The ARPA legislation states the following: DETERMINATIONS ON APPLICATIONS.—A plan’s application for special financial assistance under this section that is timely filed in accordance with the regulations or guidance issued under subsection (c) shall be deemed approved unless the corporation notifies the plan within 120 days of the filing of the application that the application is incomplete, any proposed change or assumption is unreasonable, or the plan is not eligible under this section. Such notice shall specify the reasons the plan is ineligible for special financial assistance, any proposed change or assumption is unreasonable, or information is needed to complete the application. If a plan is denied assistance under this subsection, the plan may submit a revised application under this section. Any revised application for special financial assistance submitted by a plan shall be deemed approved unless the corporation notifies the plan within 120 days of the filing of the revised application that the application is incomplete, any proposed change or assumption is unreasonable, or the plan is not eligible under this section.
Given the above wording, we are now within days of having the first applications either approved or rejected. Local 138 Pension Trust Fund filed their application on August 23rd, which means that their 120 days are up on December 20th. Furthermore, “Special financial assistance issued by the corporation shall be effective on a date determined by the corporation, but no later than 1 year after a plan’s special financial assistance application is approved by the corporation or deemed approved.” There are several other plans that filed their initial application in September meaning that January is going to be a fairly busy time for the PBGC, which also has the second priority tier eligible plans filing their initial applications, too.
Unfortunately, these plans may be receiving their Special Financial Assistance (SFA) without knowledge of the PBGC’s “Final Final Rules”. As you may recall, the PBGC published its “Initial Final Rules” in July. Many plans and their asset consultants/actuaries are waiting to see if any changes will be made that would impact the size of the government grant or how the SFA assets may be invested. As of now, the SFA assets must be segregated from the plan’s legacy assets and be invested only in investment-grade bonds. There is a provision allowing for a 5% bucket of high yield bonds, but only if they are “Fallen Angels”.
For plan participants in Critical and Declining plans that were granted “relief” under MPRA, the waiting is particularly burdensome. Many of these participants have been struggling with financial hardship due to the draconian cuts to their earned benefits. The expectation was that benefits would be restored to previous levels once the legislation passed. But the waiting continues. Will the PBGC take the full 1-year to provide the grant? I sure hope not! Stay tuned.