The new version of H.R. 4123, the American Jobs and Closing Tax Loopholes Act bill, includes provisions that would change defined benefit pension plan funding rules.
The new version of H.R. 4123, described in a section on the website of the House Ways and Committee, is based on the Tax Extenders Act of 2009, which passed in the House in December 2009.
The Senate passed a similar package, the American Workers, State and Business Relief Act, as an amendment to the Tax Extenders Act bill March 10, according to bill supporters.
House Ways and Means Chairman Sander Levin, D-Mich., and and Senate Finance Committee Chairman Max Baucus, D-Mont., have developed the latest version, the American Jobs and Closing Tax Loopholes Act bill.
One section of the bill would extend the 65% federal COBRA health benefits continuation subsidy through Dec. 31.
Another major section of the bill deals with the funding rules for single-employer and multi-employer pension plans.
The American Benefits Council, Washington, and other employer groups have been lobbying hard for pension funding rules changes, arguing that enforcing the rules now in place could force employers to shut down pension plans altogether.
For single-employer plans, the law now lets employers amortize efforts to deal with funding shortfalls over 7 years.
The new provision “would permit single-employer defined benefit plan sponsors to elect an extended 9-year amortization period with interest only being paid in the first 2 years,” backers say in an H.R. 4123 draft summary posted on the Ways and Means website.
A plan sponsor also could choose a 15-year amortization period, backers say.
“Under the provision, the plan’s funding obligation for a plan year is increased if the sponsoring employer makes excessive employee or shareholder payments,” backers say. “The provision generally allows plan sponsors to elect relief for up to 2 plan years during the 4-plan-year period from 2008 to 2011.”
A sponsor could “calculate its minimum required contribution without regard to the deficit reduction contribution rules for up to 2 plan years,” or else amortize funding liability under a 15-year payment schedule for 1 plan year, bill supporters say.
“The provision generally allows plan sponsors to elect relief for plan years beginning during the 3-plan-year period from 2009 to 2011,” supporters say.
Some charity plans could elect to be temporarily covered by the funding rules that prevailed before the passage of the Pension Protection Act of 2006.
The revised bill also would change the rules governing when underfunding would force a plan to suspend benefit accruals.
The plan funding rule changes could raise about $2 billion for the government over 10 years, officials report.