Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.
Compliance March 15, 2024
DOL Says Central States Must Repay $127M SFA Overpayment
Central States was granted $127 million that it was not entitled to because the PBGC counted over 3,000 deceased participants when calculating the size of the grant.
Reported by Paul Mulholland
The Department of Labor Thursday confirmed that multiemployer plans that received excessive payments under the Special Financial Assistance program must repay that money. The DOL added that it will not take enforcement action against plans that return overpayments.
The Special Financial Assistance Program provision of the American Rescue Plan Act provides the Pension Benefit Guaranty Corporation funding for severely underfunded multiemployer pension plans. The Central States, Southeast & Southwest Areas Pension Plan received $35.8 billion in special financial assistance in December 2022. Of that amount, $127 million was inappropriately provided because of incorrect information that 3,479 deceased participants were actually alive.
The DOL noted that this mistake was not made by the pension plan. The error was caused by the PBGC not using the Social Security Administration’s death master file, a database that pension plans cannot access, when auditing SFA applications. PBGC began using the DMF in November 2023 when reviewing applications.
“While these excess payment amounts may represent only a small fraction of total SFA payments, they would not otherwise have been paid and, as such, must be refunded to the United States government,” the PBGC said in a statement.
Thomas Nyhan, the executive director of the Central States pension plan, wrote to the DOL on February 26 and asked for clarification that repaying PBGC is lawful under the Employee Retirement Income Security Act, which requires that plan funds must be used in the sole interest of plan participants.
In a statement, DOL answered that ERISA does “not prevent plans from refunding any excess payments received through the SFA Program or excuse any failures to return SFA funds to which the plans are not entitled.”
DOL concluded that it “does not intend to take any enforcement action against a plan that repays excess SFA amounts based on inaccurate census information that is subsequently corrected through the PBGC’s use of the Death Master File.”
Central States did not respond to a request for comment and DOL did not provide a timeline for repayment.
« Data Inform Public Sector Employers on How Workers 35 and Under Were Recruited