PBGC, IRS publishes guidance on assistance for multi-employer plans


The Pension Benefits Guarantee Company (PBGC) July 9 announced that it published an interim final rule implementing a new Special Financial Assistance (AFS) program for financially troubled multi-employer pension plans. IRS the same day directives issued for multi-employer plans receiving assistance, as well as for plan members and their beneficiaries.

PBGC Guidelines

The PBGC intends the SFA program to improve the retirement security of millions of Americans by providing eligible multi-employer pension plans with SFA with the amounts required for the plans to pay all benefits due during the period beginning in payment date of SFA until the plan year ending in 2051. The PBGC had declared in its priority orientation plan that he planned to publish this rule this year.

The interim final rule implements the provisions of the American Rescue Plan Act, a measure enacted on March 11, 2021 that provides estimated assistance of $ 94 billion to severely underfunded qualifying plans, helps plans by providing funds for reinstate previously suspended benefits and resolve the solvency of PBGC’s multi-employer insurance program. To accomplish this, the Interim Final Rule adds to the PBGC Regulation a new Part 4262 to implement the requirements of Section 9704 of the American Rescue Plan Act of 2021, “Special Financial Assistance Program for Multi-Employer Plans in financial difficulty “.

More specifically, the provisional final rule:

  • sets out the requirements for requests for special assistance;
  • establishes the information that a plan must file to demonstrate eligibility for SFA;
  • establishes the formula for determining the amount of SFA that PBGC will contribute to a qualifying plan;
  • identifies the order of priority in which plans are allowed to request AFE;
  • describes a processing system which will allow the filing and examination of numerous applications within a limited period of time;
  • specifies the investments authorized for SFA funds; and
  • establishes certain restrictions and conditions on plans that receive AFE.

The PBGC will accept comments from the public for 30 days following the publication of the interim rule in the Federal Register, which is expected to take place on July 12, 2021. Comments can be submitted by:

  • send an e-mail to [email protected];
  • recording comments on https://www.regulations.gov; or
  • send or forward comments to: Regulatory Affairs Division, Office of the General Counsel, Pension Benefit Guaranty Corporation, 1200 K Street NW, Washington, DC 20005-4026.

All submissions must include the agency name (Pension Benefit Guaranty Corporation, or PBGC) and the title of this regulation (Special Financial Assistance by PBGC) and the regulation identification number for this regulation (RIN 1212-AB53) .

PBGC director Gordon Hartogensis noted in a press release that the rule implements important benefits law he called “critical to the economic security of so many retirees and their families.” According to Hartogensis, “The US bailout provides funding to severely underfunded pension plans that will ensure that more than three million American workers, retirees and their families receive the retirement benefits they earned over the years. many years of hard work. ”

Interim rule implements US bailout “as Congress designed it,” Labor Secretary Marty Walsh says in a July 9 press release. He said that as chairman of the board of the PBGC, he is “proud that today’s regulation by the Pension Benefit Guaranty Corporation will help secure the pensions of approximately 3 million American workers, retirees and their families by providing financial assistance to more than 200 seriously ill people. underfunded multi-employer plans. Walsh went on to call it “a historic achievement to secure pension benefits for unionized workers and the most important policy ever adopted to increase the solvency of our nation’s multi-employer pension plans.” Unions, their members and the beneficiaries of these plans have fought for years for what these workers have earned.

IRS guidelines

IRS issued July 9 Notice 2021-38, in which it provides guidance:

  • sponsors of multi-employer pension plans who are required to reinstate certain previously suspended benefits as a condition of receiving special financial assistance under section 4262 of ERISA;
  • whether compensation payments in respect of previously suspended benefits under section 432 (k) (2) (A) (ii) of the Code can be transferred to another pension plan eligible under section 402 (c ) of the Code; and
  • on how to apply the rule in section 432 (k) (2) (D) (i) of the Code that any special financial assistance received by the plan is not taken into account in determining the required contributions under section 431 of the Code.

More specifically, Notice 2021-38 states that if an eligible multi-employer plan receiving SFA had suspended benefits under section 418E (a) of the Code without adopting a plan amendment, the plan must be amended to reinstate suspended benefits, from the month in which the AFE is paid into the scheme, for members or beneficiaries from that month. The reinstatement will apply until the end of the plan year during which the date of entry into force of the SFA occurs. For the following plan years, the plan must apply article 418E of the code, taking into account all plan assets, including the SFA.

Compensation payments to a member or beneficiary must be paid, as determined by the plan sponsor, either as a lump sum within three months of the date on which the SFA is paid into the plan, or in monthly installments. equal over a five-year period, starting within three months of the AFE payment date.

The change to the compensation plan should also specify what form of distribution (i.e. lump sum payment or monthly installments) will apply to compensation payments to a member or beneficiary. If the compensatory payments are made over five years, the payments do not include any adjustment for interest and must be paid regardless of whether the member or beneficiary survives at the end of the five-year period.

Because a multi-employer plan that receives AFE must be amended to provide compensation payments to retirees and beneficiaries in addition to the annuity payments these individuals already receive, the notice states that these compensation payments are independent payments under Treas. Reg. §1.402 (c) -2, Q & R-6 (a) for the purposes of sections 401 (a) (31), 402 (c) and (f) and 3405 (c) (1) of the Code, unless the payments satisfy to the requirements of Treas. Reg. §1.402 (c) -2, Q & R-6 (b) (2) to be treated as additional payments as part of a series of substantially equal periodic payments.

The IRS says the plan administrator must provide the participant or beneficiary who receives a top-up payment with a lump sum that exceeds the limit under Treas. Reg. §1.402 (c) -2, Q & R-6 (b) (2) (iv) with the choice of article 401 (a) (31) of the Code to proceed with a direct rollover to an eligible pension plan and the notice described in article 402 of the Code (F). Unless such member or beneficiary elects to defer this payment to an eligible pension plan under Article 402 (c) (4) of the Code, the compensation payment will be subject to a 20% withholding under the Article 3405 (c) (1) of the Code.

The IRS notes that Section 432 (k) (1) (D) of the Code requires, in the case of a plan applying for ACS under PBGC rules providing for temporary priority review, that the request of the plan is submitted to the Treasury Department. However, according to Notice 2021-38, in the case of an application to which this provision applies, the requirement will be met by submission to PBGC.

The IRS also notes that section 432 (k) (2) (D) (i) of the Code provides that any SFA received by a multi-employer plan is not taken into account in determining the contributions required under of article 431 of the Code. Consequently, the amounts of the SFA account established under Article 4262 of the ERISA are not included in the assets of the scheme for the purposes of determining the contributions required under Article 431 of the Code. This exclusion from the SFA account applies for all purposes under Article 431 of the Code, including determining the fair market value of assets used under Article 431 (c) (6) of the Code and determining the actuarial value of assets.

The amount in the SFA account is equal to the original SFA paid by the PBGC, adjusted by the return on investments on assets held in that account, and reduced by benefit payments and expenses paid from that account, the IRS says in l ‘notice. To the extent that a benefit or expense liability is met by payments from the Special Financial Assistance Account, there will be no corresponding reduction in the portion of plan assets that is recognized in the Fund. purposes of section 431 of the Code. Therefore, says the IRS, any benefit or plan fees paid from the Special Financial Assistance Account during a plan year will generate an actuarial gain for that plan year. If the funding method used by the plan includes the determination of an actuarial gain or loss for each year of the plan, then the actuarial gain generated by any benefit or expense of the plan paid from the special financial assistance account during a plan year will be included in the actuarial calculation. gain or loss for that plan year and amortized over 15 years in accordance with section 431 (b) (3) (B) (ii) of the Code.


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