By Russ Kamp, Managing Director, Ryan ALM, Inc.
With regard to this post’s title, I’m not referring to the additional six weeks of winter predicted by Punxsutawney Phil or any other groundhog this past February 2nd. Winter in New Jersey is always cold, gray, and damp well into April no matter what our friendly rodent is forecasting. My reference has to do specifically with the fact that according to the PBGC’s ARPA update (last produced on March 8th) it has been six weeks since either a Priority Group 1 or 2 plan has had its application approved (January 24th was the last). Furthermore, only one pension system has filed a new application for Special Financial Assistance (SFA) during that timeframe.
It is estimated that roughly 80% of the Priority Group 1 pension plans have filed an application so far. However, the Priority Group 2 plans, including those that are expected to be insolvent within one year of the date the plan’s application is filed or those plans that implemented MPRA benefit suspensions before 3/11/2021, have been incredibly slow to file with only 7 having been filed to date since first becoming eligible at the end of December 2021. We know that there are 18 plans that received approval to restructure the promised benefits under MPRA that would now be eligible to file within Priority Group 2 yet only 4 pension plans have filed an application as of March 8th.
As we recently reported, there is no obligation on the part of an eligible pension system to file an application within the prescribed priority grouping, provided that they file by December 31, 2025, and not earlier than the eligible time. I am not going to speculate as to why plans may be delaying their filing, but it must be incredibly frustrating for the plan participants, especially those living with reduced pension benefits, to see the pace of activity so incredibly slow. Priority Group 3 candidates (those with more than 350,000 participants) are eligible to file effective April 1st. That group won’t add too many applications to the pile to be reviewed (perhaps it will only be the Central States plan), but the backlog is growing and the PBGC is obligated to render a decision on each application within 120 days of its filing.
Congress, in crafting the bill, encouraged the PBGC to use an application process that was lean allowing for a quick ruling on these applications. Some of the submissions that I’ve reviewed are >500 pages. So much for a streamlined process!