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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations
applications, and restrictions and conditions.
Eligible Multiemployer Plans
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There are four types of multiemployer plans identified in section 4262b1 of ERISA that are eligible to apply for SFA
under 4262.3 of PBGCs regulation.
This exclusive list consists of:
1 A plan in critical and declining status within the meaning of section 305b6 of ERISA in any plan year beginning in 2020, 2021, or 2022.
2 A plan with a suspension of benefits approved under section 305e9 of ERISA as of the date ARP
became law March 11, 2021.
3 A plan certified to be in critical status within the meaning of section 305b2 of ERISA that has a modified funded percentage of less than 40
percent and a ratio of active to inactive participants which is less than 2 to 3, in any plan year beginning in 2020, 2021, or 2022.
4 A plan that became insolvent for purposes of section 418E of the Internal Revenue Code the Code after December 16, 2014 the date MPRA
became law, has remained insolvent, and has not terminated under section 4041A of ERISA as of March 11, 2021.
PBGC notes that a plan that terminated by mass withdrawal in a plan year that ended before January 1, 2020, is not eligible for SFA under section 4262b1A of ERISA and 4262.3a1 plans that are in critical and declining status within the meaning of section 305b6 of ERISA
in any plan year beginning in 2020, 2021, or 2022. This is because the additional funding rules for plans in endangered, critical, and critical and declining status under section 432 of the Code do not apply to such a plan in a plan year that begins in 2020, 2021, or 2022.6 Accordingly, a plan that 6 Section 412a1 of the Internal Revenue Code the Code requires a pension plan to satisfy the minimum funding standard applicable to the plan for each plan year. In the case of a multiemployer defined benefit plan, section 412a2C provides that participating employers must make contributions under the plan for a plan year that, in the aggregate, are sufficient to ensure that the plan does not have an accumulated funding deficiency under section 431 as of the end of the plan year. Section 412e4 provides that the minimum funding rules under section 412 apply until the last day of the plan year in which a plan terminates within the meaning of section 4041Aa2 of ERISA that is, termination by mass withdrawal or a cessation of the obligation of all employers to contribute under the plan.
Accordingly, the rules of section 431 of the Code do not apply to such a plan for periods after the plan year of termination.
The Internal Revenue Service IRS has informed PBGC that section 432 of the Code, which provides additional funding rules for multiemployer plans in endangered status or critical status, likewise does
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terminated by mass withdrawal before the plan year selected to determine eligibility under 4262.3a1 is not in critical and declining status for that year and therefore is not eligible for SFA. For example, if a plan in critical and declining status terminated by mass withdrawal in 2019, the plan would not be eligible for SFA under 4262.3a1
because it was not in critical and declining status in 2020, 2021, or 2022.
However, if a plan in critical and declining status terminated by mass withdrawal in 2020, the plan would be eligible for SFA.
With respect to critical status plans, PBGC provides some clarifications on eligibility. Section 4262.3c1 clarifies that a plan that has elected to be in critical status under section 305b4 of ERISA but is not certified to be in critical status under section 305b2 is not an eligible multiemployer plan. To ensure uniformity for applications and clarify what data to use to satisfy eligibility requirements for critical status plans under section 4262b1C, 4262.3a3 and c2 specify the data that is used for this purpose, including specifying line items entered on the Form 5500 Schedule MB to determine the modified funded percentage, and line items entered on the Form 5500 to determine the ratio of active to inactive participants.
Under the regulation, the conditions for eligibility do not need to be satisfied for the same plan year. PBGC adds this flexibility in recognition that the filing dates for the certification of plan status and the Form 5500 are not the same.
Generally, the due date for filing the certification of plan status is well over a year before the due date for filing the Form 5500 for the same plan year. In addition, data used for the certification of plan status for a plan year may be from a different year than the data used for the Form 5500 for the same plan year, and section 4262 of ERISA is unclear as to the date within a plan year as of which data used to satisfy the conditions is determined.
Section 4262b2 of ERISA defines modified funded percentage to mean the percentage equal to a fraction the numerator of which is the current value of plan assets as defined in section not apply to a multiemployer plan for periods after the plan year of termination within the meaning of section 4041Aa2 of ERISA. This is consistent with section 301c of ERISA over which the IRS
has interpretive jurisdiction pursuant to section 101
of Reorganization Plan No. 4 of 1978 43 FR
47713, which provides that part 3 of title I of ERISA, including the minimum funding rules parallel to sections 412, 431, and 432 of the Code, applies until the last day of the plan year in which the plan terminates within the meaning of section 4041Aa2 of ERISA.

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326 of ERISA and the denominator of which is current liabilities as defined in section 431c6D of the Code.
The numerator for the plans funded percentage under 4262.3c2 is calculated using the current value of assets on line 2a of Schedule MB,7
which is also required to be reported on line 1l, column a of the Schedule H,8
and adding to it the current value of withdrawal liability payments due to be received by the plan on an accrual basis reflecting a reasonable allowance for amounts considered uncollectible 9 if not already included in the current value of net assets reported on line 2a.
The value calculated for the numerator is consistent with the meaning of current value of assets under section 326 of ERISA.10 The current value of assets includes total cash contributions due to be received on an accrual basis.
The denominator for the plans funded percentage under 4262.3c2
is calculated using the current liability measurement from line 2b4 column 2. This entry requires current liability to be calculated using the assumptions, including interest rate, in the instructions for line 1d2a of the Schedule MB. Those instructions provide how to calculate current liability under section 431c6D of the Code and provide specifically that the interest rate used to compute current liability must be in accordance with guidelines issued by the Treasury Department and the Internal Revenue Service IRS and within the interest rate rules referred to under section 431c6D, which are outlined under section 431c6E. PBGC notes that the current liability is a measure derived using an interest rate chosen by the actuary within a permissible range under section 431c6E. Since the selection of the interest rate by the actuary is part of the determination of current liability, for purposes of measuring the modified funded 7 All line references in this section are to the 2020
Form 5500 and schedules.
8 The 2020 Form 5500 instructions provide that, with certain exceptions, assets reported on line 2a of Schedule MB should be the same as reported on line 1l, column a of the Schedule H.
9 PBGC notes that Financial Accounting Standards Board FASB Accounting Standards Codification ASC 960, Plan AccountingDefined Benefit Pension Plans 960310253A states: A
multiemployer plan may also have a receivable for a withdrawing employers share of the plans unfunded liability. The plan should record the receivable, net of any allowance for an amount deemed uncollectible, when entitlement has been determined.
10 The withdrawal liability payments due to be received by the plan are not included in the actuarial value of assets or the market value of assets for purposes of sections 431 and 432 of the Code and the corresponding sections 304 and 305
of ERISA.

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