Following Senate passage on Saturday, the House of Representatives has passed by a vote of 220-211 the American Rescue Plan Act of 2021 to provide additional relief to address the continued impact of COVID-19. Included in the package are several items that would affect retirement and health benefits.
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 2022 plan years and, by election, retroactive to 2019 plan years. The amended bill provides plan sponsors with more flexibility than earlier versions which would have required use of the 15-year amortization schedule starting with 2020 plan years.
- Extends single-employer pension plan funding stabilization percentages, as follows.
- The 10 percent interest rate corridor would be reduced to 5 percent, effective in 2020.
- The phase-out of the 5 percent 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 percent in 2030, where it would remain.
- A 5-percent floor would be placed on the 25-year interest rate averages.
- The amended bill now allows plan sponsors to elect not to apply the updated percentages until 2022.
- Extends SECURE Act funding relief for certain community newspapers to additional community newspapers
- Permits a temporary delay in the 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 five 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 are to be made by Treasury transfer
Absent from the final bill was a provision that would have frozen cost-of-living adjustments (COLAs) for the annual additions limit and compensation cap after 2030.
Health Benefit Provisions
The American Rescue Plan Act 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 100 percent of the cost of COBRA continuation coverage for eligible individuals and families from April 1, 2021, through September 30, 2021. This is an increase from prior proposals for premium assistance that would have covered 85 percent of the cost of continuation coverage. Premium assistance is available if health coverage was lost due to involuntary termination of employment or a reduction in hours. It is not available when an employee has a voluntary termination of employment.
- Extends the COBRA election period for individuals who had not currently enrolled in COBRA who are otherwise assistance-eligible individuals.
- Requires health plans to provide additional notifications on the availability of the premium assistance and extended election periods; specifies that the Department of Labor must draft and issue model notice language within 30 days following the enactment of the Act.
- Provides a refundable payroll tax credit to reimburse employers and plans that paid a premium on behalf of an assistance-eligible individual
- For the 2021 plan year, the dependent care flexible spending arrangement (FSA) contribution limit will increase from $5,000 to $10,500 (half that dollar amount per parent if married filing separately)
President Biden is expected to sign the bill Friday.