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February 27, 2021

Yellow Alert: House Passes President Biden’s American Rescue Plan with Implications for Employers

The following alert is from The Council’s government affairs team.

The U.S. House of Representatives just passed President Biden’s $1.9 trillion “American Rescue Plan.” We now expect the bill to be taken up by the Senate under its reconciliation rules that will allow it to pass by a majority vote. Democrats are racing to get the bill to the President’s desk before extended unemployment benefits expire on March 14th. The legislation is one of the largest spending bills in history with the goal of strengthening public health and aiding the economy — primarily with a new round of $1,400 stimulus checks to individuals, an extension of unemployment benefits, $130 billion for schools, $350 billion for cities and states, and tens of billions for vaccines, testing and assistance to the healthcare system.

There are several provisions of the bill that could directly impact your clients:

Federal Subsidies for COBRA Coverage

The legislation “allows workers who are eligible for COBRA due to involuntary termination or reduction in hours to receive coverage under their employment-based health plan with a premium reduction of 85%.” These subsidies will be available to workers beginning the first month following the date of enactment and will remain available through September 30, 2021. The provision also allows for an extended election period to allow individuals who previously experienced a qualifying event to enroll in coverage; requires employers to provide clear and understandable written notices to workers and establishes an expedited review process for workers who are denied premium assistance; and provides a payroll tax credit to allow employers and plans to be reimbursed for the full amount of COBRA premiums not paid by workers. The Council supports the COBRA subsidies as part of our broader effort to preserve the employer-sponsored insurance marketplace.

Increased Health Insurance Premium Tax Credit

In combination with COBRA subsidies, the legislation also temporarily increases the value of the health insurance premium tax credit, fully subsidizing health coverage available through Affordable Care Act (ACA) exchanges for people earning up to 150% of the federal poverty level and those on unemployment insurance. This provision also expands eligibility for subsidies to people making over 400% of the federal poverty level and caps their premium costs at 8.5% of income. This expansion of the premium tax credit would last for two years.

Single-Employer Pension Funding Stabilization

Our employer allies note that the combination of low interest rates, a volatile market and decreased revenue due to the pandemic has created the perfect storm for companies that maintain defined benefit pension plans. To help address the crisis, the legislation extends and enhances interest rate “smoothing” and it increases the number of years employers have to pay for pension liabilities from seven to 15.

Multiemployer Pension Plan Relief and COLA Freeze

The single-employer funding stabilization provisions are embedded within Subtitle H of the Ways and Means Committee submission, titled the ‘‘Butch Lewis Emergency Pension Plan Relief Act of 2021.” This subtitle also contains a package of multiemployer plan relief provisions, including special multiemployer plan financial assistance and multiemployer funding relief.

To ensure that the reconciliation package does not raise the federal deficit outside the budget window, as stated earlier, the package freezes all cost-of-living adjustments (COLAs), starting in 2031, to:

  • The Internal Revenue Code Section 415 limits on overall contributions ($58,000 in 2021) and benefits ($230,000 annually for 2021).
  • The maximum amount of compensation permitted to be taken into account under Code Section 401(a)(17) ($290,000 for 2021).

These COLA freezes would not apply to collectively bargained plans.

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