- The PBGC is providing financial assistance for pension plans in need of funding
- What plans are eligible and how to apply
This past Friday, the IRS released a new set of rules pertaining to multiemployer qualified retirement plans with funding issues. The rules are purposed to assist those in need of extra financial assistance from the Pension Benefit Guarantee Corporation (PBGC).
Due to the lack of funding, several pension plans offered to US workers are either entirely without benefits or with reduced benefits; CNBC reported that “there are roughly 1,400 such plans in the US, covering 10 million people.”
The American Rescue Plan held details to assist these pension plans and set aside $86 billion in federal tax revenue for failing plans.
According to the PBGC, a multiemployer plan is considered eligible for special financial benefits as long as they meet one of the following criteria:
- For plan years beginning in 2020 – 2022
- The plan is in critical and declining status, AND/OR
- The plan has a “modified funding percentage” of less than 40% and has a ratio of active to inactive participants of less than 2:3
- As of March 11, 2021, a suspension of benefits has been approved for the plan under the Multiemployer Pension Reform Act of 2014
- The plan became insolvent after December 16, 2014, has remained insolvent, and has not been terminated as of March 11, 2021
Until earlier this year, the PBGC had been able to make partial payments in the event of a pension failure as many multiemployer pension plans found themselves beyond underfunded. Yet according to one source, “Under this assistance, the United States government (taxpayers) will fully fund vested benefits, including reinstatement of benefits previously suspended by a plan, for a period of 30 years.”
However, those groups are now potentially eligible for relief as the PBGC is now offering funding from Biden’s American Rescue Plan to its first priority group, which consists of pension plans which are “Already insolvent or projected to become insolvent before March 11, 2022.”
To receive this funding participants and beneficiaries must fill out an application that can be submitted through PBGC’s e-Filing Portal.
For assistance with retirement planning, speak to a tax professional at DSJ. Call our office at 516-541-6549 and visit our website to learn more.