PBGC Issues Final Rules Regarding Special Financial Assistance Program: What Contributing Employers Should Know

4 min

On July 6, the Pension Benefit Guaranty Corporation (PBGC) issued the Final Rules (Final Rules) implementing the Special Financial Assistance Program (SFA) enacted by Congress as part of the American Rescue Plan Act of 2021 (ARPA). The Final Rules follow nearly one year after the PBGC release of interim final rules (IFR) and further regulate SFA applications and conditions.


A multiemployer pension plan is a collectively bargained plan maintained by a labor union and more than one employer in the same or related industries. There are approximately 1,400 multiemployer pension plans in the United States, covering nearly 11 million participants.

About 200 multiemployer plans, covering between 2 to 3 million participants, are projected to be insolvent in the next 20 years. Absent legislative relief, these participants would have had their benefits transferred to the PBGC — and many participants probably would have suffered cuts in benefits (as the PBGC guarantee for a multiemployer participant with 30 years of service is $12,870).

In March 2021, as part of ARPA, Congress established the Special Financial Assistance Program. The SFA program addresses the immediate financial crisis facing multiemployer pension plans and the solvency of PBGC’s Multiemployer Insurance Program. The PBGC estimates that it will disburse between $74 billion and $91 billion in SFA to qualifying plans to help those plans remain solvent through 2051.

The IFR was issued to allow financially troubled plans to apply with the PBGC for financial assistance pursuant to the SFA program. The PBGC created a process to prioritize the most financially distressed plans. Approximately 40 multiemployer pension funds have had their SFA applications approved by, or have applications pending with, the PBGC.

The Final Rules take effect on August 8, 2022. For the plans that have a pending application with the PBGC or that have already received SFA, the IFR continues to govern their application. In other words, the Final Rules do not automatically apply to these plans.

Key changes

Expansion of SFA permissible investments:

The Final Rules allow plans to invest up to 33 percent of SFA assets in return-seeking assets. The remaining 67 percent (or more) of SFA funds must be invested in investment grade fixed income securities. The IFR had required 100 percent of the SFA funds to be invested in investment grade fixed income securities.

Separate interest rates for the projection of SFA assets and non-SFA assets:

The IFR provided a single assumed interest rate for the determination of SFA requested by a plan. Under the Final Rules, a plan can use different interest rate assumptions for SFA assets and non-SFA assets. The bifurcation of interest rates should result in plans receiving additional SFA if the plans used an interest rate that is higher than the newly established SFA rate.

Benefit Increases – Prospective and Retrospective Benefits:

A key feature of the IFR was its prohibition on benefit increases during the SFA coverage period. The Final Rules relaxed these prohibitions. As a result, a prospective benefit increase may be adopted if the plan actuary certifies that an increase meets certain requirements described in the Final Rules. And under certain circumstances, a plan may be permitted to restore retrospective benefits.

Contribution Decreases:

Under the Final Rules, contribution rates for each contribution base unit cannot be less than, and the definition of contribution base unit cannot be different from, those set forth in the collective bargaining agreement or plan document in effect on March 11, 2021. The regulations provide an exception when the plan sponsor determines that the risk of loss to plan participants and beneficiaries is lessened by the contribution reduction. The PBGC must consent if the contribution reduction affects over $10 million of annual contributions and over 10 percent of all employer contributions.

Withdrawal Liability: Interest Rate, Phase-in of SFA Assets, and Settlement Condition:

Under the IFR and the Final Rules, for withdrawals that occur after the plan year in which the plan receives SFA, the interest assumption used in determining unfunded vested benefits for purposes of determining withdrawal liability is the PBGC interest rate for multiemployer plans following a mass withdrawal. The Final Rules modify the duration in which this interest rate applies.

On a related note, the Final Rules adopt a new condition that phases-in the recognition of SFA for purposes of calculating withdrawal liability. 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 it will exhaust any SFA assets. The Final Rules include a request for additional comments regarding the phase-in withdrawal liability provision (the comment period ends on August 7).

Another condition that will affect withdrawing employers is the “settlement condition.” As in the IFR, the Final Rules provide that certain settlements of withdrawal liability during the SFA coverage period must be made with PBGC approval.


The Final Rules will have long-term implications to employers that participate in troubled plans that receive SFA funding. Employers are strongly encouraged to consult with their advisors to better understand these implications. The authors wish to acknowledge Kendall Woodcock, a Venable Policy Analyst, for her significant contributions to this alert.