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Senate COVID-19 Stimulus Package Light on Retirement Relief

Legislation
After a period of starts and stops over the past week, the Senate Republican leadership unveiled a $1 trillion Coronavirus relief package July 27. 

As an opening counter to the House of Representatives’ HEROES Act, the GOP’s Health, Economic Assistance, Liability and Schools (HEALS) Act sets the stage for immediate negotiations over a sequel to the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted in March.
 
The Senate relief package was introduced as several separate pieces of legislation. Included are 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.  
 
In the retirement policy space, the package appears limited to legislative fixes to the CARES Act. It does not currently include funding relief for DC plans along the lines of what the American Retirement Association had advocated for as part of the next relief package. According to a summary by the Senate Finance Committee, below are the retirement-based tax provisions currently included in the Senate draft. 
 
  • Application of special rules to money purchase pension plans: The legislation clarifies that money purchase plans are included in the retirement plans qualifying for the temporary rules enacted under the CARES Act that allows individuals to make penalty-free withdrawals from certain retirement plans for coronavirus-related expenses.  
  • Clarification of delay in payment of minimum required contributions: This provision clarifies the due date for single-employer pension plan minimum required contributions, which was delayed for 2020 in the CARES Act.  
  • Employee certification of eligibility for increased CARES Act loan limits from employer plan: The CARES Act permits eligible retirement plans to rely on an employee’s self-certification that he or she qualifies to receive a Coronavirus-related distribution. The HEALS Act legislation clarifies that plans also may rely on an employee’s self-certification that he or she meets the requirements for the increased limits on retirement plan loans. 
All three provisions would apply retroactively as if they were originally included in the CARES Act.
 
PPP and Employee Retention Tax Credit
 
Other provisions in the HEALS legislative package would allow small businesses that have seen revenue fall by more than 50% to apply for a second PPP loan.

The package also increases the applicable percentage of qualified wages reimbursed through the employee retention tax credit (ERTC) to 65%. The CARES Act had provided an ERTC in the form of a refundable payroll tax credit equal to 50% of certain wages paid by employers to employees during the COVID-19 crisis. The provision also augments coordination between the credit and the PPP by allowing employers to be eligible for both programs, but with limitations to prevent overlapping benefits. 
 
While the legislative package does not appear to include the payroll tax cut that had been touted by President Trump, it does include a safe and healthy workplace tax credit in the form of a refundable payroll tax credit equal to 50% of an employer’s “qualified employee protection expenses,” such as testing for COVID-19, protective personal equipment, cleaning supplies and “qualified workplace reconfiguration expenses.” This would include modifications to workspaces for the purpose of protecting employees and customers from the spread of COVID-19 and “qualified workplace technology expenses,” such as contactless point-of-sale systems and other technology to track employee interactions with customers.
 
What’s Next?
 
The draft Senate package is essentially the GOP's opening counterproposal to the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act passed by the House in May. The structure of the legislation is still very much in flux and will likely change over the course of the negotiations. 
 
The $3 trillion House bill goes beyond the $1 trillion draft Senate package by also providing nearly $1 trillion to state and local governments and extending the full federal unemployment benefits enacted under the CARES Act. 
 
The House bill also includes additional relief from required minimum distributions, funding relief for single-employer pension plans, relief for troubled multiemployer pension plans and clarification that expenses paid or incurred with forgiven loans under the PPP pursuant to the CARES Act 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.
 
Even before the HEROES Act had passed the House in May, Senate Republican leaders expressed opposition to its scope and cost. At the time, however, the trajectory of the ongoing health and economic conditions caused by the pandemic were still unknown. That dynamic appears to be changing as both parties are now back at the negotiating table. 
 
Republican congressional leaders, along with Trump administration officials, reportedly were scheduled to begin negotiations with their Democratic counterparts immediately and continue throughout the week until an agreement is reached. Based on statement by leaders in both parties, those negotiations won’t be easy. What’s more, both the House and Senate have scheduled district work periods starting Aug. 7 and extending until after the Labor Day holiday, so the timeline is tight to pull the pieces together.