Congress has passed, and the President is expected to sign on Monday, the Infrastructure Investment and Jobs Act (IIJA) (H. R. 3684), which contains employee benefit provisions related to interest rate stabilization for defined benefit plans, postponement of certain benefits-related tax deadlines during federally declared disasters, and more. The provisions covered by this update are located in:

Code Section 430(h)(2) describes the interest rates used to calculate a single-employer defined benefit plan's minimum required contribution (26 U.S.C. § 430(h)(2); see Practice Note, Minimum Funding Standards for Defined Benefit Plans). Those interest rates are a set of three segment rates (or, alternatively, a full yield curve). The three segment rates must be adjusted to fall within a specific range that is determined based on a percentage of the corresponding segment rates over a 25-year period. These stabilization corridors were instituted with the Moving Ahead for Progress in the 21st Century Act.

The American Rescue Plan Act of 2021 (ARPA-21) revised the corridors that are used to determine the 25-year average of segment interest rates (see Legal Update, $1.9 Trillion COVID-19 Stimulus Legislation Includes COBRA Premium Assistance, Retirement Plan Funding Relief, and an Expansion of Covered Employees Under Section 162(m): Interest Rate Stabilization).

The IIJA further revises the corridors and extends the end of the stabilization period from 2029 to 2034 (IIJA § 80602). The provisions are effective for plan years beginning after December 31, 2021.

Treasury may postpone certain tax-related deadlines, including those relating to employee benefit plans, after a federally declared disaster or terrorist or military action (26 U.S.C. § 7508A). A set-aside period of up to one year is permitted for benefit plans (26 U.S.C. § 7508A(b)).

Subsection (d) was added to Code Section 7508A by 2019 year-end government funding legislation that also included the SECURE Act (Pub. L. No. 116-94 (Dec. 20, 2019); see Legal Update, IRS Finalizes Rules Addressing Automatic Postponement of Tax Deadlines During Federally Declared Disasters: Disaster Provision Amended to Add Mandatory 60-Day Postponement Period). Subsection (d) requires Treasury to automatically postpone federal tax deadlines for 60 days for federally declared disasters occurring on or after December 21, 2019.

The IIJA amends subsection (d) by changing the end of the disregarded period to 60 days after the later of:

(IIJA § 80501.)

The legislation also adds a provision on how to determine the disregarded period in the case of multiple disaster declarations for the same area.

In addition, the IIJA amends Code Section 7508A to include significant fires in the list of disasters for which Treasury may extend certain tax-related deadlines (IIJA § 80504). The legislation defines "significant fire" as "any fire with respect to which assistance is provided under section 420 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act."

(A subsection of Code Section 7508A was the authority for the Departments' recent "outbreak period" compliance extensions involving certain benefits-related deadlines, in response to COVID-19. For more information, see Legal Update, DOL Addresses Duration of Outbreak Period Compliance Extensions Due to COVID-19.)

The CARES Act made available an employee retention credit (ERC) that incentivizes eligible employers (including tax-exempt organizations) affected by the COVID-19 pandemic to keep employees on their payroll (26 U.S.C. § 3134). As initially enacted, this provision applied only to wages paid after March 12, 2020, and before January 1, 2021. However, the Consolidated Appropriations Act, 2021 (CAA-21) extended the ERC through June 30, 2021, and ARPA-21 further extended the ERC through December 31, 2021. For more information on the ERC, see Practice Note, COVID-19 Compliance for Health and Welfare Plans: Employee Retention Credits Under CARES Act, As Amended (CAA-21 and ARPA-21).

The IIJA ends the ERC earlier than the date specified in ARPA-21. Under the IIJA, eligible employers may claim the ERC for qualified wages paid after June 30, 2021, and before October 1, 2021 (IIJA § 80604). However, recovery startup businesses may claim the ERC for qualified wages paid after June 30, 2021, and before January 1, 2022.

This provision applies to calendar quarters beginning after September 30, 2021.

In November 2020, HHS issued final regulations that eliminated a safe harbor for price reductions related to the sale of prescription pharmaceutical products from manufacturers to plan sponsors under Medicare Part D, either directly or through pharmacy benefit managers (PBMs). The regulations also created new safe harbors for certain:

(85 Fed. Reg. 76666 (Nov. 30, 2020).)

The IIJA bars HHS from implementing, administering, or enforcing the final regulations until January 1, 2026 (IIJA § 90006).