Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

• Extend the Emergency Unemployment Compensation (EUC) program through November 2010, and apply its benefits retroactively to June 2. Depending on a state’s unemployment rate, the program provides up to 53 weeks of extended benefits.
• Continue the Extended Benefits (EB) program through November 2010. This program, which expired in May, provides up to an additional 13 weeks of benefits in states with unemployment rates at or exceeding 6.5 %, and up to 20 weeks of benefits in states with unemployment rates at or above 8 %.
• Eliminate the penalty for part-time employment in the EUC program. The bill would coordinate EUC benefits with regular benefits by providing states with a number of options to allow EUC claimants to remain eligible for the EUC program when they become newly entitled to state unemployment compensation, if switching to state benefits would reduce their weekly UI check by at least $100 or  25 %.

The legislation also would extend the homebuyer tax credit, and make adjustments to other miscellaneous federal programs. Assuming the Senate ultimately approves this measure, the House of Representatives will need to conduct its own vote before the President signs it into law.
 

Other provisions contained in the House-passed version, such as those providing for refundable alternative minimum tax (AMT) credits for corporations making domestic investments; an employer wage credit for activated military reservists; temporary pension funding relief for single- and multi-employer plans; and unemployment compensation program extensions, remain intact. With respect to the unemployment provisions, the substitute amendment summary (pdf) explains that the bill would do the following:

• Extend the Emergency Unemployment Compensation (EUC) program through November 2010. This program – which provides up to 53 weeks of extended unemployment benefits depending on a state’s unemployment rate – ended in May.
• Continue the Extended Benefits (EB) program through November 2010. The EB provided up to an additional 13 to 20 weeks of benefits in certain states (13 weeks for states at or above 6.5% unemployment and another 7 weeks for states at or above 8% unemployment).
• Extend Federal Additional Compensation (FAC) through November 2010. FAC, which was also phased out in May, increases unemployment benefits by $25 a week. 
• Eliminate the penalty for part-time employment in the EUC program. As stated in the summary, the bill coordinates EUC benefits with regular unemployment benefits by providing states with a number of options to allow EUC claimants to remain eligible for the EUC program when they become newly entitled to state unemployment compensation if switching to state benefits would reduce their weekly UI check by at least $100 or 25%.

The effort to reinstate the COBRA subsidy extension may continue as more amendments are offered and the bill continues to take shape over the coming days. 

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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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According to the summary, (pdf) the joint bill contains provisions that would offer the following:

COBRA

• Extension of premium assistance for COBRA benefits. The American Recovery and Reinvestment Act (ARRA) created a program to provide a 65% COBRA health insurance premium subsidy for up to 15 months for workers who have been involuntarily terminated. After several extensions, eligibility for the COBRA premium assistance will expire for individuals terminated after May 31, 2010. The bill would extend eligibility for the program to individuals terminated on or before December 31, 2010.

Unemployment Insurance

• Extension of the Emergency Unemployment Compensation (EUC) program. The Emergency Unemployment Compensation (EUC) program is scheduled to phase out at the end of May 2010. This program provides up to fifty-three (53) weeks of extended benefits. The bill would extend the EUC program through December 2010.
• Extension of the 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 in certain states (i.e., 13 weeks for states at or above 6.5% unemployment and another 7 weeks for states at or above 8% unemployment). The bill would extend full funding for the EB program through December 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.

Miscellaneous Business Provisions

• Employer wage credit for activated military reservists. The bill would extend 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 of the sum of differential wage payments to activated military reservists.
• 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 they invest during 2010 in capital equipment for use in the United States.

It is expected that the legislation will be considered by the House and Senate next week.
 

In addition to extending the premium COBRA subsidy until the end of the year, the bill makes certain technical changes to the program itself. Specifically, the bill makes the following clarifications, among others:

• Adds a new section clarifying special rules in the case of individuals losing COBRA coverage due to a reduction in hours;
• Clarifies the period of assistance; and
• Adds a provision stating that the government or the individual may bring a civil action to enforce applicable provisions of this law, and provides that the Secretary may assess a penalty of up to $110 per day against a plan sponsor or health insurance issuer for each violation.

The Senate also approved by voice vote an amendment (S. Amdt. 3430) to the bill that aims to encourage employers to continue their defined benefit pension programs by providing temporary relief from statutory pension funding obligations. According to a press release issued by Sen. Isakson (R-GA) – who introduced the amendment with Sen. Ben Cardin (D-MD) – the amendment would provide employers with two options “to spread out” their pension obligations:

Under the first option, employers would be able to repay their pension shortfall over seven years, but the seven-year amortization would start two years late. During the two-year delay period, the employer would only owe interest on the shortfall. Under the second option, employers would be able to pay back their pension shortfall over 15 years.

Employers electing to avail themselves of the “two and seven”, or 15-year relief plans would be required to abide by the “cash flow rule,” under which an employer must make an extra “matching” contribution equal to the amount by which any of its employees’ taxable compensation exceeds $1 million. An employer would also be required to contribute an amount equal to the “extraordinary dividends” paid during the year, and an amount equal to the aggregate fair market value of the “stock redeemed” during the year that exceeds the employer’s net income for accounting purposes.

Other pension funding relief measures are included in the bill, which, according to Sen. Baucus, are designed to provide temporary, targeted funding relief for single employer and multiemployer pension plans that suffered significant losses in asset value due to the 2008 market downturn.

The bill includes other tax credit measures, including an extension until Dec. 31, 2010 of an employer wage credit for employees who are active duty members of the uniformed services. This extension would provide eligible small business employers with a credit against income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists, up to $4,000, and be applicable to payments made after December 31, 2009. Other program extensions include one that provides a tax credit for employers of qualified employees that work or live on or near an Indian reservation, and an extension of the Work Opportunity Tax Credit (WOTC) for qualifying employers that hire employees in the areas hit hardest by Hurricane Katrina.

The measure will now need to be reconciled with the House bill and undergo a second round of approval before it can be signed into law.

With respect to the premium COBRA subsidy, the measure – in addition to extending the program until the end of the year – makes some clarifications to certain provisions of this program.

The measure also contains a section devoted entirely to pension-funding relief. According to a press release, (pdf) these provisions provide temporary, targeted funding relief for single employer and multiemployer pension plans that suffered significant losses in asset value due to the financial crisis in 2008.

In addition, the measure would extend until December 31, 2010, an employer wage credit for employees who are active duty members of the uniformed services. Specifically, the bill would extend the provision that provides eligible small business employers with a credit against income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists, up to $4,000, and be applicable to payments made after December 31, 2009.

A final vote on this bill is expected late Tuesday or Wednesday.