Extensive funding relief for single-employer pension plans, reforms to help troubled multiemployer plans and several other retirement-related provisions feature in a massive coronavirus relief bill (HR 6800) passed by the House on May 15. The sweeping legislation — the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act — represents an opening bid by the House Democratic leadership in what will likely be lengthy and contentious negotiations with Senate Republicans and the White House to craft a final measure. While the outlook is uncertain, a compromise could include the House bill’s retirement proposals.
The House bill looks to build on the stopgap 2020 pension contribution relief provided by the Coronavirus Aid, Relief and Economic Security (CARES) Act (Pub. L. No. 116-136). In particular, the HEROES Act contains two key forms of longer-term funding relief backed by Mercer and the pension community:
The bill would grant the Pension Benefit Guaranty Corp. (PBGC) expanded authority to partition troubled multiemployer pension plans and to increase the number of plans eligible for partition, while streamlining the application process through 2024. A qualifying plan could receive enough financial assistance to stay solvent and well-funded for 30 years with no benefit cuts. The PBGC would receive additional funding for the program.
The legislation also would almost double the PBGC guarantee for multiemployer plans. The current maximum guarantee is $12,870 for participants with 30 years of service. Under the bill, the maximum guarantee would rise to $24,300, indexed for future increases in the national average wage.
In addition, the bill would repeal the benefit-suspension provisions of the Multiemployer Pension Reform Act of 2014. However, plans would gain five more years to work on their rehabilitation plans, and the 15-year period to make up funding shortfalls would be extended to 30 years.
Other retirement provisions in the bill include the following:
The legislation provides no help for DC plan sponsors considering temporarily suspending or reducing 401(k) matching contributions, although Congress could address the issue in a final bill. Lawmakers are considering awarding refundable tax credits to certain employers that maintain DC plan matching contributions.
The HEROES Act marks House Democratic leaders’ opening bid for negotiations with the Republican-controlled Senate and the Trump administration. Senate Republicans call the bill a nonstarter, and many want more time to see how the nearly $3 trillion in aid already enacted is working before approving a new round of relief.
Once negotiations begin, Senate Republicans will bring their own set of priorities to the table. As in the past, GOP senators will likely resist Democrats’ insistence that any pension funding relief apply to both single-employer and multiemployer plans. Nevertheless, the ongoing lobbying effort by the corporate pension community (including Mercer) that secured the HEROES Act’s pension relief could help keep those provisions in a final bill.
While the negotiations will be a relatively long and difficult process, political pressure for additional government aid will likely intensify over the coming months. A compromise package could emerge sometime this summer.