Proposed Rule2026-12100
Technical Amendments: Special Financial Assistance
Primary source
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Published
June 16, 2026
Issuing agencies
Pension Benefit Guaranty Corporation
Abstract
The Pension Benefit Guaranty Corporation (PBGC) is proposing technical corrections, clarifications, and improvements to the restrictions and conditions in its regulation on special financial assistance. These changes would clarify (a) the permissibility of investing special financial assistance in certain securities and (b) the condition requiring PBGC approval for settling withdrawal liability claims. The amendments also would repeal a provision that enabled plans that received special financial assistance to request the reallocation of employer contributions to pay for health benefit costs.
Full Text
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<title>Federal Register, Volume 91 Issue 115 (Tuesday, June 16, 2026)</title>
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[Federal Register Volume 91, Number 115 (Tuesday, June 16, 2026)]
[Proposed Rules]
[Pages 36100-36105]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-12100]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 91, No. 115 / Tuesday, June 16, 2026 /
Proposed Rules
[[Page 36100]]
PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 4262
RIN 1212-AB61
Technical Amendments: Special Financial Assistance
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Proposed rule.
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SUMMARY: The Pension Benefit Guaranty Corporation (PBGC) is proposing
technical corrections, clarifications, and improvements to the
restrictions and conditions in its regulation on special financial
assistance. These changes would clarify (a) the permissibility of
investing special financial assistance in certain securities and (b)
the condition requiring PBGC approval for settling withdrawal liability
claims. The amendments also would repeal a provision that enabled plans
that received special financial assistance to request the reallocation
of employer contributions to pay for health benefit costs.
DATES: Comments must be submitted on or before August 17, 2026, to be
assured of consideration.
ADDRESSES: Comments may be submitted by any of the following methods:
<bullet> Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the online instructions for submitting comments. If you are
reading this document on <a href="http://federalregister.gov">federalregister.gov</a>, you may use the green
``SUBMIT A PUBLIC COMMENT'' button beneath this rulemaking's title to
submit a comment to the <a href="http://regulations.gov">regulations.gov</a> docket.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#691b0c0e470a0604040c071d1a29190b0e0a470e061f"><span class="__cf_email__" data-cfemail="92e0f7f5bcf1fdfffff7fce6e1d2e2f0f5f1bcf5fde4">[email protected]</span></a>. Refer to 1212-AB61 in the
subject line.
<bullet> Mail or Hand Delivery: Legislative and Regulatory
Division, Office of the General Counsel, Pension Benefit Guaranty
Corporation, 445 12th Street SW, Washington, DC 20024-2101.
Commenters are strongly encouraged to submit comments
electronically. Commenters who submit comments by mail should allow
sufficient time for mailed comments to be received before the close of
the comment period.
All submissions must include the agency's name (Pension Benefit
Guaranty Corporation, or PBGC) and the Regulation Identifier Number
(RIN) for this rulemaking (RIN 1212-AB61). Comments received will be
posted without change to PBGC's website, <a href="http://www.pbgc.gov">www.pbgc.gov</a>, including any
personal information provided. Do not submit comments that include any
personally identifiable information (such as name, address, or other
contact information) or confidential business information that you do
not want publicly disclosed. Comments may be submitted anonymously.
Copies of comments may also be obtained by writing to Disclosure
Division (<a href="/cdn-cgi/l/email-protection#ef8b869c8c83809c9a9d8aaf9f8d888cc1888099"><span class="__cf_email__" data-cfemail="3c58554f5f50534f494e597c4c5e5b5f125b534a">[email protected]</span></a>), Office of the General Counsel, Pension
Benefit Guaranty Corporation, 445 12th Street SW, Washington, DC 20024-
2101 or calling 202-326-4040 during normal business hours. If you are
deaf or hard of hearing, or have a speech disability, please dial 7-1-1
to access telecommunications relay services. You may also follow the
search instructions on <a href="https://www.regulations.gov">https://www.regulations.gov</a> to view public
comments.
FOR FURTHER INFORMATION CONTACT: Abigail Davidow
(<a href="/cdn-cgi/l/email-protection#dfbbbea9b6bbb0a8f1bebdb6b8beb6b3ee9fafbdb8bcf1b8b0a9"><span class="__cf_email__" data-cfemail="dabebbacb3beb5adf4bbb8b3bdbbb3b6eb9aaab8bdb9f4bdb5ac">[email protected]</span></a>), Deputy Assistant General Counsel,
Legislative and Regulatory Division, Office of the General Counsel,
Pension Benefit Guaranty Corporation, 445 12th Street SW, Washington,
DC 20024-2101; 202-229-6418. If you are deaf or hard of hearing, or
have a speech disability, please dial 7-1-1 to access
telecommunications relay services.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
A. Purpose and Authority
This proposed rule would make technical corrections,
clarifications, updates, and improvements to PBGC's regulation on
Special Financial Assistance by PBGC (29 CFR part 4262) (PBGC's SFA
regulation) to improve and facilitate the operation of PBGC's special
financial assistance (SFA) program.
PBGC's legal authority for this rulemaking is derived from (a)
section 4002(b)(3) of the Employee Retirement Income Security Act of
1974 (ERISA), which authorizes PBGC to issue regulations to carry out
the purposes of title IV of ERISA, and (b) section 4262 of ERISA
(Special Financial Assistance by the Corporation), which (1) permits
PBGC to provide for how SFA and earnings thereon are to be invested and
(2) permits PBGC, in consultation with the Secretary of the Treasury,
to impose reasonable conditions by regulation or other guidance on an
eligible multiemployer plan that receives SFA.
B. Major Provisions
The major provisions of this proposed rulemaking would amend PBGC's
SFA regulation to:
<bullet> Clarify the permissibility of investing SFA in certain
assets:
<bullet> Clarify the condition, imposed on a plan that receives SFA
requiring PBGC approval for a proposed settlement of withdrawal
liability; and
<bullet> Eliminate a provision that enables a plan that receives
SFA to request the reallocation of employer contributions to pay for
health benefit costs.
II. Background
PBGC administers the SFA program for eligible financially
distressed multiemployer plans under section 4262 of ERISA and PBGC's
SFA regulation. The amendments in this proposed rule would apply to the
SFA program.
The proposed amendments and improvements to PBGC's SFA regulation
are discussed below. PBGC invites comment on these proposals.
III. Permissible Investments of Special Financial Assistance
Section 4262(l) of ERISA requires that SFA received, and any
earnings thereon (SFA funds), be used to make benefit payments and pay
plan expenses, and that such SFA funds be held separately from other
plan assets. Section 4262(l) also requires that SFA funds be invested
in investment grade bonds or other investments permitted by PBGC.
Section 4262.14 of PBGC's SFA regulation describes the permitted
investments for SFA funds, referred to as permissible investments.
Section 4262.14(b) of PBGC's SFA regulation identifies permissible
investments as either investments in return-seeking assets or
investments in investment grade fixed income securities and cash.
While administering the SFA program, PBGC has received practitioner
questions on, or otherwise
[[Page 36101]]
uncovered uncertainty about, whether certain investments are
permissible investment grade fixed income securities and the nature of
permitted derivative exposure. PBGC issued guidance to address the
questions, which PBGC is now proposing to codify in its SFA regulation.
The following discussion covers the questions, PBGC's guidance, and the
proposed changes to the SFA regulation.
A. Commonly Held Fixed Income Investments
Under Sec. 4262.14(d)(1) of PBGC's SFA regulation, investments in
investment grade fixed income securities and cash include ``[a] bond or
other debt security that pays a fixed amount or fixed rate of interest,
is denominated in U.S. dollars, sold in an offering registered under
the Securities Act of 1933, and is investment grade. . . .'' These
criteria are very similar to those used for inclusion in large
aggregate bond indexes used as benchmarks by a broad spectrum of
investors. Practitioners expressed uncertainty about whether certain
Total Loss Absorbing Capacity (TLAC) bonds are permissible. Many TLAC
bonds are commonly held and included in large aggregate bond indexes.
In some circumstances, TLAC bonds may convert to equity, raising the
question of whether they are a ``bond, or other debt security.'' Other
TLACs may change the interest paid for certain periods, under certain
circumstances, creating uncertainty about whether they ``pay a fixed
amount or fixed rate of interest.'' One example of such an instrument
is a fixed-to-float security. Fixed-to-float securities pay a fixed
interest rate for a period of time before switching to a variable rate.
These bonds may be called in by the issuer before switching to a
variable rate, but would otherwise drop out of the index and
simultaneously would no longer be considered permissible.
On July 16, 2024, PBGC updated a set of frequently asked questions
(FAQs) about the SFA program to provide examples of securities included
in large, aggregate U.S. bond indexes that meet the criteria for
permissible investment grade fixed income securities under the statute
and regulation. Examples of securities included in large, aggregate
U.S. bond indexes that may meet the criteria for permissible investment
grade fixed income securities are U.S. Treasury bonds, U.S. Government
Agency bonds, U.S. Corporate bonds, asset-backed debt securities,
mortgage-backed debt securities, commercial mortgage-backed debt
securities, fixed-to-float securities during the fixed rate period, and
step-up bonds, which pay an initial interest rate that increases
according to a predetermined schedule. The FAQs also provided examples
of securities that do not meet the definition of permissible investment
grade fixed income, including fixed-to-float securities during any
period when they pay a variable rate interest, high yield bonds,
traditional convertible bonds, preferred stock, collateralized loan
obligations, annuity purchases, and contingent capital securities, such
as contingent convertible bonds, which typically have a mechanical
trigger based on capital ratios for conversion or write down of value.
PBGC now seeks to codify this guidance in its SFA regulation. For
that reason, PBGC's proposed rule would amend the definition of
permissible investment grade fixed income in Sec. 4262.14(d)(1) of
PBGC's SFA regulation to make clear that a bond or other debt security
that pays a fixed amount or fixed rate of interest during the entire
period that it is owned or that pays predetermined interest according
to a schedule is permissible. A security that is convertible to equity
will be considered a debt security (and therefore eligible to be a
permissible investment) if it is convertible to equity solely by action
of a Federal agency or other regulator.
B. Investments Exempt From Registration in Fixed Income
Several plans and practitioners have asked PBGC about whether SFA
funds may be invested in certain fixed income securities that are
exempt from registration requirements under the Securities Act of 1933.
Of particular interest are securities issued or guaranteed by banks
(exempt under section 3(a)(2) of the Securities Act of 1933) and
securities issued by nonprofits (exempt under section 3(a)(4) of the
Securities Act of 1933).
PBGC understands that, though exempt securities typically make up a
small portion of fixed income investments, they are relatively common
in portfolios of pension plans and are included in large, aggregate
U.S. bond indexes. As discussed earlier, PBGC FAQs have clarified that
bonds included in these indexes generally will be considered
permissible investment grade fixed income investments. Further, upon
evaluating various illustrative SFA asset investment portfolios, PBGC
accepts that not all securities have a readily available method to
verify the security's registration status under the Securities Act of
1933 and that the costs to plans to determine such status may be unduly
burdensome.
Taking into consideration the requirements imposed on plans and the
risks associated with holding the identified securities, PBGC is
proposing to amend the definition of permissible investment grade fixed
income in section 4262.14(d)(1) of PBGC's SFA regulation to permit
investment in a bond or other debt security that is exempt from
registration under sections 3(a)(2) or 3(a)(4) of the Securities Act of
1933 if it is investment grade.
C. Permissible Derivative Exposure
Section 4262.14(h) of PBGC's SFA regulation covers permissible
derivative exposure for SFA plans and states that ``[p]ermissible
investments must not be supplemented by, and permissible fund vehicles
cannot include, derivatives or otherwise be leveraged in a way that
could increase the risk of the permissible investment beyond the risk
associated with the market value of the un-leveraged permissible
investment.'' In addition, Sec. 4262.14(h) of PBGC's SFA regulation
currently states that ``[a]ny notional derivative exposure, other than
exposure gained through a permissible fund vehicle described under
paragraph (g) of this section, must be supported by liquid assets that
are cash or cash equivalents denominated in U.S. dollars.''
On November 4, 2024, PBGC posted an updated FAQ covering the types
of derivative exposure, outside of permissible fund vehicles, that are
permissible in portfolios of SFA funds. In doing so, it provided
examples. The guidance states that SFA funds should generally not be
invested in derivatives but that permissible derivative exposure
includes, for a short period of time, derivative positions that
substitute for and closely replicate permissible physical securities
when those physical securities are not immediately available in the
market. Further, the FAQ clarifies that derivative positions intended
to change the risk related to potential future events, such as changes
in interest rates, yield curve shape, or bond and equity prices, are
not permissible.
PBGC is proposing to amend Sec. 4262.14(h) of PBGC's SFA
regulation to clarify the intended application of the provision,
consistent with its FAQ.
IV. Condition on Withdrawal Liability Settlements
To ensure that SFA is used to pay benefits and the expenses related
to those benefit payments, section 4262(m)(1) of ERISA expressly
authorizes PBGC, in consultation with the Secretary of the Treasury, to
impose reasonable conditions, relating to certain aspects of plan terms
or
[[Page 36102]]
operations, on any eligible multiemployer plan that receives SFA. These
conditions are specified in Sec. 4262.16 of PBGC's SFA regulation.
PBGC's SFA regulation imposes a condition on settling withdrawal
liability.\1\ More specifically, Sec. 4262.16(h)(1) requires that, for
a certain period of time (what is referred to as the SFA coverage
period), a plan ``must obtain PBGC approval for a proposed settlement
of withdrawal liability if the amount of the liability settled is
greater than $50 million.'' This $50 million amount is calculated as
the lesser of ``(i) The allocation of unfunded vested benefits to the
employer under section 4211 of ERISA; or (ii) The present value of
withdrawal liability payments assessed for the employer discounted
using the interest assumptions under Sec. 4044.54 of this chapter.''
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\1\ Withdrawal liability represents a withdrawing employer's
proportionate share of the plan's unfunded benefit obligations and
is an important source of funding for the plan. To assess withdrawal
liability, the plan sponsor must determine the withdrawing
employer's: (1) allocable share of the plan's unfunded vested
benefits (UVBs) (the value of nonforfeitable benefits that exceeds
the value of plan assets) as of the end of the plan year before the
employer's withdrawal, or as otherwise provided under section 4211
of ERISA, and (2) annual withdrawal liability payment and
amortization period under section 4219.
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Thus, if a plan wishes to settle a withdrawal liability claim
during its SFA coverage period, it must make a present value
determination in accordance with Sec. 4262.16(h)(1)(ii) of PBGC's SFA
regulation to determine if the value of the proposed settlement exceeds
$50 million. Doing so involves an actuarial calculation to determine
the value of future withdrawal liability payments to the plan as of a
specific date referred to as the determination date, using the plan's
interest assumption in effect on that date.
Practitioners have asked PBGC questions about how to determine the
determination date under Sec. 4262.16(h)(1)(ii) of PBGC's SFA
regulation. Because the calculation is sensitive to the interest
assumption in effect on the determination date,\2\ the determination
date can be determinative of whether the amount of liability settled is
greater than $50 million.
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\2\ This is because the value of a future withdrawal liability
payment discounted using a higher interest rate will be lower than
if it were discounted using a lower interest rate, all else being
equal.
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After considering alternatives, PBGC is proposing to fix the
determination date as of the last day of the plan year preceding the
withdrawal. This date coincides with the most recent date benefits are
valued to determine the employer's share of unfunded vested benefits in
the withdrawal liability calculation under section 4211 of ERISA.
One alternative PBGC considered was the ``first day of the plan
year following the plan year in which the withdrawal occurs,'' which is
the date the withdrawal liability payment schedule is calculated under
section 4219(c)(1)(A)(i) of ERISA. PBGC decided against this
alternative because this date can be well after the date of withdrawal
(i.e., when an employer withdraws early in a plan year). Also, because
the value of withdrawal liability payments as of that date may be
unknown until sometime after that date, plans could be prevented from
expediently determining whether a withdrawal liability settlement offer
exceeds $50 million, which determines whether PBGC approval would be
required for the settlement.
For these reasons, this proposed rule would amend Sec.
4262.16(h)(1)(ii) of PBGC's SFA regulation to require that the value of
withdrawal liability payments assessed be determined as of the last day
of the plan year preceding the withdrawal.
V. Condition on Reallocation of Contributions
PBGC's SFA regulation imposes a condition relating to the
allocation of contributions. Under Sec. 4262.16(e)(1), broadly
speaking and not including certain good-faith practices enumerated in
paragraphs (e)(1)(i) through (iv), during the SFA coverage period, a
decrease in the proportion of income (contributions, investment
returns, etc.) or an increase in the proportion of expenses allocated
to a plan that receives SFA is prohibited. This prohibition applies to
written or oral agreements or practices (other than a written agreement
in existence on March 11, 2021, to the extent not subsequently amended
or modified) under which income or expenses are divided or to be
divided between a plan that receives SFA and one or more other employee
benefit plans. This condition is to ensure that plan trustees do not
inappropriately reallocate contributions away from the plan that
receives SFA to other benefit programs or inappropriately reallocate
expenses from other benefit programs to the plan.
The regulation also includes a procedure to request an exception to
this prohibition under narrow circumstances. The exception was intended
to accommodate circumstances arising after March 11, 2021, beyond the
control of the plan sponsor and the bargaining parties (e.g., health
benefit cost increases due to legislative changes) that would justify a
good faith reallocation of income or expenses between employee benefit
plans. Thus, Sec. 4262.16(e)(2) of PBGC's SFA regulation currently
states that, beginning 5 years after the end of the plan year in which
a plan receives payment of SFA, a plan may apply for an exception by
demonstrating to the satisfaction of PBGC that, taking into account the
value of any proposed reallocation, the plan that received SFA will
avoid insolvency and that the reallocation is needed due to a
significant increase in health benefit costs due to a change in Federal
law.
PBGC has determined that this exception procedure, which could
allow SFA funds to be diverted to welfare plans, is inconsistent with
the best reading of the underlying statute,\3\ which clearly
contemplates that SFA should be used to make benefit payments from, and
pay expenses for, eligible multiemployer pension plans. It is also
inconsistent with PBGC's statutory purposes to encourage the
continuation and maintenance of voluntary private pension plans for the
benefit of their participants and to provide for the timely and
uninterrupted payment of pension benefits to participants. Accordingly,
PBGC proposes to remove the exception procedure in current Sec.
4262.16(e)(2) and to reorganize Sec. 4262.16(e).
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\3\ American Rescue Plan (ARP) Act of 2021 (Pub. L. 117-2).
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VI. Compliance With Rulemaking Guidelines
A. Executive Orders 12866, 13563, and 14192
The Office of Management and Budget (OMB) has determined that this
proposed rule is not a ``significant regulatory action'' under
Executive Order 12866. Accordingly, OMB has not reviewed the proposed
rule under Executive Order 12866.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity).
Although this is not a significant regulatory action under
Executive Order 12866, PBGC has examined the economic and policy
implications of this proposed rule and has concluded that there will be
no significant economic impact as a result of these amendments to
PBGC's SFA regulation. Many of the amendments codify
[[Page 36103]]
clarifications already issued by PBGC in sub-regulatory guidance.
Making these clarifications more transparent will decrease uncertainty
among plan sponsors and their service providers. The clarifications
will also prevent delays of withdrawal liability settlements and
unnecessary divestment. In addition, some cost savings will be realized
through simpler annual statement of compliance filings and elimination
of exception filings.
Section 6 of Executive Order 13563 requires agencies to rethink
existing regulations by periodically reviewing their regulatory program
for rules that ``may be outmoded, ineffective, insufficient, or
excessively burdensome.'' These rules should be modified, streamlined,
expanded, or repealed as appropriate. PBGC has identified the
amendments in this final rule as consistent with the principles for
review under Executive Order 13563. PBGC believes codifying its
previously issued guidance provides further clarity to the public and
that the amendments will improve and clarify its existing regulations.
Executive Order 14192 requires agencies to identify at least ten
existing regulations to be repealed when the agency issues a new
regulation and that new incremental costs associated with new
regulations shall, to the extent permitted by law, be offset by the
elimination of existing costs associated with prior regulations. As OMB
explains in its memorandum, ``Guidance Implementing Section 3 of
Executive Order 14192, Titled `Unleashing Prosperity Through
Deregulation,' '' an ``Executive Order 14192 regulatory action'' is a
significant regulatory action (as defined in section 3(f) of Executive
Order 12866) that would impose total costs greater than zero. Because
this proposed rule is not a significant regulatory action under
Executive Order 12866, it is not an Executive Order 14192 regulatory
action. However, PBGC believes this rule, if finalized, qualifies as an
``Executive Order 14192 deregulatory action'' (as defined in M-25-20)
because of expected cost savings associated with both removing
restrictions on investments and eliminating the option to reallocate
employer contributions to health care.
PBGC estimates that easing investment restrictions on fixed-to-
float securities and securities exempt from registration would result
in annualized cost savings of approximately $18.4 million. This
estimate reflects PBGC's observation of typical market practice
regarding benchmark construction and advisory fee differentials for
non-standard mandates, applied to the projected SFA asset base and an
estimated proportion of affected plans (($10 million for one-time setup
costs + $450 million for ongoing advisory fee impact) x 0.6 (reflecting
an estimated 60 percent of the 200 plans expected to receive SFA) / 15
(reflecting a straight-line decline in advisory-fee impacts to $0 over
15 years)). Furthermore, PBGC estimates that eliminating the procedure
to grant an exception to the condition prohibiting the reallocation of
contributions would result in fewer expected determination requests
submitted to PBGC. PBGC estimates there would have been at least 10
requests for an exception from the condition prohibiting the
reallocation of contributions, and by eliminating this procedure, PBGC
estimates a total annual cost savings of $250,000 (10 x $25,000 per
request). Therefore, this rulemaking, if finalized, would result in
$18.65 million in total annual cost savings.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act \4\ (RFA) imposes certain
requirements respecting rules that are subject to the notice-and-
comment requirements of section 553(b) of the Administrative Procedure
Act, or any other law,\5\ and that are likely to have a significant
economic impact on a substantial number of small entities. Unless an
agency certifies that a proposed rule will not, if promulgated, have a
significant economic impact on a substantial number of small entities,
section 603 of the RFA requires that the agency present an initial
regulatory flexibility analysis at the time of the publication of the
proposed rule describing the impact of the rule on small entities and
seek public comment on such impact. Small entities include small
businesses, organizations, and governmental jurisdictions.\6\
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\4\ 5 U.S.C. 601 et seq.
\5\ The applicable definition of ``rule'' is found in section
601 of the RFA. See 5 U.S.C. 601(2).
\6\ The applicable definitions of ``small business,'' ``small
organization,'' and ``small governmental jurisdiction'' are found in
section 601 of the RFA. See 5 U.S.C. 601.
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For purposes of the RFA requirements with respect to this proposed
rule, PBGC considers a small entity to be a plan with fewer than 100
participants.\7\ This is substantially the same criterion PBGC uses in
other regulations \8\ and is consistent with certain requirements in
title I of ERISA \9\ and the Code \10\, as well as the definition of a
small entity that PBGC and the Department of Labor (DOL) have used for
purposes of the RFA.\11\
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\7\ PBGC consulted with the Small Business Administration's
Office of Advocacy before making this determination. Memorandum
received from the U.S. Small Business Administration, Office of
Advocacy on March 9, 2021.
\8\ See, e.g., special rules for small plans under part 4007
(Payment of Premiums).
\9\ See, e.g., section 104(a)(2) of ERISA, which permits the
Secretary of Labor to prescribe simplified annual reports for
pension plans that cover fewer than 100 participants.
\10\ See, e.g., section 430(g)(2)(B) of the Code, which permits
plans with 100 or fewer participants to use valuation dates other
than the first day of the plan year.
\11\ See, e.g., PBGC's proposed rule on Reportable Events and
Certain Other Notification Requirements, 78 FR 20039, 20057 (Apr. 3,
2013) and DOL's final rule on Procedures Governing the Filing and
Processing of Prohibited Transaction Exemption Applications, 89 FR
4662, 4690 (Jan. 24, 2024).
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PBGC believes that assessing the impact of the final rule on small
plans is an appropriate substitute for evaluating the effect on small
entities. The definition of small entity considered appropriate for
this purpose differs, however, from a definition of small business
based on size standards promulgated by the Small Business
Administration (13 CFR 121.201) pursuant to the Small Business Act.
PBGC therefore requests comments on the appropriateness of the size
standard used in evaluating the impact on small entities of this
proposed rule.
Based on its proposed definition of small entity, PBGC certifies
under section 605(b) of the RFA that the amendments in this proposed
rule would not have a significant economic impact on a substantial
number of small entities. As explained above under ``Executive Orders
12866 and 13563,'' the proposed amendments offer clarifications or
conform the regulation to statutory changes and thus are neutral in
their impact. For instance, the clarification of the date as of which
the value of withdrawal liability payments is calculated does not
impose any new requirements, and, by choosing a date on which the
sponsor is already determining present value amounts for purposes of
determining withdrawal liability, should simplify the process of
determining the present value. While it is possible that individual
small plans would be impacted by this change, the overall effect on
small plans, or plans of any size, would not be significant.
Accordingly, as provided in section 605 of the RFA, sections 603 and
604 do not apply.
C. Paperwork Reduction Act
This proposed rule contains collections of information that PBGC
has submitted to OMB for review and approval under the Paperwork
Reduction Act (PRA). OMB's decision
[[Page 36104]]
regarding these information collection requests will be available at
<a href="http://www.reginfo.gov">www.reginfo.gov</a>. An agency may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless it
displays a currently valid OMB control number. Many of the changes PBGC
expects to make are revisions to filing instructions, where necessary
or helpful, to incorporate the clarifications in the proposed rule.
Therefore, PBGC estimates that the proposed rule will have a small
reduction on the hour and cost burden of reporting as described below.
The collection of information under part 4262 is approved under OMB
control number 1212-0074 (expires May 31, 2027). The current
information collection requirements have an estimated annual hour
burden of 864 hours and a cost burden of $1,931,800.
PBGC's Annual Statement of Compliance instructions would be updated
to reflect the changes in this proposed rule to make clear that plans
need not attempt to evaluate the registration status of a security
exempt from registration under sections 3(a)(2) or 3(a)(4) of the
Securities Act of 1933. The clarifications incorporated into the
instructions would replace or augment existing language but would not
create additional filing burden. The proposed elimination of the
procedure to grant an exception to the condition prohibiting the
reallocation of contributions would result in fewer expected
determination requests submitted to PBGC. PBGC estimates it would have
received at least 10 requests for an exception from the condition
prohibiting the reallocation of contributions at an estimated total
cost savings of $250,000 (10 x $25,000 per request).
List of Subjects in 29 CFR Part 4262
Employee benefit plans, Pension insurance, Pensions, Reporting and
recordkeeping requirements.
For the reasons stated in the preamble, PBGC proposes to amend 29
CFR part 4262 as follows:
PART 4262--SPECIAL FINANCIAL ASSISTANCE BY PBGC
0
1. The authority citation for part 4262 continues to read as follows:
Authority: 29 U.S.C. 1302(b)(3), 1432.
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2. Amend Sec. 4262.14 of PBGC's SFA regulation by revising paragraphs
(d)(1) and (h) to read as follows:
Sec. 4262.14 Permissible investments of special financial assistance.
* * * * *
(d) * * *
(1) A bond or other debt security that pays a fixed amount or fixed
rate of interest during the entire period that it is owned or that pays
predetermined rates of interest according to a schedule, is denominated
in U.S. dollars, is a security registered under the Securities Act of
1933 or is a security exempt from registration under section 3(a)(2) or
3(a)(4) of the Securities Act of 1933 that does not include embedded
features that result in returns or risks that differ materially from
those of a fixed-rate or predetermined-rate debt security, and is
investment grade as described under paragraph (f) of this section. For
the purposes of this paragraph, a security that is convertible to
equity will be considered a debt security only if it is convertible
solely by action of a Federal agency or other regulator.
* * * * *
(h) Permissible investments must not be supplemented by, and
permissible fund vehicles cannot include, derivatives or otherwise be
leveraged in a way that could increase the risk of the permissible
investment beyond the risk associated with the market value of the un-
leveraged permissible investment. Outside of a permissible fund
vehicle, permissible exposure to derivatives includes, for a short
period of time, derivative positions that substitute for and closely
replicate permissible physical securities when those physical
securities are not immediately available in the market. The relevant
facts and circumstances will determine the appropriate length of time
that the plan may hold such derivative positions. Any notional
derivative exposure, other than exposure gained through a permissible
fund vehicle described under paragraph (g) of this section, must be
supported by liquid assets that are cash or cash equivalents
denominated in U.S. dollars. Derivative positions that are intended to
change the risk related to potential future events are not permissible.
(i) Example. The following example provides an illustration of
appropriate exposure to otherwise impermissible derivatives.
(1) At the time a pension plan receives SFA, a fixed income manager
does not identify enough investible corporate bonds that are consistent
with the plan's investment objectives and that are available on the
market. For a few weeks after the plan's receipt of SFA, the investment
manager accesses fixed income exposure through long positions in
exchange traded Treasury futures. The notional value of Treasury
futures plus the market value of physical securities in the plan's SFA
account do not exceed the total market value of physical securities,
had they been available. This example would constitute permissible
exposure.
* * * * *
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3. Amend Sec. 4262.16 of PBGC's SFA regulation by:
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a. Revising paragraphs (e) and (h)(1)(ii);
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b. Adding new subparagraph (h)(1)(iii).
The revisions read as follows:
Sec. 4262.16 Conditions for special financial assistance.
* * * * *
(e) Allocating contributions and other practices--(1) In general.
During the SFA coverage period, a decrease in the proportion of income
or an increase in the proportion of expenses allocated to a plan that
receives special financial assistance pursuant to a written or oral
agreement or practice (other than a written agreement in existence on
March 11, 2021, to the extent not subsequently amended or modified)
under which the income or expenses are divided or to be divided between
a plan that receives special financial assistance and one or more other
employee benefit plans is prohibited.
(2) The prohibition in this paragraph (e) does not apply to a good
faith allocation of:
(i) Contributions pursuant to a reciprocity agreement;
(ii) Costs of securing shared space, goods, or services, where such
allocation does not constitute a prohibited transaction under ERISA or
is exempt from such prohibited transaction provisions pursuant to
section 408(b)(2) or 408(c)(2) of ERISA, or pursuant to a specific
prohibited transaction exemption issued by the Department of Labor
under section 408(a) of ERISA;
(iii) The actual cost of services provided to the plan by an
unrelated third party; or
(iv) Contributions where the contributions to a plan that receives
special financial assistance required for each base unit are not
reduced, except as otherwise permitted by paragraph (d) of this
section.
* * * * *
(h) * * *
(1) * * *
(ii) The present value of withdrawal liability payments assessed
for the employer, discounted to the last day of the plan year preceding
the plan year in which the withdrawal occurs, using the interest
assumptions under Sec. 4044.54 of this chapter that applied as of that
date.
(iii) For purposes of paragraph (h)(1)(ii), that present value must
be
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aggregated with the present value of withdrawal liability payments
assessed that are the subject of any prior or contemporaneous
settlement or proposed settlement during the SFA coverage period
involving the same employer or any trade or business (whether or not
incorporated) treated as a single employer with that employer under
section 4001(b)(1) of ERISA, to the extent arising from the same
withdrawal or from a series of related withdrawals (including partial
withdrawals), transactions, or arrangements. Settlements, transactions,
or arrangements undertaken with a principal purpose of avoiding the
approval requirement under this paragraph are treated as related for
purposes of this paragraph (h)(1)(ii).
* * * * *
Jack Lund,
General Counsel, Pension Benefit Guaranty Corporation.
[FR Doc. 2026-12100 Filed 6-15-26; 8:45 am]
BILLING CODE 7709-02-P
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