PBGC Amends Final Rule on Special Financial Assistance for Multiemployer DB Pension Plans With Withdrawal Liability Exception
Published November 07, 2023
The Pension Benefit Guaranty Corporation (PBGC) released a final rule that makes technical corrections, updates, and clarifications to several regulations, including to clarify a special financial assistance (SFA) withdrawal liability condition and to update the reference to the dollar limit for lump-sum distributions in the closeout of sufficient multiemployer plans to reflect changes implemented under the SECURE 2.0 Act of 2022.
In addition to the various updates, this final rule amends PBGC’s regulations on:
- SFA by PBGC (29 CFR part 4262) to clarify the calculation methodology for the condition requiring a phased recognition of SFA in a plan’s determination of withdrawal liability for plans that receive SFA, and
- Termination of Multiemployer Plans (29 CFR part 4041A) to update the reference to the dollar limit for lump-sum distributions in the closeout of sufficient multiemployer plans (reflecting updated dollar limits for pension plans under section 304 of the SECURE 2.0 Act of 2022.
(Updated November 7, 2023)
The Pension Benefit Guaranty Corporation (PBGC) is amending its final rule implementing changes to the Special Financial Assistance (SFA) program for financially troubled multiemployer defined benefit (DB) pension plans to add an exception process for conditions relating to withdrawal liability.
These changes are as a result of comments received after the final rule was published in July, 2022, which provided a 30-day comment period on the condition requiring a phased recognition of SFA in a plan’s determination of withdrawal liability. Additionally, PBGC expressed interest in hearing from stakeholders about what the expected impact of such condition is likely to be and whether additional clarification or guidance would be useful.
After receiving comment letters requesting exceptions from the withdrawal liability conditions, PBGC determined that adding a process for a plan to request an exception from the withdrawal liability conditions in § 4262.16(g)(1) and (2) under narrow circumstances is reasonable. The conditions on withdrawal liability are intended to ensure that SFA is preserved for the payment of benefits and expenses and not used to subsidize employer withdrawals. If application of the conditions would result in an increase in employer withdrawals, the plan would be negatively impacted and the purpose of the conditions would not be met. Accordingly, PBGC is adding § 4262.16(g)(3), which provides a process for a plan sponsor to request approval from PBGC for an exception from the withdrawal liability conditions in § 4262.16(g)(1) and (2) under specific circumstances.
The effective date of the final rule is January 26, 2023.