Investment strategies for the current pension regulatory environment


The impact of the American Rescue Plan Act (ARPA)


This paper illustrates how the U.S. pension regulatory environment, characterized by significant funding relief and high Pension Benefit Guaranty Corporation (PBGC) premiums, influences the optimal investment strategies for pension plans. The America Rescue Plan Act (ARPA) funding relief significantly reduces funding requirements, while dramatic increases to the PBGC variable rate premium impose a meaningful headwind for many plan sponsors seeking funded status improvement. Prior to 2022, strong investment returns were helpful, but stubbornly low interest rates have prevented most plan sponsors from seeing large improvements to their plans’ funded ratios. In 2022, those trends reversed, but most plans’ funded ratios continued to stagnate as plan assets and liabilities fell together. .


These recent changes to the regulatory environment have had a particularly meaningful impact on relatively poorly funded plans. Those plans benefit from the funding relief the most, but they also pay the highest PBGC premiums.


This paper will explore the actions plan sponsors can take to best position themselves to succeed in this challenging market environment, including:


  • Funding relief background
  • Two primary mechanisms by which ARPA reduces funding requirements
  • Impact of funding relief on future funding requirements
  • Investment implications
  • Strategic implementation
  • Elevated PBGC premiums and the application of the VRP cap

Read our full paper


Read our paper for more information, including a focus on the implications for developing prudent pension investment strategies.

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