On July 9, 2021, the Pension Benefit Guaranty Corporation (“PBGC”) issued an Interim Final Rule (the “Rule”) implementing the American Rescue Plan Act of 2021 (“ARPA”) provisions for special financial assistance (“SFA”) to failing multiemployer plans. 86 Fed. Reg. 36598 (July 12, 2021). We summarized that program and other employee benefits provisions of ARPA in Important Benefit Plan Provisions of the American Rescue Plan Act of 2021, and competing legislative proposals in Congress Considers Multiemployer Pension Reforms While Benefit Suspensions Loom.

ARPA will have important consequences for employers participating in multiemployer plans that qualify for SFA. The Congressional Research Service has identified more than 200 plans that may qualify, nearly one in every five multiemployer plans. They include some of the largest plans, such as the Central States, Southeast & Southwest Areas Pension Plan, and smaller regional and local plans in transportation, the building trades, retail, and many others.

PBGC issued the Rule without notice and comment, for “good cause found,” as permitted by the Administrative Procedure Act. An interim final rule has the force of law. But PBGC has also invited comments, suggestions, or views on the Rule’s provisions. Comments are due August 11, 2021.  

Conditions on Special Financial Assistance

Under ARPA, PBGC may impose reasonable conditions on plans that receive SFA. They include conditions relating to increases in future benefit accrual rates and retroactive benefit improvements, reductions in employer contribution rates, withdrawal liability, and diversion of contributions to other benefit plans.

The conditions relating to withdrawal liability should be of particular interest to employers and prospective employers, including acquirors. Those conditions could result in assessments that are different from standard assessments, but it is too early to tell whether they will be higher or lower, as we explain below. 

Benefit Increases

The Rule conditions SFA on there being no benefit increase attributable to pre-SFA service or other events. Prospective increases may be adopted, but only if the plan’s actuary certifies that they will be covered by increased contributions that were not considered in the determination of SFA. PBGC explains that this is meant to give plans flexibility to afford active participants more attractive benefits if they are affordable. The agency notes that limits on benefit increases imposed by ERISA’s funding rules (on endangered and critical status plans) continue to apply.

Contribution Reductions

The Rule also conditions SFA on there being no reduction in contributions per CBU (contribution base unit, such as hours worked) or change in the definition of CBU in the collective bargaining agreement as of March 11, 2021. The Rule makes an exception for reductions that would lessen the risk of loss to participants and beneficiaries, such as to keep an employer from filing bankruptcy and withdrawing from the plan. If the reduction affects annual contributions of more than $10 million or more than 10 percent of all participants, however, PBGC must also determine that the reduction would reduce the risk of loss.

Withdrawal Liability

One of the most closely watched issues was whether SFA reduces employers’ exposure to withdrawal liability. Some had suggested that such assistance would lift the cloud of withdrawal liability, making it easier to borrow and even facilitating stock sales. 

SFA would be expected to stabilize a plan and reduce the risk of mass withdrawal. If employers could withdraw cheaply, however, that would have the opposite effect. 

Withdrawal liability is a withdrawing employer’s share of the plan’s unfunded vested benefits - the present value of vested benefits less the value of assets. And while SFA comes with restrictions on investment, it is arguably a plan asset for withdrawal liability purposes.

Congress considered adopting a provision that SFA has no effect on withdrawal liability for fifteen years. But ARPA, as enacted, is silent on this point (as a result of a Senate parliamentary ruling). At the same time, ARPA provides that SFA is disregarded in determining required contributions under ERISA and the Internal Revenue Code.

That could lead to an inference that SFA does reduce withdrawal liability, under traditional canons of statutory interpretation. But the silence resulted from a parliamentary ruling, which may weaken the inference, as the canons implicitly assume that Congress is free to act.  

In any event, Congress expressly authorized PBGC to “impose, by regulation or other guidance, reasonable conditions [on SFA] relating to . . . withdrawal liability.”   And PBGC has general rulemaking authority under ERISA. 

In the Rule, PBGC specified that withdrawal liability is to be determined using PBGC mass withdrawal assumptions to value vested benefits for the later of ten years or the date SFA and earnings on SFA are depleted. Mass withdrawal assumptions are based on annuity purchase prices and therefore result in a conservative valuation. 

For instance, current “PBGC rates” are slightly above 2 percent. Many plans use their funding valuation rates or a blend of PBGC and funding rates. See Multiemployer Withdrawal Liability Assumptions Under Attack. The funding rate is often 6 percent or more. A difference of even 100 basis points can swing the value of pension liabilities significantly.

PBGC considered but rejected disregarding SFA in the calculation of withdrawal liability. PBGC explained that such a rule would make it more “administratively complex” for plans to determine the effect of employer withdrawals on their SFA requests. 

One would expect that PBGC did some modeling of the effects of both alternatives. But PBGC did not include any information on the relative effects of the two approaches. It is therefore unclear whether including SFA as an asset while imposing mass withdraw liability assumptions would result in larger or smaller withdrawal liability assessments than simply disregarding SFA.                      

The Rule also requires PBGC approval of any settlement of withdrawal liability claims in excess of $50 million. In recent years, PBGC has taken a more active role in overseeing troubled multiemployer plans, and this condition codifies one aspect of that practice.   

In a footnote to the Rule, PBGC indicated that it intends to adopt a rule of general applicability on actuarial assumptions for withdrawal liability purposes. PBGC has had that authority since 1980, but has never exercised it, leaving such assumptions to the actuary’s professional judgment, subject to review by arbitrators and the courts.   


The Rule conditions SFA on there being no reduction in the proportion of income or expenses allocated to the plan in favor of another plan. The Rule makes an exception for written agreements in existence as of March 11, 2021. The condition does not apply to reciprocity agreements (for participants working in a sister union’s jurisdiction), good faith allocations of contributions that do not reduce the contribution rate to the plan (unless PBGC approves, as stated above), or cost sharing as permitting by ERISA’s prohibited transaction rules. 

A pre-ARPA case suggests that PBGC can police against abuse even if direct PBGC assistance is not a factor. In that case, the parties froze benefits and started a future service plan, which diverted $100 million in contributions from the legacy plan, threatening plan insolvency. PBGC negotiated a settlement that required the plans to merge and the merged plan to terminate, with employers paying $56 million in withdrawal liability per year for 25 years. PBGC Reaches Settlement to Help Protect Troubled Multiemployer Insurance Program, (Jan. 1. 2021). There is no indication that the Rule displaces PBGC’s general anti-abuse powers.  


As a result of ARPA, the Rule, and PBGC’s continued vigilance, employers participating in troubled multiemployer plans have several new factors to consider. Conditions on Special Financial Assistance may affect decisions about continuing in the plan or withdrawing, as well as decisions about plan design and new plan formation. These conditions may also affect the structure and pricing of M&A transactions for both sellers and buyers. 

Such decisions are best approached with the assistance of expert counsel and other professionals. If you have question in these areas, please contact Israel Goldowitz or your regular Wagner Law Group attorney.