Congress, Trump Administration Remain Far Apart on COVID-19 Stimulus Deal

It looks like we’ll have to wait a little longer to find out whether Congress and the Trump administration include retirement plan relief in the next round of economic relief to address the ongoing COVID-19 pandemic. 

 

The Democrat-controlled House has been deadlocked with the Republican-controlled Senate and the Trump administration on the parameters of another trillion-dollar package, as a follow-up to the CARES Act enacted in March. 

 

Congress had set an informal target date of August 7 to have a deal completed, but now it looks like the next round of negotiations and legislating won’t occur until after Labor Day. However, if a deal is reached before then, House and Senate lawmakers would return to vote, but that prospect seems uncertain at this point.

 

 

The Senate Republican leadership on July 27 had unveiled a $1 trillion package, dubbed the HEALS Act (Health, Economic Assistance, Liability and Schools Act), but that package was immediately decried by congressional Democrats, just as the HEROES Act was decried by Republican leaders.  

 

The HEALS Act was introduced as several separate pieces of legislation, which included another round of $1,200 stimulus payments for eligible individuals, an extension and modification of the Paycheck Protection Program (PPP), and a modified extension in unemployment benefits. The legislative package also includes funding for Coronavirus testing and offers protection from Coronavirus lawsuits.

 

As the House Democrats counterpart, the $3 trillion HEROES Act, which passed in May, goes beyond what congressional Republicans and the Trump administration are willing to accept. For Republicans, the sticking points appear to be the $1 trillion relief for state and local governments provided for in the HEROES Act, as well as more generous unemployment benefits and other assistance. For Democrats, key sticking points appear to be ensuring that the enhanced federal unemployment benefits are continued, the inclusion of liability relief in the Senate package, as well as emergency funding for the U.S. Postal Service. 

 

 

In the retirement policy space, the HEALS package is limited to legislative fixes to the CARES Act and does not include broader provisions that were included in the House-passed HEROES Act, such as additional relief from required minimum distributions, funding relief for single-employer pension plans and an assortment of other changes. Neither bill currently  includes funding relief for DC plans along the lines of what the American Retirement Association has been advocating for as part of the next relief package, but Rep. Richard Neal (D-MA), Chairman of the House Ways and Means Committee, has expressed an openness to including relief.

 

Since both the House and Senate bills include legislative clarifications to the CARES Act—including a statutory clarification permitting plans to rely on an employee’s certification for purposes of the special loan rules and a clarification that the early distribution and loan relief for retirement plans during the coronavirus relief period also applies to money purchase pension plans (MPPP)—those changes would likely be included in whatever package emerges. 

 

Items that would need to be reconciled include whether to include the House-passed provisions to expand the required minimum distribution relief for both DC plans and IRAs, funding relief for single-employer pension plans and relief for troubled multiemployer pension plans. 

 

In addition, a provision that was included in the House’s HEROES Act but not the Senate’s HEALS Act is a clarification that expenses paid or incurred with forgiven loans under the Paycheck Protection Program that are not included in gross income do not result in a denial of any deduction or basis of any asset for federal tax purposes. This is an issue that caught the attention of the congressional tax-writing committee chairmen following the IRS’s interpretation that these loan proceeds would not be deductible. 

 

 

As noted earlier, if a deal is reached before Labor Day, House and Senate lawmakers would return to vote in their respective chambers. Except for the late-breaking news that the House will return this weekend (August 22) to address challenges facing the U.S. Postal Service, it appears, for now, that lawmakers are planning to remain on break back in their home districts. 

 

Aside from any major changes in the economy, the start of the federal government’s fiscal year on October 1 might be the next big deadline that compels the lawmakers back to negotiating table and helps drive an agreement for additional COVID-19 relief. Lawmakers will likely seek to approve a “continuing resolution” to fund the government temporarily until after the election and then return for a lame-duck session. 

 

In the meantime, after it became clear the negotiations were stalled, President Trump on August 8 issued a series of Executive Orders that include a call for deferral of the employee portion of Social Security payroll taxes and a modified extension of unemployment benefits, but questions remain about how those orders will be implemented and businesses, in particular, are asking for more guidance on the payroll tax deferral.