American Rescue Plan Act of 2021 Impact on Multiemployer Defined Benefit Plans
On March 11, 2021 President Biden signed into Law the American Rescue Plan Act of 2021 (“ARPA”). ARPA contains significant relief for underfunded Multiemployer Defined Benefit Plans. The law also includes several other helpful provisions, such as; extending actuarial loss amortization periods, allowing for 10 years of asset fluctuation smoothing and “look backs” for zone certifications and improvement plans. However, of most importance to a qualifying underfunded plan is the estimated $80-$90 billion in relief to support these plans through 2051. To qualify for this relief, a plan must meet one of the following criteria:
The plan is determined to be “critical and declining” from their actuarial valuation in 2020, 2021 or 2022,
The plan is in “critical” status from their actuarial valuation in 2020, 2021 or 2022, has a “modified” funded percentage under 40% (likely similar to box 2c on Schedule MB) and has at least 3 inactive participants for every 2 active participants,
The plan became insolvent after December 16, 2014, continues to be insolvent and has not terminated as of ARPA’s effective date,
The plan had a suspension of benefits under MPRA as of ARPA’s effective date.
The relief will be administered by the PBGC but funded by Treasury as a separate program. The PBGC is required to publish the filing requirements within 120 days. For a plan that fully complies with the program, there is no requirement to pay back the funds.
On the negative side, the annual premiums paid by all Multiemployer Defined Benefit Plans to the PBGC will increase from their current $31 per participant to $52 beginning January 1, 2031. After that, the $52 will be indexed to increase with inflation.
Within the next few days, we will be providing more information on ARPA’s other impacts on Multiemployer plans. In the meantime, if you believe your plan may qualify for the special relief, we suggest reaching out to your actuary and/or fund counsel for more information. Of course, we at Zenith are also available to help in any way we can.
