The White House has outlined a final rule implementing the American Rescue Plan’s Special Financial Assistance (SFA) program, billed as protecting “millions of workers in multiemployer pension plans who faced significant cuts to their benefits.” Before American Rescue, retirees participating in more than 200 multiemployer pension plans faced the prospect of not receiving full benefits—often the consequence of past financial mismanagement. Workers whose multiemployer plans became insolvent would see their expected pension benefits cut, based on Multiemployer Pension Reform Act of 2014 (MPRA) provisions.
Multiemployer plans are insured by the Pension Benefit Guaranty Corporation (PBGC), an agency providing partial protection of the benefits of nearly 11 million workers and retirees in approximately 1,400 private-sector multiemployer, union-connected plans. Prior to America Rescue, the PBGC’s multiemployer pension insurance program was projected to become insolvent in 2026. Under the new SFA program, financially struggling plans can apply to the PBGC for relief. PBGC issued an Interim Final Rule implementing the program in July 2021. Unions, employers, and other key stakeholders provided comments that PBGC and the three Cabinet agencies represented on its board of directors—Commerce, Labor, Treasury—considered in developing the Final Rule. Policy changes from the Interim to the Final Rule include:
• Addressing the amount of SFA needed to better achieve the goal of allowing plans to remain solvent until 2051. The interim rule applied a single rate of return included in the statute that is higher than could be expected for SFA funds given that they were required to be invested exclusively in safe, but low-return, investment-grade fixed income products. The final rule uses two different rates of return for SFA and non-SFA assets so that the interest rate for the former is more realistic given the investment limitations on these funds. The policy fix will help ensure that all multiemployer plans that receive assistance will receive sufficient funds to remain solvent until 2051.
• Responsible permissible return-seeking investments. The final rule allows 33 percent of SFA to be invested in return-seeking assets that are projected to allow plans to receive a higher rate of return on their investments than under the interim final rule, but subject to strict protections. This portion of plans’ SFA funds generally must be invested in publicly traded assets on liquid markets to ensure responsible stewardship of federal funds. These return-seeking investments include equities, equity funds, and bonds. The other 67 percent of SFA funds must be invested in investment-grade, fixed-income products.
• Ensure MPRA plans could confidently restore both past and future benefits and enter 2051 with rising assets. PBGCd esigned the final rule to ensure that none of the 18 MPRA plans that sustained solvency by cutting benefits was forced to choose between restoring their benefit payments to previous levels and remaining indefinitely solvent, as required by the Act. The final rule ensures that all MPRA plans avoid this dilemma, with enough assistance so that these plans can both restore benefits and be projected to remain indefinitely solvent going into 2051.
Taken together, the White House contends, these changes ensure that all plans that receive SFA are projected to be solvent and pay full benefits through at least 2051.
Before the American Rescue Plan, a wave of multiemployer pension plan insolvencies was projected to leave 2 million to 3 million union workers, retirees, and their families without the full benefits. Beneficiaries in plans that receive assistance are now projected to have their full pension benefits for the next three decades. The 18 multiemployer plans that cut benefits under MPRA spanned 80,000-plus workers and retirees. The SFA program ensures that all those plans are able to restore prior cuts in full, maintain full benefits into the foreseeable future, and be projected to remain indefinitely solvent.
The White House bills the American Rescue Plan SFA as the “most significant effort to protect the solvency of the multiemployer pension system in almost 50 years.” The SFA extends PBGC multiemployer insurance program solvency from 2026 to 2055. Such relief is the most substantial policy to strengthen multiemployer pension plan solvency since enactment of the Employee Retirement Income Security Act in 1974.