The Pension Benefit Guaranty Corp.'s interim final rule about how underfunded multiemployer plans can get special financial assistance is getting mixed reviews.
The assistance was part of the American Rescue Plan Act of 2021 enacted in March and provides an estimated $94 billion in federal assistance grants for the most at-risk plans to pay benefits, if it will help them survive for 30 years.
The interim final rule, issued July 9, provides the formula for determining how much financial assistance the PBGC will pay to an eligible plan and establishes the order of priority for applications.
The rule also establishes several conditions, such as investing the aid portion of assets in investment-grade bonds.
As Gene Kalwarski, CEO at actuarial consultant Cheiron, sees it, PBGC officials "took the most narrow possible view to ensure that these plans will be gone in 30 years. The calculation is done so there won't be any money" after 30 years, which would particularly hurt active workers contributing to plans, Mr. Kalwarski said. "I think people are going to find out a way to get out of these plans."
According to a statement from Labor Secretary Marty Walsh, the program will help secure the pensions of an estimated 3 million participants in more than 200 severely underfunded multiemployer plans. Mr. Walsh called it "the most substantial policy ever passed to further the solvency of our nation's multiemployer pension plans" and said the PBGC rule "implements the program just as Congress designed it."
The legislation does limit the PBGC's ability to do more, said Michael Kreps, principal of Groom Law Group. "On balance, the PBGC hewed as closely as possible to the statute and took very few risks. It's clear that their primary goal is to figure out a way to make this manageable. PBGC has a tough job. There's always room for improvement," Mr. Kreps said.
The assistance program does give pension funds "the opportunity to protect full benefits for 30 years and it's not coming out of anybody's paycheck," Mr. Kreps added.
A public comment period ends in 30 days.
