ARPA Update as of June 10, 2022

By: Russ Kamp, Managing Director, Ryan ALM, Inc.

Either the Summer doldrums have set in as it relates to the PBGC and ARPA activity or everyone is just waiting on the Final, Final Rules to be approved and published. There was hardly any activity last week. Only Local 557 (Freight Drivers and Helpers Pension Plan) resubmitted their application which had been withdrawn on May 24th. The new application is seeking $186.5 million in SFA proceeds up from the initial request of $185.3 million. No additional applications were filed, none were rejected, and no others were withdrawn. Ho-hum!

With regard to the Final Rules, I pray that they don't loosen the guidelines on permissible investments. Why? Just look at what is happening in the capital markets. The ARPA legislation providing the Special Financial Assistance sought to SECURE the promised benefits. That can only be accomplished through the purchase of bonds and the defeasing of liability cash flows through the cash flows (principal and interest) from the bond portfolio. An investment-grade bond portfolio attempting to generate a total return has been crushed in this environment, as US interest rates continue to rise and likely will for the foreseeable future. Why jeopardize this precious resource trying to "earn" a few more $s? Securing the benefit will ensure that assets are readily available to meet the promised benefits for years to come. Let's stop playing games with the lives of plan participants.