The Pension Benefit Guaranty Corporation issued updated guidance clarifying how mergers involving multiemployer pension plans that received funds from the federal Special Financial Assistance Program will be evaluated and regulated.
The expanded FAQs, published as part of the agency’s American Rescue Plan Act resources, address a growing area of concern for employers, unions and pension professionals, as consolidation activity increases among multiemployer plans that accepted federal relief funding.
Since the inception of the SFA Program, the PBGC received 209 applications requesting a total of $75.7 billion in special financial assistance. It approved 174 applications for $74.1 billion in grants, according to the agency’s annual report for fiscal 2025.
In the guidance, the PBGC reaffirms that any merger involving a plan recipient of special financial assistance must satisfy several statutory and regulatory standards before it can receive agency approval. According to the agency, proposed mergers must comply with Employee Retirement Income Security Act requirements; cannot unreasonably increase the PBGC’s financial risk; and must not harm the interests of plan participants or beneficiaries.
The updated FAQs go beyond prior guidance by providing additional detail on how plans should handle special financial assistance assets after a merger occurs. According to the PBGC, federally provided special financial assistance funds must remain segregated from other plan assets and may only be used to pay pension benefits and administrative expenses. The FAQ responses also reiterate that those funds generally must be invested in investment-grade fixed-income securities or other permissible investments under existing regulations.
One of the most significant additions included in the updated guidance involves withdrawal liability calculations for merged plans. The PBGC outlines special rules governing how unfunded vested benefits tied to a plan that received special financial assistance must be treated following a merger. Under the framework, merged plans may be required to continue using special interest rate assumptions and phased recognition of special financial assistance assets for years after the transaction closes in order to avoid artificially reducing employer withdrawal liability.
According to the agency, settlements of withdrawal liability exceeding certain thresholds—including settlements greater than $50 million—may require separate PBGC approval, signaling heightened oversight of large post-merger liability negotiations.
In addition, the guidance imposes several continuing restrictions during the special financial assistance coverage period. According to the PBGC, merged plans generally cannot provide retrospective benefit increases for participants from the plan that received special financial assistance, reduce employer contribution requirements tied to that plan, or reallocate contributions and income in ways that diminish the financial position of the grant-supported portion of the merged system.
The FAQs also establish procedures for plans seeking waivers from some of those conditions. Waiver requests related to contribution allocation, benefit increases or contribution reductions must be submitted alongside any merger approval application.
To streamline the approval process, the agency is encouraging plans to consult informally with the PBGC before filing formal merger requests. The guidance states that applications for merger approval should generally be submitted at least 120 days before the proposed effective date of a merger.
The FAQs also introduce an example of an alternative allocation methodology intended to help merged plans comply with withdrawal liability requirements while preserving the financial assumptions associated with special financial assistance. However, the agency cautions that use of the example method alone does not guarantee approval, emphasizing that each proposed merger will be evaluated individually, based on its overall impact on participants and the PBGC’s exposure.
The updated FAQs are part of the PBGC’s continuing implementation of the Special Financial Assistance Program established under the American Rescue Plan Act of 2021. The program was designed to stabilize severely underfunded multiemployer pension plans facing insolvency and protect retirement benefits for millions of union workers and retirees across industries including construction, transportation and hospitality.
Improving the solvency of the special financial assistance grant recipient pension funds also improved the financial health of the PBGC’s Multiemployer Insurance Program. The Multiemployer Program had a positive net position of $2.6 billion at the end of fiscal 2025, up from $2.1 billion at the end of fiscal 2024, according to the PBGC’s 2025 Annual Report.
Tags: PBGC