. 

(c) Rescission of partition order. 

Effective when special financial 

assistance is paid under § 4262.12, and 

in a manner consistent with the 

application procedure determined 

under paragraph (b) of this section— 

(1) PBGC will rescind the partition 

order; and 

(2) The plan sponsor must amend the 

plan to remove any provisions or 

amendments that were required to be 

adopted under the partition order. 

§ 4262.10 Processing applications. 

(a) In general. Any application for 

special financial assistance for an 

eligible multiemployer plan must be 

filed by the plan sponsor in accordance 

with the provisions of this part and the 

special financial assistance instructions 

on PBGC’s website at www.pbgc.gov. 

(b) Method of filing. An application 

filed with PBGC under this part must be 

made electronically in accordance with 

the rules in part 4000 of this chapter. 

The time period for filing an application 

under this part must be computed under 

the rules in subpart D of part 4000 of 

this chapter. 

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

filed with PBGC under this part must be 

filed as described in § 4000.4 of this 

chapter. 

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

requires an application in a priority 

group under paragraph (d)(2) of this 

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 or 

supplemented application must be filed 

by December 31, 2026. Any application 

other than a plan’s initial application or 

a supplemented application is a revised 

application regardless of whether it 

differs from the initial application or 

supplemented 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, 


jspears on DSK121TN23PROD with RULES3
41014 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

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. Plans not specified in paragraph 

(d)(2) of this section may not file an 

application before March 11, 2023. 

(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. A plan may not file an 

application earlier than the beginning 

date specified for the plan’s 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 is in critical 

and declining status (as defined in 

section 305(b)(6) of ERISA) and has 

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 is signed in 

accordance with § 4262.6(b) and meets 

the applicable requirements in 

paragraph (d) of this section, including 

that it 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. References in this part to 

a plan’s initial application are to the 

plan’s first application that is 

considered filed. 

(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) Lock-in applications. (1) A lock-in 

application described in this paragraph 

(g), clearly and prominently identified 

as such, may be filed for a plan as its 

initial application (thus establishing the 

plan’s base data as provided under 

§ 4262.11(c)). 

(2) A lock-in application must— 

(i) Except as provided in paragraph 

(g)(2)(ii) of this section, be filed after 

March 11, 2023, and on or before 

December 31, 2025; or 

(ii) Be filed by a plan described in 

paragraphs (d)(2)(v) through (vii) of this 

section in accordance with the 

processing system described in 

paragraphs (d)(1)(ii) and (iii) and (d)(2) 

of this section at a time when PBGC is 

not accepting applications for filing 

under paragraph (d)(1)(i) of this section. 

(3) The lock-in application must— 

(i) Provide the information in 

§ 4262.7(a)(1) through (3) and in the 

instructions for lock-in applications on 

PBGC’s website at www.pbgc.gov; 

(ii) Be signed in accordance with 

§ 4262.6(b); and 

(iii) Be filed in accordance with 

paragraphs (a) through (c) of this section 

and the instructions for lock-in 

applications on PBGC’s website at 

www.pbgc.gov. 

(4) A lock-in application for a plan 

that satisfies the requirements of this 

paragraph (g) is considered filed as the 

plan’s initial application and denied for 

incompleteness under § 4262.11(a)(2)(i). 

(h) Informal consultation. Nothing in 

this section prohibits a plan sponsor 

from contacting PBGC informally to 

discuss a potential application for 

special financial assistance. 

§ 4262.11 PBGC action on applications. 

(a) In general. Within 120 days after 

the date an initial, revised, or 

supplemented application for special 

financial assistance is properly and 

timely filed, PBGC will— 

(1) Approve the application and 

notify the plan sponsor of the payment 

of special financial assistance in 

accordance with § 4262.12; or 

(2) Deny the application because— 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41015 

(i) The application is incomplete, and 

notify the plan sponsor of the missing 

information; or 

(ii) An assumption is unreasonable, a 

proposed change in assumption is 

individually unreasonable, or the 

proposed changed assumptions are 

unreasonable in the aggregate, and 

notify the plan sponsor of the reasons 

for the determination; or 

(iii) The plan is not an eligible 

multiemployer plan, and notify the plan 

sponsor of the reasons the plan fails to 

be eligible for special financial 

assistance; or 

(3) Fail to act on the application, in 

which case the application is deemed 

approved, and notify the plan sponsor 

of the payment of special financial 

assistance in accordance with § 4262.12. 

(b) Incomplete application. PBGC will 

consider an application incomplete 

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

unless the application accurately 

includes the information required to be 

filed under this part and the special 

financial assistance instructions on 

PBGC’s website at www.pbgc.gov, 

including any additional information 

that PBGC requires under § 4262.6(d). 

(c) Application base data. For an 

eligible plan other than a plan described 

in § 4262.4(g)— 

(1) A plan’s base data are— 

(i) The plan’s SFA measurement date 

as defined under § 4262.2; 

(ii) The plan’s participant census data 

as required to be used under § 4262.4(d); 

and 

(iii) The plan’s non-SFA interest rate 

and SFA interest rate as determined 

under § 4262.4(e)(1) and (2). 

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

date the eligible plan’s initial 

application for special financial 

assistance is filed and must be used for 

any revised application for the plan. If 

the plan was not eligible for special 

financial assistance on such date, the 

plan’s base data will be fixed by the date 

the plan files a revised application and 

demonstrates eligibility for special 

financial assistance. 

(d) Withdrawn applications. (1) A 

plan’s application for special financial 

assistance may be withdrawn at any 

time before PBGC denies or approves 

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. 

(e) Denied applications. If PBGC 

denies a plan’s application, an 

application submitted for a plan after 

the denial is a revised application. Any 

revised application must 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 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. 

(g) Final agency action. PBGC’s 

decision on an application for special 

financial assistance under this section is 

a final agency action under § 4003.22(b) 

of this chapter for purposes of judicial 

review under the Administrative 

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

§ 4262.12 Payment of special financial 

assistance. 

(a) Amount of special financial 

assistance under this part. The amount 

of special financial assistance to be paid 

by PBGC to or for a plan for which 

either an initial or a revised application 

for special financial assistance is filed 

on or after August 8, 2022, will be the 

total of— 

(1) The amount required as 

demonstrated by the plan sponsor on 

the application for such special 

financial assistance, determined under 

§ 4262.4 as of the SFA measurement 

date; plus 

(2) Interest on the amount in 

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

SFA measurement date to the SFA 

payment date at a rate equal to the 

interest rate required under 

§ 4262.4(e)(2); plus 

(3) The amount owed to PBGC under 

section 4261 of ERISA determined as of 

the SFA payment date; minus 

(4) Financial assistance payments 

under section 4261 of ERISA received 

by the plan between the SFA 

measurement date and the SFA payment 

date, with interest on each such 

financial assistance payment from the 

date thereof to the SFA payment date 

calculated at a rate equal to the interest 

rate required under § 4262.4(e)(2). 

(b) Amount of special financial 

assistance under the interim provisions 

of this part. The amount of special 

financial assistance to be paid by PBGC 

to or for a plan for which neither an 

initial nor a revised application for 

special financial assistance is filed on or 

after August 8, 2022 and there has not 

been any previous payment of special 

financial assistance, and where a plan’s 

application has not been supplemented, 

will be the total of— 

(1) The amount required as 

demonstrated by the plan sponsor on 

the application for such special 

financial assistance, determined under 

§ 4262.4 (under the terms of this part as 

in effect before August 8, 2022) as of the 

SFA measurement date; plus 

(2) Interest on the amount in 

paragraph (b)(1) of this section from the 

SFA measurement date to the SFA 

payment date at a rate equal to the 

interest rate required under 

§ 4262.4(e)(1); plus 

(3) The amount owed to PBGC under 

section 4261 of ERISA determined as of 

the SFA payment date; minus 

(4) Financial assistance payments 

under section 4261 of ERISA received 

by the plan between the SFA 

measurement date and the SFA payment 

date, with interest on each such 

financial assistance payment from the 

date thereof to the SFA payment date 

calculated at a rate equal to the interest 

rate required under § 4262.4(e)(1). 

(c) Amount of additional special 

financial assistance under 

supplemented application. The amount 

of additional special financial assistance 

to be paid by PBGC to or for a plan 

where the plan has received a prior 

payment of special financial assistance 

under the terms of this part as in effect 

before August 8, 2022 will be the total 

of— 

(1) The amount required as 

demonstrated by the plan sponsor on 

the application for such special 

financial assistance (including any 

supplemented application filed after the 

prior payment of special financial 

assistance), determined under § 4262.4 

as of the SFA measurement date; minus 

(2) The amount required as 

demonstrated by the plan sponsor on 

the application for such special 

financial assistance, determined under 

§ 4262.4 (under the terms of this part as 

in effect before August 8, 2022) as of the 

SFA measurement date; plus 

(3) Interest on the excess of the 

amount in paragraph (c)(1) of this 

section over the amount in paragraph 

(c)(2) of this section from the SFA 

measurement date to the payment date 

of the additional special financial 

assistance at a rate equal to the interest 

rate required under § 4262.4(e)(2). 

(d) Payment instructions. The plan 

must include in its application payment 

instructions in accordance with the 

special financial assistance instructions 

on PBGC’s website at www.pbgc.gov. 

PBGC may request additional 

information from the plan related to 

PBGC’s payment of special financial 

assistance. Payment will be considered 

made by PBGC when, in accordance 

with the payment instructions in the 


jspears on DSK121TN23PROD with RULES3
41016 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

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. 

(e) Repayment of traditional financial 

assistance. If a plan described in 

paragraph (a) or (b) of this section 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. 

(f) Date of payment of special 

financial assistance. (1) 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— 

(i) Ninety days after a plan’s special 

financial assistance application is 

approved by PBGC or deemed approved 

under § 4262.11(a)(3); or 

(ii) September 30, 2030. 

(2) References in this section to the 

SFA payment date are to the date PBGC 

sends payment of special financial 

assistance, not the bank settlement date. 

(g) 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 preceding 

sentence, the following payment 

obligations apply: 

(1) Special financial assistance is 

subject to recalculation or adjustment to 

correct a clerical or arithmetic error. 

PBGC will, and plans must, make 

payments as needed to reflect any such 

recalculation or adjustment in a timely 

manner. 

(2) If PBGC determines that a payment 

for special financial assistance to a plan 

exceeded the amount to which the plan 

was entitled, any excess payment 

constitutes a debt to the Federal 

Government. If not paid within 90 

calendar days after demand, PBGC may 

reduce the debt by any action permitted 

by Federal statute. Except where 

otherwise provided by statutes or 

regulations, PBGC will charge interest 

and other amounts permitted on an 

overdue debt in accordance with the 

Federal Claims Collection Standards (31 

CFR parts 900 through 999). The date 

from which interest is computed is not 

extended by litigation or the filing of 

any form of appeal. 

§ 4262.13 Restrictions on special financial 

assistance. 

(a) In general. A plan that receives 

special financial assistance must be 

administered in accordance with the 

restrictions in this section and in 

§ 4262.14. 

(b) Restrictions and use of SFA. 

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 as described in § 4262.14(a); 

(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 § 4262.14. 

§ 4262.14 Permissible investments of 

special financial assistance. 

(a) A plan that receives special 

financial assistance must segregate 

special financial assistance assets and 

earnings thereon (‘‘amounts attributable 

to special financial assistance’’) in an 

account that is separate from the plan’s 

non-special financial assistance assets 

and that is invested consistent with the 

investment requirements of this section. 

(b) Permissible investments for 

amounts attributable to special financial 

assistance are— 

(1) Investments in return-seeking 

assets as described under paragraph (c) 

of this section, not to exceed 33 percent 

of amounts attributable to special 

financial assistance measured using fair 

market value as of— 

(i) Each day the plan purchases 

return-seeking assets, other than 

through the automatic re-purchase of 

capital gains and reinvestment of 

dividends; and 

(ii) At least one day during every 

rolling period of 12 consecutive months 

beginning from the date the plan 

receives special financial assistance. 

(2) Investments in investment grade 

fixed income securities and cash as 

described in paragraph (d) of this 

section for all other amounts 

attributable to special financial 

assistance. 

(c) For purposes of this section, 

investments in return-seeking assets are 

investments in— 

(1) Common stock that is 

denominated in U.S. dollars and 

registered under section 12(b) of the 

Securities Exchange Act of 1934. 

(2) Shares held in a permissible fund 

vehicle described in paragraph (g) of 

this section that abides by an 

investment policy that restricts 

investment predominantly to equity 

securities registered under section 12(b) 

of the Securities Exchange Act of 1934, 

U.S. Treasury securities with less than 

one year to maturity date, cash and cash 

equivalents described in paragraph 

(d)(5) of this section, and money market 

funds described in paragraph (d)(6) of 

this section. 

(3) A debt security that has been 

resold in an offering pursuant to 17 CFR 

230.144A (Rule 144A under the 

Securities Act of 1933), is investment 

grade as described under paragraph (f) 

of this section, and has not been issued 

by a foreign issuer as defined under 17 

CFR 240.3b–4(b). 

(4) A debt instrument, as described 

under paragraph (d) of this section, that 

is no longer investment grade if it was 

investment grade as described under 

paragraph (f) of this section when 

purchased by the plan for the portion of 

special financial assistance invested in 

investment grade fixed income 

securities. 

(d) For purposes of this section, 

investments in investment grade fixed 

income securities and cash are 

investments in— 

(1) A bond or other debt security that 

pays a fixed amount or fixed rate of 

interest, is denominated in U.S. dollars, 

sold in an offering registered under the 

Securities Act of 1933, and is 

investment grade as described under 

paragraph (f) of this section. 

(2) Shares held in a permissible fund 

vehicle described under paragraph (g) of 

this section that abides by an 

investment policy that restricts 

investment predominantly to securities 

described in this paragraph (d) that are 

denominated in U.S. dollars and are 

investment grade as defined under 

paragraph (f) of this section. 

(3) Securities issued, guaranteed or 

sponsored by the U.S. Government or its 

designated agencies as required to be 

entered as government securities on the 

Form 5500 Schedule H. 

(4) Municipal securities defined in 

section 3(a)(29) of the Securities 

Exchange Act of 1934 that are 

investment grade as defined under 

paragraph (f) of this section. 

(5) Noninterest-bearing cash and 

interest-bearing cash equivalents as 

required to be entered on the Form 5500 

Schedule H. 

(6) Money market funds regulated 

pursuant to 17 CFR 270.2a–7 (Rule 2a– 

7 under the Investment Company Act of 

1940). 

(e) Fixed income securities described 

under paragraph (d) of this section must 

be considered investment grade (as 

described under paragraph (f) of this 

section) by a fiduciary, within the 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41017 

meaning of section 3(21) of ERISA, who 

is or seeks the advice of an experienced 

investor (such as an Investment Adviser 

registered under section 203 of the 

Investment Advisers Act of 1940). 

(f) Investment grade means securities 

for which the issuer (or obligor) has at 

least adequate capacity to meet the 

financial commitments under the 

security for the projected life of the asset 

or exposure. For purposes of this 

paragraph (f), adequate capacity to meet 

financial commitments means that the 

risk of default by the issuer (or obligor) 

is low and the full and timely 

repayment of principal and interest on 

the security is expected. 

(g) Permissible fund vehicle means an 

investment company or collective trust, 

that is— 

(1) An open-end investment company 

registered on Form N–1A under section 

8 of the Investment Company Act of 

1940; or 

(2) A unit investment trust (as defined 

in section 4(2) of the Investment 

Company Act of 1940 and registered 

under section 8 of such Act) the shares 

of which are listed and traded on a 

national securities exchange, and that 

has been formed and operates under an 

exemptive order granted by the U.S. 

Securities and Exchange Commission; 

or 

(3) A collective trust fund that is 

maintained by a bank or trust company 

and that has been formed and operates 

pursuant to an exemption under section 

3(c)(11) of the Investment Company Act 

of 1940. 

(h) Permissible investments must not 

be supplemented by, and permissible 

fund vehicles cannot include, 

derivatives or otherwise be leveraged in 

a way that could increase the risk of the 

permissible investment beyond the risk 

associated with the market value of the 

un-leveraged permissible investment. 

Any notional derivative exposure, other 

than exposure gained through a 

permissible fund vehicle described 

under paragraph (g) of this section, must 

be supported by liquid assets that are 

cash or cash equivalents denominated 

in U.S. dollars. 

(i) This section is applicable to a plan 

that applies or has applied for special 

financial assistance under this part. 

Notwithstanding the preceding 

sentence, for a plan that received special 

financial assistance under this part in 

effect before August 8, 2022, this section 

will not apply unless and until the plan 

files a supplemented application under 

this part. Before the date that the plan 

files a supplemented application under 

this part, the rules under this section in 

effect before August 8, 2022 apply. 

§ 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 section 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 

section 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 and section 

432(k) of the Code. The requirements for 

the notice are in notice of reinstatement 

instructions available on PBGC’s 

website at www.pbgc.gov. 

§ 4262.16 Conditions for special financial 

assistance. 

(a) In general. A plan that receives 

special financial assistance must be 

administered in accordance with the 

conditions in this section. 

(b) Benefit increases. This paragraph 

(b) applies to benefits and benefit 

increases described in section 

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

the time the benefit or benefit increase 

has been in effect. This paragraph (b) 

does not apply to the reinstatement of 

benefits that were suspended under 

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

provided under § 4262.15) or a 

restoration of benefits under 26 CFR 

1.432(e)(9)–1(e)(3). 

(1) Retrospective. A benefit or benefit 

increase must not be adopted during the 

SFA coverage period if it is in whole or 

in part attributable to service accrued or 

other events occurring before the 

adoption date of the amendment. 

(2) Prospective. A benefit or benefit 

increase must not be adopted during the 

SFA coverage period unless— 

(i) The plan actuary certifies that 

employer contribution increases 

projected to be sufficient to pay for the 

benefit increase have been adopted or 

agreed to; and 

(ii) Those increased contributions 

were not included in the determination 

of the special financial assistance. 

(3) Request for exception. No earlier 

than 10 years after the end of the plan 

year in which the plan receives payment 

of special financial assistance under 

§ 4262.12, the plan sponsor may request 

approval from PBGC for an exception 

from the conditions under paragraphs 

(b)(1) and (2) of this section by 

demonstrating to the satisfaction of 

PBGC that, taking into account the value 

of the proposed benefit or benefit 

increase, the plan will avoid insolvency. 

A request for PBGC approval of a 

proposed benefit or benefit increase 

must be submitted by the plan sponsor 

or its duly authorized representative 

and must contain all of the following 

identifying, actuarial, and financial 

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) 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. 

(iv) The EIN assigned to the plan 

sponsor by the IRS and the PN assigned 

to the plan by the plan sponsor of the 

plan that applied for special financial 

assistance, if not the same as the EIN 

and PN in paragraph (b)(3)(ii) of this 

section. 

(v) A copy of the proposed benefit or 

benefit increase amendment. 

(vi) Most recent plan document or 

restatement of the plan document and 

all subsequent amendments adopted (if 

any). 

(vii) A copy of the most recent 

actuarial valuation performed for the 

plan before the date of the plan’s 

submission of a request for approval 

under this paragraph (b)(3), and the 

actuarial valuation performed for each 

of the 2 plan years immediately 


jspears on DSK121TN23PROD with RULES3
41018 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

preceding the most recent actuarial 

valuation. 

(viii) 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. 

(ix) A statement certified by an 

enrolled actuary of the effect of the 

proposed benefit or benefit increase on 

the plan’s existing benefit formula and 

benefit amount, and a demonstration 

that the expected contributions equal or 

exceed the estimated amount necessary, 

taking into account the proposed benefit 

or benefit increase, to satisfy the 

minimum funding requirement of 

section 431 of the Code. 

(x) A detailed statement certified by 

an enrolled actuary that the plan is 

projected to avoid insolvency, taking 

into account the value of the proposed 

benefit or benefit increase. The 

statement must include the basis for the 

conclusion, supporting data, 

calculations, assumptions, a description 

of the methodology, the basis for 

assumptions used, and the present value 

of the proposed benefit or benefit 

increase. The statement must also 

specify the amount of the change in the 

minimum required contribution under 

section 431 of the Code attributable to 

the proposed benefit or benefit increase 

for the first full plan year in which it is 

in effect, including the change in 

normal cost, the change in actuarial 

accrued liability and the annual 

amortization amount associated with 

the change in actuarial accrued liability. 

(xi) The statement in paragraph 

(b)(3)(x) of this section must include an 

exhibit showing the annual cash flow 

projection for the plan for 30 years 

beginning on or after the proposed 

adoption date of the amendment. The 

cash flow projection should use an open 

group valuation. 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 made and expected to 

be made to the plan taking into account 

a reasonable allowance for amounts 

considered uncollectible. 

(C) Plan level benefit payments 

organized by participant type (e.g., 

active, retiree, terminated vested) for the 

projection period. 

(D) Administrative expenses for the 

projection period. 

(E) Assumed investment return 

separately for special financial 

assistance and non-special financial 

assistance amounts. 

(F) Fair market value of assets as of 

the end of the year. 

(xii) The present value of accrued 

benefits. 

(xiii) Any additional information 

PBGC determines it needs to review a 

request for approval of a proposed 

amendment, including any adjustments 

to assumptions required by PBGC in its 

review of whether the plan is projected 

to avoid insolvency. 

(c) Allocation of plan assets. During 

the SFA coverage period, plan assets, 

including special financial assistance, 

must be invested in investment grade 

fixed income as described in 

§ 4262.14(d) 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, taking into 

account the limitations on derivatives 

and leverage in § 4262.14(h). 

(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 over $10 million of 

annual contributions 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 over $10 million of annual 

contributions 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 of the 

contributing employer identified in 

paragraph (d)(2)(ii) of this section, 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, 

cashflow statement, and notes) for the 

contributing employer and the 

controlled 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 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41019 

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 any 

such existing plan will be increased. 

(ix) Any additional information PBGC 

determines it needs to review a request 

for approval of a proposed contribution 

change. 

(e) Allocating contributions and other 

practices—(1) In general. 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: 

(i) Contributions pursuant to a 

reciprocity agreement; 

(ii) 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; 

(iii) The actual cost of services 

provided to the plan by an unrelated 

third party; or 

(iv) 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. 

(2) Request for exception. No earlier 

than 5 years after the end of the plan 

year in which the plan receives payment 

of special financial assistance under 

§ 4262.12, the plan sponsor may request 

approval from PBGC for an exception 

from the conditions under paragraph (e) 

of this section by demonstrating to the 

satisfaction of PBGC that, taking into 

account the value of any proposed 

reallocation of contributions, the plan 

will avoid insolvency, that the 

reallocation is needed due to a 

significant increase in health benefit 

costs due to a change in Federal law 

which goes into effect after March 11, 

2021, that the reallocation is no more 

than a 10 percent reduction in the 

amount of the contribution rate 

negotiated on or before March 11, 2021, 

that is allocable to the pension plan, and 

that the reallocation relating to any 

change in Federal law is for no more 

than 5 years. A continuation of the 

reallocation of contributions relating to 

any change in Federal law after the 

initial reallocation beyond 5 years must 

satisfy the requirement for a 

contribution decrease under paragraph 

(d) of this section. A subsequent change 

in Federal law causing a significant 

increase in health benefit costs is a 

separate event for purposes of applying 

this exception, except that a plan may 

reallocate contributions under this 

exception from the conditions under 

paragraph (e) of this section for no more 

than 10 years cumulatively for all 

reallocation requests during the SFA 

coverage period. A request for PBGC 

approval of a proposed reallocation of 

contributions must be submitted by the 

plan sponsor or its duly authorized 

representative and must contain all of 

the following identifying, actuarial, and 

financial 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) 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. 

(iv) The EIN assigned to the plan 

sponsor by the IRS and the PN assigned 

to the plan by the plan sponsor of the 

plan that applied for special financial 

assistance, if not the same as the EIN 

and PN in paragraph (e)(2)(ii) of this 

section. 

(v) A copy of the proposed 

reallocation of contributions 

amendment. 

(vi) Most recent plan document or 

restatement of the plan document and 

all subsequent amendments adopted (if 

any). 

(vii) A copy of the most recent 

actuarial valuation performed for the 

plan before the date of the plan’s 

submission of a request for approval 

under this paragraph (e)(2), and the 

actuarial valuation performed for each 

of the 2 plan years immediately 

preceding the most recent actuarial 

valuation. 

(viii) 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. 

(ix) A statement certified by an 

enrolled actuary of the effect of the 

proposed reallocation of contributions 

on the plan’s existing contributions, and 

a demonstration that the expected 

contributions equal or exceed the 

estimated amount necessary, taking into 

account the proposed reallocation of 

contributions, to satisfy the minimum 

funding requirement of section 431 of 

the Code. 

(x) A detailed statement certified by 

an enrolled actuary that the plan is 

projected to avoid insolvency, taking 

into account the value of the proposed 

reallocation of contributions. The 

statement must include the basis for the 

conclusion, supporting data, 

calculations, assumptions, a description 

of the methodology, the basis for 

assumptions used, and the present value 

of the proposed reallocation of 

contributions. 

(xi) The statement in paragraph 

(e)(2)(x) of this section must include an 

exhibit showing the annual cash flow 

projection for the plan for 30 years 


jspears on DSK121TN23PROD with RULES3
41020 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

beginning on or after the proposed 

adoption date of the amendment. The 

cash flow projection should use an open 

group valuation. 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 expected to be made 

to the plan taking into account a 

reasonable allowance for amounts 

considered uncollectible. 

(C) Plan level benefit payments 

organized by participant type (e.g., 

active, retiree, terminated vested) for the 

projection period. 

(D) Administrative expenses for the 

projection period. 

(E) Assumed investment return 

separately for special financial 

assistance and non-special financial 

assistance amounts. 

(F) Fair market value of assets as of 

the end of the year. 

(xii) The present value of accrued 

benefits. 

(xiii) A demonstration that the 

reallocation is needed due to a 

significant increase in health benefit 

costs due to a change in Federal law, 

that the reallocation is no more than a 

10 percent reduction in the amount of 

the contribution rate negotiated on or 

before March 11, 2021, going to the 

pension plan, and that the reallocation 

is for no more than 5 years for a 

reallocation request relating to any 

single change in Federal law and no 

more than 10 years cumulatively for all 

reallocation requests during the plan’s 

SFA coverage period. 

(xiv) Any additional information 

PBGC determines it needs to review a 

request for approval of a proposed 

amendment, including any adjustments 

to assumptions required by PBGC in its 

review of whether the plan is projected 

to avoid insolvency. 

(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) In general. 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) Request for approval. 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 

information for each of the plans 

involved in the transaction: 

(i) A certification by the enrolled 

actuary that the plan or any of its 

component parts received special 

financial assistance and the most recent 

value of special financial assistance 

assets. 

(ii) A copy of the actuarial valuation 

performed for each of the 2 plan years 

before the most recent actuarial 

valuation filed in accordance with 

§ 4231.9(f) of this chapter. 

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

recent certification under section 

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

description of the assumptions used in 

the certification, and the basis under 

which they were determined. The 

description must include information 

about the assumptions used for the 

projection of future contributions, 

withdrawal liability payments, and 

investment returns, and any other 

assumption that may have a material 

effect on projections. 

(iv) A detailed narrative description 

demonstrating that the transaction does 

not unreasonably increase PBGC’s risk 

of loss with respect to any plan involved 

in the transaction. The narrative must be 

supported by a detailed determination 

certified by the enrolled actuary of the 

present value of financial assistance 

under section 4261 of ERISA which is 

calculated using 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. 

The certification must include 

supporting data, calculations, 

assumptions, a description of the 

methodology, the basis for assumptions 

used, and the projected date of 

insolvency. 

(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 

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 taking into account a 

reasonable allowance for amounts 

considered uncollectible. 

(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) If the plan requests that PBGC 

approve that a waiver of the conditions 

in paragraph (b)(1) of this section 

(retrospective benefits), paragraph (d) of 

this section (contribution decreases), 

and the condition in paragraph (e) of 

this section relating to allocating 

contributions and other income applies 

to the merged plan, a demonstration that 

the requirements for a waiver in 

paragraph (f)(4) of this section are met. 

(vii) A detailed narrative description 

with supporting documentation 

demonstrating that the transaction 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. The 

narrative description and supporting 

documentation must consider the 

projected month and year of plan 

insolvency for each of the plans before 

and after the transaction. 

(viii) 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. 

(3) Application of conditions with 

respect to an approved transfer or 

merger. If PBGC approves a transfer of 

assets and liabilities (that is not a 

merger) from a plan that receives special 

financial assistance to another plan (the 

transferee plan) under this paragraph (f), 

the restrictions and conditions that 

apply to the plan that receives special 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41021 

financial assistance will also apply to 

the transferee plan as determined by 

PBGC as a condition of the approval. If 

PBGC approves a merger under this 

paragraph (f), the restrictions and 

conditions that apply to a plan that 

receives special financial assistance will 

apply after the merger as follows: 

(i) The restrictions in §§ 4262.13(b) 

and 4262.14 and the conditions in this 

paragraph (f) (transfer or merger), 

paragraph (h) of this section 

(withdrawal liability settlement), 

paragraph (i) of this section (annual 

compliance statement), and paragraph 

(j) of this section (audit) apply to the 

merged plan. 

(ii) The conditions in paragraph (b)(2) 

of this section (prospective benefit 

increase), paragraph (c) of this section 

(allocation of plan assets), and 

paragraph (e) of this section relating to 

allocating expenses do not apply to the 

merged plan. 

(iii) In the absence of a waiver 

described in paragraph (f)(4) of this 

section, the condition in paragraph 

(b)(1) of this section (retrospective 

benefit increase) continues to apply to 

participants in the plan that received 

special financial assistance before the 

merger, the condition in paragraph (d) 

of this section (contribution decreases) 

continues to apply to employers who 

had an obligation to contribute to the 

plan that received special financial 

assistance before the merger, and the 

condition in paragraph (e) of this 

section relating to allocating 

contributions and other income 

continues to apply to contributions or 

income relative to the plan that received 

special financial assistance before the 

date of the merger. 

(iv) For the condition described in 

paragraph (g)(1) of this section 

(withdrawal liability interest 

assumption), the merged plan must use 

the interest assumptions in appendix B 

to part 4044 of this chapter to determine 

the unfunded vested benefits that arose 

under the plan that received special 

financial assistance before the date of 

the merger for purposes of allocating 

unfunded vested benefits under subpart 

D of part 4211 of this chapter and 

determining withdrawal liability for 

employers that participated in that plan. 

(v) For the condition described in 

paragraph (g)(2) of this section 

(withdrawal liability amount of special 

financial assistance required to be 

phased in), the merged plan must apply 

the special financial assistance phase-in 

condition to determine the unfunded 

vested benefits that arose under the plan 

that received special financial assistance 

before the date of the merger for 

purposes of allocating unfunded vested 

benefits under subpart D of part 4211 of 

this chapter and determining 

withdrawal liability for employers that 

participated in that plan. 

(4) Waiver of conditions with respect 

to an approved merger. A plan may 

request a waiver of the condition in 

paragraph (b)(1) of this section 

(retrospective benefit increase), 

paragraph (d) of this section 

(contribution decreases), and the 

condition in paragraph (e) of this 

section relating to allocating 

contributions and other income for the 

merged plan in the plan’s request for 

PBGC’s approval of a merger pursuant to 

paragraph (f)(1) of this section. If any of 

the plans involved in the merger engage 

in multiple transactions in any 1-year 

period, the transactions will be 

considered in the aggregate. The plan’s 

application must demonstrate the 

following requirements for a waiver— 

(i) The total current value of assets of 

the plans that received special financial 

assistance before the merger must be 25 

percent or less of the total current value 

of assets of the merged plan, calculated 

using the current value of assets most 

recently required before the merger to be 

entered by the plans on the Form 5500 

Schedule MB. 

(ii) The total current liability of the 

plans that received special financial 

assistance before the merger must be 25 

percent or less of the total current 

liability of the merged plan, calculated 

using the current liability most recently 

required before the merger to be entered 

by the plans on the Form 5500 Schedule 

MB. 

(iii) In the most recent certification of 

plan status for any plan that did not 

receive special financial assistance 

before the merger, the plan actuary must 

have certified that the plan is not in 

endangered or critical status (including 

critical and declining status) and is not 

projected to be in critical status within 

5 years from the date of the plan’s 

request for approval, and the plan must 

not be described in section 432(b)(5) of 

the Code. 

(g) Withdrawal liability 

determination—(1) Interest 

assumptions. A plan must use the 

interest assumptions in appendix B to 

part 4044 of this chapter in determining 

the unfunded vested benefits of the plan 

under section 4213(c) of ERISA (for the 

purpose of determining withdrawal 

liability), and in determining the 

amortization schedule under section 

4219(c)(1)(A) of ERISA, beginning with 

the first plan year in which the plan 

receives payment of special financial 

assistance under § 4262.12 and until the 

later of— 

(i) The end of the tenth plan year after 

the first plan year in which the plan 

receives payment of special financial 

assistance under § 4262.12; or 

(ii) The end of the plan year described 

in paragraph (g)(1)(iii) of this section (if 

the special financial assistance most 

recently paid to the plan as of the end 

of that plan year is calculated under this 

part as in effect before August 8, 2022); 

otherwise the end of the plan year 

described in paragraph (g)(1)(iv) of this 

section. 

(iii) The plan year described in this 

paragraph (g)(1)(iii) is the plan year by 

which the plan is projected to exhaust 

any SFA assets as determined under the 

methodology of § 4262.4(b), applying 

the interest rate under § 4262.4(e)(2) to 

the special financial assistance as 

determined as of the SFA measurement 

date as determined under this part as in 

effect before August 8, 2022. However, 

if the first plan year in which the plan 

receives payment of special financial 

assistance is after the plan year that 

includes the plan’s SFA measurement 

date, the plan year by which the plan is 

projected to exhaust any SFA assets is 

deferred by the number of years by 

which the first plan year in which the 

plan receives payment is after the plan 

year that includes the plan’s SFA 

measurement date. 

(iv) The end of the plan year by 

which, according to the plan’s 

projection, the plan is projected to 

exhaust any SFA assets, as determined 

under § 4262.4(b). However, if the first 

plan year in which the plan receives 

payment of special financial assistance 

is after the plan year that includes the 

plan’s SFA measurement date, the plan 

year by which the plan is projected to 

exhaust any SFA assets is deferred by 

the number of years by which the first 

plan year in which the plan receives 

payment of special financial assistance 

is after the plan year that includes the 

plan’s SFA measurement date. 

(2) Phase-in of SFA—(i) In general. In 

determining unfunded vested benefits 

under section 4213(c) of ERISA (for the 

purpose of determining withdrawal 

liability), the procedures in this 

paragraph (g)(2) must be followed. 

(ii) Phase-in period. The procedures 

in this paragraph (g)(2) apply to the 

determination of unfunded vested 

benefits as of the end of any 

determination year that is not earlier 

than the payment year or later than the 

exhaustion year. 

(iii) Determination year. For purposes 

of this paragraph (g)(2), the 

determination year is the plan year as of 

the end of which unfunded vested 

benefits are being valued. 


jspears on DSK121TN23PROD with RULES3
41022 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

(iv) Payment year. For purposes of 

this paragraph (g)(2), the payment year 

is the first plan year in which the plan 

receives special financial assistance. 

(v) Determination of exhaustion year. 

For purposes of this paragraph (g)(2), if 

the special financial assistance most 

recently paid to the plan as of the last 

day of the determination year is 

calculated under this part as amended 

effective August 8, 2022, then the 

exhaustion year is the plan year 

described in paragraph (g)(2)(vi) of this 

section; otherwise, the exhaustion year 

is the plan year described in paragraph 

(g)(2)(vii) of this section. 

(vi) Exhaustion year. The plan year 

described in this paragraph (g)(2)(vi) is 

the plan year by which, according to the 

plan’s projection, the plan is projected 

to exhaust any SFA assets, as 

determined under § 4262.4(b). However, 

if the first plan year in which the plan 

receives payment of SFA is after the 

plan year that includes the plan’s SFA 

measurement date, the exhaustion year 

is deferred by the number of years by 

which the payment year is after the plan 

year that includes the plan’s SFA 

measurement date. 

(vii) Exhaustion year before any SFA 

paid under this part. The plan year 

described in this paragraph (g)(2)(vii) is 

the plan year by which the plan is 

projected to exhaust any SFA assets, 

determined under the methodology of 

§ 4262.4(b), applying the interest rate 

under § 4262.4(e)(2) to the special 

financial assistance as determined as of 

the SFA measurement date as 

determined under this part as in effect 

before August 8, 2022. However, if the 

first plan year in which the plan 

receives payment of SFA is after the 

plan year that includes the plan’s SFA 

measurement date, the exhaustion year 

is deferred by the number of years by 

which the payment year is after the plan 

year that includes the plan’s SFA 

measurement date. 

(viii) SFA assets excluded. The value 

of the plan assets taken into account as 

of the end of each determination year is 

the value of the assets that would 

otherwise be taken into account in the 

absence of this provision reduced by the 

amount described in paragraph (g)(2)(ix) 

of this section. 

(ix) Calculation of SFA assets 

excluded. The amount described in this 

paragraph (g)(2)(ix) is the total amount 

of special financial assistance paid to 

the plan under § 4262.12 (as determined 

under § 4262.12(a) or (b), or under 

§ 4262.12(b) and (c) for plans paid under 

a supplemented application, as 

applicable) as of the end of the 

determination year multiplied by a 

fraction, the numerator of which is the 

number of years determined under 

paragraph (g)(2)(x) of this section as of 

the end of the determination year and 

the denominator of which is the number 

of years determined under paragraph 

(g)(2)(xi) of this section as of the end of 

the determination year. 

(x) Numerator. The number of years 

determined under this paragraph 

(g)(2)(x) is the number of plan years in 

the period beginning with the 

determination year and ending with the 

exhaustion year. 

(xi) Denominator. The number of 

years determined under this paragraph 

(g)(2)(xi) is the number of plan years in 

the period beginning with the payment 

year and ending with the exhaustion 

year. 

(xii) Plan year. For purposes of this 

paragraph (g)(2), any reference to a plan 

year means a complete plan year. 

(xiii) No receivable. Special financial 

assistance assets must be excluded from 

the determination of unfunded vested 

benefits until the date that special 

financial assistance is paid to the plan 

under § 4262.12, and no receivable shall 

be set up as of any earlier date in 

anticipation of the plan receiving such 

payment. 

(xiv) Reporting. For any withdrawal 

liability assessed during the phase-in 

period, the amount described under 

paragraph (g)(2)(ix) of this section must 

be reported in the plan’s annual 

statement of compliance (as required 

under paragraph (i) of this section) for 

the plan year in which the liability is 

assessed. 

(xv) Applicability. This paragraph 

(g)(2) applies to a plan in determining 

withdrawal liability for withdrawals 

occurring after the plan year in which 

the plan receives payment of special 

financial assistance under this part. 

Notwithstanding the preceding 

sentence, for a plan that received special 

financial assistance under this part in 

effect before August 8, 2022, this 

paragraph (g)(2) will not apply unless 

the plan files a supplemented 

application under this part. If the plan 

files a supplemented application, this 

paragraph (g)(2) applies to the plan in 

determining withdrawal liability for 

withdrawals occurring on or after the 

date the plan files the supplemented 

application. 

(xvi) Examples. The following 

examples illustrate the provisions of 

paragraph (g)(2) of this section. 

(A) Example 1. Plan A, a calendaryear plan, filed an application for 

special financial assistance under this 

part with an SFA measurement date in 

plan year 2023 and received a special 

financial assistance payment of 

$1,000,000 in 2024. In the plan’s 

application, Plan A is projected to 

exhaust its special financial assistance 

assets during plan year 2028. 

Accordingly, the payment year is 2024 

and the exhaustion year is 2029 (the 

projected SFA exhaustion year in the 

application plus 1 year for the 

difference between the plan year that 

includes the SFA measurement date and 

the payment year). Employer P 

withdraws from Plan A in 2028. For 

Employer P: {1} the determination year 

is 2027; {2} the numerator of the phasein fraction is 3 (2027 to 2029); {3} the 

denominator of the phase-in fraction is 

6 (2024 to 2029); and {4} the phased in 

amount is $500,000 ($1,000,000 × 3⁄6). If 

total assets (assuming no phased 

recognition of SFA) are $100,000,000, 

unfunded vested benefits are based on 

assets of $99,500,000. 

(B) Example 2. Plan B, a calendar-year 

plan, filed an application for special 

financial assistance under the terms of 

the interim provisions of this part with 

an SFA measurement date in plan year 

2022 and received a special financial 

assistance payment of $1,000,000 in 

2022. According to the methodology 

under paragraph (g)(2) of this section 

and the information submitted in the 

plan’s application under the interim 

provisions of this part, Plan B is 

projected to exhaust its special financial 

assistance assets during plan year 2028. 

However, Plan B files a supplemented 

application under this part in 2023 and 

receives an additional special financial 

assistance payment of $100,000 in 2024. 

In Plan B’s supplemented application, 

the plan is projected to exhaust its 

special financial assistance assets 

during plan year 2030. Employer R 

withdraws from Plan B in 2024, which 

is after Plan B filed a supplemented 

application. For Employer R: {1} the 

payment year is 2022; {2} the 

determination year is 2023; {3} the 

exhaustion year is 2028; {4} the 

numerator of the phase-in fraction is 6 

(2023 to 2028); {5} the denominator of 

the phase-in fraction is 7 (2022 to 2028); 

and {6} the phased in amount is 

$857,143 ($1,000,000 × 6⁄7). If total 

assets (assuming no phased recognition 

of SFA) are $100,000,000, unfunded 

vested benefits are based on assets of 

$99,142,857. Employer S withdraws 

from Plan B in 2028. For Employer S: 

{1} the payment year is 2022; {2} the 

determination year is 2027; {3} the 

exhaustion year is 2030; {4} the 

numerator of the phase-in fraction is 4 

(2027 to 2030); {5} the denominator of 

the phase-in fraction is 9 (2022 to 2030); 

and {6} the phased in amount is 

$488,889 ($1,100,000 × 4⁄9). If total 

assets (assuming no phased recognition 


jspears on DSK121TN23PROD with RULES3
Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 41023 

of SFA) are $100,000,000, unfunded 

vested benefits are based on assets of 

$99,511,111. If, instead of withdrawing 

in 2024, Employer R withdrew from 

Plan B in 2023 before Plan B filed its 

supplemented application, the phase-in 

condition would not apply and 

unfunded vested benefits would be 

based on total assets of $100,000,000. 

(C) Example 3. Plan C, a calendar-year 

plan, filed an application for special 

financial assistance under this part with 

an SFA measurement date in plan year 

2024 and received a special financial 

assistance payment of $1,000,000 in 

2025. According to the plan’s 

application, Plan C is projected to 

exhaust its SFA assets during plan year 

2024. Accordingly, the payment year is 

2025 and the exhaustion year is 2025 

(the projected SFA exhaustion year in 

the application plus 1 year for the 

difference between the plan year that 

includes the SFA measurement date and 

the payment year). Employer T 

withdraws from Plan C in 2026. For 

Employer T: {1} the determination year 

is 2025; {2} the numerator of the phasein fraction is 1 (2025 to 2025); {3} the 

denominator of the phase-in fraction is 

1 (2025 to 2025); and {4} the phased in 

amount is $1,000,000 ($1,000,000 × 1⁄1). 

If total assets (assuming no phased 

recognition of SFA) are $100,000,000, 

unfunded vested benefits are based on 

assets of $99,000,000. 

(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 in appendix B to part 4044 

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 for each 

plan year, beginning with the plan year 

in which the plan received payment of 

special financial assistance and through 

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 as follows— 

(1) Except as provided in paragraph 

(i)(2) of this section, a plan’s statement 

of compliance for each plan year must 

be filed no later than 90 days after the 

end of the plan year. 

(2) If six months or fewer remain in 

the plan year after the month that 

includes the date the plan first received 

payment of special financial assistance, 

the first statement of compliance must 

cover the period from the date the plan 

received payment of special financial 

assistance through the last day of the 

plan year following the plan year in 

which the plan received payment of 

special financial assistance, and must be 

filed no later than 90 days after the end 

of such plan year. 

(3) Each statement of compliance 

must be 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 receives 

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 (b), (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 (b), (d), (f), (h), or (i) of 

this section must be made electronically 

in accordance with the rules in 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 (b), (d), (f), (h), or (i) of 

this section must be submitted as 

described in § 4000.4 of this chapter. 

§ 4262.17 Other provisions. 

(a) Special financial assistance is not 

capped by the guarantee under section 

4022A of ERISA. 

(b) A plan that receives special 

financial assistance must continue to 

pay premiums due under section 4007 

of ERISA for participants and 

beneficiaries in the plan. 

(c) A plan that receives special 

financial assistance is deemed to be in 

critical status within the meaning of 

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

day of the last plan year ending in 2051. 

(d) A plan that receives special 

financial assistance and subsequently 

becomes insolvent under section 4245 

of ERISA will be subject to the rules and 

guarantee for insolvent plans in effect 

when the plan becomes insolvent. 

(e) A plan that receives special 

financial assistance is not eligible to 

apply for a suspension of benefits under 

section 305(e)(9) of ERISA. 

(f) A plan that receives special 

financial assistance and meets the 

eligibility requirements for partition of 


jspears on DSK121TN23PROD with RULES3
41024 Federal Register / Vol. 87, No. 130 / Friday, July 8, 2022 / Rules and Regulations 

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 

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. 

Issued in Washington, DC, by: 

Gordon Hartogensis, 

Director, Pension Benefit Guaranty 

Corporation. 

[FR Doc. 2022–14349 Filed 7–7–22; 8:45 am] 

BILLING CODE 7709–02–P 


jspears on DSK121TN23PROD with RULES3