PBGC Adds FAQs for Multiemployer Plans That Receive Special Financial Assistance

Published July 17, 2024

The Pension Benefit Guaranty Corporation (PBGC) has posted two updated SFA FAQs that provide guidance for multiemployer plans that receive SFA. The SFA FAQs explain and provide examples of securities included in large, aggregate U.S Bond index funds that meet the criteria for permissible investment grade fixed income (IGFI) securities. The question "What are some examples of permissible investment grade fixed income securities?" has an updated answer.

(Updated July 17, 2024)

The Pension Benefit Guaranty Corporation (PBGC) posted two sets of new SFA FAQs that provide guidance and examples for multiemployer plans that receive SFA on July 19, 2023. FAQs focused on permissible investment grade fixed income (IGFI) securities and return-seeking assets (RSA), calculating the amount of SFA excluded from plan assets for purposes of the withdrawal liability condition, and make-up payments of previously suspended benefits. 

New questions include the following:

Make-Up Payments of Previously Suspended Benefits

How should the SFA assets attributable to make-up payments of previously suspended pension benefits be considered when calculating the amount of SFA excluded from plan assets for purposes of the withdrawal liability condition of 29 CFR 4262.16(g)(2)?

Withdrawal Liability
Can the calculation of SFA excluded for purposes of the withdrawal liability condition requiring a phased recognition of SFA assets in determining UVBs reduce the value of plan assets for determining UVBs below zero?

Permissible Investments
  • What do terms like “investment grade,” “fixed rate,” “debt security,” “leverage,” and “common stock” mean in the context of permissible investments for SFA?
  • Will PBGC identify whether a particular asset class, sub-asset class, fund structure, or investment strategy is permissible before a plan invests?
  • What are some examples of permissible investment grade fixed income securities?
  • What is an IGFI permissible fund vehicle?
  • What are some examples of permissible return-seeking asset securities?
  • What is a return-seeking asset permissible fund vehicle?
  • What is a “Rule 144A” security? How are “Rule 144A” debt securities, which are permissible RSA under the SFA regulation, different from private credit, which isn’t a permissible investment?
  • When does the 33 percent limit on RSA apply?
  • What does “predominantly” mean in the context of the type of permissible fund vehicles SFA assets may be invested in?

(Posted June 20, 2023)