On March 10, 2021, the House of Representatives passed the version of the
American Rescue Plan Act (H.R. 1319, the “Act”) previously passed by the Senate on March 6. President Biden is expected to sign the legislation on Friday. The Act is intended to, among other things, provide financial support to families struggling because of the pandemic, including a third round of stimulus checks for individuals (up to certain income limits), temporary COBRA and Affordable Care Act (“ACA”) subsidies intended to help people maintain health insurance coverage during the pandemic, and funding for COVID-19 vaccines and testing. The Act also includes a number of other tax and retirement provisions, including extended funding stabilization for single-employer pension plans, financial assistance for certain multiemployer pension plans, and changes to the executive compensation rules. Below, we summarize the key health, tax, and retirement provisions in the Act.
Annuities Aren’t the Only Option for Generating Retirement Income
Annuity adoption lags, but there are other ways to help retirement plan participants prepare for income in retirement.
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Art by Emine Yilmaz
When the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in late 2019, many in the industry celebrated it as the first step toward widespread annuity adoption. Yet a little more than a year later, only a small fraction of plan sponsors have embraced the option, according to experts.
Eric Levy, executive vice president of AIG Retirement Services, points to the COVID-19 crisis as a reason why adoption has stalled. As vaccination rates increase and workforces open up, he expects a gradual implementation of the options. “We’ve all been dealing with [the pandemic] for the past 12 months, so I think what you’ll see is a slow rise in conversation and a learning curve, and ultimately, longer-term levels of adoption.”
Retirement Income: Key Considerations
Peg Knox, with the Defined Contribution Institutional Investment Association (DCIIA), says DC plans need to evolve to prepare participants to convert their assets into retirement income.
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Having evolved meaningfully over the past 40 years, today’s defined contribution (DC) plans now enable participants to accumulate and invest retirement assets even more easily than in the past. DC plans also most often allow participants to retain assets in-plan throughout retirement. Yet research indicates that most of them are ill-prepared to convert their assets into retirement income.
The conclusion for DC plan sponsors seeking to assist these participants is clear: The next step is to evolve plan design and investments by adding a benefit distribution focus to offerings and communications and/or by adding services to better address the needs of those near or in retirement. Plan participants have also identified this as an area of need.
New COVID-19 Stimulus Bill Includes Significant Pension Reforms and Expands Scope of 162(m) Compensation Deduction Limit Wednesday, March 10, 2021
Today, the House of Representatives passed the $1.9 trillion American Rescue Plan Act of 2021 (the “ARPA”). The ARPA has already been approved by the Senate and is expected to be quickly signed into law by President Biden. This client alert addresses Title IX, Subtitle H of the new legislation, which includes significant pension reforms for multiemployer and single-employer pension plans, and expands the number of covered employees for the limitation on the deductibility of executive compensation under Section 162(m) of the Tax Code.