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

In yesterday’s weekly update on the PBGC’s ARPA implementation, I mentioned that I didn’t have any particular insight into why the process of receiving and approving applications seemed to have come to a screeching halt. Well, I may finally have an answer or at least an insight into what might be happening.

According to an article (NY Post) in the “King Report”, members of Congress have reached out to the PBGC with concerns about the potential overpayment of Special Financial Assistance (SFA) due to incorrect census data. In fact, they referenced the possibility that Central States received roughly $127 million in overpayments as a result of nearly 3,500 deceased participants included in the calculation for SFA. Now, let’s put that into context, as the $127 million was part of a $35.8 billion SFA payment (including interest) or roughly 0.35% of the total. In addition, the 3,479 deceased participants are roughly 1% of the plan participants.

I don’t know if there have been deceased members among the other 68 plans that have received SFA to date, but if the ratios are similar, the “overpayment” represents a drop in the bucket of the total outlay to date. Yes, the ARPA funds are taxpayer monies, but the benefit of this program on the lives of millions of plan participants far outweigh the potential impact of erroneous census data. I’m going to assume (always fraught with danger) that the lack of progress since November is tied to this action. I can imagine the PBGC requiring those plans seeking SFA to be 100% certain that their census data is correct.

Implementing this legislation has been a challenge for the PBGC based on the sheer magnitude of the program and the importance, certainly as it pertains to those pension plans that had cut benefits, of getting the promised benefits restored and secured. I have had my issues with the PBGC’s Final Final Rules (FFR) allowing for the inclusion of risk assets given the importance of maximizing benefit coverage, but overall I’ve been impressed with the pace by which plans have had applications approved and funds received. As reported yesterday, 69 pension plans have been granted nearly $54 billion in SFA.

Unfortunately, the Butch Lewis Act (BLA), which passed the House in 2019, was caught up in politics in the Senate during the same year. Fortunately, a very similar form of the BLA was attached to ARPA, passed, and signed into law in March 2021. The roughly $90 billion that will eventually flow to perhaps 200 or so plans will secure the pension promises for millions of plan participants, while providing them with the economic wherewithal to remain active participants in our economy. Without this legislation, many plan participants would have struggled in retirement and likely become more dependent on the Federal government through their social safety net.

It is important that this program be implemented appropriately, but let’s hope that politics doesn’t get in the way of the important task of allocating ARPA grant money to these struggling pension plans whose participants have worked long careers with the understanding that they would receive X in retirement. Not X minus something, if anything at all.