The $2.5 trillion coronavirus stimulus package from the House of Representatives includes several retirement provisions in the Senate bill currently being debated, but goes substantially further.
The Senate’s CARES Act includes a temporary suspension of required minimum distributions for in 2020, a doubling of hardship and loan distribution limits to $100,000, a waiver of the 10 percent penalty on hardship and loan distributions, and the ability to pay back taxes on loans over a three year period.
Those provisions are also in the House bill, the Take Responsibility for Workers and Families Act. But Democratic lawmakers have packed in several other retirement provisions, as negotiators in the Senate finalize a bill that would be acceptable to the Democratic majority in the House:
1. Furloughed time counts toward retirement plans
- Furloughed employees would continue to have their retirement and health care benefits. Furloughed time would count toward years of service in defined benefit plans.
- And those with 401(k)s would have the employer matches during their time off contributed upon returning to work.
2. Delayed contributions to single-employer pension plans
- Sponsors would be able to delay 2020 required contributions to pension plans until January 1, 2021.
- Contributions would be due with interest, accrued at a plan’s effective rate.
3. SECURE Act’s relief for community newspaper pensions extended to more plans
- The SECURE Act gave relief to struggling community newspaper pensions by increased their discount rate to 8 percent, and more than quadrupling the amortization period for assessing future liabilities to 30 years.
- The bill would be extended to more newspaper plans.
4. Expanding Cooperative and Small Employer Charity Pension Plans status to more nonprofits.
More nonprofits would be able to claim this status.
5. Extended amortization for single-employer plans
Pension funding shortfall would be amortized over 15 years, instead of seven.
6. Extending pension-smoothing corridor
- The bill would halt the phase out of the pension funding smoothing corridor, which has been intermittently narrowing and is slated to be phased out in 2021.
- Under existing law, the interest rate used to determine plan liabilities must be within 10 percent of the 25-year interest rate averages.
- Under the House’s bill, the 10 percent corridor would be reduced to 5 percent, and the phase out would be delayed until 2026.
7. Butch Lewis Act added in House bill
- The Multiemployer Pension Plan Relief Act, otherwise known as the Butch Lewis Act, would create a new lending arm in the Treasury Department that would channel low-interest rate loans to multiemployer plans in critical and declining status.
- The 30-year loans are designed to maintain multiemployer plans that are destined to be insolvent, impacting more than 1 million workers and retirees.