By: Russ Kamp, Managing Director, Ryan ALM, Inc.
A massive Blue Fin Tuna was caught off the coast of Florida a couple of days ago. The 832-pound tuna may prove to be a Florida state record, but it doesn’t compare to the whale of a pension plan that has filed for Special Financial Assistance (SFA) with the PBGC. The Central States, Southeast & Southwest Areas Pension Plan filed the application on April 28th seeking more than $35.1 billion in SFA grant assets to secure the promised benefits for 364,908 plan participants. This plan, if the application is approved, will claim about 35%-38% of the total estimated cost of the ARPA rescue plan assets. The Central States is the first Priority Group 3 plan to file since becoming eligible on April 1st.
In other news, members of the PBGC were quite busy last week approving applications for SFA grants for an additional 7 funds, including three Priority Group 2 applications. The new approvals will help cover the promised benefits for 99,588 participants, as they are expected to receive roughly $3.7 billion in grants. Since last July, 20 plans have had the SFA applications approved covering >117,000 participants with $6.08 billion in grants.
Despite the positive momentum now being witnessed, multiemployer plans (and their advisors) are still waiting for the PBGC’s Final, Final Rules as to how the SFA and legacy assets should be managed. As we’ve discussed, those plans that have already received their assets may have been hurt in this rising rate environment. However, those plans that have yet to receive the approved assets are lucky, as they will now have an opportunity to use the SFA grant assets to defease their plan’s liabilities at higher interest rates, which reduces the economic present value of that future liability payment.