By: Russ Kamp, Managing Director, Ryan ALM, Inc.

Good morning to all my friends in multiemployer pension systems that have filed or will soon file applications with the PBGC to receive Special Financial Assistance (SFA) grants under ARPA. I have just been informed that the PBGC’s Final, Final Rules are with the Office of Management and Budget (OMB). This has always been an important step in the process of getting the final guidelines from the PBGC approved. Let’s hope that this review process can be handled swiftly. Equally important, let’s hope that these final rules don’t create potential harm.

What do I mean by that? I’ve been very consistent in expressing my opinions that the intent of the legislation was to SECURE the promised benefits for as long as possible. The securing of benefits chronologically can only occur through a cash flow matching defeasement strategy, as bonds are the only asset that has a known terminal value (par) and a set of future income cash flows (semi-annual interest). These asset cash flows can be used to match and fund liability cash flows (benefit payments). Let’s not bring uncertainty into this process by expanding the restricted investment list to include stocks, real estate, private equity, etc. These assets don’t do anything to secure the promised benefits. They bring greater volatility and uncertainty, which goes against the legislation’s intent.

This pension legislation is potentially helping millions of Americans gain (regain) more retirement security. It is the first real rescue of the promises made to pension participants in a long time. I am praying that the updated guidelines don’t set this effort backward.