President Joseph Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law on November 15, 2021. The IIJA will provide funding to overhaul the country’s physical infrastructure and will serve to give the nation’s roads and bridges a much-needed facelift, but squirreled away in the legislation are tweaks that will give defined benefit plans a bit of a nip and tuck too. The new law also provides further relief for taxpayers facing filing deadlines after a disaster and updates the list of such disasters to include wildfires.
The IIJA extends the interest rate stabilization period to “smooth” interest rates used in determining a defined benefit plan’s minimum funding requirement. The interest rate stabilization period had been adjusted under the Moving Ahead for Progress in the 21st Century Act (MAP-21), and had already been extended earlier this year under the American Rescue Plan (ARPA). By way of background, Internal Revenue Code (Code) section 430(h)(2)(B) prescribes the interest rates that a defined benefit plan may use to determine its minimum funding contribution, using a set of three yield curve segment rates that apply to benefit payments expected to be made from the plan during each of three specified periods. Generally, the lower the interest rate used, the higher the plan’s minimum funding contribution. In an effort to mitigate the effects of historically low interest rates on defined benefit plan funding, MAP-21 amended Code section 430(h) to provide that the segment rates used in any year are based on the average segment rates over a 25-year period, and are adjusted so that they fall within a 10% funding stabilization corridor. This smoothing or averaging of interest rates over a long period of time generally results in a lower minimum funding requirement, providing funding relief to defined benefit plans. Under MAP-21, the 10% stabilization corridor would gradually expand until it reached a 30% corridor. Subsequent legislation extended the dates for the expansion of the interest rate stabilization periods, but interest rate stabilization was slated to phase out in 2021. ARPA extended the interest rate stabilization period through 2029, but with the enactment of the IIJA, the interest rate stabilization period is extended further to 2034.
The IIJA changes the determination of when the disaster postponement period for certain tax-filing deadlines ends and adds “significant fires” to the list of disasters for which a federal disaster declaration may be made. Code section 7508A(d) requires the Treasury to postpone automatically federal tax deadlines for 60 days for federally declared disasters. Effective with respect to federally declared disasters declared after the date of enactment of the IIJA, the new law amends Code section 7508A(d) to provide that the postponement period ends 60 days after the later of (1) the earliest incident date specified in the disaster declaration, or (2) the date the disaster declaration was issued. The IIJA further amends Code section 7508A to include “significant fires” as a disaster category, effective with respect to fires occurring after enactment of the IIJA for which federal assistance is provided.