[Federal Register Volume 87, Number 130 (Friday, July 8, 2022)]
[Rules and Regulations]
[Pages 40968-41024]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14349]



[[Page 40967]]

Vol. 87

Friday,

No. 130

July 8, 2022

Part III





Pension Benefit Guaranty Corporation





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29 CFR Part 4262





Special Financial Assistance by PBGC; Final Rule

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

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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.

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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, Sec.  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 Sec.  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, Sec.  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, Sec.  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 Sec.  
4262.16(g)(2): Comments, which should address only the withdrawal 
liability condition in Sec.  4262.16(g)(2), must be received on or 
before August 8, 2022 to be assured of consideration.

ADDRESSES: Comments on Sec.  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: [email protected].
     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 
([email protected]; 202-229-6510), Deputy General Counsel, 
Program Law and Policy Department, Hilary Duke ([email protected]; 
202-229-3839), Assistant General Counsel for Regulatory Affairs, or 
Stephanie Cibinic ([email protected]; 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\
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    \1\ The rule was published in the Federal Register on July 12, 
2021, at 86 FR 36598.
    \2\ Under 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.
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    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

[[Page 40969]]

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.
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    \3\ Multiemployer plan guaranteed benefits are primarily 
nonforfeitable benefits and the maximum guarantee is set by law 
under section 4022A of ERISA.
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    The Multiemployer Pension Reform Act of 2014 (MPRA) created 
pathways under ERISA to 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.
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    \4\ Amultiemployer 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).
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    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.
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    \5\ Plans with suspended benefits pursuant to section 305(e)(9) 
or 4245(a) of ERISA.
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    Section 4262 of ERISA requires PBGC to prescribe in regulations or 
other guidance the requirements for SFA applications, including an 
alternate application for plans with an approved

[[Page 40970]]

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.
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    \6\ See section 4262(n) of ERISA.
    \7\ See sections 4262(m) and 4262(n) of ERISA.
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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.
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    \8\ PBGC considered comments received up to 1 week after the 30-
day comment period as timely received during the comment period.
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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 Sec.  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 Sec.  4262.4 was defined in Sec.  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 Sec.  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 non-priority 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 non-priority 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

[[Page 40971]]

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 Sec.  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 Sec.  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, non-SFA 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 Sec.  
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.
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    \9\ A 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.
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    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 Sec.  
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 Sec.  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 Sec.  4262.3(a)(3) (plans that are in critical status in any plan 
year beginning in 2020, 2021, or 2022).
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    \10\ Section 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.
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    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 Sec.  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 Sec.  
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

[[Page 40972]]

eligible critical status plan under Sec.  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, Sec.  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 Sec.  
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.
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    \11\ All line references in this section are to the 2021 Form 
5500 and schedules.
    \12\ The 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.
    \13\ PBGC notes that Financial Accounting Standards Board (FASB) 
Accounting Standards Codification (ASC) 960, Plan Accounting--
Defined Benefit Pension Plans 960-310-25-3A states: ``A 
multiemployer plan may also have a receivable for a withdrawing 
employer's share of the plan's unfunded liability. The plan should 
record the receivable, net of any allowance for an amount deemed 
uncollectible, when entitlement has been determined.''
    \14\ The 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.
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    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-of-the-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 Sec.  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.
---------------------------------------------------------------------------

    \15\ The Departments of Labor, the Treasury, and Commerce.
---------------------------------------------------------------------------

    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

[[Page 40973]]

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

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 non-SFA 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 investment-
return 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.
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    \17\ For purposes of determining the amount of SFA under Sec.  
4262.4, the final rule defines a MPRA plan under Sec.  
4262.4(a)(3)(ii) as a plan that is eligible for SFA under Sec.  
4262.3(a)(2).
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    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

[[Page 40974]]

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

    \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.
---------------------------------------------------------------------------

    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 taxpayer-funded 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 ``return-seeking 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

[[Page 40975]]

requirements and that may apply under Sec.  4262.3 will not receive SFA 
or will receive only minimal SFA under Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  
4262.3(a)(2), and changes Sec.  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.

[[Page 40976]]

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 Sec.  4262.12, by which the 
value of all plan obligations exceeds the value of all plan resources, 
determined as of the plan's SFA measurement date and limited to the SFA 
coverage period (the period ending on the last day of the last plan 
year ending in 2051). 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 Sec.  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 
Sec.  4262.4, the final rule defines a MPRA plan under Sec.  
4262.4(a)(3) as a plan that is eligible for SFA under Sec.  
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 Sec.  
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 Sec.  
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.
---------------------------------------------------------------------------

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

    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

[[Page 40977]]

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.''
---------------------------------------------------------------------------

    \20\ 26 CFR 1.432(e)(9)-1(d)(5)(ii).
---------------------------------------------------------------------------

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

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

    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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 
Sec.  4262.4(e)(1)).
    Under Sec.  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 Sec.  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 non-
SFA 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

[[Page 40978]]

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 non-SFA assets. Under Sec.  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 Sec.  4262.4(e)(1) of the 
interim final rule, and the expected lower return on SFA assets 
invested in permissible investments under Sec.  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, SFA-eligible 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 non-SFA 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

[[Page 40979]]

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 
Sec.  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 non-SFA 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\
---------------------------------------------------------------------------

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

    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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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

[[Page 40980]]

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.
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    \23\ PBGC 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 parts--is the 
average of the three segment rates plus 67 basis points.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  4262.4(f) had not 
occurred. These events include mergers, transfers of assets or 
liabilities (including spinoffs), certain increases in accrued or 
projected benefits, and certain reductions in contribution rates. The 
limitation applies to events that occur between July 9, 2021, and the 
SFA measurement date. To accommodate the possibility of multiple 
events, the limitation does not apply on an event-by-event basis but is 
based on comparing the amount of SFA a plan applies for with the amount 
of SFA a plan (or all plans in the case of a merger) would have 
received had the events not occurred. PBGC included these provisions in 
the interim final rule in consultation with the Treasury Department.
    With respect to mergers, Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \24\ PBGC's inherent authority under section 4002(b)(3) of ERISA 
allows PBGC to adopt regulations to carry out the purposes of the 
title IV insurance program.
---------------------------------------------------------------------------

    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 pre-
2021 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

[[Page 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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  4262.14 and to the withdrawal liability condition 
in Sec.  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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  4262.4(g)(2) for ``pending applications.'' They 
provide that the plan's pending application may be withdrawn (as 
described in Sec.  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 Sec.  
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 Sec.  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 Sec.  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 
Sec.  4262.11(d), the plan may file a revised application (see the 
provisions for a ``withdrawn application'' and a ``denied application'' 
under Sec.  4262.4(g)(3) and (4) respectively). Any revised application 
must use the plan's base data defined in Sec.  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 
Sec.  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 
Sec.  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

[[Page 40982]]

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 pre-2021 assumptions unless clearly 
unreasonable. Yet another commenter requested that PBGC clarify that 
pre-2021 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).
---------------------------------------------------------------------------

    \25\ Actuarial Standards of Practice (ASOPs) are issued by the 
Actuarial Standards Board and are available at http://www.actuarialstandardsboard.org/standards-of-practice. Certain 
ASOPs, including ASOPs Nos. 4, 23, 27, 35, 41, and 56 may be 
relevant to the actuary's work related to special financial 
assistance, including the assessment of the reasonableness of the 
actuary's assumptions and methods.
---------------------------------------------------------------------------

    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, Sec.  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 Sec.  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 
safe-harbor assumption. One of these commenters also suggested a safe 
harbor for MPRA plans to use other actuarial

[[Page 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 pre-2021 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 Sec.  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 Sec.  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 Sec.  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 Sec. Sec.  4262.6 through 4262.8 to reflect the 
new methodology in Sec.  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 Sec.  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

[[Page 40984]]

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 Sec.  4262.6(b) to make the 
language more precise and is modifying the language of the required 
amendments to the plan in Sec.  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 Sec.  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 Sec.  4262.6(e)(2) to 
assist filers in complying with the amendment requirements. In 
addition, PBGC is amending Sec.  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 Sec.  4262.3(a)(2). To avoid any confusion 
about the eligibility of a partitioned plan, PBGC is clarifying this 
requirement in Sec.  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 Sec.  4262.9(c) and other 
conditions particular to a partitioned plan as described under Sec.  
4262.9(b). One of these conditions is that the plan sponsor must file a 
single application for SFA, consisting of information about the 
original plan and the successor plan. The combined information must 
reflect that, on the date SFA is transferred to the plan, PBGC will 
rescind the order that created the successor plan, and the plan sponsor 
will remove plan provisions and amendments that were required to be 
adopted under the order.
    Another condition is that the application must include a statement 
that the plan was partitioned and a copy of the provisions or 
amendments that the plan was required to adopt under the partition 
order. A partitioned plan's application must include all the required 
information described in Sec. Sec.  4262.6 through 4262.8 for 
applications generally. However, if the plan sponsor of a partitioned 
plan has 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 Sec.  4262.6(a) that the information was already filed.
    Partitioned plans also have benefit suspensions that must be 
reinstated if the plan is approved for SFA. Under Sec.  4262.15, a plan 
receiving SFA must reinstate benefits suspended under section 305(e)(9) 
of ERISA and provide make-up payments to participants and beneficiaries 
to restore previously suspended benefits in accordance with guidance 
issued by the Treasury Department and the IRS 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 Sec.  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 Sec.  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

[[Page 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 Sec.  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 priority-group 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 Sec.  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:

------------------------------------------------------------------------
                        Description of priority  Description of priority
    Priority group       group--date plans may    group--date plans may
                             apply for SFA            apply for SFA
------------------------------------------------------------------------
1.....................  Plans already insolvent  Beginning on July 9,
                         or projected to become   2021
                         insolvent before March
                         11, 2022.
2.....................  Plans expected to be     Beginning on December
                         insolvent within 1       27, 2021.
                         year of the date an
                         application for SFA is
                         filed.
                        Plans that implemented   Beginning on January 1,
                         a benefit suspension     2022.
                         under ERISA section
                         305(e)(9) as of March
                         11, 2021.
3.....................  Plans in critical and    Beginning on April 1,
                         declining status that    2022.
                         had 350,000 or more
                         participants.
4.....................  Plans projected to       Beginning on July 1,
                         become insolvent         2022.
                         before March 11, 2023.
5.....................  Plans projected to       Date to be specified on
                         become insolvent         PBGC's website at
                         before March 11, 2026.   least 21 days in
                                                  advance of such date,
                                                  but no later than
                                                  February 11, 2023.
6.....................  Plans for which PBGC     Date to be specified on
                         computes the present     PBGC's website at
                         value of financial       least 21 days in
                         assistance under         advance of such date,
                         section 4261 of ERISA    but no later than
                         to be in excess of $1    February 11, 2023.
                         billion (in the
                         absence of SFA).
------------------------------------------------------------------------

    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.

[[Page 40986]]

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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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

[[Page 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, Sec.  
4262.11 provides requirements for plan applications that are denied by 
PBGC or withdrawn by a plan.
    As described under Sec.  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 Sec.  4262.12.
    If PBGC denies an application, it will notify the plan sponsor in 
writing of the reasons for the denial. An application may be denied 
because it is incomplete (it does not accurately include the 
information required to be filed); because an assumption is 
unreasonable, a proposed change in assumption is individually 
unreasonable, or the proposed changed assumptions are unreasonable in 
the aggregate; or because the plan is not an eligible multiemployer 
plan. For example, pending approval of an application, if PBGC 
determines that documentation supporting a certification of critical 
and declining status is missing, or 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 Sec.  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, 
Sec.  4262.12 provides that PBGC will pay a plan the amount 
demonstrated under the plan's application, determined as of the SFA 
measurement date, plus interest on that amount 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 Sec.  
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 Sec.  
4262.4(e)(1).
    For a supplemented application, where the plan received a previous

[[Page 40988]]

payment of SFA, the interest rate applied is the SFA rate required 
under Sec.  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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \26\ For 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.
---------------------------------------------------------------------------

    For a plan with an obligation to repay financial assistance under 
section 4261 of ERISA, the process for that repayment is described in 
Sec.  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 Sec.  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 Sec.  4262.13 of the regulation. 
SFA received, and any earnings thereon, must be segregated from other 
plan assets and may only be used to make benefit payments and pay plan 
expenses (but SFA may be used before other plan assets are used for 
these purposes). In addition, SFA (and earnings) must be invested by 
plans in investment grade bonds or other investments as permitted by 
PBGC in Sec.  4262.14. These limitations on the use of SFA reflect the 
purpose of SFA. As provided for under section 4262(j)(1) of ERISA and 
in Sec.  4262.4, SFA is the amount required for the plan to pay all 
benefits due during the SFA coverage period taking into account all 
plan resources and obligations. SFA should not be used in a manner that 
would divert SFA funds to other purposes--for instance, reducing 
sources of plan income, such as employer contributions or withdrawal 
liability, or increasing plan obligations, such as to pay for 
additional future increases in benefits (that are not exempted under 
Sec.  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 Sec.  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 low-risk, 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

[[Page 40989]]

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 Sec.  4262.14 to allow 
for a wider range of investments for SFA assets.
    As provided in Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 broad-based 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.
---------------------------------------------------------------------------

    \27\ The 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.
---------------------------------------------------------------------------

    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

[[Page 40990]]

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 Sec.  
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 noninterest-bearing 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 interest-bearing 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., non-derivative 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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \28\ Section 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 make-up payments 
that must be made by a multiemployer plan receiving SFA, for 
purposes of ERISA as well as the Code. Under section 4262(k), the 
Secretary of Labor, in coordination with the Secretary of the 
Treasury, must ensure benefits are reinstated and previously 
suspended benefits are paid.
---------------------------------------------------------------------------

    As provided under section 4262(k) of ERISA, Sec.  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 Sec.  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

[[Page 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 make-up 
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 Sec.  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 
Sec.  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 
Sec.  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 Sec.  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 Sec.  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 long-term 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,

[[Page 40992]]

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 Sec.  
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 Sec.  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 Sec.  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 Sec.  4262.14 sufficient to pay for at least 1 year (or until the 
date the plan is projected to become insolvent, if earlier) of 
projected benefit payments and administrative expenses. Under Sec.  
4262.14 of the interim final rule, permissible investments were limited 
to fixed income.
    PBGC set the condition in Sec.  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 Sec.  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 Sec.  4262.14 
of the final rule, as described earlier in the

[[Page 40993]]

preamble under the subheading Permissible Investments, PBGC has made 
conforming changes to Sec.  4262.16(c) to reflect that the condition is 
tied to fixed income. Accordingly, the final rule amends Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 
Sec.  4231.10 and the additional actuarial and financial information 
described in Sec.  4262.16(f)(2). PBGC will approve a proposed transfer 
or merger if: (1) the transaction complies with section 4231(a)-(d) of 
ERISA, (2) the transfer or merger, or the larger transaction of which 
the transfer or merger is a part, does not unreasonably increase PBGC's 
risk of loss respecting any plan involved in the transaction, and (3) 
the transfer or merger is not reasonably expected to be adverse to the 
overall interests of the participants and beneficiaries of any of the 
plans involved in the transaction. An example of a larger transaction 
is where the trustees of a plan receiving SFA arrange a transfer of 
assets and liabilities from the plan and amend the plan to 
substantially or completely end benefit accruals in connection with the 
plan's active participants beginning to accrue benefits under another 
existing or newly formed plan. 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

[[Page 40994]]

approve a transfer from a single-employer 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  4262.16(i) through the last day of 
the last plan year ending in 2051 and will be subject to periodic 
compliance audits under Sec.  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 Sec.  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 Sec.  
4262.16(f) that the conditions relating to prospective benefit 
increases under Sec.  4262.16(b)(2), allocation of plan assets under 
Sec.  4262.16(c), and allocating expenses under Sec.  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.
---------------------------------------------------------------------------

    \29\ Section 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.
---------------------------------------------------------------------------

    In addition, PBGC is amending Sec.  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 Sec.  
4262.16(b)(1), contribution decreases under Sec.  4262.16(d), and 
allocating contributions and other income under Sec.  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.
---------------------------------------------------------------------------

    \30\ All line references in this section are to the 2021 Form 
5500 and schedules.
---------------------------------------------------------------------------

    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 Sec.  4262.16(b)(1), 
contribution decreases under Sec.  4262.16(d), allocating contributions 
and other income under Sec.  4262.16(e), and withdrawal liability under 
Sec.  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 Sec.  
4262.16(g) (described in the next section of the preamble), PBGC is 
limiting the conditions to the

[[Page 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
----------------------------------------------------------------------------------------------------------------
                                        Does not apply to
       Applies to merged plan              merged plan                              Other
----------------------------------------------------------------------------------------------------------------
 Restrictions (Sec.           Prospective     Retrospective benefit increase (Sec.
 4262.13(b)).                         benefit increase        4262.16(b)(1)): plan may apply for a waiver, and,
 Transfer or merger (Sec.     (Sec.                   absent a waiver, continues to apply to
 4262.16(f)).                         4262.16(b)(2)).         participants in the SFA plan.
 Withdrawal liability         Allocation of   Contribution decreases (Sec.
 settlement (Sec.   4262.16(h)).      plan assets (Sec.       4262.16(d)): plan may apply for a waiver, and,
 Annual compliance            4262.16(c)).            absent a waiver, continues to apply to employers
 statement (Sec.   4262.16(i)).       Allocating      who had an obligation to contribute to the SFA
 Audit (Sec.   4262.16(j)).   expenses (Sec.          plan.
                                      4262.16(e)).            Allocating contributions and other income
                                                              (Sec.   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 (Sec.
                                                              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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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

[[Page 40996]]

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 Sec.  4262.16(g) as Sec.  4262.16(g)(1), and 
clarifies that the condition in Sec.  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 Sec.  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 
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.
    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 Sec.  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

[[Page 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 Sec.  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 Sec.  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 
Sec.  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 Sec.  4262.16(h)(1)). 
Approval ensures that any negotiated settlements of material size are 
in the best interests of the participants in the plan and do not create 
an unreasonable risk of loss to PBGC. 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 Sec.  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

[[Page 40998]]

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 Sec.  
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, Sec.  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 Sec.  4262.17 and made no changes in 
the final rule except, as described, to Sec.  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 Sec.  
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

[[Page 40999]]

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

    \31\ Specifically, section 9704 of ARP establishes an eighth 
fund under section 4005 of ERISA.
---------------------------------------------------------------------------

    In the Regulatory Impact Analysis of the interim final rule, PBGC 
provided estimates of the transfer amounts of the SFA program using the 
Multiemployer-Pension 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

[[Page 41000]]

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

    \32\ The 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.
    \33\ Actual experience could deviate outside this projected 
range.
---------------------------------------------------------------------------

    The final rule also makes changes to permissible investments under 
Sec.  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 Sec.  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 return-seeking 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 longer-term 
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 Sec.  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 Sec.  
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 
Sec.  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 non-SFA 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.

[[Page 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  4262.16(f) to provide that the 
conditions relating to prospective benefit increases under Sec.  
4262.16(b)(2), allocation of plan assets

[[Page 41002]]

under Sec.  4262.16(c), and allocating expenses under Sec.  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 Sec.  
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 
Sec.  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 Sec.  4262.13(b), conditions in Sec.  4262.16(f) (merger or 
transfer), Sec.  4262.16(h) (withdrawal liability settlement), Sec.  
4262.16(i) (statement of compliance), and Sec.  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.
---------------------------------------------------------------------------

    \34\ SFA 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.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                  PV amount  (3%     PV amount  (7%                                                                                                                 2027-2051
                                      rate)              rate)              2021              2022               2023               2024             2025            2026         (total) \34\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Annual Transfer Amounts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total transfer amounts based    $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.
 on Interim Final Rule (total
 nominal value of $93.98
 billion).
Change based on updated model   (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.
 data (plan & economic data)
 (total nominal value of
 $17.30 billion).
Change based on updated         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.
 provisions of Final Rule
 (total nominal value of $5.64
 billion).
Total transfer amounts based    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.
 on Final Rule (total nominal
 value of $82.32 billion).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Annual Cost Amounts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Anticipated PBGC                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.
 administrative expenses
 (total nominal value of $150
 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           68,900...........  63,800...........  0..............  73,100...........  0................  0................  0.............  0.............  0.
 participant notices.
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.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 41003]]

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 Sec.  4262.4 and changes to permissible investments under Sec.  
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\
---------------------------------------------------------------------------

    \35\ The 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.
---------------------------------------------------------------------------

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 Sec.  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 Sec.  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 Sec.  
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 Sec.  4262.14 in the final rule. In one alternative, 
if the regulation for permissible investments and for the applicable 
interest rate (Sec.  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 Sec.  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 return-seeking 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

[[Page 41004]]

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 
Sec.  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 
Sec.  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 
Sec.  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 Sec.  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 Sec.  4262.16(b) and allocation of 
contributions and other income under Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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

[[Page 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 x $30,000) and 780 (78 x 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 x $800) and 23 (23 x 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 x $2,400) and 212 (106 x 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 x $2,000) and 22.66 (11.33 x 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 x .2) and $5,000 ($25,000 x .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.

----------------------------------------------------------------------------------------------------------------
                                                                                   Hour burden--
             Information collection                Average # of     Hour burden     equivalent      Cost burden
                                                    respondents       (hours)          cost
----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------


[[Page 41006]]

    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.

0
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.


Sec.  4262.1   Purpose.

    The purpose of this part is to prescribe rules governing 
applications for special financial assistance under section 4262 of 
ERISA and related requirements.


Sec.  4262.2   Definitions.

    The following terms are defined in Sec.  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 Sec.  4231.2 of this 
chapter.
    Merger means merger as defined in Sec.  4231.2 of this chapter.
    SFA coverage period means the period beginning on the plan's SFA 
measurement date and ending on the last day of the last plan year 
ending in 2051.
    SFA measurement date for a plan other than a plan described in 
Sec.  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 Sec.  4231.2 of this 
chapter.


Sec.  4262.3   Eligibility for special financial assistance.

    (a) In general. Subject to all the provisions of this section, a 
multiemployer plan is eligible for special financial assistance in any 
of the following cases:
    (1) Critical and declining status plans. The plan is in critical 
and declining status within the meaning of section 305(b)(6) of ERISA 
for the specified year; or
    (2) Plans with a suspension of benefits. A suspension of benefits 
has been approved with respect to the plan under section 305(e)(9) of 
ERISA as of March 11, 2021; or
    (3) Critical status plans. The plan:
    (i) Is certified to be in critical status within the meaning of 
section 305(b)(2) of ERISA for a specified year; and
    (ii) The percentage calculated under paragraph (c)(2) of this 
section was less than 40 percent; and
    (iii) The ratio of the total number of active participants at the 
end of the plan year required to be entered on the Form 5500 that was 
required to be filed for a specified year to the sum of inactive 
participants (retired or separated participants receiving benefits, 
other retired or separated participants entitled to future benefits, 
and deceased participants whose beneficiaries are receiving or are 
entitled to receive benefits) required to be entered on such Form 5500 
was less than 2 to 3; 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

[[Page 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 Sec.  
4262.5.


Sec.  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 Sec.  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 Sec.  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 non-SFA 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 non-SFA 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 Sec.  4262.15(a)(1), payment of previously suspended 
benefits under Sec.  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 
Sec.  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 Sec.  4262.15(a)(1), 
payment of previously suspended benefits under Sec.  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 Sec.  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 
Sec.  4262.15(a)(1), payment of previously suspended benefits under 
Sec.  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 Sec.  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 Sec.  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

[[Page 41008]]

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 Sec.  4262.5.
    (f) Certain events--(1) General rules. (i) The special financial 
assistance of a plan that experiences one or more of the events 
described in 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 pre-existing linkage between benefit 
accruals and contributions), but only if the plan does not demonstrate 
(in accordance with the special financial assistance instructions on 
PBGC's website at www.pbgc.gov) that the risk of loss to participants 
and beneficiaries is reduced (disregarding special financial 
assistance) by execution of the document. The document referred to in 
this paragraph (f)(4) is either--
    (i) A collective bargaining agreement not rejected by the plan; or
    (ii) A document reallocating contribution rates.
    (5) Effect of pre-event ineligibility. In determining the amount of 
special financial assistance that would have applied to a plan if an 
event described in this paragraph (f) had not occurred, if the plan 
would have been ineligible for special financial assistance under Sec.  
4262.3 in the absence of the event, then the amount of special 
financial assistance is deemed to be $0 (zero).
    (6) Examples. The following examples illustrate the provisions of 
paragraph (f) of this section.
    (i) Example 1. Plan A applies for special financial assistance. If 
the limitation in paragraph (f)(1)(i) of this section did not apply, 
Plan A would be entitled to special financial assistance in the amount 
of $20X. Before the SFA measurement date, but on or after July 9, 2021, 
Plan A transferred a portion of its assets and liabilities to Plan B. 
If the transfer had not occurred, Plan A would, as of the SFA 
measurement date, be entitled to special financial assistance in the 
amount of $40X. Although an event described in paragraph (f)(2) of this 
section occurred with respect to Plan A, Plan A's special financial 
assistance is unaffected by the limitation in paragraph (f)(1)(i) of 
this section and is $20X. Plan B also applies for special financial 
assistance. If the limitation in paragraph (f)(1)(i) of this section 
did not apply, Plan B would be entitled to special financial assistance 
in the amount of $30X. If the transfer from Plan A had not occurred, 
Plan B would, as of the SFA measurement date, be ineligible for special 
financial assistance. As a result of the event described in paragraph 
(f)(2) of this section, the limitation in paragraph (f)(1)(i) of this 
section reduces Plan B's special financial assistance from $30X to $0.
    (ii) Example 2. Plan C applies for special financial assistance. If 
the limitation in paragraph (f)(1)(ii) of this section did not apply, 
Plan C would be entitled to special financial assistance in the amount 
of $40X. Before the SFA measurement date, but on or after July 9, 2021, 
Plans A and B were merged into existing Plan C. If the mergers had not 
occurred, Plan A would not be eligible for special financial 
assistance, and Plan B and Plan C would be entitled, respectively, to 
$10X and $5X of special financial assistance as of the SFA measurement 
date. As a result of the merger event described in paragraph (f)(1)(ii) 
of this section, the limitation in paragraph (f)(1)(ii) of this section 
reduces Plan C's special financial assistance from $40X to $15X.
    (iii) Example 3. Plan A applies for special financial assistance. 
If the limitation in paragraph (f)(1)(i) of this section did not apply, 
Plan A would be entitled to special financial assistance in the amount 
of $10X. Before the SFA measurement date, but on or after July 9, 2021, 
projected benefits under Plan A were increased. If the increase had not 
occurred, Plan A would, as of the SFA measurement date, be ineligible 
for

[[Page 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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  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 Sec. Sec.  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.

[[Page 41010]]

Sec.  4262.5   PBGC review of plan assumptions.

    (a) In general. (1) As set forth in Sec.  4262.3(d)(1), PBGC will 
accept the assumptions used by a plan to determine eligibility for 
special financial assistance under Sec.  4262.3(d)(1) unless PBGC 
determines that such assumptions are clearly erroneous.
    (2) PBGC will accept the assumptions used by a plan to determine 
eligibility for special financial assistance under Sec.  4262.3(d)(2) 
or to determine the amount of special financial assistance under Sec.  
4262.4(e)(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 Sec.  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 Sec.  4262.4(e)(1) and (2)) must be 
reasonable and the combination of those actuarial assumptions and 
methods (excluding the interest rate assumptions under Sec.  
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 Sec.  4262.3(d)(2) or Sec.  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 
Sec.  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.


Sec.  4262.6   Information to be filed.

    (a) In general. An application for special financial assistance 
must include the information specified in this section and Sec. Sec.  
4262.7 (plan information) and 4262.8 (actuarial and financial 
information); a copy of the executed plan amendment required under 
paragraph (e)(1) of this section; a copy of the proposed plan amendment 
required under paragraph (e)(2) of this section; 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{time}  
reinstate benefits, as required by Sec.  4262.15(a)(1), and {II{time}  
make payments of previously suspended benefits, as required by Sec.  
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

[[Page 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.


Sec.  4262.7  Plan information.

    (a) Basic information. An application for special financial 
assistance must include all of the following information with respect 
to the plan and amount of special financial assistance requested:
    (1) Name of the plan, Employer Identification Number (EIN), and 
three-digit Plan Number (PN).
    (2) Name of the individual filing the application and role of the 
individual with respect to the plan.
    (3) Name, address, email, and telephone number of the plan sponsor 
and the plan sponsor's authorized representatives, if any.
    (4) The total amount of special financial assistance requested 
under Sec.  4262.4(a)(1) or (2).
    (b) Eligibility. An application must identify the eligibility 
requirements in Sec.  4262.3 that the plan satisfies to be eligible for 
special financial assistance. An application for a plan that is 
eligible under section 4262(b)(1)(C) of ERISA must include a 
demonstration to support that the plan meets the eligibility 
requirements.
    (c) Priority group identification. An application must identify any 
priority group under Sec.  4262.10(d)(2) that the plan is in. An 
application must include a demonstration to support the plan's 
inclusion in a priority group, unless the plan is insolvent under 
section 4245(a) of ERISA, has implemented a suspension of benefits 
under section 305(e)(9) of ERISA as of March 11, 2021, is in critical 
and declining status (as defined in section 305(b)(6) of ERISA) and had 
350,000 or more participants, or is listed on PBGC's website at 
www.pbgc.gov as a plan in priority group 6, as defined under Sec.  
4262.10(d)(2)(vi).
    (d) Plans with a suspension of benefits. If a plan previously 
suspended benefits under 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 
Sec.  4262.15) to participants and beneficiaries under the plan. The 
proposed schedule should be prepared assuming the effective date for 
reinstatement is the SFA measurement date and that payments for 
previously suspended benefits described in Sec.  4262.15(a)(2) are paid 
or commence on the SFA measurement date. If the plan restored benefits 
under 26 CFR 1.432(e)(9)-1(e)(3) before the SFA measurement date, the 
proposed schedule should reflect the amount and timing of payments of 
restored benefits and the effect of the restoration on the benefits 
remaining to be reinstated.
    (e) Plan documentation. An application must include all of the 
following plan documentation:
    (1) Most recent plan document or restatement of the plan document 
and all subsequent amendments adopted (if any), including a copy of the 
executed plan amendment required under Sec.  4262.6(e)(1).
    (2) 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 Sec.  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.


Sec.  4262.8  Actuarial and financial information.

    (a) Required information. An application for special financial 
assistance must include all of the following actuarial and financial 
information:
    (1) For each plan year from the 2018 plan year until the most 
recent plan year for which the Form 5500 is required to be filed 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

[[Page 41012]]

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 non-investment income, including, if applicable, withdrawal 
liability payments collected, contributions from reciprocity 
agreements, and other sources of contributions or income not already 
identified.
    (4) Information used to determine the amount of the requested 
special financial assistance, including all of the following 
information--
    (i) Non-SFA interest rate required under Sec.  4262.4(e)(1), 
including supporting details on how it was determined, and SFA interest 
rate required under Sec.  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 
Sec.  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 Sec.  
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 Sec.  4262.4(b)(1) attributable to the reinstatement of 
benefits under Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
4262.4(a)(2)(ii) is the greatest amount calculated under Sec.  
4262.4(a)(2), the amount of special financial assistance calculated 
under Sec.  4262.4(a)(2)(ii) and information used to determine the 
amount under Sec.  4262.4(a)(2)(ii), based on a deterministic 
projection, including all of the following information--
    (i) Special financial assistance calculated underSec.  
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 Sec.  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 Sec.  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 Sec.  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 
Sec.  4262.4,

[[Page 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 Sec.  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 Sec.  4262.4, showing, for each assumption change 
from the Baseline, a deterministic projection calculated in the same 
manner as the requested amount in Sec.  4262.4.
    (c) Information required for certain events. An application for a 
plan with respect to which an event described in Sec.  4262.4(f) occurs 
on or after July 9, 2021, must include the applicable information 
related to the event specified in special financial assistance 
instructions on PBGC's website at www.pbgc.gov.
    (d) Information required for changed assumptions in supplemented 
applications. Any supplemented application filed for a plan described 
in Sec.  4262.4(g) must include the information specified in the 
supplemented special financial assistance instructions on PBGC's 
website at www.pbgc.gov.


Sec.  4262.9  Application for a plan with a partition.

    (a) In general. This section applies to a plan partitioned under 
section 4233 of ERISA that is eligible for special financial assistance 
under Sec.  4262.3(a)(2). A partitioned plan is in priority group 2 for 
purposes of Sec.  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 Sec. Sec.  4262.6 through 4262.8.
    (3) If a plan sponsor has already filed with PBGC any of the 
required information described in paragraph (b)(2)(iii) of this 
section, the plan sponsor is not required to file that information with 
its application for special financial assistance. For any such 
information not filed with the application, the plan sponsor must note 
on the checklist described under Sec.  4262.6(a) when the information 
was filed.
    (c) Rescission of partition order. Effective when special financial 
assistance is paid under Sec.  4262.12, and in a manner consistent with 
the application procedure determined under paragraph (b) of this 
section--
    (1) PBGC will rescind the partition order; and
    (2) The plan sponsor must amend the plan to remove any provisions 
or amendments that were required to be adopted under the partition 
order.


Sec.  4262.10  Processing applications.

    (a) In general. Any application for special financial assistance 
for an eligible multiemployer plan must be filed by the plan sponsor in 
accordance with the provisions of this part and the special financial 
assistance instructions on PBGC's website at www.pbgc.gov.
    (b) Method of filing. An application filed with PBGC under this 
part must be made electronically in accordance with the rules in part 
4000 of this chapter. The time period for filing an application under 
this part must be computed under the rules in subpart D of part 4000 of 
this chapter.
    (c) Where to file. (1) An application filed with PBGC under this 
part must be filed as described in Sec.  4000.4 of this chapter.
    (2) Section 432(k)(1)(D) of the Code requires an application in a 
priority 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,

[[Page 41014]]

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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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.


Sec.  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 Sec.  
4262.12; or
    (2) Deny the application because--

[[Page 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 Sec.  4262.12.
    (b) Incomplete application. PBGC will consider an application 
incomplete under paragraph (a)(2)(i) of this section unless the 
application accurately includes the information required to be filed 
under this part and the special financial assistance instructions on 
PBGC's website at www.pbgc.gov, including any additional information 
that PBGC requires under Sec.  4262.6(d).
    (c) Application base data. For an eligible plan other than a plan 
described in Sec.  4262.4(g)--
    (1) A plan's base data are--
    (i) The plan's SFA measurement date as defined under Sec.  4262.2;
    (ii) The plan's participant census data as required to be used 
under Sec.  4262.4(d); and
    (iii) The plan's non-SFA interest rate and SFA interest rate as 
determined under Sec.  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 Sec.  4003.22(b) of this chapter for purposes of judicial 
review under the Administrative Procedure Act (5 U.S.C. 701 et seq.).


Sec.  4262.12   Payment of special financial assistance.

    (a) Amount of special financial assistance 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 
Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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

[[Page 41016]]

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 Sec.  
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.


Sec.  4262.13  Restrictions on special financial assistance.

    (a) In general. A plan that receives special financial assistance 
must be administered in accordance with the restrictions in this 
section and in Sec.  4262.14.
    (b) Restrictions 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 Sec.  
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 Sec.  4262.14.


Sec.  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

[[Page 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.


Sec.  4262.15  Reinstatement of benefits previously suspended.

    (a) In accordance with guidance issued by the Secretary of the 
Treasury under section 432(k) of the Code, a plan with benefits that 
were suspended under 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.


Sec.  4262.16  Conditions for special financial assistance.

    (a) In general. A plan that receives special financial assistance 
must be administered in accordance with the conditions in this section.
    (b) Benefit increases. This paragraph (b) applies to benefits and 
benefit increases described in section 4022A(b)(1) of ERISA without 
regard to the time the benefit or benefit increase has been in effect. 
This paragraph (b) does not apply to the reinstatement of benefits that 
were suspended under section 305(e)(9) or 4245(a) of ERISA (as provided 
under Sec.  4262.15) or a restoration of benefits under 26 CFR 
1.432(e)(9)-1(e)(3).
    (1) Retrospective. A benefit or benefit increase must not be 
adopted during the SFA coverage period if it is in whole or in part 
attributable to service accrued or other events occurring before the 
adoption date of the amendment.
    (2) Prospective. A benefit or benefit increase must not be adopted 
during the SFA coverage period unless--
    (i) The plan actuary certifies that employer contribution increases 
projected to be sufficient to pay for the benefit increase have been 
adopted or agreed to; and
    (ii) Those increased contributions were not included in the 
determination of the special financial assistance.
    (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 Sec.  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

[[Page 41018]]

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 Sec.  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 Sec.  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

[[Page 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 Sec.  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

[[Page 41020]]

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 Sec.  4231.9(f) of this chapter.
    (iii) A copy of the plan actuary's most recent certification under 
section 305(b)(3) of ERISA, including a detailed description of the 
assumptions used in the certification, and the basis under which they 
were determined. The description must include information about the 
assumptions used for the projection of future contributions, withdrawal 
liability payments, and investment returns, and any other assumption 
that may have a material effect on projections.
    (iv) A detailed 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

[[Page 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 Sec. Sec.  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 Sec.  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 
Sec.  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 Sec.  4262.4(b), applying the 
interest rate under Sec.  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 Sec.  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.

[[Page 41022]]

    (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 Sec.  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 Sec.  4262.4(b), applying the interest rate under Sec.  
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 Sec.  4262.12 (as determined under 
Sec.  4262.12(a) or (b), or under Sec.  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 Sec.  
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 calendar-year 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{time}  the 
determination year is 2027; {2{time}  the numerator of the phase-in 
fraction is 3 (2027 to 2029); {3{time}  the denominator of the phase-in 
fraction is 6 (2024 to 2029); and {4{time}  the phased in amount is 
$500,000 ($1,000,000 x \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{time}  the payment year is 
2022; {2{time}  the determination year is 2023; {3{time}  the 
exhaustion year is 2028; {4{time}  the numerator of the phase-in 
fraction is 6 (2023 to 2028); {5{time}  the denominator of the phase-in 
fraction is 7 (2022 to 2028); and {6{time}  the phased in amount is 
$857,143 ($1,000,000 x \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{time}  the payment year is 2022; {2{time}  the 
determination year is 2027; {3{time}  the exhaustion year is 2030; 
{4{time}  the numerator of the phase-in fraction is 4 (2027 to 2030); 
{5{time}  the denominator of the phase-in fraction is 9 (2022 to 2030); 
and {6{time}  the phased in amount is $488,889 ($1,100,000 x \4/9\). If 
total assets (assuming no phased recognition

[[Page 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{time}  the determination year is 2025; 
{2{time}  the numerator of the phase-in fraction is 1 (2025 to 2025); 
{3{time}  the denominator of the phase-in fraction is 1 (2025 to 2025); 
and {4{time}  the phased in amount is $1,000,000 ($1,000,000 x \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 
Sec.  4000.4 of this chapter.


Sec.  4262.17   Other provisions.

    (a) Special financial assistance is not capped by the guarantee 
under section 4022A of ERISA.
    (b) A plan that receives special financial assistance must continue 
to pay premiums due under section 4007 of ERISA for participants and 
beneficiaries in the plan.
    (c) A plan that receives special financial assistance is deemed to 
be in critical status within the meaning of section 305(b)(2) of ERISA 
until the last day of the last plan year ending in 2051.
    (d) A plan that receives special financial assistance and 
subsequently becomes insolvent under section 4245 of ERISA will be 
subject to the rules and guarantee for insolvent plans in effect when 
the plan becomes insolvent.
    (e) A plan that receives special financial assistance is not 
eligible to apply for a suspension of benefits under section 305(e)(9) 
of ERISA.
    (f) A plan that receives special financial assistance and meets the 
eligibility requirements for partition of

[[Page 41024]]

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