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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations
4262.15, a plan receiving SFA must reinstate benefits suspended under section 305e9 of ERISA and provide make-up payments to participants and beneficiaries, to restore previously suspended benefits, in accordance with guidance issued by the Treasury Department and the IRS. This requirement applies to both the original plan and the successor plan created by a partition where benefits under the original plan were suspended. Having the original and successor plans apply as one will ensure coordinated benefit reinstatements for all participants in the partitioned plan.
The filing of an application for a partitioned plan falls under priority group 2 for purposes of 4262.10d explained in Processing applications, consistent with other plans that are eligible for SFA because they have implemented a suspension of benefits under section 305e9 of ERISA as of March 11, 2021. The plan sponsor of a partitioned plan, therefore, may file an application for SFA beginning on January 1, 2022, or earlier date specified on PBGCs website.
Partitioned plans have also been receiving financial assistance from PBGC with repayment obligations under section 4261 of ERISA. How financial assistance under section 4261 is repaid is prescribed under 4262.12b of the regulation.

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Processing Applications PBGC expects the SFA program to attract many applicants, and the statute makes clear that PBGC is expected to process applications quickly. PBGC is required to hold application processing times to within 120 days and is given authority to manage that process.
Under section 4262c of ERISA, PBGC must issue regulations or guidance setting forth requirements for SFA applications. Applications are considered timely filed under section 4262g only if they are filed in accordance with PBGCs regulations.
PBGCs inherent authority under section 4002b3 of ERISA allows PBGC to adopt regulations relating to the conduct of its business and to carry out the purposes of the title IV insurance program. Under section 4262d of ERISA, PBGC also may limit the filing of SFA applications to filings for plans that are in one or more of four priority categories during a period limited to within the first 2 years after March 11, 2021.
While PBGC is confident in its ability to process an application within the
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mandated 120 days, it might not be able to process all applications timely if many applications must be processed within a brief period. Thus, PBGC is concerned about the rate at which applications are submitted for processing. Relying on the aforementioned authorities that allow PBGC to administer the SFA application process, PBGC has developed a metering system to manage the filing and processing of applications. The goal of this system is to process the large number of expected applications within the 120 days mandated by the statute, while avoiding both floods of applications that could cause applications to be deemed approved as described in 4262.11 without sufficient PBGC review, and droughts when processing capacity is sitting idle.
The risks of an insufficiently reviewed application are varied, including, but not limited to, SFA payments that are insufficient to meet program requirements, and SFA payments that are higher than necessary to meet program requirements. These risks are exacerbated by the lump sum form of payment required by ARP. To manage these risks and ensure the success, integrity, and proper stewardship of the program, it is important that PBGC
thoroughly review each application.
The electronic filing system described in 4262.10 of the regulation is based on three mechanisms. The first mechanism permits PBGC to accept applications in a manner that in PBGCs estimation allows for sufficient review and processing within 120 days of filing. The inherent authority provided by section 4002b3 of ERISA to issue regulations related to the conduct of its business, and the directive under section 4262c to set forth requirements for applications, clearly authorize PBGC
to limit the number of applications it will accept at any one time, and to close the filing window to avoid choking the processing system, provided that every prospective submitter has a fair opportunity to file its application by December 31, 2025 or December 31, 2026, for a revised application.
The second mechanism is a priority system permitted by section 4262d of ERISA. PBGC is establishing priority periods during which an application will be accepted only for a plan that is in the category or one of the categories to which the period is limited. This mechanism is consistent with section 4262d, although not a direct implementation of that provision, which
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by its use of the disjunctive or indicates that priority status may be extended to any one or more subgroups of priority-status plans and which does not limit the number of priority submission windows. Accordingly, PBGC has designed this mechanism to prioritize the most impacted plans and participants first. For example, the highest priority is given to applications of plans that are projected to become insolvent under section 4245 of ERISA
by March 11, 2022, so that they will not have to reduce participant benefits, and plans that are already insolvent, to enable them to reinstate benefits and provide make-up payments to participants and beneficiaries, to restore previously suspended benefits. The objective is to accept and process as many applications in the highest priority group as possible before opening the submission process to the next priority group. Ultimatelyno later than March 11, 2023the submission process will be opened to all eligible plans, to ensure that every prospective submitter has a fair opportunity to file its application during the statutory period. As described earlier in this section of the preamble, PBGC will continue to meter the flow of applications to avoid exceeding its capacity to process them within 120
days.
PBGC will accept applications for filing for priority group 1 beginning on July 9, 2021. The second highest priority is given to applications of plans that have implemented a suspension of benefits under section 305e9 of ERISA as of March 11, 2021, to enable them to reinstate benefits and provide make-up payments to participants and beneficiaries to restore previously suspended benefits, and plans expected to be insolvent within 1 year of the date an application for SFA is filed. PBGC
will accept applications for filing for priority group 2 beginning no later than January 1, 2022. The filing dates for applications from the remaining four priority groups groups 36 are provided for in 4262.10d2iii through vi, with filings for priority groups 5 and 6 beginning no later than February 11, 2023. In addition, PBGC
will specify on its website, at least 21
days in advance, the date the last 2
priority groups groups 5 and 6 may file.
This table shows when applications for each priority group may begin to be filed.

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