March 2021 was an exciting time for many multiemployer pension plans and their participants with news that the American Rescue Plan Act (ARPA) had been signed into law and a “rescue” of some roughly 130 struggling multiemployer pension systems was right around the corner. But was it? Following the March passage, we all waited for the PBGC to produce their interim “final” rules, which they did in early July. Those guidelines laid out a schedule – a priority pecking order – for funds that qualify for the Special Financial Assistance (grant).

According to the PBGC’s website, there have been 20 applications for the Special Financial Assistance (SFA) filed to date, with one plan, Road Carriers Local 707 Pension Plan, submitting their first application on August 13th and a revised application on November 12th. To date, no applications have either been approved or rejected. The PBGC has 120 days from receipt of the application to either approve the SFA request or send it back to the plan for an amended application. Furthermore, we continue to wait for the PBGC’s “Final, Final Rules”.

As a reminder, roughly 100 letters were received by the PBGC following the publication of the Interim Final Rules in July. These comments covered various aspects of the legislation and represented feedback from individual participants, pension systems, actuaries, asset consultants, money managers, and more. It is anyone’s guess at this point whether the PBGC will, in fact, listen to the industry participants and amend any of their initial guidance. The key request by industry participants is to change the discount rate used to calculate the SFA grant from a PPA 3^rd segment rate + 200 basis points to the PPA three segment rates currently used. The higher discount rate required by the legislation significantly reduces the SFA grant.  I am not confident that they will further amend their guidelines, despite the fact that several leading voices in Congress are not pleased with how the legislation was interpreted.

It remains to be seen whether the goal to secure the next 30-years of benefits and expenses will be achieved, but initial analysis suggests that few if any, plans will, in fact, be able to secure the promised benefits, reinstitute cuts that had previously been made to benefits (18 plans under MPRA), and maintain sufficient assets to meet future benefits. Despite the possible shortfall, what we should be focused on is the fact that these struggling plans are getting a grant, and in some cases, a substantial one, to help improve funding, at least in the near term. Importantly, the SFA assets received should be used to secure the promised benefits as far out into the future as possible. This action will buy time for the current assets to grow unencumbered, and if necessary, allow for future amendments to this legislation to be enacted. Actions that don’t secure the promised benefits only act to increase the likelihood that assets received through ARPA will not be sufficient to meet the promises that are supposed to be secured until 2051. More to come.