American Rescue Plan Act of 2021

March 11, 2021

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law. Congress had passed the massive piece of legislation on March 10, when the House approved the measure by a 220-211 vote. This followed passage in the Senate by a 50-49 vote on March 6. The Act was originally passed by the House on February 27, but was amended in the Senate in order both to appease moderate Democrats to ensure passage in the evenly divided chamber and to meet Senate rules. Lawmakers had set a deadline of March 14 to approve the package, as that was the expiration of unemployment relief last extended by the Consolidated Appropriations Act, 2021 in late December, 2020.

In order to secure approval in the evenly divided Senate, the Act was passed under budget reconciliation rules which require only a simple majority for approval in the upper chamber. In order to use the reconciliation process, the contents of the Act had to adhere to specific rules, and be approved by the Senate Parliamentarian. Before the House even voted on the package, the Parliamentarian announced that the original House bill’s $15 minimum wage provision did not meet the rules, and was thus eliminated from the Senate-amended bill.

The Act largely aligns with the framework put forth by President Biden before his inauguration on January 20. It includes extensions of enhanced unemployment relief, increased funding for COVID-19 testing and vaccination programs, aid to state and local governments, and assistance to schools to help get students back into classrooms.

The Act also includes a number of tax provisions, including a third round of direct stimulus payments, enhancements of many personal credits meant to benefit people with lower incomes and children, extensions of highly popular payroll tax credits for employers first instituted at the beginning of the pandemic, and changes related to retirement plan funding.

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This roadmap provides a summary of the tax provisions in the American Rescue Plan Act of 2021, as modified by the Senate and passed by the House on March 10, 2021. It was prepared by Bloomberg Tax & Accounting staff and was last updated on March 10, 2021.

Payroll Credits for Paid Sick and Family Leave

• Codifies payroll credits for paid sick leave and paid family leave initially established by the Families First Coronavirus Response Act (Pub. L. No. 116-127) for wages paid for the period beginning April 1, 2021, and ending September 30, 2021. For purposes of the family leave credit, eligible wages are increased to $12,000 from $10,000. Note that the obligation under Pub. L. No. 116-127 to provide paid sick and family leave does not apply in 2021 – instead, employers may voluntarily provide pay for these types of leave.
• Establishes nondiscrimination requirements that prevent the employer from providing sick and family leave wages in a way that discriminates in favor of highly compensated employees (within the meaning of IRC §414(q)), full-time employees, or employees on the basis of employment tenure with such employer.
• Requires waiver of penalties for failure to deposit employment taxes under IRC §6656 if due to anticipation of the credit.
• Expands eligible leave to include time taken to seek or await COVID-19 diagnostic testing or receive or recover from a COVID-19 vaccine.
• The credit allowed is increased by the amount of FICA taxes imposed on qualified sick or family leave wages for which the credit is allowed. No double benefit is allowed with respect to the credit increase.

Employee Retention Credit

• Extends the employee retention credit originally established by the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. No. 116-136) through the end of 2021. This credit can be taken against the employer portion of the IRC §3111(b) Medicare tax.

Repeal of Election to Allocate Interest Expense on Worldwide Basis

• Repeals the election to allocate interest expense of members of a worldwide affiliated group on a worldwide basis, effective for taxable years beginning after December 31, 2020.

Tax Treatment of Targeted Emergency Economic Injury Disaster Loan (EIDL) Advances

• Gross income does not include amounts received as a targeted economic injury disaster loan (EIDL) advance.
• Deductions are allowed for otherwise deductible expenses paid with the amounts so excluded from income, and tax basis and other attributes will not be reduced as a result of those amounts being excluded from income.
• Any amount excluded from the income of a partnership or S corporation under this provision is treated as tax-exempt income for purposes of IRC §705 and IRC §1366.

Tax Treatment of Restaurant Revitalization Grants

• Gross income does not include amounts received as restaurant revitalization grants.
• Deductions are allowed for otherwise deductible expenses paid with the amounts so excluded from income, and tax basis and other attributes will not be reduced as a result of those amounts being excluded from income.
• Any amount excluded from the income of a partnership or S corporation under this provision is treated as tax-exempt income for purposes of IRC §705 and IRC §1366.

Information Reporting for Third-Party Network Transactions

• Amends the third-party network transaction reporting de minimis exception to require reporting where the amount exceeds $600.
• Clarifies that reporting is not required on transactions that are not for goods or services.
• Applies to returns for calendar years beginning after December 31, 2021.

Limitation on Excessive Employee Remuneration

• Effective for taxable years beginning after December 31, 2026, the limit on deductions certain companies can take for compensation paid to the CEO, the CFO, and the next three highest paid individuals reported in securities disclosures also applies to the next five highest paid individuals.
• Practical Pointer: Because the expansion of the deduction limit takes effect at a much later date (generally, in 2027), there is ample time for subsequent legislation to nullify this provision.

Continuation Coverage Premium Assistance

• Provides for temporary, fully subsidized COBRA continuation coverage premiums for certain individuals for up to six months. An individual who is eligible for, and elects, COBRA continuation coverage due to a reduction in hours or a termination in employment that is not voluntary (an “assistance eligible individual”) is treated as having paid the full COBRA coverage premium for premiums for coverage during the period beginning on the first day of the first month beginning after the date of enactment (i.e., April 1, 2021) and ending on September 30, 2021. The premium assistance is not included in the individual’s gross income.
• An individual cannot receive this premium assistance and the health coverage tax credit for the same month.
• The individual must notify the group health plan if premium assistance ceases to apply because the individual is eligible for other group health plan coverage or Medicare benefits. A penalty of $250 applies, unless due to reasonable cause and not to willful neglect, for each failure to notify. The penalty for each fraudulent failure to notify is 110% of the premium assistance provided, if greater than $250.
• Any assistance eligible individual who is enrolled in a group health plan may, within 90 days after the date of notice of the plan enrollment option, elect to enroll in different coverage offered by the employer, if the employer decides to permit enrollment in different coverage that is offered to similarly situated active employees, and that coverage will be treated as COBRA coverage if certain conditions are met. The different coverage cannot have a higher premium. The different coverage excludes coverage providing only excepted benefits (such as dental or vision coverage), a qualified small employer health reimbursement arrangement (QSEHRA), or a flexible spending arrangement. This premium assistance does not apply to an individual for months beginning on or after the earlier of: (1) the first date the individual is eligible for coverage under another group health plan or benefits under Medicare; or (2) the date following the expiration of the maximum period of continuation coverage under the basis for COBRA coverage or the period of continuation coverage that would have been required if the coverage had been elected, whichever is earlier.
• Practical Pointer: Limiting premium assistance to the cost of coverage the participant had prior to becoming assistance-eligible prevents a participant from shopping around for higher quality coverage offered by the employer in anticipation that the premium will be fully subsidized.
• The period to elect COBRA coverage is extended for an individual who (1) does not have an election in effect on April 1, 2021 but who would be an assistance eligible individual if an election were in effect or (2) elected COBRA coverage and discontinued the coverage before April 1, 2021. The individual may elect COBRA coverage during the period beginning on April 1, 2021 and ending 60 days after the date on which the notification of the extended election period is provided to that individual. The administrator of the group health plan must provide, within 60 days after the first day of the first month beginning after the date of enactment, notice of the extended election period, and failure to provide the notice is treated as a failure to meet the COBRA notice requirements.
• COBRA continuation coverage elected during an extended election period begins with the first period of coverage beginning on or after the first day of the first month beginning after the date of enactment. It does not extend beyond the period that would have been required under the applicable COBRA provision.
• Expedited review is available if an individual requests but is denied treatment as an assistance eligible individual. The individual applies in the form and manner provided by the Secretary, and the eligibility determination must be made within 15 business days after receipt of the application for review. the determination will be de novo and final, and a reviewing court must grant deference.
• The general COBRA election notice must include an additional written notification regarding the availability of premium assistance and, if permitted by the employer, the option to enroll in different coverage. If the notice provision does not apply, the Secretary of Labor must provide rules requiring such notice. Additional notification may be by amendment of existing notice forms or by inclusion of a separate document. The Secretary of Labor must prescribe, within 30 days after the date of enactment, models for the additional notification.
• The COBRA election notice requirements are not met unless the plan administrator provides notice of the expiration of the period of premium assistance that includes prominent identification of the date on which premium assistance will expire. This notice must be provided no earlier than 45 days before the date of expiration of the premium assistance and no later than 15 days before the date of expiration. This notice is not required if the expiration is due to the individual being eligible for other group health plan coverage or Medicare benefits. The Secretary of Labor must prescribe, within 45 days after the date of enactment, models for the notification.
• Practical Pointer: An employee’s termination for gross misconduct negates any COBRA eligibility and also would negate the premium assistance mentioned here. Because, in practice, employers often lose the argument that an employee was terminated for cause, and COBRA rights are reinstated to the employee, special care should be taken by the employer to be very specific about the reasons for termination and should specifically document the facts behind the termination. Borderline case should be treated carefully, especially in light of this new premium assistance.

Continuation Coverage Premium Assistance – Employment Tax Credit

• The person to whom premiums are payable for continuation coverage (the employer maintaining the plan, including a state or local government or an Indian tribal government, the multiemployer plan, or the insurer) is allowed a credit against the hospital insurance portion of the FICA tax for the calendar quarter for the amount of premiums not paid by assistance eligible individuals due to premium assistance. The credit cannot exceed the hospital insurance tax imposed for the quarter for all of the employer’s employees and is reduced by any paid sick leave, paid family leave, or COVID-19 employee retention credit allowed against the hospital insurance portion by IRC §3131, §3132, and §3134. Also, no double benefit is allowed, so the amount of the credit is included in gross income. An excess credit is refundable, while an overstated credit is treated as an underpayment.
• The credit may be advanced.
• The IRS must waive penalties for failure to deposit hospital insurance tax if the IRS determines that the failure is attributable to anticipation of the credit allowed.
• If an assistance eligible individual pays the amount of the premium the individual would otherwise be required to pay, the person to whom the premium is payable must reimburse the excess over the required amount within 60 days after the individual elects continuation coverage. A credit is allowed for the payment.
• Effective for continuation coverage premiums to which this credit applies and wages paid on or after April 1, 2021.

Premium Tax Credit

• The premium tax credit is available to lower-income individuals who enroll in a qualified health plan offered through a public health insurance exchange. An individual whose employer offers coverage that is not affordable may claim the credit. The amount that an individual receiving premium assistance must contribute is based on a sliding scale that, for 2021 before the legislation, starts at 2.07% for household income at 100% of the federal poverty line and is capped at 9.83% for household income not more than 400% of the poverty line.
• For taxable years beginning in 2021 or 2022, the premium tax credit may be available for a taxpayer who purchases coverage through a health exchange even if their household income for the year is 400% or more of the poverty line for their family’s size. Thus, any individuals enrolled through an exchange would pay no more than 8.5% if their household income in premiums. In addition, the sliding scale used to calculate the monthly amount of premium assistance is expanded temporarily. Under the expanded scale, for taxable years beginning in 2021 or 2022, the contribution is zero for an individual whose household income is no more than 150% of the poverty line. Also, the amount an individual must contribute is based on no more than 8.5% of household income, and the scale applies this 8.5% to individuals with household income greater than 400% of the poverty line.
• Individuals who receive advance payment of the credit must reconcile on their income tax return the amount received with the amount that they are allowed, and their tax is increased when there is an excess advance payment. The Act suspends temporarily, for taxable years beginning in 2020, the tax increase for excess advance payments for a taxpayer who reconciles the amounts on the return.
• Unemployment compensation generally is included in gross income and is counted in determining household income. If an individual receives or is approved to receive unemployment compensation for any week beginning during 2021, the individual is treated as being eligible for the premium tax credit. Also, the amount of household income taken into account is capped at 133% of the poverty line, but not when determining whether the employer’s group health plan or qualified small employer health reimbursement arrangement is affordable coverage.

Reduced Cost Sharing

• If an individual receives or is approved to receive unemployment compensation for any week beginning during 2021, the individual is treated as having household income between 100% and 400% of the poverty line. Also, for purposes of determining the reduction in cost sharing and for the rules for members of an Indian tribe, the amount of household income taken into account is capped at 133% of the poverty line.
• Effective for plan years beginning after December 31, 2020.

Exchange Grant Program

• Establishes a grant program for public health benefits exchanges other than federally established exchanges to obtain funding to modernize or update systems, programs, and technologies.

2021 Recovery Rebates to Individuals

• Provides a $1,400 refundable tax credit to individuals ($2,800 for joint filers) with up to $75,000 in adjusted gross income (or $112,500 for heads of household and $150,000 for married couples filing jointly).
• Provides $1,400 for dependents (both child and non-child).
• The credit will be phased out entirely for those with incomes above $80,000 (or $120,000 for heads of household and $160,000 for married couples filing jointly). The credit is reduced between $75,000 and $80,000 (or $112,500 and $120,000 for heads of household and $150,000 and $160,000 for married couples filing jointly).
• The credit will be paid out in advance like the Economic Impact Payments previously provided under the CARES Act and the COVID-related Tax Relief Act. For this purpose, the IRS will use the most recent adjusted gross income in its system (2020 or 2019). If an individual qualifies for a larger payment using 2021 income, the difference will be claimed as a credit on the individual’s 2021 return.

Child Tax Credit

• Increases the child tax credit amount for 2021 only, to $3,600 for children under 6, and to $3,000 for children ages 6 to 17; expands definition of “qualifying child” to include 17-year-olds.
• IRS will make periodic advance payments of the child tax credit based on 2019 or 2020 tax return information, from July 2021 through December 2021. These payments comprise half of the child tax credit for which the taxpayer is otherwise entitled for 2021, with the remaining half claimed on the 2021 tax return.
• Phases out the additional credit amount − $1,000 per child age 6 or over; $1,600 per child under age 6 − for joint filers with a modified adjusted gross income above $150,000 ($112,500 for head of household filers and $75,000 for other filers).
• Makes the child tax credit fully refundable in 2021.
• No child tax credit against U.S. income taxes is allowed to an individual, if the child tax credit is allowable against taxes imposed on the individual by a U.S. possession with a mirror code tax system.

Earned Income Credit (EITC)

• For 2021, temporarily modifies definition of “eligible individual” (without qualifying children) by decreasing minimum age to 19 (24 for specified students and 18 for homeless/former foster youth) and eliminating maximum age limit. Additionally for 2021, the credit phaseout percentage increases to 15.3% and the earned income and phaseout amounts increase to $9,820 and $11,610, respectively.
• Eligible individuals can claim childless EITC even if they have qualifying children who fail to meet certain identification requirements.
• A separated spouse who meets certain requirements is not treated as married, such that he/she may be eligible for the EITC despite not filing jointly. Requirements are that the spouse does not file jointly, lives with qualifying child for over half the year, and either (1) does not live with other spouse during the last 6 months of the year or (2) has a separation instrument and does not live with other spouse by the end of the year.
• Increases the disqualified investment income amount to greater than $10,000.
• If a taxpayer’s 2019 earned income is higher than 2021 earned income, a taxpayer may elect to determine EITC using 2019 earned income instead of 2021 earned income.

Dependent Care Assistance

• The household and dependent care tax credit is made refundable for 2021, and the maximum credit amount is increased to $8,000 if there is 1 qualifying individual with respect to the taxpayer for such taxable year, or $16,000 if there are 2 or more qualifying individuals with respect to the taxpayer for such taxable year.
• For 2021, the creditable portion of the employment-related expenses is increased to 50%, reduced (but not below the “phaseout percentage”) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer’s adjusted gross income for the taxable year exceeds $125,000.
• The “phaseout percentage” is 20% reduced (but not below zero) by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer’s AGI exceeds $400,000.
• For 2021, no household and dependent care credit against U.S. income taxes is allowed to an individual, if the household and dependent care credit is allowable against taxes imposed on the individual by a U.S. possession with a mirror code tax system.
• For 2021, the amount which may be excluded from an employee’s gross income for dependent care assistance with respect to dependent care services provided during the taxable year is increased to $10,500 ($5,250 in the case of a separate return by a married individual).

Credits for Paid Sick and Family Leave for Certain Self-Employed Individuals

• Extends the refundable paid sick time and paid family leave credits established by the Families First Coronavirus Response Act (Pub. L. No. 116-127) through September 30, 2021. For purposes of the family leave credit, between April 1, 2021, and September 30, 2021, eligible wages are increased to $12,000 from $10,000.
• Extends eligibility to additional self-employed workers.
• Increases the number of days a self-employed individual can take into account in calculating the qualified family leave equivalent amount from 50 to 60.
• Expands eligible leave to include time taken to seek or await COVID-19 diagnostic testing or receive or recover from a COVID-19 vaccine.
• The limit on the overall number of days taken into account for paid sick leave will reset after March 31, 2021.

Student Loan Forgiveness

• For eligible student loans discharged in 2021-2025, the discharged amounts are excluded from income.
• The exclusion from income does not apply to the discharge of a loan made by certain lenders if the discharge is on account of services performed for the lender.

Tax Treatment of Targeted Emergency Economic Injury Disaster Loan (EIDL) Advances

• Gross income does not include amounts received as a targeted economic injury disaster loan (EIDL) advance.
• Deductions are allowed for otherwise deductible expenses paid with the amounts so excluded from income, and tax basis and other attributes will not be reduced as a result of those amounts being excluded from income.
• Any amount excluded from the income of a partnership or S corporation under this provision is treated as tax-exempt income for purposes of IRC §705 and IRC §1366.

Tax Treatment of Restaurant Revitalization Grants

• Gross income does not include amounts received as restaurant revitalization grants.
• Deductions are allowed for otherwise deductible expenses paid with the amounts so excluded from income, and tax basis and other attributes will not be reduced as a result of those amounts being excluded from income.
• Any amount excluded from the income of a partnership or S corporation under this provision is treated as tax-exempt income for purposes of IRC §705 and IRC §1366.

Temporary Delay of Designation of Multiemployer Plans as in Endangered,Critical, or Critical and Declining Status

• Annually, multiemployer defined benefit (DB) plans must obtain actuarial certification of their plan’s financial health status, known as zone status. The zone status shows the ability of the fund to meet current and future benefit obligations, as well as the likelihood that a plan is or may become underfunded or insolvent. A plan with a zone status of no category is an example of a plan on track to meet its financial obligations. Generally, plans with other zone statuses must take measures to improve upon the plan’s financial status.
• Multiemployer DB plans reporting a zone status of endangered, seriously endangered, critical, or critical and declining, in the previous plan year, may elect to retain such status for the first plan year beginning during the period from March 1, 2020, through February 28, 2021, or the subsequent plan year.
• Multiemployer plans with a previous year zone status of critical or critical and declining would not be obligated to update the plan’s rehabilitation or funding improvement plan until the subsequent year. If a multiemployer plan elects to maintain its previous year’s zone status, but becomes critical during the year of the election, that plan will be deemed to be in critical status and will not be subject to excise taxes for failure to make required minimum contributions. Plans classified as critical by way of annual certification, but endangered because of the election, will be required to provide notice as if the plan had been certified as being in endangered status for the plan year.
• The election to maintain a previous year’s zone status may be revoked with the approval of the Treasury Secretary prior to the annual certification date if the revocation is submitted along with the annual certification, or within 30 days of submission if made after the annual certification date.
• The plan sponsor of a plan that is not in endangered or critical status must provide notice of the election to participants, beneficiaries, PBGC, and other relevant parties within 30 days of the filing of the election if election is made prior to the annual certification deadline, or no later than 30 days after the election date if the election is made after the annual certification deadline.

Temporary Extension of the Funding Improvement and Rehabilitation Periods for Multiemployer Pension Plans in Critical and EndangeredStatus for 2020 or 2021

• A multiemployer DB retirement plan in endangered status must adopt a funding improvement plan – a plan of action proposed to enable the plan to meet certain requirements based upon specified future improvements in its funding percentage. A multiemployer DB plan in critical status must adopt a rehabilitation plan, with the plan sponsor must provide the bargaining parties with one or more schedules showing revised benefit and/or contribution structures, designed to enable the plan to emerge from critical status. The funding improvement or rehabilitation plan must be implemented over a specific timeframe, known as the funding improvement or rehabilitation period.
• For plan years beginning in 2020 or 2021, plan sponsors of endangered or critical multiemployer DB plans with funding improvement plans may elect to extend a funding improvement or rehabilitation period by 5 years (e.g., a funding improvement or rehabilitation period of 15 years would become 20 years; a funding improvement or rehabilitation period of 10 years would become 15 years).
• Plan zone status, for purposes of this provision, are based on the zone status elected by a multiemployer plan under §9701 of the Act.
• The option to make the election applies to plan years beginning after December 31, 2019.

Adjustments to Funding Standard Account Rules

• A multiemployer defined benefit plan must maintain a funding standard account. An accumulated funding deficiency exists in a given plan year to the extent total charges to the account exceed total credits to the account.
• Generally, a multiemployer plan that incurs experience losses (investment losses, other losses) may elect to separately amortize those loss payments to avoid violation of the minimum funding standard rules. Experience loss charges to a plan’s funding standard account are generally spread out, or amortized, over a 15-year period.
• Special funding relief is provided for multiemployer plans experiencing losses (investment losses and other losses related to the COVID-19 pandemic, including losses related to the reductions in contributions or employment, and deviations from expected retirement rates as determined by the plan sponsor) for years 2020 and 2021. Multiemployer plans that can pass a solvency test may elect to separately amortize experience losses incurred in either or both of the first two plan years ending after February 29, 2020, over a period of 30 years (instead of 15 years). The plan may also elect an expanded smoothing period to spread the difference between expected and actual returns in the same plan year(s) over a period of up to 10 years.
• Restrictions on benefit increases apply to a multiemployer plan that elects either of these special relief rules, and the plan sponsor must provide notice of the election to participants, beneficiaries, and the PBGC. Plans receiving special financial assistance under ERISA §4262 (new) (discussed below) are ineligible for relief under §9703.
• Effective first day of the first plan year ending on or after February 29, 2020, except that any election a plan makes that affects the plan’s funding standard account for the first plan year beginning after February 29, 2020, shall be disregarded for purposes of applying ERISA §305IRC §432.

Special Financial Assistance Program for Financially Troubled MultiemployerPlans

• In efforts to address looming insolvency concerns for many multiemployer plans and the PBGC, an additional PBGC fund is established to provide special financial assistance to certain multiemployer defined benefit plans, which plans will not be obligated to repay.
• A multiemployer plan may apply for special financial assistance if: (1) the plan was in critical and declining status in any plan year beginning from 2020 through 2022; (2) the plan had an approval to suspend benefits (as of enactment date); (3) the plan is in critical status in any plan year beginning in 2020 through 2022, with a modified funded percentage (i.e., current value of plan assets ÷ current liabilities) of less than 40%, and a ratio of active to inactive participants which is less than 2 out of 3; or (4) the plan became insolvent as outlined under IRC §418E after December 16, 2014, has remained insolvent, but has not been terminated as of the date of enactment.
• The special financial assistance will be the amount required to pay all plan benefits from the date of payment to the plan through the last day of the plan year ending in 2051. To determine the amount of financial assistance needed in its application, an eligible plan would use the interest rate and assumptions in its latest actuarial certification made prior to January 1, 2021, if the rate does not exceed the interest rate limit, and the assumptions are reasonable.
• The PBGC may specify that during the first two years after enactment of this Act, priority consideration of special financial assistance applications will be given to: insolvent plans or plans in danger of becoming insolvent within 5 years of enactment; plans projected to require greater than $1 billion in PBGC aid under ERISA §4261 without the special financial assistance; plans that suspended benefits under MPRA prior to enactment of this Act; or plans meeting other PBGC-determined conditions.
• Eligible multiemployer plans may submit applications through December 31, 2025, and revised applications through December 31, 2026. PBGC must issue regulations or guidance outlining application requirements within 120 days of enactment, and applications received will be deemed approved unless PBGC notifies a plan otherwise within 120 days of the application submission date. Special financial assistance payments will be made in lump sum, held separately from other plan assets, and restricted to PBGC-approved investment options. No financial assistance under this program will be paid after September 30, 2030.
• Plans receiving assistance must comply with several conditions, including reinstating, and in some cases, reimbursing (in lump sum or installments), previously suspended benefits; remaining in critical status through 2051; continuing to pay PBGC premiums; ineligibility for benefit suspensions under MPRA. Other reasonable conditions imposed by PBGC and Treasury – with limitations – may include limitations on changes to accrual rates, retroactive benefit improvements, plan asset allocations, contribution rates, and the funding of other benefit plans and/or withdrawal liability.
• PBGC premiums will increase from the current 2021 amount of $31 per participant to $52 per participant beginning in 2031, and adjusted for inflation thereafter.

Extended Amortization for Single Employer Plans

• Underfunded single-employer plans may amortize underfunding over an extended period of 15 plan years (instead of 7 plan years), for plan years beginning after December 31, 2021 (or, if the plan sponsor elects, plan years beginning after December 31, 2018, December 31, 2019, or December 31, 2020). Shortfall amortization bases for all plan years preceding the first plan year beginning after December 31, 2021 (or after an earlier date if elected by the plan sponsor), and all shortfall amortization installments determined with respect to those bases are reduced to zero.
• Generally effective for plan years beginning after December 31, 2021 with option to apply in earlier plan years.

Extension of Pension Funding Stabilization Percentages for Single EmployerPlans

• A pension plan’s future benefit liabilities are calculated using a specified interest rate, based on three segment rates that are the average of the corporate bond yields for each segment in the preceding 24-month period.
• Congress in MAP-21 (Pub. L. No. 112-141) and its extensions, provided a method to stabilize segment rates by establishing a range for each segment. The applicable range is made up of a minimum applicable percentage and a maximum applicable percentage based on the average annual segment rates for years in the 25-year period ending with September 30 of the calendar year preceding the calendar year in which the plan year begins. MAP-21 segment rates are determined by adjusting interest rates based on the corporate bond yield curve that are lower than the minimum applicable percentage or higher than the maximum applicable percentage to fall within the applicable range.
• Section 9706 of the Act narrows the funding corridor for segment rates for years between 2020 and 2025, and widens the corridor thereafter, from 2026 through 2029 and beyond. For 2012 through 2019, the applicable range is 90% to 110% of the 25-year average; for 2020-2025, 95% to 105%; for 2026, 90% to 110%; for 2027, 85% to 115%; for 2028, 80% to 120%; for 2029, 75% to 125%; and for years after 2029, 70% to 130%. If the first, second, and third segment rates for a 25-year period average less than 5%, the average will be deemed to be 5%.
• Plan sponsors may elect to delay application of the amendments made by §9706 of the Act to any plan year beginning before January 1, 2022, for all purposes or solely for purposes of determining the adjusted funding attainment target under IRC §436 and ERISA §206(g).
• Effective with respect to plan years beginning after December 31, 2019.

Modification of Special Rules for Minimum Funding Standards for Community Newspaper Plans

• Expands types of plans eligible for special funding rules given to certain single-employer community newspaper plans originally implemented under the SECURE Act of 2019 (Pub. L. No. 116-94, Div. O, §115). Provides alternative minimum funding standards to certain community newspaper plan sponsors with funding shortfalls. Allows plans to extend ameliorative contributions over a 30-year period to restore plan assets to the target funding level and increases the interest rates used to determine the funding target and target normal cost to 8%.
• Eligible newspaper plan sponsors may elect to apply the alternative funding status if no participant has had an accrued benefit increase after April 19, 2019. Any election would apply for all subsequent plan years after the date of election, unless revoked with permission of the Treasury Secretary.
• Effective for plan years ending after December 31, 2017.

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