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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations percentage PBGC has chosen to accept the interest rate selected by the actuary and not to require the use of an alternate interest rate.
As explained earlier in this section of the preamble, section 4262b1C of ERISA requires as one of the conditions of eligibility, for critical status plans to have a ratio of active to inactive participants that is less than 2 to 3. The statute does not specify what participant count to use. To fill in this gap, the regulation refers to end-of-year participant counts on the Form 5500.
On the 2020 Form 5500, these are the number of participants identified on line 6a2 for total number of active participants and the sum of lines 6b, 6c, and 6e for inactive participants:
Retired or separated participants receiving benefits, other retired or separated participants entitled to future benefits, and deceased participants whose beneficiaries are receiving or are entitled to receive benefits. Requiring the use of these counts provides for uniformity among applications in the use of participant counts to determine the ratio.

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Assumptions for Determining Eligibility A plans eligibility for SFA is determined by PBGC in accordance with 4262.3d of the regulation, which incorporates the actuarial assumptions for determining eligibility found in sections 4262e1 and e4 of ERISA.
When a plan sponsor applies for SFA
claiming the plans eligibility based on a certification of either critical status or critical and declining status completed before January 1, 2021, PBGC is required to accept the assumptions incorporated into that certification unless the assumptions are clearly erroneous.
When a plan sponsor applies for SFA
and claims the plan is eligible based on a certification of plan status for a plan year that was not completed before January 1, 2021, the sponsor must determine whether the plan is in critical status or critical and declining status using the assumptions that were used in the plans most recently completed certification before January 1, 2021, unless those assumptions excluding the plans interest rate are unreasonable. A
plan sponsor that determines that one or more of the assumptions used in the plans most recently completed certification before January 1, 2021, is unreasonable may propose changes to the assumptions in the plans application except to the interest rate by disclosing the changes, describing why such assumptions are no longer reasonable, and demonstrating that the changed assumptions are reasonable.

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The information required to be included as part of an application, including to support changes to assumptions, is described in 4262.6
through 4262.8 of the regulation.
PBGCs review of the assumptions used by a plan are described in 4262.5 of the regulation.
Amount of Special Financial Assistance Under section 4262a1 of ERISA, PBGC is to provide SFA to an eligible multiemployer plan upon application.
Under section 4262j1, the amount of SFA to be provided is the amount required for the plan to pay all benefits due during the period beginning on the date of payment of the special financial assistance payment . . . and ending on the last day of the plan year ending in 2051 . . . . This is referred to in section 4262i1 as the amount necessary as demonstrated by the plan sponsor. PBGC believes that the plain meaning of the statutory language is that SFA is the amount by which a plans resources fall short of its obligations, taking all plan resources and obligations into account.
The heart of the matter is found in the requirement that SFA be the amount necessary or required for the plan to pay all benefits due. To the extent that a plan has other means available to pay benefits, it does not require or need SFA
for that purpose.11 Thus, all of a plans resources must be considered in determining the amount of SFA for the plan. Moreover, since the determination must be made by looking through the end of the last plan year ending in 2051, the resources to be considered must include plan assets and income contributions, investment returns, etc..
If Congress had contemplated the exclusion of these resources in the calculation of the amount of SFA
required for the plan, it would have done so explicitly.
Additionally, all of a plans benefits must be considered, as the statute says clearly all benefits. And, because plan expenses must be paid to keep the plan in operation and capable of paying benefits, all expenses must likewise be taken into account. In short, the statutory language, by requiring the payment of all benefits due, mandates 11 Furthermore, it would not be a reasonable result if the amount of SFA were to be calculated under a formula that disregards the plans available resources, which could lead to a windfall for a plan that needs only a small amount of SFA to pay benefits. PBGC estimates that under such an approach, the total amount of SFA distributed under the program would increase by 2 to 4 times the estimated $94 billion amount projected under PBGCs MEPIMS model. See section 4, Estimated Impact of Regulatory Action, of the Regulatory Impact Analysis section.

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by clear implication the consideration of all plan obligations and resources in determining the amount of SFA that is needed or is necessary.
Some interested parties commented to PBGC on section 4262j1 of ERISA
that, in determining the amount of SFA, PBGC should exclude from consideration all or a portion of one or more plan obligations or resources, such as existing assets, expected benefit payments, earnings on assets, contributions, withdrawal liability, and administrative expenses. The items to be disregarded, and the theories on which they are to be ignored, differ from one commenter to another.
The common thread among these comments is that they advance a particular policy goal or desired outcome and an approach designed to fit that desired policy goal or outcome.
Such desired goals include providing generous assistance, long-term sustainability, avoiding a recurrence of the current crisis, protection of retirees, and simplicity. The approaches advanced to achieve such goals vary among commenters, but include disregarding resources such as current assets, or the portion thereof needed to fund post-2051 payments; future contributions; and other sources of revenue. In considering these comments, PBGC has concluded that the approaches recommended in these comments could be supported only by a strained reading of the clear language of section 4262j1, which defines the SFA amount as the amount required for the plan to pay all benefits due during the period beginning on the date of payment of the special financial assistance payment under this section and ending on the last day of the plan year ending in 2051 . . . .
The inability to project resources and obligations with absolute precision for 30 years prompted another objection to the plain meaning of the language in question from some interested parties.
The benefits projected to be paid into the future will rarely turn out to be the same as the benefits that actually will be paid which can only be determined in hindsight. These interested parties argued that the amount of SFA is insufficient unless it enables a plan to pay all benefits actually due through the last plan year in 2051, for example by assuming zero mortality for that period. However, this approach would be a radical departure from accepted actuarial practice and would be at odds with the pattern of actuarial determinations that underlies section 4262 of ERISA. PBGC thus considers this suggestion to be contradictory to the statute.

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