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PBGC Inspector General Warns of Added $6B in Costs to SFA Program
A recent court ruling allowed previously excluded terminated and insolvent plans to resubmit applications for special financial assistance, enacted by the American Rescue Plan Act.
A recent decision by the U.S. 2nd Circuit Court of Appeals could lead to an unexpected $6 billion cost under the Special Financial Assistance Program for multiemployer plans, a pension rescue program established in 2021, according to a risk advisory from the Pension Benefit Guaranty Corporation’s inspector general.
The 2nd Circuit last month a previous PBGC denial of funds for the Bakery Drivers Local 550 and Industry Pension Fund, a New York-based terminated pension plan, opening the door for more than 100 previously ineligible multiemployer pension plans to apply for Special Financial Assistance, according to the risk advisory letter.
“This potential influx of plans as the statutory deadline for applications looms [on December 31] could challenge PBGC’s processes for a timely, thorough review and result in plans’ approval by default,” the letter stated.
Originally, terminated pension plans were not expected to qualify for special financial assistance, enacted by the American Rescue Plan Act to, among other things, rescue deeply underfunded multiemployer plans. The recent ruling reinterpreted that restriction, allowing previously excluded terminated and insolvent plans to resubmit applications.
As of March 2025, the PBGC had already received 202 applications for special financial assistance totaling $76.4 billion, with $68.6 billion approved, according to the letter. Now an estimated 123 terminated plans, many with extensive outstanding liabilities, could be added to that pool.
This new wave alone could cost approximately $6 billion, including $3.5 billion to repay the PBGC’s earlier loans to approximately 91 terminated plans, which the inspector general’s letter described as a potential waste.
“The repayment of $3.5 billion to PBGC would be a waste of taxpayer funds due to the positive current and projected financial condition of the multiemployer program,” the letter stated. “PBGC’s multiemployer program is in the best financial condition it has been in for many years. PBGC’s 2023 Projections Report states that PBGC’s multiemployer program is projected to ‘likely remain solvent for at least 40 years.’”
The PBGC is legally required to process each special financial assistance application within 120 days. Failure to do so results in automatic approval. With a significant influx of complex cases and months remaining before the application window closes, the inspector general warned the agency might not be able to fulfill this obligation in time.
To mitigate the potential fallout, the inspector general recommended that PBGC leadership work with its board of directors—the secretaries of labor, treasury and commerce—to seek legislative fixes. The letter’s proposed remedies included extending the filing deadline, waiving the repayment requirement for plans that previously received financial assistance and clarifying eligibility rules for terminated plans under the ARPA.
Although the PBGC’s financial outlook has significantly improved since the ARPA’s passage and the Government Accountability Office removed it from the high-risk list in 2023, the letter cautioned that the $3.5 billion repayment to the agency may no longer be justified.
“PBGC should continue to work with stakeholders to address the risk related to the appeals court decision impacting terminated multiemployer plans,” the letter stated.
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