Compliance News | January 30, 2023
On January 26, 2023, the Pension Benefit Guaranty Corporation (PBGC) published a final rule that adds an exception to the conditions that apply to withdrawal liability for plans that receive special financial assistance (SFA). The final rule adds a process for requesting from the PBGC an exception that applies in narrow circumstances, including for plans that use an alternative allocation method for determining withdrawal liability.
The final rule took effect on January 26, 2023.
On July 6, 2022, PBGC released a final rule (published in the July 8, 2022 Federal Register) implementing the SFA program as provided under the American Rescue Plan Act of 2021 (ARPA). (We discussed ARPA in our March 11, 2021 insight, “The American Rescue Plan and Multiemployer Pension Relief,” and the final rule on the SFA program in our July 7, 2022 insight, “PBGC Final Rule on Multiemployer SFA: Solvency Through 2051.”)
The final rule includes conditions on withdrawal liability for SFA-recipient plans that are intended to preserve SFA for the payment of plan benefits and expenses without subsidizing employer withdrawals. These conditions include the use of mass withdrawal interest rates generally until the later of 10 years or exhaustion of SFA assets and phased recognition of SFA assets.
In its latest final rule, the PBGC recognizes that for a small number of SFA-eligible plans with “unique facts and circumstances,” the conditions on withdrawal liability could have the reverse effect of lowering withdrawal liability assessments and increasing the number of employer withdrawals. Plans for which this may occur include those that have a PBGC-approved alternative allocation method for determining withdrawal liability.
The final rule describes the process for requesting an exception from the withdrawal liability conditions, including required demonstrations that the exception:
The exception process is separate from the SFA application process, and a request for exception must be filed before the plan’s initial SFA application or before a revised SFA application is filed. The request for an exception must include actuarial, financial and other plan information, including certifications by the plan’s actuary.
The PBGC encourages plan sponsors to engage in a pre-submission consultation with the PBGC regarding any request for exception.
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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