The Pension Benefit Guaranty Corporation (PBGC) released an interim final rule on July 9, 2021 which offered guidance on the Special Financial Assistance (SFA) Program as established under the American Rescue Plan Act (ARPA). This article summarizes the requirements for the actuarial assumptions to be used in determining the eligibility for and the amount of SFA.
In an effort to prevent the use of biased actuarial assumptions that would maximize a plan’s entitlement to SFA money, the PBGC is encouraging the use of the actuarial assumptions that represent a “neutral view of circumstances, unbiased by the prospect of receiving a substantial sum of money based on those circumstances.”
For purposes of determining eligibility for SFA, the PBGC will accept actuarial assumptions incorporated in a plan’s certification of plan status completed before 2021 unless such assumptions are “clearly erroneous”.
The amount of SFA is based on the results of a single deterministic projection. The actuarial discount rate is prescribed as the lesser of A) the discount rate used for funding standard account purposes based on the most recently filed certification prior to January 1, 2021 and B) the discount rate that is 200 basis points higher than the 3rd segment rate, without regard to any segment rate stabilization.
For all other projection assumptions, the PBGC will evaluate reasonableness based on generally accepted actuarial principles and practices. If a plan actuary determines that any of the assumptions used in a plan’s certification of status before 2021 is no longer reasonable, such assumption may be changed for purposes of calculating the amount of SFA. The plan’s SFA application must describe why the assumption is no longer reasonable, disclose the modified assumption, and justify the modified assumption.
The PBGC has released guidance which describes generally acceptable actuarial assumption changes as well as actuarial assumption changes which would generally not be acceptable:
https://www.pbgc.gov/sites/default/files/sfa-assumptions-guidance.pdf.