Well got a CEL on my 2001 Outback VDC, which has ~76k miles. Code P0420 is 'Catalyst Efficiency Below Threshold'. Does indicate that I need a new front, rear or both O2 sensor? Or does it indicate I need a new catalytic converter? Please advise.
My '97 threw the same code, I didn't ever need the cats though. Generally something else could have failed which caused that code. Start by replacing the cheapest option until you get to the Cats.
The O2 sensors have their own OBDII code, so I don't think they are causing your problem. Though, they gradually decline in performance, so they could have had a bad day which caused your Cats to be unhappy.
I'd drive around for a day and see if the light goes out on it's own, that often happens. A P0420 code is highly unlikely to strand you someplace, so I wouldn't worry about urgently getting it fixed, but definitely keep your eye on it.
That code is for the rear o2 sensor. It only tells you that the exhaust gas O2 levels are out of the proper range for the cat. It will not change anything as far as the way the car runs. Not like the front sensor that effects the A/F ratios. It could be a bad sensor, Bad Cat or that it was super duper cold out and the sensor got a false reading. It's very common to get this code after doing something to the exhaust system that changes the flow.
On my RS when I installed a hi flow cat this was what I was told by a Random Tec engineer:
The alleged problem with low converter efficiency that triggers a Check Engine light isn't real. The OBD II system uses exhaust gas oxygen content to gauge converter efficiency. That's like using fuel pressure to monitor fuel flow. The assumption is that a given pressure in a line of a given diameter will flow a specific volume. However, if there's a restriction in the line, volume will be severely limited, in spite of system pressure.
With the OBD II system, the assumption is that oxygen content behind the converter will be substantially more consistent than content in front of the converter. And that's true when you have a restrictive converter that causes exhaust gases to back up in front of it. But when you increase flow capacity, the residual oxygen content behind the converter is not as consistent, so the PCM erroneously thinks converter efficiency has deteriorated. In spite of the fact that the system "thinks" converter efficiency is below the acceptable threshold, the converter is doing its job and the vehicle will pass an emissions test.