PBGC Issues Interim Final Rule on the American Rescue Plan Act’s Special Financial Assistance Program

On July 9, 2021, the Pension Benefit Guaranty Corporation issued its interim final rule implementing the Special Financial Assistance (SFA) program passed in March 2021 as part of President Biden’s American Rescue Plan Act of 2021. The SFA program is designed to address the immediate financial crisis facing certain multiemployer plans. The PBGC estimates that through the SFA program it will provide $94 billion to more than 200 plans, impacting over three million participants and their beneficiaries.

The program is funded by the Department of Treasury’s general revenue, not PBGC premiums.  PBGC established six priority groups to determine the order in which eligible fund applications may be received.  Applications from the highest priority funds may be filed as of July 9, 2021, and eligible funds may submit applications through December 31, 2025.


In order to be eligible to receive an SFA payment, a fund must meet one of four criteria between 2020 and 2022:

  • Critical and declining status in any plan year beginning in 2020 through 2022;
  • A suspension of benefits that has been approved under the Multiemployer Pension Reform Act of 2014 as of March 11, 2021;
  • Critical status with a funding ratio of less than 40% and a “mature population” (meaning the active-to-inactive participant ratio is less than 67%) in any plan year beginning in 2020 through 2022; or
  • Became insolvent after December 16, 2014 and has remained insolvent and has not terminated as of March 11, 2021.

The PBGC’s rule provides that for the third criteria (a funding ratio of less than 40% and a mature population), the two qualifications do not need to be met in the same year.

Amount of Special Financial Assistance

One key issue left open by the statutory text was the amount of SFA an eligible plan could receive.  The law provided that the SFA must be “such amount required for the plan to pay all benefits due during the period beginning on the date of payment of the special financial assistance payment under this section and ending on the last day of the plan year ending in 2051, with no reduction in a participant’s or beneficiary’s accrued benefit as of [March 11, 2021].”

The PBGC interpreted this to mean that all of a plan’s current resources must be factored into this calculation.  Thus, under the PBGC’s rule, the amount of the SFA is the value of all plan obligations minus the plan’s resources.  The obligations include an estimate of every amount the fund will need to pay out between the date of its application and 2051.  This will, necessarily, involve relying on actuarial data and estimates of how much benefits employees may still accrue that would need to be paid out before 2051.  A plan’s obligations also will include the amounts needed to make retroactive payments for plans with previous benefit suspensions approved under the Multiemployer Pension Reform Act of 2014 (which the PBGC estimates at $550 million) and the restoration of benefits above the PBGC guarantee for plans that have gone insolvent (estimated at $150 million). It also includes anticipated administrative expenses over the next 30 years. 

Meanwhile, for purposes of calculating the amount of the SFA, a plan’s resources includes all of the existing plan assets, expected future contributions from employers (which will, of course, necessitate estimating the hours employees will work and the applicable contribution rates over the next 30 years), and withdrawal liability payments.

The PBGC also issued guidance on under what circumstances a fund can change its established assumptions for purposes of determining eligibility for SFA and the amount of SFA.  

Application and Review Process

The PBGC’s rule creates six tiers of priority groups, designed to prioritize the most impacted plans and participants first:

Priority Group


Application Period Begins

Estimated Number of Plans


Already insolvent or projected to become insolvent before 3/11/2022




Implemented MPRA benefit suspensions before 3/11/2021 or expected to be insolvent within one year of the date application was filed.




Critical and declining status plans with greater than 350,000 participants




Projected to become insolvent before 3/11/2023




Projected to become insolvent before 3/11/2026




Present value of financial assistance in excess of $1 billion



The PBGC has indicated that the application dates for priority groups 2-6 may be earlier depending on the volume, processing time, and capacity.  It expects to make the first SFA payments by the end of this year.  The rule also provides a process for emergency filings if a plan is approaching insolvency within one year. 

Under the statute, the PBGC must process the application within 120 days, and the SFA payment will be made within 60 days of approval.

The rule provides that all denials will be in writing and will specify the reasons for the denial and what the plan needs to do to correct the issue in a revised application.  Under the text of ARPA, the PBGC may only issue one payment to any specific fund.

Restrictions, Conditions, and Reporting

Following the text of the statute, the PBGC’s interim final rule confirms that SFA assets must be segregated from other plan assets.  The PBGC’s rule does, however, permit the assets to be used, at the plan’s discretion, before other plan assets.  SFA funds must be invested in investment-grade bonds or other permissible investments.  The rule provides that these include individual fixed-income securities or in commingled funds such as Exchange Traded Funds, mutual funds, pooled trusts, or other commingled securities.  The rule also creates a 5% allowance for a plan to retain investments that were considered investment grade at the time of purchase but are no longer credit quality.

As anticipated, the PBGC’s rule sets multiple conditions for receiving SFA.

Benefit improvements:  Retroactive benefit improvements are not permitted if they are attributable in whole or in part to service accrued or other events that occurred before the adoption date of ARPA.  As the PBGC explained, this is “intended to prevent excessive increases in benefits that would result in a transfer of SFA beyond the payment of benefits at the level that participants were promised as of the date of enactment of [ARPA].”  Prospective benefit increases are permissible if they are funded with new contributions.

Allocation of plan assets: The PBGC’s rule requires a fund receiving SFA to hold at least one year of plan benefits and expenses in fixed income investments through 2051.

Contribution decreases, allocations:  The PBGC’s rule provides that the contributions required for each contribution base unit must not be less than those set forth in collective bargaining agreements or plan documents in effect on March 11, 2021 (including agreed-to contribution rate increases through the expiration date of the collective bargaining agreements).  The definition of the contribution base unit also cannot change.  An exception is only available if the plan sponsor determined that the risk of loss to plan participants and beneficiaries is lessened by the reduction.  Additionally, any contribution decreases are subject to the PBGC’s approval if it affects annual contributions of more than $10 million and more than 10% of the fund’s contributions.

Transfers or Mergers:  Transfers and mergers for funds that have received SFA may only happen with PBGC approval.  Any proposed transfer or merger cannot increase the PBGC’s risk of loss or adversely impact the overall interests of participants.  Of course, it must still comply with the pre-ARPA merger requirements in ERISA § 4231. 

Withdrawal liability: The PBGC’s rule provides that a plan’s assets include the SFA balance.  But, for withdrawals that occur after the plan year in which the plan receives SFA, withdrawal liability must be calculated using the mass withdrawal interest assumptions. This rule applies until the later of 10 years or the depletion of SFA assets.  (Because a fund can elect to use its own assets before tapping into the SFA assets, this effectively means that the mass withdrawal interest assumptions could be required through 2051, when the fund has depleted all of its assets.)  Moreover, settlements of more than $50 million require PBGC approval.

Reporting and audit:  The PBGC’s rule also requires that funds that have received SFA file an annual statement of compliance with the terms and conditions of the law and rule, and provide certain documentation.  Additionally, the PBGC may conduct periodic audits to review compliance.  Finally, funds must issue participant notices that include the amount of reinstatement and make-up payments, as applicable.    


For many employers and their employees and retirees, ARPA and the PBGC’s implementing regulations provide huge relief.  Going forward, however, a fund’s receipt of (or anticipated receipt of) SFA may impact union negotiations and these funds must also simultaneously meet the additional requirements of the PBGC’s rule.  Meanwhile, employers considering withdrawing from a fund that is slated to received SFA funds may wish to calculate the anticipated withdrawal liability under pre- and post-ARPA assumptions.  Finally, because the PBGC’s calculation of the SFA takes into account 100% of the fund’s assets (including anticipated assets), it is important to remember that ARPA is not a long-term solution for these funds.  Barring additional congressional intervention, many, if not all of them, are likely to be insolvent in or before 2051.  Additional reforms to the multiemployer system are critical to its long-term survival.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.