The Democratic majority in the U.S. House of Representatives has published a draft version of a fourth economic relief package in response to the coronavirus pandemic, dubbed the Health and Economic Recovery Omnibus Emergency Solutions Act or the “Heroes Act.”
The wide-ranging legislation addresses a host of issues, from providing supplemental funding to the SNAP food security program to creating a special fund to support struggling fisheries. Notably, the entire Division D section of the legislation is dedicated to retirement security policies.
First and foremost in Division D is the creation of “special partition relief” for struggling multiemployer union pensions. This proposal is detailed in a section of the Heroes Act referred to as the Emergency Pension Plan Relief Act or “EPPRA.”
Under current law, the Pension Benefit Guaranty Corporation (PBGC) has limited authority to partition certain troubled multiemployer pension plans. In a partition, PBGC takes on the financial responsibility of some of the benefits of an eligible plan so the plan as a whole can stay solvent.
In short, EPPRA creates a special partition program that would expand PBGC’s existing authority, increase the number of eligible plans and simplify the application process—thus allowing more troubled plans to obtain much-needed relief. Eligible plans would include plans in critical and declining status, plans with significant underfunding with more retirees than active workers, plans that have suspended benefits, and certain plans that have already become insolvent.
EPPRA allows plans to become eligible for the special partition program through 2024.
“Because the COVID19 crisis has already caused significant investment losses to pension plan assets and decreased the number of hours worked, plan funding may deteriorate over time,” the proposal states. “Consequently, plans may need to access the special partition relief program in coming years.”
Though proposed by House Democrats, this type of strategy for supporting struggling union pensions has been included in recent Republican-sponsored proposals floated in the Senate. Also important to Republicans is the fact that the legislation includes accountability and transparency provisions. Among them, PBGC would be required to annually report to Congress. The Government Accountability Office (GAO) would be required to regularly evaluate PBGC’s implementation and administration of the special partition relief program, and the PBGC’s inspector general would receive funding to audit the special partition relief program to prevent waste, fraud and abuse.
Among the provisions focused on single employer pensions is a proposed extension of amortization of required annual funding amounts. In basic terms, all shortfall amortization bases for all plan years beginning before January 1, 2020—and all shortfall amortization installments determined with respect to such bases—would be reduced to zero. Furthermore, all shortfalls would be amortized over 15 years, rather than the seven years prescribed under current law.
Other retirement-related provisions include that required minimum distributions (RMDs) made for 2019 could be rolled back into a plan or individual retirement account (IRA) without regard to the normal 60-day rollover requirement if the rollback is made by November 30. Similarly, RMDs already made for 2020 can also be rolled back in the same time frame.
Another important section provides for grants that can be made to assist low-income women and survivors of domestic violence in obtaining qualified domestic relations orders.
Read the full text of the draft legislation here.