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Federal Register / Vol. 86, No. 130 / Monday, July 12, 2021 / Rules and Regulations
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Regulatory condition
Baseline assumption
Benchmark scenario assumption
Estimated benchmark impact

Comments
Future Benefit Accruals.

No assumed accrual increases
An immediate 10% increase in future accruals followed by annual increases based on assumed wage index increases no corresponding contribution rate increases.

$5 billion to $8 billion in section 4261 Financial Assistance estimated through 2070.

Retroactive Benefit Accruals.

No assumed accrual increases
A one-time 10% increase in retroactive accrued benefits for all active participants increases no corresponding contribution rate increases.

$7 billion to $10 billion in section 4261 Financial Assistance estimated through 2070.

Allocation of Plan Assets.

Baseline stochastic returns under MEPIMS model, without restrictions on asset allocation.

All plans that receive SFA utilize an LDI strategy to match assets to benefit payments.

$5 billion to $15 billion in section 4261 Financial Assistance estimated through 2070.

Reduction in Contribution Rates.

Level contribution rates no assumed decreases.

A one-time 20% decrease in the per-capita contribution rate increases no corresponding reduction in future accruals.

$20 billion to $40 billion in section 4261 Financial Assistance estimated through 2070.

Allocation of Contributions and Other Practices.

No assumed reallocation of contributions to other plans.
CBUs projected with annual 1.3% decline.

Withdrawal Liability

No assumed future employer withdrawals explicitly factored into modeling.

A one-time immediate decline $10 billion to $25 billion in secto CBUs of 20%, followed by tion 4261 Financial Assistannual 1.3% declines inance estimated through cludes corresponding reduc2070.
tion in future accruals.
Employers representing 35% of $15 billion to $20 billion in secactive members withdraw imtion 4262 SFA.
mediately after receiving SFA.

Plans are already constrained on increasing accrual levels based on rehabilitation plan requirements.
The estimated impact is primarily due to accelerated plan insolvencies. Most increases to benefit accrual rates would not be covered under PBGC guaranteed benefit limits.
Plans are already constrained on increasing benefit levels based on rehabilitation plan requirements. The estimated impact is primarily due to accelerated plan insolvencies. Most increases to accrued benefits would not be covered under PBGC guaranteed benefit limits.
Plans required to invest all available plan assets in high quality fixed income securities are expected to attain lower investment returns, which accelerates plan insolvencies.
The estimated impact includes the acceleration of projected plan insolvencies resulting from reduced contribution levels, as well as lower contribution and withdrawal liability income following insolvency used to partially offset benefit payments.
Reallocation of contributions to other plans could take the form of plan transactions such as spinoffs or liability transfers, which are not explicitly modeled.
Plans are assumed to project the increased level of employer withdrawals as part of assumption setting for SFA determination purposes.

The estimated impacts that increase the $94 billion of SFA amounts under section 4262 of ERISA occur from 2021 through 2027. The estimated impacts for all Section 4261 Financial Assistance represent the aggregate nominal amount of this assistance provided through 2070. Section 4261 Financial Assistance is the multiemployer insurance program financial assistance PBGC provides in periodic payments upon plan insolvency under section 4261 of ERISA, which is limited to PBGC guarantee amounts.

5 Regulatory Alternatives Considered
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Conditions Related to Future Benefit Accruals PBGC first considered the implications of foregoing any regulatory authority provided under section 4262m of ERISA to impose reasonable conditions related to future benefit accruals. The primary factor in support of the option to not regulate is that additional constraints on benefit improvements may be unnecessary and may be considered onerous. Plans that receive SFA will be deemed to be in critical status through the plan year ending in 2051 and will be subject to the terms of their applicable rehabilitation plan. A rehabilitation plan generally restricts a plan from increasing benefits unless the plan is able to provide additional contribution income that is not already contemplated with the rehabilitation plan.
Although this may be applicable for many plans, there may be additional benefits to imposing a secondary restriction on benefit increases as permitted under section 4262m of
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ERISA. A secondary condition may eliminate some existing flexibility but could prevent plans from adopting benefit improvements that prove ultimately to be unaffordable for the plan. If a plan that receives SFA were able to subsequently implement significant increases to the future accrual rate, it would likely accelerate the plans insolvency date which would jeopardize participant benefits and impose financial strain on PBGCs multiemployer insurance program.
PBGC estimates that a one-time 10
percent increase in the future accrual rate accompanied by annual increases based on the national average wage index, for all active participants, could increase the aggregate nominal amount of future financial assistance under section 4261 of ERISA by approximately $5 billion to $8 billion. Absent regulatory action, it is unknown the extent to which employers can and would increase future accrual rates.
PBGC would generally expect the financial impact to be less than this estimated range due to the existing rehabilitation plan constraints, but the
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true impact is unknown and subject to a great deal of uncertainty.
Another regulatory alternative was considered under which PBGC would limit levels of future increases based on wage indexation. This alternative would allow plans with limited flexibility to adopt increases but would prevent significant improvements that may prove unaffordable. PBGC considered that certain eligible plans may have recently imposed substantial reductions in the accrual level to forestall insolvency, such that the current level of accruals are not sufficient to retain active members. Although this alternative would have helped to limit the financial impact below the $5
billion to $8 billion range modeled in the sensitivity scenario, it was determined to be too restrictive.
Yet another regulatory alternative was considered under which PBGC would strictly prohibit any increases in future benefit accruals until 2051. Under this approach, the value of plan accrual rates could erode significantly due to inflation. As the benefits lose value, it would likely become increasingly
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