The ARPA Rescue Plan for Distressed Multiemployer Plans

September 16, 2021
Hall Benefits Law, LLC

Under the American Rescue Plan Act of 2021 (ARPA), certain financially troubled multiemployer pension plans are eligible for financial assistance from the Pension Benefit Guaranty Corporation (PBGC), which estimates that approximately 11 percent of multiemployer pension plans in the U.S. are in critical condition.

Plan sponsors that qualify for PBGC assistance may apply for a one-time lump sum payment to cover all benefits due through 2051 without any reduction in earned benefits for participants if the plan meets one of the following requirements:

  • Is certified as being in critical and declining status for any plan year beginning in 2020, 2021, or 2022;
  • Has been approved for a suspension of benefits under the Multiemployer Pension Reform Act (MPRA);
  • Is certified as being in critical status for any plan year starting in 2020 through 2022, has a modified funding percentage less than 40%, and a ratio of active to inactive participants of less than 2 to 3; or
  • Became insolvent after December 16, 2014, and has not been terminated as of March 11, 2021 (ARPA’s date of enactment).

Plan sponsors are not required to repay the funds received from the PBGC. Plans that had previously reduced benefits are required to restore those benefits to the affected participants and are not eligible to apply for a new suspension of plan benefits.

Plans that receive financial assistance must segregate those funds from other plan assets and invest them in investment-grade bonds. Plan sponsors that qualify have until the end of 2025 to file for this special financial assistance.

The ARPA also includes provisions that increase the PBGC multiemployer plans premium to $52 per participant beginning in 2031 and thereafter indexed for inflation. It is estimated that special financial assistance for troubled multiemployer plans will top $94 billion. 

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

The following two tabs change content below.

Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.