It has been reported that the American Federation of Musicians and Employers’ Pension Fund (AFM-EPF) has decided to pull the application for benefit reductions under MPRA and “bet” that the recently passed American Rescue Plan Act will provide a superior outcome. The latest MPRA application by AFM-EPF filed in December (the first application was rejected) called for an across-the-board 30.9% reduction of the multipliers used to calculate benefits for contributions earned before Jan. 1, 2010. Under ARPA, plans designated as Critical and Declining or Critical can file an application with the PBGC for a grant that would ensure that benefits would be paid through 2051 with no requirement that the grant is repaid.

It seems fairly obvious to me what I would do if I were responsible for that plan. But, there are outstanding issues that need to be resolved with regard to the legislation. This determination falls onto the PBGC, which is responsible for providing guidance on the legislation’s provisions, including how the Special Financial Assistance (SFA) is calculated in the first place. I’ve seen multiple interpretations as to how the SFA will be determined, and the size of the assistance varies tremendously under the most extreme differences.

Personally, I can’t imagine that it was the goal of Congress to have legislation passed that doesn’t accomplish the objective of securing the promised benefits for these struggling plans through 2051, especially given that there are roughly 1.4 million Americans in these plans who are expecting to get what was promised. So, what would you do? Would you cut benefits under MPRA, even if the pain is quite severe in order to extend the viability of these entities, or would you “roll the dice” on ARPA and the PBGC’s interpretation of how the SFA should be calculated? I firmly believe that the PBGC will produce guidelines that provide the necessary SFA to ensure that there is enough money in 2051 to meet the plan’s liabilities at that time.