[Federal Register Volume 88, Number 17 (Thursday, January 26, 2023)]
[Rules and Regulations]
[Pages 4900-4906]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01415]


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PENSION BENEFIT GUARANTY CORPORATION

29 CFR Part 4262

RIN 1212-AB53


Special Financial Assistance by PBGC--Withdrawal Liability 
Condition Exception

AGENCY: Pension Benefit Guaranty Corporation.

ACTION: Final rule; response to comments.

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SUMMARY: The Pension Benefit Guaranty Corporation (PBGC) published a 
final rule in the Federal Register on July 8, 2022, concerning the 
requirements for special financial assistance applications and related 
restrictions and conditions pursuant to the American Rescue Plan (ARP) 
Act of 2021, and provided a 30-day comment period on the condition 
requiring a phased recognition of special financial assistance in a 
plan's determination of withdrawal liability. PBGC is amending its 
special financial assistance regulation to add an exception process for 
the conditions relating to withdrawal liability.

DATES: This final rule is effective on January 26, 2023.

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, Regulatory Affairs 
Division, Office of the General Counsel, Pension Benefit Guaranty 
Corporation, 445 12th Street SW, Washington, DC 20024-2101. If you are 
deaf or hard of hearing or have a speech disability, please dial 7-1-1 
to access telecommunications relay services.

SUPPLEMENTARY INFORMATION:

Executive Summary

    On July 9, 2021, the Pension Benefit Guaranty Corporation (PBGC) 
issued an interim final rule with a request for comment, 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\ 
On July 8, 2022, PBGC issued a final rule that made changes to the 
special financial assistance (SFA) program and requested comments on 
the condition requiring a phased recognition of SFA in a plan's 
determination of withdrawal liability (July 2022 final rule).\2\ In 
response to comments received, PBGC is adding an exception process for 
certain withdrawal liability conditions that apply to a plan that 
receives SFA.
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    \1\ The rule was published in the Federal Register on July 12, 
2021, at 86 FR 36598.
    \2\ The rule was published in the Federal Register on July 8, 
2022, at 87 FR 40968.
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    PBGC's legal authority for this rulemaking comes from section 4262 
of the Employee Retirement Income

[[Page 4901]]

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.

Background

    Section 4262 of ERISA creates a program to enhance retirement 
security for millions of Americans by providing SFA to certain 
financially troubled multiemployer pension plans upon application for 
assistance. 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, and restrictions on the use of SFA. It 
also provides that certain plans with suspended benefits must reinstate 
those benefits prospectively and provide make-up payments to restore 
previously suspended benefits. A plan receiving SFA under section 4262 
has no obligation to repay SFA.
    On July 9, 2021, PBGC issued an interim final rule on Special 
Financial Assistance by PBGC (29 CFR part 4262). Part 4262 provides 
guidance to multiemployer pension plan sponsors on eligibility for SFA, 
determining the amount of SFA, content of an application for SFA, the 
process of applying, PBGC's review of applications, restrictions and 
conditions, and reporting and notice requirements. On July 8, 2022, 
with the approval of PBGC's board of directors, PBGC published a final 
rule implementing changes to the SFA program, 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.\3\
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    \3\ Under section 4002(a) of ERISA, PBGC is administered in 
accordance with policies established by its 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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    In the July 2022 final rule, PBGC provided 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). 
PBGC invited comments on 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 expressed its interest 
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 received six comment letters on the conditions relating to the 
calculation of withdrawal liability. PBGC received one comment letter 
on permissible investments that was not relevant to the request for 
comments and, consequently, is not discussed in this document. The next 
section of this preamble discusses the conditions under Sec.  
4262.16(g), the six comment letters on the conditions relating to the 
calculation of withdrawal liability, PBGC's responses to the comments, 
and a summary of changes made in this final rule.

Conditions Relating to Withdrawal Liability, Public Comments, and 
PBGC's Responses

    To ensure that SFA is used to pay benefits and the expenses related 
to those benefit payments, 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. These conditions are described in Sec.  
4262.16 and include conditions that relate to 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 (UVBs) (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 the SFA Regulation

    Under Sec.  4262.16(g)(1), the interest assumptions used in 
determining UVBs for purposes of calculating withdrawal liability under 
section 4213(c) of ERISA must be the interest assumptions in appendix B 
to 29 CFR part 4044. 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. The beginning of the 10-year period is the last day 
of the plan year in which the plan receives payment of SFA. 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 would 
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 withdrawing before 2054 would have UVBs 
determined using the prescribed interest rates. While a plan is not 
required to use mass withdrawal interest assumptions beyond the 
specified period, the regulation does not preclude the use of 
settlement rates thereafter to determine withdrawal liability, as 
otherwise permitted by ERISA.

Phased Recognition of SFA Assets

    Under Sec.  4262.16(g)(2), a plan that receives SFA is required 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 runs from the first plan year in which the plan receives payment

[[Page 4902]]

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 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, 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. 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 under the terms 
of the interim final rule.
    Three examples are included in Sec.  4262.16(g)(2) to illustrate 
the procedures for the phased recognition of SFA assets.
    PBGC determined that requiring phased recognition of SFA as a plan 
asset is a reasonable condition under section 4262(m) of ERISA because 
SFA does not result from employer contributions, but is a transfer of 
taxpayer funds to statutorily 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 Internal Revenue Code (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 
Department of 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 5 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. 
Internal Revenue Service (IRS) Notice 2021-38, 2021-30 IRB 155, 
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 response to the July 2022 final rule, three commenters generally 
supported the added withdrawal liability condition under Sec.  
4262.16(g)(2) or said that the phased recognition of SFA funds as a 
plan asset was an improvement over the interim final rule that required 
a plan that received SFA to immediately recognize the SFA funds as a 
plan asset. One commenter opposed the condition because of separation-
of-powers principles. PBGC disagrees with this comment. As explained in 
the July 2022 final rule, 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 condition in Sec.  4262.16(g)(2) 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.
    One commenter was concerned that the phased recognition of SFA will 
not be effective after the first few years following a plan's receipt 
of SFA and suggested several ways of strengthening the condition. One 
suggestion was to apply the condition to all plans that receive SFA 
(including plans that have already applied for and received SFA under 
the terms of the interim final rule without requiring that the plan 
file a supplemented application) because contributing employers to 
these plans should not be treated more favorably in the calculation of 
withdrawal liability than employers in plans that have not yet been 
able to apply for SFA. Alternatively, the commenter suggested 
permitting a plan that received SFA before August 8, 2022, the option 
to adopt the condition without having to file a supplemented 
application. Another suggestion was for PBGC to affirm that the amount 
of excluded SFA should include the investment return on SFA for each 
year in the phase-in period. An additional suggestion was to apply the 
condition over the full 30-year period that SFA is intended to cover, 
but that a compromise might be to amortize the SFA over no fewer than a 
stated period of years, such as 20 years.
    PBGC considered these suggestions but decided not to adopt them. 
PBGC provided a process in the July 2022 final rule for a plan that 
receives SFA under the terms of the interim final rule to have the 
withdrawal liability condition in Sec.  4262.16(g)(2) apply to the 
plan. The condition applies to a plan in determining withdrawal 
liability for a withdrawal occurring on or after the date the plan 
files a supplemented application. The supplemented application used for 
this purpose is not burdensome for a plan to file. Regarding the amount 
to be phased-in, PBGC provided examples in the July 2022 final rule 
that make it clear that investment returns are not included in the 
calculation of the amount excluded. PBGC also considered requiring the 
condition to cover a longer period of time, but decided not to adopt 
this suggestion. A longer period, such as requiring the condition to 
cover 20 or 30

[[Page 4903]]

years, may not be reasonable for plans that receive a small amount of 
SFA and the contributing employers to those plans.
    Another commenter who supported the phased-recognition of SFA over 
the projected payout period recognized that the length of that period 
may vary based on characteristics of the SFA-recipient plan. PBGC 
agrees with this comment. The condition in Sec.  4262.16(g)(2) is 
reasonable and appropriate for plans because it applies only through 
the end of the plan year by which each plan projects it will exhaust 
SFA assets.
    Some of the suggestions made by commenters are beyond the scope of 
this rulemaking. For example, one commenter suggested that PBGC impose 
a condition so that an employer that has an obligation to contribute to 
a plan for work performed in the building and construction industry 
that ceases operations or transfers operations outside the jurisdiction 
of its collective bargaining unit will incur withdrawal liability. 
Under section 4203(b) of ERISA, such employers are not considered to 
have withdrawn from the plan.
    Two commenters requested that PBGC review the impact on the 
assessment of withdrawal liability when a plan that receives SFA is 
deemed to be in critical status through 2051. Under the Multiemployer 
Pension Reform Act of 2014, critical status plans must ignore certain 
contribution increases in calculating UVBs and withdrawal liability. 
One of these commenters suggested that PBGC add a condition to require 
plans that receive SFA to include contribution increases under a 
rehabilitation plan for withdrawal liability purposes. This issue 
raises interpretive issues about sections 305(g)(3), 305(d)(1)(B), and 
305(f)(1)(B) 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.). PBGC is continuing to examine these 
issues with the Department of the Treasury and, if appropriate, may 
issue additional guidance.

Exceptions From Withdrawal Liability Conditions

    PBGC received two comment letters requesting exceptions from the 
withdrawal liability conditions. One commenter requested an exception 
for single-owner professional employers stating that the phase-in of 
SFA does not provide sufficient relief from the withdrawal liability 
such employers could be assessed. The commenter proposed that PBGC 
provide for full consideration of SFA in the calculation of withdrawal 
liability for single-owner professional employers and relax the 
condition in Sec.  4262.16(g)(1) requiring the use of a specific 
interest rate assumption. PBGC declines to add an exception for single-
owner professional employers. The purpose of SFA is to help plans pay 
for benefits and plan expenses and not to indirectly subsidize 
employers to withdraw from these plans. PBGC is not making this change 
because if PBGC provided an exception for a special class, such as, 
single-owner professional employers, it would subsidize the withdrawal 
of these employers rather than discourage employer withdrawal.
    Another commenter requested that PBGC grant exceptions from or 
modifications to the withdrawal liability conditions under Sec.  
4262.16(g)(1) and (2) for plans that have unique facts and 
circumstances, such as a plan that uses an alternative withdrawal 
liability allocation method, if applying the condition to the plan 
would result in a lower assessment of withdrawal liability, thereby 
incentivizing contributing employers to withdraw.
    After considering the comment, PBGC determined that adding a 
process for a plan to request an exception from the withdrawal 
liability conditions in Sec.  4262.16(g)(1) and (2) under narrow 
circumstances is reasonable. The conditions on withdrawal liability are 
intended to ensure that SFA is preserved for the payment of benefits 
and expenses and not used to subsidize employer withdrawals. If 
application of the conditions would result in an increase in employer 
withdrawals, the plan would be negatively impacted and the purpose of 
the conditions would not be met. Accordingly, PBGC is adding Sec.  
4262.16(g)(3), which provides a process for a plan sponsor to request 
approval from PBGC for an exception from the withdrawal liability 
conditions in Sec.  4262.16(g)(1) and (2) under specific circumstances.
    Under the exception process, a plan sponsor may request an 
exception from the withdrawal liability conditions by demonstrating to 
the satisfaction of PBGC that the exception lessens the risk of loss to 
plan participants and beneficiaries and does not increase expected 
employer withdrawals. The plan sponsor must also demonstrate that the 
exception does not increase the amount of the plan's SFA or 
unreasonably increase PBGC's risk of loss. A request for PBGC approval 
of an exception must be submitted by the plan sponsor or its duly 
authorized representative and must contain identifying, actuarial, and 
financial information described in Sec.  4262.16(g)(3).
    The exception process added by this final rule is separate from the 
SFA application process. A request for an exception from the withdrawal 
liability conditions may be submitted to PBGC either before the plan's 
initial application for SFA is filed or before a revised application is 
filed. A plan sponsor requesting an exception is encouraged to have a 
pre-submission consultation with PBGC.
    When an application for SFA is prepared, a plan is required to take 
into account plan assets in determining the amount of requested SFA. 
Under Sec.  4262.4(c)(4), this includes 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. Accordingly, if a plan sponsor submits a request for an 
exception from the withdrawal liability conditions, the plan's 
application for SFA must take the exception into account in the 
determination of the withdrawal liability payments expected to be made 
to the plan and the amount of requested SFA.

Compliance With Rulemaking Guidelines

Administrative Procedure Act

    As described in the July 2022 final rule, PBGC's adoption of a 
condition requiring a phased recognition of SFA in a plan's 
determination of withdrawal liability under Sec.  4262.16(g)(2) 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 purposes 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 that have the 
potential to accelerate plan insolvencies. This condition was adopted 
after consideration of comments received on the withdrawal liability 
condition requiring the use of specified interest assumptions included 
in the interim final rule. PBGC provided for a comment period of 30 
days on the new withdrawal liability condition in Sec.  4262.16(g)(2) 
because it is an area of complexity that PBGC recognized may benefit 
from additional public comment. PBGC noted this additional opportunity 
for public comment on the condition would allow PBGC to assess the 
effectiveness of the withdrawal liability

[[Page 4904]]

condition, consider adjustments or changes, and determine whether more 
clarification is needed regarding the condition or the mechanics of 
implementation. The preamble to the July 2022 final rule provided that 
to the extent PBGC determines that adjustments or changes to the 
withdrawal liability condition are appropriate and authorized, or that 
further clarification is needed, PBGC would revise the condition 
accordingly.
    As discussed earlier in the preamble, in response to this comment 
solicitation, PBGC received comments on the phase-in condition in Sec.  
4262.16(g)(2) as well as on the condition requiring the use of 
specified interest assumptions in Sec.  4262.16(g)(1). Following 
consideration of these comments, PBGC determined that it would be 
appropriate to provide a process for plans to apply for an exception to 
the conditions in Sec.  4262.16(g)(1) and (2), that would be available 
where application of the conditions would result in an increase in 
employer withdrawals. Enabling a plan to apply for an exception from 
the withdrawal liability conditions based on the specific facts and 
circumstances of the plan will provide flexibility to ensure that the 
statutory purposes of SFA to pay for benefits and administrative 
expenses, as described earlier in this preamble, are met.
    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.'' As 
described in PBGC's interim final rule and July 2022 final rule, 
Congress expressed a clear urgency for PBGC to implement an SFA program 
to get appropriate assistance to eligible plans as quickly as possible. 
Congress authorized PBGC to prioritize the filing of applications for 
eligible plans with the greatest need, during the first 2 years after 
March 11, 2021, and PBGC provided for such a process. PBGC is receiving 
and processing applications filed by these plans. Under this final 
rule, a plan eligible for SFA may apply for an exception to the 
withdrawal liability conditions before the plan files its SFA 
application. It is in the interest of a plan eligible to apply during 
the priority period to be able to determine if the plan should apply 
for an exception to the withdrawal liability conditions. Any delay in 
the effective date of the final rule would be contrary to the interests 
of the plan's participants and beneficiaries and could cause a delay in 
the submission of the plan's application and the plan's receipt of SFA. 
Accordingly, PBGC has determined that the public interest is best 
served by issuing this final rule expeditiously, without further 
opportunity for notice and comment, and that good cause exists for 
making the exception process set forth in this amendment effective less 
than 30 days after publication.
    PBGC is making this rule effective on January 26, 2023.

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 to distribute 
appropriate financial assistance to eligible plans quickly, PBGC has 
determined that this final rule must take effect January 26, 2023. As 
described earlier in the preamble, this effective date allows eligible 
plans to apply for an exception from the withdrawal liability 
conditions and apply for SFA without unnecessary delay. Under the 
circumstances, PBGC has determined that public interest is best served 
by making this final rule effective on January 26, 2023. PBGC does not 
want to unduly delay providing financial assistance to plans.

Regulatory Impact Analysis

(1) Relevant Executive Orders and 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) Estimated Impact of Regulatory Action

    As discussed earlier in the preamble, PBGC published a final rule 
on July 8, 2022, to modify its regulations under part 4262, which 
implement the requirements under ARP. It is through this program that 
PBGC is providing 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 Department of the Treasury.
    In the Regulatory Impact Analysis of the July 2022 final rule, PBGC 
provided estimates of the transfer amounts of the SFA program using 
Multiemployer Pension Insurance Modeling System (ME-PIMS), PBGC's 
stochastic modeling tool. The aggregate SFA was estimated to be 
approximately $82.3 billion in assistance payments paid to 
approximately 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

[[Page 4905]]

in the form of loans will repay PBGC in aggregate approximately $385 
million.
    The addition of Sec.  4262.16(g)(3), to provide plans with an 
exception process for the withdrawal liability conditions is expected 
in rare circumstances to impact the assumptions selected by the plan 
for projecting future withdrawal liability payments and ongoing 
employer contributions for purposes of determining the SFA amount in 
the plan's application. In the absence of an exception process under 
Sec.  4262.16(g)(3), some plans may expect an increase in employer 
withdrawals and a decrease in employer contributions following receipt 
of SFA. Consequently, without the exception, these plans would be 
expected to incorporate these anticipated employer withdrawals into 
their withdrawal liability payment assumption, which could increase the 
SFA requested in their applications. Although this circumstance would 
be expected to be limited to very few plans, PBGC estimates that the 
addition of Sec.  4262.16(g)(3) could decrease overall SFA program 
transfers by $1 to $2 billion.
    As discussed earlier in the preamble, PBGC considered regulatory 
alternatives based on the public comments provided during the 30-day 
comment period on the withdrawal liability condition in Sec.  
4262.16(g)(2) included in the July 2022 final rule. Under one such 
regulatory alternative, PBGC considered extending the period of time 
for the phased recognition of SFA in a plan's determination of 
withdrawal liability. PBGC decided not to adopt this suggestion because 
a longer period, such as requiring the condition to cover 20 or 30 
years, may not be reasonable for plans that receive a small amount of 
SFA and for the contributing employers to those plans. PBGC also 
considered leaving the withdrawal liability condition unchanged. 
However, it was decided that the addition of a narrow exception process 
under Sec.  4262.16(g)(3) will enhance the ability of plans, based on 
their specific facts and circumstances, to retain employers and 
minimize the likelihood that the receipt of SFA could induce employers 
to withdraw from these plans.

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 this 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. 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.
    Under Sec.  4262.16(g)(3), PBGC is adding a request for a 
determination from PBGC for approval of an exception from the 
withdrawal liability conditions under Sec.  4262.16(g)(1) and (2). PBGC 
estimates that, beginning in 2023, it will receive an average of only 
one request per year with an average annual hour burden of 8 hours and 
an average annual cost burden of $25,000. In addition, under the 
circumstances described in Sec.  4262.16(d), (f), and (h), a plan 
sponsor may file a request for a determination from PBGC for approval 
of an exception from SFA conditions relating to reductions in 
contributions, transfers or mergers, and settlement of withdrawal 
liability. PBGC estimates that beginning in 2023, PBGC will receive an 
average of 2.2 requests per year for these additional determinations. 
PBGC needs the information required for a request for determination to 
determine whether to approve an exception from each of the specified 
conditions of receiving SFA. PBGC estimates that, beginning in 2023, 
PBGC will receive an average of 3.2 requests per year for all 
determinations. PBGC estimates an average annual hour burden of 15.6 
hours and average annual cost burden of $44,000.
    The estimated aggregate average annual hour burden for the next 3 
years for the information collection in part 4262 is 878.6 hours for 
employer and fund office administrative, clerical, and supervisory 
time. The estimated aggregate average annual cost burden for the next 3 
years for the information collection request in part 4262 is 
$2,130,400, for approximately 5,326 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.

List of Subjects in 29 CFR Part 4262

    Employee benefit plans, Pension insurance, Pensions, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, PBGC is amending 29 CFR 
part 4262 as follows:

PART 4262--SPECIAL FINANCIAL ASSISTANCE BY PBGC

0
1. The authority citation for part 4262 continues to read as follows:

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


0
2. In Sec.  4262.16, add paragraph (g)(3) to read as follows:


Sec.  4262.16   Conditions for special financial assistance.

* * * * *
    (g) * * *
    (3) Request for exception. The plan sponsor of a plan eligible for 
special financial assistance may request approval from PBGC for an 
exception from the conditions under paragraphs (g)(1) and (2) of this 
section by demonstrating to the satisfaction of PBGC that the exception 
lessens the risk of loss to plan participants and beneficiaries and 
does not increase expected employer withdrawals. The plan sponsor must 
also demonstrate to the satisfaction of PBGC that the exception does 
not increase the amount of the plan's special financial assistance or 
unreasonably increase PBGC's risk of loss. A request for PBGC approval 
of an exception must be submitted by the plan sponsor, or its duly 
authorized representative, either before an initial application or 
before a revised application for special financial assistance is filed 
by the plan, 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) Most recent plan document or restatement of the plan document 
and all subsequent amendments adopted (if any) and most recent 
Declaration of Trust.
    (iv) Administrative manuals and other documents governing the 
plan's assessment or administration of withdrawal liability.
    (v) 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 (g)(3), and the actuarial valuation performed for 
each of the 2 plan years immediately preceding the most recent 
actuarial valuation.

[[Page 4906]]

    (vi) 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.
    (vii) A statement of whether the plan sponsor is requesting an 
exception from the condition under paragraph (g)(1) or (2) of this 
section or both and a demonstration of how the proposed exception 
lessens the risk of loss to plan participants and beneficiaries and 
does not increase expected employer withdrawals. The statement must 
also include a demonstration that the exception does not increase the 
amount of the plan's special financial assistance or unreasonably 
increase PBGC's risk of loss.
    (viii) A list of employers contributing greater than 5 percent of 
plan contributions in a plan year.
    (ix) A certification by the plan's actuary that the amount of 
special financial assistance that will be requested in the plan's 
application for special financial assistance will be determined 
assuming the exception will be approved.
    (x) A detailed statement certified by an enrolled actuary of the 
effect of the proposed exception, and a demonstration for 30 years that 
the estimated withdrawal liability payments and contributions with the 
proposed exception exceed the estimated withdrawal liability payments 
and contributions without the proposed exception. The demonstration 
must show an aggregate of all withdrawal liability payments and an 
aggregate of all contributions for each year in the 30-year period and 
include representative examples of employer withdrawal liability 
payments and contributions. An individual employer's withdrawal 
liability assessment reflecting the proposed exception must be no less 
than what would be assessed without the proposed exception.
    (xi) Any additional information PBGC determines it needs to review 
a request for approval of a proposed exception.
* * * * *

    Issued in Washington, DC.
Gordon Hartogensis,
Director, Pension Benefit Guaranty Corporation.
[FR Doc. 2023-01415 Filed 1-25-23; 8:45 am]
BILLING CODE 7709-02-P