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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations
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notice will identify the missing information or documentation required to complete the application. If PBGC
denies an application, the plan sponsor may choose to submit a revised application or withdraw the denied application. If the plan sponsor submits a revised application, the revised application must not differ from the denied application except to the extent necessary to address the reasons stated in PBGCs notification for the denial. In other words, PBGC is not requiring a plan sponsor to refile the entire application. PBGC only needs the information that cures the reasons specified in the denial notice.
The plan sponsor may withdraw an application in writing and in accordance with the SFA instructions on PBGCs website, www.pbgc.gov at any time before or after PBGC denies the application, but not after PBGC has approved the application. If an application is withdrawn, the plan sponsor may refile the application as a revised application.
For any revised application, PBGC
requires that the base data the SFA
measurement date, participant census data, and interest rate assumption remain the same as reported on the plans initial application to guard against multiple filings for purposes of changing this data. Once PBGC has accepted an initial application for processing, PBGC believes that it is in the best interest of all parties to avoid the duplicate work and delays associated with changes to the base data. Accordingly, if the plan sponsor withdraws an application and submits a revised application it must use the base data from its initial application, but it may make other changes.
PBGCs decision on an application for SFA is a final agency action for purposes of judicial review under the Administrative Procedure Act 5 U.S.C.
704.
Payment of Special Financial Assistance Section 4262j of ERISA provides that SFA is the amount required for an eligible plan to pay all benefits due from the date PBGC pays the SFA to the plan until the last day of the plan year ending in 2051. But as described earlier in this preamble, a plan sponsor does not know when SFA will be paid at the time the sponsor prepares an application. The SFA amount supported by an application and approved by PBGC will be the amount appropriate to a date in the past. The amount of SFA could be recomputed as of the date of payment, yet the result would still be an estimate and the burden of computation would
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be significant. Instead, 4262.12
provides that PBGC will pay a plan the amount demonstrated under the plans application, determined as of the SFA
measurement date, plus interest on that amount, representing the time differential between the computation and the date PBGC sends payment not the bank settlement date and using the interest rate equal to the rate required under 4262.4e1.
Section 4262.12d of the regulation provides that PBGC will pay SFA to a plan in a lump sum or substantially so 15
as soon as practicable upon approval of the plans SFA application. PBGC
expects payment to be made usually within 60 days, but no later than 90
days after the plans SFA application is approved by PBGC or deemed approved and in any event not later than September 30, 2030. Payment will be made in accordance with payment instructions provided by the plan in its application. Payment will be considered made when, in accordance with the plans payment instructions, PBGC no longer has ownership of the amount being paid. Any adjustment for delay will be borne by PBGC only to the extent that it arises while PBGC has ownership of the funds.
For a plan with an obligation to repay financial assistance under section 4261
of ERISA, the regulation describes the process for that repayment.
Unlike assistance under section 4261, section 4262a2 of ERISA provides that payment of SFA is not a loan subject to repayment obligations.
However, PBGC clarifies in 4262.12d1 that SFA is subject to recalculation or adjustment to correct a clerical or arithmetic error. PBGC will, and plans must, make payments as needed to reflect any such changes in a timely manner. SFA is also subject to debt collection if PBGC determines that a payment for SFA to a plan exceeded the amount to which the plan was entitled. Section 4262.12d2 provides the rules for payment of a debt owed to the Federal Government.
Restrictions on Special Financial Assistance Section 4262l of ERISA places restrictions on the use of SFA. These restrictions are described in 4262.13 of the regulation. SFA received, and any earnings thereon, must be segregated from other plan assets and may only be used to make benefit payments and pay plan expenses but SFA may be used 15 For example, if a plans SFA payment exceeds the statutory limitation for a federal wire of $10
billion, the plan will receive multiple Fedwire payments that will equal the approved lump sum amount.

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before other plan assets are used for these purposes. In addition, SFA and earnings must be invested by plans in investment-grade bonds or other investments as permitted by PBGC in 4262.14. These limitations on the use of SFA reflect the purpose of SFA. As provided for under section 4262j1 of ERISA and in 4262.4, SFA is the amount required for the plan to pay all benefits due during the SFA coverage period taking into account all plan resources and obligations. SFA should not be used in a manner that would divert SFA funds to other purposesfor instance, reducing sources of plan income, such as employer contributions or withdrawal liability, or increasing plan obligations, such as to pay for additional future increases in benefits.
Permissible Investments Section 4262l of ERISA requires that SFA received, and any earnings thereon, may be used to make benefit payments and pay plan expenses, and such SFA
and earnings must be held separately from other plan assets. Section 4262l also requires that SFA funds be invested in investment-grade bonds or other investments permitted by PBGC.
Given the statutes requirement that SFA funds, and any earnings on investment of those funds, be used solely to pay benefits and plan expenses, PBGC understands that SFA
funds should be invested in relatively safe vehicles that will help ensure that short-term needs to pay benefits and plan expenses can be met. That section 4262l of ERISA refers to investmentgrade bonds first, supports this view.
The allowance under section 4262l for other investments permitted by the corporation could provide some flexibility as well as limited exposure to other assets, but PBGC in this interim final rule is reluctant to allow for investment vehicles with fundamentally different characteristics without further input from the public.
Section 4262.14 of the regulation describes the permitted investments of SFA, referred to as permissible investments. To give effect to the evident intention that SFA be invested in relatively safe investments, the regulation permits SFA and earnings on SFA to be invested only in fixed income securities that must be considered investment grade except for a 5 percent sleeve that allows a plan to hold on to investments that were considered investment grade at the time of purchase but are no longer of that credit quality.
Thus, SFA funds will be fairly protected and plans will have clear expectations about what the income return will be.

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