August 03, 2021

Bipartisan infrastructure legislation (HR 3684) heading for Senate votes this week would extend for another five years the pension funding interest rate relief provided in the 2021 American Rescue Plan Act (ARPA) (Pub. L. No. 117-2) The provision’s inclusion in the bill came as a surprise to many pension professionals and is intended to help pay for the roughly $1 trillion package. The extended relief is projected to raise $2.9 billion over 10 years by reducing tax-deductible pension contributions.

Delayed phase-out of stabilized interest rates. To extend and enhance interest rate relief, ARPA narrows the prior-law 10% interest rate corridor to 5%, effective retroactively to 2020, and keeps the 5% corridor in place through 2025. The Senate infrastructure bill would extend the 5% corridor through 2030. At that point, the corridor would widen by 5 percentage points each year until it reaches 30% in 2035, rather than in 2030 as under ARPA.

The bill would leave unchanged the rest of ARPA’s single-employer pension relief. A 5% floor would continue to apply to 25-year interest rate averages to provide protection from extreme interest rate movements, and employers would continue to use ARPA’s new 15-year shortfall amortization period. No adjustments to PBGC premium rates are proposed in the measure.

Rocky path to enactment. The Senate will try to pass the infrastructure bill this week before a scheduled August break, but approval is far from certain. Democratic leaders in both chambers are tying the bill’s fate to a $3.5 trillion party-line budget “reconciliation” plan covering much of the president’s “human infrastructure” agenda that will have to pass without Republican support. House Democratic leaders say they will not consider the infrastructure package if it passes the Senate unless the upper chamber also approves the $3.5 trillion budget plan. While the Senate will attempt to do that this week, the outlook is uncertain.

Related resources

Non-Mercer resources

  • HR 3684, the Infrastructure Investment and Jobs Act (US Senate, Aug. 1, 2021)
  • Pub. L. No. 117-2, the American Rescue Plan Act of 2021 (Congress, March 11, 2021)

Mercer Law & Policy resources

Geoff Manville
by Geoff Manville

Partner, Mercer’s Law & Policy Group

Margaret Berger
by Margaret Berger

Partner, Mercer’s Law & Policy Group

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