Will there be enough money?

There is much chatter and speculation on social media regarding ARPA’s funding and ability to meet all the promises. There is growing fear among some circles that somehow the “pool of resources” will fall short of meeting the objective to fund ALL the benefits (and expenses) for the next 30-years for those plans filing for financial assistance. Please remember that no specific $ amount has been allocated and no estimate of the final cost was in the legislation. Sure, there was an estimate by the OMB that suggested that the ultimate price tag would be $86 billion, but that is only an estimate. Furthermore, the amount of Special Financial Assistance (SFA) will be predicated on multiple inputs yet to be decided. These inputs include the discount rate used to determine the present value (PV) of the liability and whether or not the current assets, future contributions, and projected return on the assets are included in the SFA calculation. Hopefully, we’ll get answers to these critical variables when the PBGC publishes their guidelines around July 10th.

Importantly, the legislation does specifically state that “there is appropriated from the general fund such amounts as are necessary for the costs of providing financial assistance under section 4262 and necessary administrative and operating expenses of the corporation. The eighth fund established under this subsection shall be credited with amounts from time to time as the Secretary of the Treasury, in conjunction with the Director of the Pension Benefit Guaranty Corporation, determines appropriate, from the general fund of the Treasury.”

The only possible fly in the ointment is the following: “but in no case shall such transfers occur after September 30, 2030. Given this restriction, the powers that be better get the discount rate and calculation of the SFA correct, or there could be significant shortfalls during the next 30-years in the amount of assets needed to meet those promised benefits!

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