PBGC Proposes Minor Fixes to Special Pension Assistance
Published Date: 6/16/2026
Proposed Rule
Summary
The Pension Benefit Guaranty Corporation is updating rules about special financial help for pension plans. These changes clarify how plans can invest the money, when PBGC approval is needed for certain claims, and remove a rule about using funds for health costs. Plan managers and employers should note these tweaks and send comments by August 17, 2026.
Analyzed Economic Effects
6 provisions identified: 5 benefits, 0 costs, 1 mixed.
Broader list of allowed bond investments
PBGC will explicitly allow special financial assistance (SFA) funds to be invested in bonds that pay a fixed amount during the entire time they are owned or that pay predetermined rates according to a schedule. PBGC also permits investment in investment-grade debt securities that are exempt from Securities Act registration under sections 3(a)(2) or 3(a)(4), and a security that is convertible to equity is treated as debt only if conversion can occur solely by action of a Federal agency or regulator.
No reallocation of employer funds to health costs
PBGC proposes to remove the exception procedure that allowed a plan receiving SFA, beginning five years after receipt, to request reallocation of employer contributions to pay for health benefit costs. That exception would be repealed so SFA recipients may not use the exception to reallocate employer contributions to welfare or health plans.
Short-term derivatives allowed to substitute securities
PBGC clarifies that SFA funds generally should not be invested in derivatives, but short-term derivative positions that substitute for and closely replicate permissible physical securities are allowed when those securities are not immediately available. Any notional derivative exposure (outside permitted fund vehicles) must be supported by liquid U.S. dollar cash or cash equivalents, and derivative positions intended to change risk for future events are not allowed.
Fixed date and aggregation rule for $50M settlements
PBGC will require that the present value of withdrawal liability payments used to decide whether PBGC approval is needed for a proposed settlement be calculated as of the last day of the plan year preceding the plan year in which the withdrawal occurs. The rule also requires aggregating that present value with prior or contemporaneous settlements involving the same employer (or related employers) during the SFA coverage period when determining whether the $50 million threshold is met.
Estimated annualized program cost savings
PBGC estimates that easing investment restrictions (e.g., allowing certain fixed-to-float and exempt securities) and eliminating the reallocation exception would yield approximately $18.65 million in total annual cost savings. The estimate includes about $18.4 million from investment-related savings and $250,000 from fewer exception requests.
Small-plan impact certification
For Regulatory Flexibility Act purposes, PBGC treats a small entity as a pension plan with fewer than 100 participants and certifies that the proposed amendments would not have a significant economic impact on a substantial number of such small plans. PBGC requests comment on the appropriateness of that size standard.
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Key Dates
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