As the Senate squabbles over legislation designed to alleviate the impact of the coronavirus, the Speaker of the House has unveiled a version with slightly different provisions regarding retirement plans.
House Speaker Nancy Pelosi (D-CA), contending that the Senate Republicans’ bill “put corporations first, not workers and families,” has released an alternative 1,000-page stimulus proposal named the Take Responsibility for Workers and Families Act. Pelosi is contemplating whether to bring the House of Representatives back into session to consider this bill, which would require House members to travel back to Washington. She indicated that it partially depends on what happens with the negotiations on the Senate bill and whether it addresses House Democrats’ concerns.
Like the CARES Act, the draft Take Responsibility for Workers and Families Act includes relief from the RMD rules, as well provisions to ease retirement plan hardship and loan rules to free up funds for individuals impacted by the pandemic. This section of the bill is under Division T and is cited as the Emergency Pension Plan Relief Act of 2020. The draft bill also includes funding relief for single employer defined benefit plans and multiemployer plan reforms. The multiemployer reforms appear to be based on the so-called Butch-Lewis Act, which passed the House in July 2019.
Following is a list of the provisions included in the draft House bill.
- Special rules for use of retirement funds. Provides early distribution and loan relief for retirement plans during the coronavirus relief period by:
- waiving the 10% penalty on early withdrawals;
- allowing individuals three years to repay distributions;
- allowing individuals to include distributions in income ratably over three years;
- increasing loan limitations to lesser of $100,000 or 100% of participants vested account balance (this doubles current loan limits); and
- delaying loan repayment beginning dates by one year.
- Single-employer plan funding rules. Provides single-employer plan funding relief by giving companies more time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until Jan. 1, 2021. At that time, contributions due earlier would be due with interest. The provision also provides that a plan’s status for benefit restrictions as of Dec. 31, 2019 will apply throughout 2020.
- Temporary waiver of required minimum distribution rules. Waives RMDs for 2020, allowing individuals to keep funds in their retirement plans. Under current law, individuals generally at age 72 must take an RMD from their DC plans and IRAs.
- Modification of minimum funding standards for community newspaper plans. Modifies the special rules for minimum funding standards for community newspaper plans by expanding the SECURE Act relief to additional community newspapers. The SECURE Act provided pension funding relief by increasing the interest rate to calculate those funding obligations to 8%. In addition, the SECURE Act provided for a longer amortization period of 30 years from seven years.
- Application of cooperative and small employer charity pension plan rules to certain charitable employers. Applies cooperative and small employer charity pension plan rules to certain charitable employers whose primary exempt purpose is providing services with respect to mothers and children. Under the provision, a pension plan sponsored by a non-profit employer meeting certain conditions will be subject to the pension funding rules applicable to “Cooperative and Small Employer Charity Pension Plans” (CSEC Plans).
- Extends amortization for all single employer plans. Effective for all single employer plans for plan years beginning after Dec. 31, 2019, all shortfall amortization bases for all plan years beginning before Jan. 1, 2020 (and all shortfall amortization installments determined with respect to such bases) would be reduced to zero; and all shortfalls would be amortized over 15 years, rather than seven years.
- Extension of pension funding stabilization percentages for single employer plans. To preserve the stabilizing effects of pension smoothing:
- 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; and
- a 5% floor would be put on the 25-year interest rate averages to establish stability and predictability on a longer-term basis.
- Rehabilitation for multiemployer pension plans. The bill includes the House-passed Butch Lewis Act to address the multiemployer pension plan crisis. In general, the provision would establish a Pension Rehabilitation Trust Fund under the purview of the Treasury Department to issue bond-backed loans to faltering multiemployer plans.
Senate Negotiations
Meanwhile, Senate leaders and Trump administration officials continued negotiations over a nearly $2 trillion stimulus bill in response to the Coronavirus, as the House Speaker floated this alternative.
These negotiations between the Senate Republican and Democratic leadership and Treasury Secretary Steve Mnuchin continued as the Senate failed for the second time in two days to overcome a key procedural hurdle to limit debate on the proposed legislation. This apparent stalemate caused tensions to run high between the two parties, but the negotiations were expected to continue until an agreement could be reached.
Senate Majority Leader Mitch McConnell (R-KY) on March 22 released a revised version of the Coronavirus, Aid, Relief, and Economic Security (CARES) Act, which was expanded to include ARA-supported relief from the Required Minimum Distribution rules. This is in addition to the ARA-supported provisions that loosen retirement plan hardship and loan rules to free up funds for individuals impacted by the Coronavirus pandemic.
