Our periodic Washington D.C. newsletter highlights the expertise of our Wagner Law Group attorneys analyzing legislative, regulatory and other cutting-edge benefits issues arising from activity in Washington or other important jurisdictions. Our office members are well suited for this given many of them have decades of experience working in key governmental agencies such as the Department of Labor (“DOL”) and Pension Benefit Guaranty Corporation (“PBGC”).
This edition of our Benefits Bulletin has articles analyzing:
- a lawsuit recently filed against the PBGC by two multiemployer pension plans seeking to avoid a year-end deadline that would prevent them from applying for Special Financial Assistance
- the best practice features of FedEx’s recently published executive severance plan
- a brief overview and some observations of PBGC distress and involuntary terminations
Pension Train Wreck Averted?
By Israel Goldowitz
On September 2, 2026, 22 multiemployer pension plans sued the Pension Benefit Guaranty Corporation (PBGC), seeking to avoid a year-end deadline that would prevent them from applying for Special Financial Assistance (SFA) under the American Rescue Plan Act of 2021 (ARPA). The case is Sports Arena Employees Retirement Plan, et al. v. PBGC, and the Complaint can be found here. (click here)
ARPA was enacted on a party-line vote. As part of a $1.9 trillion stimulus package, Congress approved an estimated $90 billion in SFA to pay pension benefits in an estimated 200 multiemployer defined benefit pension plans covering nearly two million participants and beneficiaries. Congress charged PBGC with administering the program, though the money comes from the U.S. Treasury and not PBGC insurance funds.
Among other categories, SFA is for plans in “critical and declining” status, defined by ERISA’s minimum funding standard as projected to run out of money in 15 years. SFA is paid in a nonrefundable lump sum and is to cover full plan benefits through 2051.
As we’ve reported, in April 2025, in Bakery Drivers Local 550 and Industry Pension Fund v. PBGC (see here), the Second Circuit held that a plan that meets ERISA’s test for critical and declining status can qualify for SFA even if it terminated by mass withdrawal and the minimum funding standard therefore no longer applies. The court reasoned that ARPA “cuts and pastes” the definition of critical and declining for SFA purposes without regard to its original context as a part of the minimum funding standard. PBGC sought Supreme Court review, and in May 2026, the Court denied review. Meanwhile, PBGC began receiving additional SFA applications from affected plans located within the Second Circuit and elsewhere.
By law, the statutory deadline to apply for SFA was December 31, 2025, and the deadline to file a revised or supplemented application is December 31, 2026. PBGC has 120 days to rule on an application, or it is deemed approved.
Due to the complexities of administering this new program, PBGC has been metering applications via a “wait list” or an abbreviated, incomplete application to “lock in” a valuation date for calculation of SFA needed to pay future benefits, which PBGC then denies for incompleteness but subject to completion. In the wake of the Second Circuit’s decision, the plaintiffs allege, PBGC has refused to wait-list affected plans located outside the Second Circuit and has denied their lock-in applications without conferring a right to complete the application. Thus, the plaintiffs allege, the clock is running, but PBGC is preventing them from perfecting applications before time runs out.
With the December 31 deadline approaching, such plans assertedly cannot even exhaust their administrative remedies so they can seek a judicial determination on the merits. At the same time, they allege, PBGC has allowed plans located within the Second Circuit to jump the line and file complete applications while non-Second Circuit plans cannot. According to the Complaint, these actions adversely affect 67 plans and some 25,000 participants and beneficiaries, who face benefit cuts of as much as 54% if their plans run out of money and must seek “traditional” financial assistance, which is paid as a loan from PBGC insurance funds.
The Complaint asserts that PBGC actions are not in accordance with law and in excess of statutory authority, that agency action is being unlawfully withheld or unreasonably delayed, and that allowing Second Circuit plans to jump the line is arbitrary and capricious, all as meant by the Administrative Procedure Act. The Complaint seeks an order that plan termination is not grounds for denial of an SFA application, vacatur of the wait list, an injunction to permit completed applications and to compel their approval, reasoned denial, or deemed denial, and suspension of the December 31, 2026, deadline for completed applications. The Plaintiffs have filed a motion for preliminary injunction, with a hearing set for September 28.
It appears that PBGC cannot extend the deadline, as it is statutory. PBGC does not take positions on legislation, and the Administration may be of two minds. SFA has been seen as a Biden-era “bailout,” but both parties need labor votes in the midterms, and multiemployer plan participants and beneficiaries generally live in union households. Congress could enact an extension for that reason, as part of must-pass legislation.
PBGC is not required to apply the Second Circuit’s decision nationwide, and it has not acquiesced in that decision outside that Circuit. The 22 plaintiff plans are therefore doing what they must do, by seeking a judicial resolution. Such a resolution could be unpredictable and might not be lasting. But the suit could give the Administration and Congress the cover they need to extend the application deadline for affected plans nationwide.
This is not just an Inside-the-Beltway story. Many people are suffering or will suffer benefit cuts as their plans run out of money and benefits are cut to the PBGC level. Unlike PBGC’s single-employer plan guaranty, which tops out at about $93,000 per year at age 65, the multiemployer maximum guaranty is only about $13,000 with 30 years of service. Many union pensions are significantly higher than that and are at risk if the plans cannot obtain SFA to pay benefits at plan levels.
Congress may or may not have anticipated how ARPA would apply to terminated plans. But with the Second Circuit’s decision, a lawsuit like Sports Arena Employees should have been expected. On September 16, the parties stipulated to a portion of the relief requested. The Court approved the stipulation on September 21, ordering a status report on December 1.
The multiemployer community, including plans, unions, interest groups and professionals, will be watching closely.
Israel (Izzy) Goldowitz has handled multiemployer pension plan issues for more than 40 years, including 30 years as a senior attorney with the PBGC. He is available to answer any questions in that area.
Executive Severance Plans: Best Practice Reminders thanks to FedEx
By Mark Poerio
FedEx recently publicly released its new-and-improved executive severance plan (https://www.sec.gov/ix?doc=/Archives/edgar/data/0001048911/000110465926086643/tm2621019d1_8k.htm ). Several features of the plan demonstrate best practices that public and private employers should consider. Consider for example the following:
- ERISA Coverage to mitigate litigation risk – widely underappreciated.
- Non-competition and other protective covenants
- Forfeiture and/or claw-back for breached covenants
- Claims Release as a condition for severance benefits
- Consistent Platform for all covered employees
- Enhanced Benefits on a change-in-control
- Golden Parachute Cut-back
The foregoing list suggests the wide range of business interests that may be advanced through well-drafted severance plans. Given the need to retain key employees and the risks arising from bad leavers, employers should take this opportunity to have experienced special counsel perform a simple examination of their severance plans, agreements, and practices.
PBGC Distress and Involuntary Terminations: A Brief Overview and Some Observations
By Harold Asher
The Journal of Pension Planning & Compliance recently published this article, which is available at https://www.wagnerlawgroup.com/wp-content/uploads/sites/1104911/2026/09/September2026AShnerJPPCArticle.pdf, and is discussed at https://www.einnews.com/pr_news/943053972/former-senior-pbgc-attorney-offers-practical-guidance-on-pbgc-distress-and-involuntary-terminations).
