House-Approved Extender Bill Omits COBRA Extension

On Friday the House of Representatives narrowly approved (215-204) a scaled-back version of the American Jobs and Closing Tax Loopholes Act (H.R. 4213), a bill that would extend a number of benefit programs, including emergency unemployment payments, and provide for pension funding relief and fee disclosures. Details of this joint legislation were first unveiled last week.  Due to the measure’s escalating cost estimate, however, members of Congress agreed to trim a number of benefit extensions to ensure enough votes for passage, including a last-minute decision to omit the COBRA premium subsidy extension entirely. Other provisions, such as the one providing for an extension of the emergency unemployment benefits program, was reduced by one month. Specifically, as outlined in a summary (pdf) of the revised bill, certain provisions would do the following:

Unemployment Insurance

• Extension of Emergency Unemployment Compensation (EUC) program. The Emergency Unemployment Compensation (EUC) program – set to expire at the end of May 2010 – would be extended through November 2010.
• Extension of Extended Benefits (EB) program. 100% federal funding for the Extended Benefits (EB) program is scheduled to phase-out at the end of May 2010. This program provides up to an additional 13 to 20 weeks of benefits, depending on the rate and extent of unemployment per state. The bill would extend full funding for the EB program through November 2010.

Pension Funding Relief

• Single employer plan funding relief measures include: extended period for single employer defined benefit plans to amortize certain shortfall amortization bases; application of an extended amortization period to plans subject to prior law funding rules; suspension of certain funding level limitations; temporary allowance of election to apply balances against minimum required contribution; modification of the reporting requirement by requiring additional reporting if aggregate unfunded vested benefits of plans maintained by the sponsor exceed $75 million; and rollover of amounts received in airline carrier bankruptcy.
• Multiemployer plan funding relief measures include: optional use of 30-year amortization periods; optional longer recovery periods for multiemployer plans in endangered or critical status; modification of certain amortization extensions under prior law; alternative default schedule for plans in endangered or critical status; and the provision of transition rules for the certifications of plan status.

Fee Disclosures

• Defined Contribution Plan Fee Disclosure. The bill would amend the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA) to provide disclosure rules relating to fees incurred in connection with defined contribution plans (such as 401(k) plans) to plan administrators and plan participants. Among other things, these fee disclosure provisions require 401(k) service providers to disclose to employers all fees assessed against the participant’s account, broken down into three categories: plan administration and recordkeeping fees, investment management fees, and all other fees. Additionally, the bill mandates that before plan enrollment, workers receive basic investment disclosures, such as information on risk, return, and investment objectives. Moreover, a worker’s quarterly statement would be required to list total contributions, earnings, closing account balance, net return, and all fees subtracted from the account.

Miscellaneous Provisions

• Refundable AMT credits for corporations making domestic investments. The bill would allow corporations to receive a refund of a portion of their alternative minimum tax (AMT) credits if in 2010 they invest in capital equipment for use in the United States.
• Employer wage credit for activated military reservists. The bill would extend for one year (through 2010) the provision that provides eligible small business employers with a credit against the taxpayer’s income tax liability for a taxable year in an amount equal to twenty percent (20%) of the sum of differential wage payments to activated military reservists.

More information on this bill and the changes made to it can be found on the House Ways and Means Committee webpage.

Because the Senate already recessed for the Memorial Day break, it will not begin consideration of this measure until June 7 at the earliest. In the meantime, the premium COBRA subsidy and emergency unemployment insurance programs are set to expire before Congress reconvenes.

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