Client Stories | November 1, 2021

How One Multiemployer Pension Plan Maximized its SFA

When your plan is eligible to apply for special financial assistance (SFA) from the PBGC under the American Rescue Plan Act of 2021 (ARPA), ensure your application is structured to receive the maximum SFA. ARPA permits eligible multiemployer pension plans, generally those expected to become insolvent by 2051, to apply for SFA. The application deadline varies depending on whether a plan is in one of six PBGC priority groups.

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The challenge

Trustees of a multiemployer fund were getting ready to apply for SFA from the PBGC. Before submitting the application, which the fund’s actuary had completed, the trustees wanted reassurance that it was accurate and maximized the amount of SFA, so they asked Segal for a second opinion.

Since an application for SFA is a one-time event, it’s very important to get everything right. Even a small increase in the amount of assistance can delay a plan’s future insolvency by several months or even a few years.

Our strategy

To maximize the amount of assistance in the application under review, we checked all of the actuary’s assumptions. We also looked for errors in the application that could delay or prevent its approval.

We have a team of 12 actuaries who focus on best practices for SFA applications. They know the complex rules under ARPA and the PBGC guidance that provide many options that could increase the amount of financial assistance. (Having worked with about one-half of all of the applications submitted to the PBGC to date, our experience matches that of all other firms combined.)

The results

Our review of the actuary’s draft application identified several issues to correct:

  • Use of the wrong asset statement
  • Use of the wrong hours assumption
  • Use of the wrong expense assumption
  • Numerous technical errors, including use of the wrong interest rate

Our recommended changes to the application will net the plan an estimated additional $3 million — which is a 4 percent increase in SFA. That additional assistance will extend the period until insolvency by as much as two years.

Interested in getting a second opinion on your plan’s SFA application?

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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