Effect of the Pension Benefit Guaranty Corporation’s Final Rule on Special Financial Assistance

This letter responds to a request for information on the effects of a final rule issued in July 2022 by the Pension Benefit Guaranty Corporation (PBGC) for special financial assistance (SFA) provided under the American Rescue Plan Act (ARPA), enacted in March 2021. The Congressional Budget Office’s initial estimates of SFA were based on how CBO expected that PBGC would implement ARPA. PBGC’s July 2021 interim final rule was consistent with those expectations. The final rule, which was issued in July 2022, changed the method used to compute SFA, including the assumed rate of return. It also changed the type of assets in which pension plans may invest SFA, which changes the expected rate of return and risk profile of those investments.

CBO anticipates that the changes in the final rule will increase the total amount of SFA that plans will receive. The agency estimates that the amount of assistance will total $90.4 billion over the 2022-2032 period, which is $4.5 billion, or 5 percent, more than the $85.9 billion estimated in CBO’s May 2022 baseline budgetary projections, which were based on expectations consistent with the July 2021 interim final rule.

The July 2022 final rule also allows pension plans more flexibility in investing the SFA they receive, which CBO expects will result in higher expected investment returns and in additional investment risk. With higher SFA amounts and higher expected investment returns, CBO projects that plans will remain solvent for a longer time than they would under the interim final rule. The estimate of SFA is unaffected by the expected return or the investment risk on actual plan investments, because SFA is computed based on specified rates of return.