(a) In general. A plan that receives special financial assistance must be administered in accordance with the conditions in this section.
(b) Benefit increases. This paragraph (b) applies to benefits and benefit increases described in section 4022A(b)(1) of ERISA without regard to the time the benefit or benefit increase has been in effect. This paragraph (b) does not apply to the reinstatement of benefits that were suspended under sections 305(e)(9) or 4245(a) of ERISA (as provided under § 4262.15) or a restoration of benefits under 26 CFR 1.432(e)(9)-1(e)(3).
(1) Retrospective. A benefit or benefit increase must not be adopted during the SFA coverage period if it is in whole or in part attributable to service accrued or other events occurring before the adoption date of the amendment.
(2) Prospective. A benefit or benefit increase must not be adopted during the SFA coverage period unless -
(i) The plan actuary certifies that employer contribution increases projected to be sufficient to pay for the benefit increase have been adopted or agreed to; and
(ii) Those increased contributions were not included in the determination of the special financial assistance.
(c) Allocation of plan assets. During the SFA coverage period, plan assets, including special financial assistance, must be invested in permissible investments as described in § 4262.14 sufficient to pay for at least 1 year (or until the date the plan is projected to become insolvent, if earlier) of projected benefit payments and administrative expenses.
(d) Contribution decreases.
(1) During the SFA coverage period, the contributions to a plan that receives special financial assistance required for each contribution base unit must not be less than, and the definition of the contribution base units used must not be different from, those set forth in collective bargaining agreements or plan documents (including contribution increases to the end of the collective bargaining agreements) in effect on March 11, 2021, unless the plan sponsor determines that the change lessens the risk of loss to plan participants and beneficiaries and, if the contribution reduction affects annual contributions over $10 million and over 10 percent of all employer contributions, PBGC also determines that the change lessens the risk of loss to plan participants and beneficiaries.
(2) A request for PBGC approval of a proposed contribution change that affects annual contributions over $10 million and over 10 percent of all employer contributions must be submitted by the plan sponsor or its duly authorized representative and must contain all of the following information:
(i) Name, address, email, and telephone number of the plan sponsor and the plan sponsor's authorized representatives, if any.
(ii) The nine-digit employer identification number (EIN) assigned to the plan sponsor by the IRS and the three-digit plan identification number (PN) assigned to the plan by the plan sponsor, and, if different, the EIN and PN last filed with PBGC. If an EIN or PN has not been assigned, that should be indicated.
(iii) Name, address, email, and telephone number of the contributing employer for which the proposed contribution change is being submitted, and the employer's authorized representatives, if any.
(iv) Names and addresses of each controlled group member, along with a chart depicting the structure of the controlled group by entity and its ownership with ownership percentage.
(v) Audited financial statements (income statement, balance sheet, cash flow statement, and notes) for the contributing employer and the consolidated group including the contributing employer, if available, for the most recent 4 years, or, if audited financial statements were not prepared, unaudited financial statements, a statement explaining why audited statements are not available, and tax returns with all schedules for the most recent 4 years available. The financial statement submissions must:
(A) Identify the cash contributions to the multiemployer plan for which the contributing employer is seeking contribution relief;
(B) Identify all outstanding indebtedness, including the name of the lender, the amount of the outstanding loan, scheduled repayments interest rate, collateral, significant covenants, and whether the loan is in default;
(C) Identify and explain any material changes in financial position since the date of the last financial statement;
(D) To the extent that the contributing employer has undergone or is in the process of undergoing a partial liquidation, estimate the sales, gross profit, and operating profit that would have been reported for each of the 3 years covered by the financial statement for only that portion of the business that is currently expected to continue; and
(E) State the estimated liquidation values for any assets related to discontinued operations or operations that are not expected to continue, along with the sources for the estimates.
(vi) Projected financial statements (income statement, balance sheet, cash flow statement) for the current year and the following 4 years as well as the key assumptions underlying those projections and a justification for the reasonableness for each of those key assumptions. The projections must include:
(A) All business or operating plans prepared by or for management, including all explanatory text and schedules;
(B) All financial submissions, if any, made within the prior 3 years to a financial institution, government agency, or investment banker in support of possible outside financing or sale of the business;
(C) All recent financial analyses done by an outside party with a certification by the employer's chief executive officer that the information on which each analysis is based is accurate and complete; and
(D) Any other relevant information.
(vii) Description of events leading to the current financial distress.
(viii) Description of financial and operational restructuring actions taken to address financial distress, including cost cutting measures, employee count or compensation reductions, creditor concessions obtained, and any other restructuring efforts undertaken; also, indicate whether any new profit-sharing or other retirement plan has been or will be established or if benefits under such existing plan will be increased.
(e) Allocating contributions and other practices. During the SFA coverage period, a decrease in the proportion of income or an increase in the proportion of expenses allocated to a plan that receives special financial assistance pursuant to a written or oral agreement or practice (other than a written agreement in existence on March 11, 2021, to the extent not subsequently amended or modified) under which the income or expenses are divided or to be divided between a plan that receives special financial assistance and one or more other employee benefit plans is prohibited. The prohibition in the preceding sentence does not apply to a good faith allocation of:
(1) Contributions pursuant to a reciprocity agreement;
(2) Costs of securing shared space, goods, or services, where such allocation does not constitute a prohibited transaction under ERISA or is exempt from such prohibited transaction provisions pursuant to section 408(b)(2) or 408(c)(2) of ERISA, or pursuant to a specific prohibited transaction exemption issued by the Department of Labor under section 408(a) of ERISA;
(3) The actual cost of services provided to the plan by an unrelated third party; or
(4) Contributions where the contributions to a plan that receives special financial assistance required for each base unit are not reduced, except as otherwise permitted by paragraph (d) of this section.
(f) Transfer or merger. During the SFA coverage period, a plan must not engage in a transfer of assets or liabilities (including a spinoff) or merger except with PBGC's approval. Notwithstanding anything to the contrary in 29 CFR part 4231, the plans involved in the transaction must request approval from PBGC.
(1) PBGC will approve a proposed transfer of assets or liabilities (including a spinoff) or merger if PBGC determines that the transaction complies with section 4231(a)-(d) of ERISA and that the transaction, or the larger transaction of which the transfer or merger is a part, does not unreasonably increase PBGC's risk of loss with respect to any plan involved in the transaction, and is not reasonably expected to be adverse to the overall interests of the participants and beneficiaries of any of the plans involved in the transaction.
(2) A request for approval of a proposed transfer of assets or liabilities (including a spinoff) or merger must be submitted by the plan sponsor or its duly authorized representative and must contain the information that must be submitted with a notice of merger or transfer and a request for a compliance determination under subpart A of part 4231 of this chapter and all of the following actuarial and financial information for each of the plans involved in the transaction:
(i) A certification by the enrolled actuary that the plan or any of its component parts received special financial assistance and the most recent value of special financial assistance assets.
(ii) A copy of the actuarial valuation performed for each of the 2 plan years before the most recent actuarial valuation filed in accordance with § 4231.9(f) of this chapter.
(iii) A copy of the plan actuary's most recent certification under section 305(b)(3) of ERISA, including a detailed description of the assumptions used in the certification, and the basis under which they were determined. The description must include information about the assumptions used for the projection of future contributions, withdrawal liability payments, and investment returns, and any other assumption that may have a material effect on projections.
(iv) A detailed statement certified by an enrolled actuary that the transaction does not unreasonably increase PBGC's risk of loss with respect to any plan involved in the transaction. The statement must include the basis for the conclusion, supporting data, calculations, assumptions, a description of the methodology, the basis for assumptions used, the projected date of insolvency, and the present value of financial assistance expected to be paid to the plan by PBGC under section 4261 of ERISA as of the date of the transaction individually for each of the plans before and after the transaction. The present value of financial assistance must be based on the guaranteed benefits and administrative expenses presented in the cash flow projections under paragraph (f)(2)(v) of this section, discounted using interest rates published under section 4044 of ERISA.
(v) The statement in paragraph (f)(2)(iv) of this section must include an exhibit showing the annual cash flow projections for each plan before and after the transaction, through the year that each plan pays its last dollar of benefit (but not to exceed 100 years). The cash flow projection should use an open group valuation until the plan reaches insolvency. Annual cash flow projections must reflect the following information:
(A) Fair market value of assets as of the beginning of the year, splitting the assets by special financial assistance and non-special financial assistance amounts.
(B) Contributions and withdrawal liability payments.
(C) Plan level benefit payments organized by participant type (e.g., active, retiree, terminated vested) for the projection period.
(D) Guaranteed benefits payable post insolvency by participant type (e.g., active, retiree, terminated vested).
(E) Administrative expenses for the projection period.
(F) Assumed investment return separately for special financial assistance and non-special financial assistance amounts.
(G) Fair market value of assets as of the end of the year.
(vi) Any additional information PBGC determines it needs to review a request for approval of a proposed transfer of assets or liabilities (including a spinoff) or merger.
(g) Withdrawal liability interest assumptions. A plan must use the interest assumptions under § 4281.13(a) of this chapter to determine withdrawal liability for withdrawals after the plan year in which the plan receives payment of special financial assistance under § 4262.12 and until the later of -
(1) Ten years after the end of the plan year in which the plan receives payment of special financial assistance under § 4262.12; or
(2) The last day of the plan year in which the plan no longer holds any special financial assistance or earnings thereon in a segregated account as required by § 4262.13(b)(2).
(h) Withdrawal liability settlement.
(1) During the SFA coverage period, a plan must obtain PBGC approval for a proposed settlement of withdrawal liability if the amount of the liability settled is greater than $50 million calculated as the lesser of -
(i) The allocation of unfunded vested benefits to the employer under section 4211 of ERISA; or
(ii) The present value of withdrawal liability payments assessed for the employer discounted using the interest assumptions under § 4281.13(a) of this chapter.
(2) PBGC will approve a proposed settlement of withdrawal liability if it determines -
(i) Implementation of the settlement is in the best interests of participants and beneficiaries; and
(ii) The settlement does not create an unreasonable risk of loss to PBGC.
(3) A request for approval of a proposed settlement of withdrawal liability must be submitted by the plan sponsor or its duly authorized representative and must contain all of the following information:
(i) Name, address, email, and telephone number of the plan sponsor and the plan sponsor's authorized representatives, if any.
(ii) The nine-digit employer identification number (EIN) assigned to the plan sponsor by the IRS and the three-digit plan number (PN) assigned to the plan by the plan sponsor, and, if different, the EIN and PN last filed with PBGC. If an EIN or PN has not been assigned, that should be indicated.
(iii) A copy of the proposed settlement agreement.
(iv) A description of the facts leading up to the proposed settlement, including -
(A) The date the employer withdrew from the plan;
(B) The calculation of the withdrawal liability amount, including payment dates and amounts listed in the schedule for liability payments provided to the withdrawn employer in accordance with section 4291(b)(1)(A) of ERISA;
(C) The amount(s) and date(s) of withdrawal liability payments made; and
(D) How the proposed settlement amount was determined (discount rate used, financial condition of the employer, and other factors, as applicable).
(v) Most recent 3 years of audited financial statements and a 5-year cash flow projection for the employer with which the plan proposes to settle.
(vi) A copy of the most recent actuarial valuation report of the plan.
(vii) A statement certifying the trustees have determined that the proposed settlement is in the best interest of the plan and the plan's participants and beneficiaries.
(viii) Any additional information PBGC determines it needs to review a request for approval of a proposed withdrawal liability settlement.
(i) Reporting. In accordance with the statement of compliance instructions on PBGC's website at www.pbgc.gov, a plan sponsor must file with PBGC each plan year, beginning with the plan year after the payment of special financial assistance and through the last day of the last plan year ending in 2051, a statement of compliance with the terms and conditions of the special financial assistance under this part and section 4262 of ERISA. The statement must be -
(1) Filed no later than 90 days after the end of the plan year; and
(2) Signed and dated by a trustee who is a current member of the board of trustees and authorized to sign on behalf of the board of trustees, or by another authorized representative of the plan sponsor.
(j) Audit. As authorized under section 4003 of ERISA, PBGC may conduct periodic audits of a plan that has received special financial assistance to review compliance with the terms and conditions of the special financial assistance under this part and section 4262 of ERISA.
(k) Filing rules. The filing rules in this paragraph (k) apply to a request for PBGC approval under paragraph (d), (f), or (h) of this section and a statement of compliance under paragraph (i) of this section.
(1) Method of filing. A filing described under paragraph (d), (f), (h), or (i) of this section must be made electronically in accordance with the rules in subpart A of part 4000 of this chapter. The time period for filing a request or statement of compliance must be computed under the rules in subpart D of part 4000 of this chapter.
(2) Where to file. A filing described under paragraph (d), (f), (h), or (i) of this section must be submitted as described in § 4000.4 of this chapter.