Pandemic Relief Package Includes Benefit Provisions
Legislation proposed by the House Ways and Means Committee to provide COVID-19 pandemic relief and economic stimulus includes several items that would affect retirement and health benefits. Among them are the following.
COLA Freeze for Certain Retirement Plan Limitations
The legislation would freeze cost-of-living adjustments (COLAs) for the following retirement plan limitations after 2030, to reduce federal tax expenditures in keeping with the budget reconciliation process under which this legislation is being managed. (The freeze would not apply to collectively bargained plans.)
- Annual additions limit for defined contribution plans ($58,000 for 2021)
- Annual additions limit for defined benefit pension plans ($230,000 for 2021)
- Compensation cap for determining retirement plan allocations ($290,000 for 2021)
Defined Benefit Pension Plan Relief
- Extends the single-employer plan funding shortfall amortization period from 7 to 15 years, to be applied to all plans beginning with 2020 plan years and, by election, 2019 plan years
- Extends single-employer pension plan funding stabilization percentages, as follows
- The 10% interest rate corridor would be reduced to 5%, effective in 2020.
- The phase-out of the 5% corridor would be delayed until 2026, at which point the corridor would, as under current law, increase by 5 percentage points each year until it attains 30% in 2030, where it would remain.
- A 5% floor would be placed on the 25-year interest rate averages.
- Extends the SECURE Act funding relief for certain community newspapers to additional community newspapers
- Permits a temporary delay in designation of a multiemployer (union) plan as being in endangered, critical, or critical-and-declining status
- Permits a plan in endangered or critical status for a plan year beginning in 2020 or 2021 to extend its rehabilitation period by 5 years
- Permits multiemployer plans to amortize investment losses over 30 rather than 15 years, as was granted to plans for 2008 and 2009 losses (for plan years ending on or after February 29, 2020)
- Creates a financial assistance program under which cash payments would be made by the Pension Benefit Guaranty Corporation to financially troubled multiemployer plans to continue paying retiree benefits, such payments to be made by Treasury transfer
Health Benefit Provisions
The legislation also contains provisions to assist employees who have lost employer-provided health insurance benefits and employers that have provided benefit continuation assistance.
- Provides premium assistance to cover 85% of the cost of COBRA continuation coverage for eligible individuals and families, effective the first of the month after enactment, through September 31, 2021
- Extends the COBRA election period
- Provides a refundable payroll tax credit to reimburse employers and plans that paid a subsidized portion of the premium on behalf of an assistance-eligible individual
A vote by the full House of Representatives is expected by the week of February 22. If passed, the legislation would be referred to the Senate for its consideration.