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

This last-minute compromise comes after the Senate on Thursday failed to move forward a more expansive “tax extender” bill, the American Jobs and Closing Tax Loopholes Act (H.R. 4213). (pdf)  On Wednesday, Senate Finance Committee Chairman Max Baucus (D-MT) unveiled an amended version of the bill in order to reduce its price tag from $140 billion to $110 billion. Generally, this measure would have continued a number of individual and business tax cut programs and extended emergency unemployment, in addition to providing a number of pension funding relief measures.

This bill had been gradually scaled back over the last few weeks in the hope of gaining sufficient support. In May, the House approved this legislation once COBRA premium subsidy extensions were dropped. Last week, the Senate introduced a substitute version of the bill that lacked certain defined contribution pension plan fee disclosure provisions. After it became evident Wednesday that the Senate did not have enough votes to limit debate on the bill, Baucus introduced the trimmed down draft. Despite Baucus’s efforts to reduce the bill’s costs, however, the Senate voted 56-40 – four votes shy of the necessary 60 – to limit debate on the measure and submit it to the Senate floor for a final vote.

During yesterday’s Senate session, Sen. Robert Casey (D-PA) offered an amendment (S. Amt. 4371) to the bill that would extend the COBRA premium subsidy program through November 2010. In urging approval of his amendment, Casey stated that “[w]ithout the extension of the COBRA Premium Assistance Program, a report from the National Employment Law Projects predicts as many as 150,000 Americans each month will lose out on the subsidies necessary to afford quality health care.” At this point, however, the fate of the tax extender bill – and its amendments – is unclear.

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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