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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.
Multiemployer Pension Reforms
Background
The multiemployer pension system in the United States is currently in crisis, with over 100 multiemployer pension plans, covering more than one million participants in total, projected to become insolvent within the next 10 to 20 years. The largest and most significant of these plans, the Central States, Southeast and Southwest Areas Pension Fund (the “CSPF”), is projected to become insolvent by 2025. Under existing law, the Pension Benefit Guaranty Corporation (the “PBGC”) provides financial assistance to a plan after it becomes insolvent that is sufficient to allow the plan to continue paying benefits up to the level guaranteed by the PBGC. However, the scope of the crisis, and the pending insolvency of the CSPF, is projected to cause the PBGC’s own multiemployer insurance fund to become insolvent by 2026. This issue has created significant concern among individual participants, contributing employers, unions, and plans themselves. As a result, Congress has previously made several attempts to enact a legislative solution, including the establishment of the bicameral Joint Select Committee on Solvency of Multiemployer Pension Plans in 2018, but these attempts have largely failed to date.