Recent action taken by the Pension Benefit Guaranty Corporation (PBGC) and the US Department of Labor (DOL) will affect plans that are eligible for, or have received, special financial assistance (SFA). SFA-eligible plans should note the new guidance when applying for SFA.
In addition, certain plans that have received SFA may wish to prepare for a potential audit by the DOL.
UPDATES TO PBGC’S SFA GUIDANCE
Plans that are eligible for SFA should be aware of new processes established by PBGC on July 27, 2023 for (1) requesting an independent death audit from PBGC, (2) expedited processing of minimally revised applications, and (3) submitting revised lock-in applications. PBGC has also added a new template for plans to summarize assumptions.
Availability of Enhanced Death Audit from PBGC
A plan seeking SFA must perform a death audit to identify deceased participants on the census data the plan used for SFA purposes. Commercial vendors on which many plans rely for death audit assistance generally use the Public Death Master File (PDMF) as opposed to the Social Security Administration’s Full Death Master File—the largest, most accurate single repository of records of deceased persons. Effective November 1, 2011, 4.2 million records were removed from the PDMF and, in every subsequent year, the file has lost approximately 40% of possible records of deaths per year.
Under the new guidance, certain plans may request that PBGC, which has access to the Full Death Master File, conduct an independent death audit before the plan submits its full revised application. This does not, however, relieve the plan from having to provide the death audit required by the existing guidance when it files its full revised (not lock-in) application.
Expedited Processing of Revised Applications
If a plan has submitted an application for SFA and later discovers that it has made certain minor errors in its SFA application, it can request an “amendment” to withdraw the plan’s previous application revision and request expedited review of a minimally revised application. If a plan meets the requirements and files an amendment according to PBGC’s instructions, PBGC will complete its review of the plan’s revised application for SFA on an expedited schedule.
Revised Lock-In Applications
If a plan, after it has filed a lock-in application, determines that it was not actually eligible when its lock-in application was filed, it can file a “revised lock-in” application when it subsequently becomes eligible. A revised lock-in application will not change the plan’s base data.
New Template for Summary of Assumptions
A plan applying for SFA must now prepare another template, Template 10, which requires a plan to prepare a table identifying and summarizing which assumptions/methods the plan used in each of the pre-2021 certification of plan status, the baseline details, and the final SFA calculation.
DOL AUDITS OF PLANS IN RECEIPT OF SFA
Several plans that received SFA funds and that had previously suspended benefits under the Multiemployer Pension Reform Act (MPRA) have received investigative letters from the Employee Benefits Security Administration within the DOL. The DOL investigations appear focused on plan policies and procedures related to SFA as well as the make-up payments to participants and beneficiaries who experienced suspension of their benefits as part of MPRA. These investigations also are looking at plan procedures for the identification of missing participants and more.
The DOL’s investigation into plans that received SFA funds is expected to continue and expand to other plans over time.
HOW WE CAN HELP
For concerns about an SFA application, how a DOL audit may proceed, or ERISA fiduciary responsibilities, please feel free to contact the author or your Morgan Lewis contacts.
For more background and information on the SFA program, read our LawFlashes from April 2021 and July 2021 and blog post from February 2023.