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Multiemployer Retirement Plans Get IRS Guidance for PBGC Assistance

Multiemployer Retirement Plans Get IRS Guidance for PBGC Assistance

New guidance from the Internal Revenue Service attempts to shine a little light on multiemployer qualified retirement plans that got financial help from the Pension Benefit Guaranty Corporation (PBGC), while explaining what that assistance means for participants and beneficiaries.

The guidance comes by way of Notice 2021-38, which denotes its guidance comes in light of changes driven by the American Rescue Plan of 2021.

The American Rescue Plan, or ARP, made changes in how special financial assistance paid by the PBGC should be treated by eligible multiemployer defined-benefit pension plans that are also at financial risk.

Notice 2021-38 puts forth guidance for these pension plans in three major areas:

  • The reinstatement of previously suspended pension benefits, along with make-up payments, as a condition that eligible multiemployer plans must meet if they receive special financial assistance.
  • The individual income tax treatment of these make-up payments.
  • How a plan that receives special financial assistance must treat the plan's special financial assistance account for purposes of the minimum funding requirements for multiemployer defined benefit plans

The Notice says it is specifically targeted to qualified pension plans that are required to restart previously suspended benefits as a result of getting special financial help under the Employee Retirement Income Security Act of 1974, (ERISA).

Part of the Notice deals with specific instructions on how plans can use any special financial assistance they may receive:

“Section 432(k)(2)(B) provides that the special financial assistance received by the plan may be used to make benefit payments and pay plan expenses. The special financial assistance must be segregated from other plan assets and invested by the plan in investment-grade bonds (or other investments as permitted by PBGC in regulations or other guidance).”

Eligible plans that receive financial assistance, however, cannot use that assistance to count toward the required level of contributions.

For more information on retirement plans applying for special financial assistance, visit the PBGC website.

Sources: IRS provides guidance for multiemployer retirement plans receiving assistance from the PBGC; Notice 2021-38

Bob Williams

Forget genes; I’ve got words in my DNA. Communication has been part of who I am nearly all my life. From a long career in radio news to another one in newspapers – and a University of Georgia journalism degree sandwiched between the two – language has been my life. I’ve also been fortunate to have learned the tax business from the ground up here at Drake, starting with 1040.com online forms some years ago before moving on to work on the Web. In all things tax-ish, we aim to give you tools you can use.

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