The action came on a 227-150 vote, disagreeing to the Senate’s version of the legislation as passed earlier this week.
Highway bill to return to Senate
The Senate now has the option to approve the House bill; consider an alternative; or do nothing.
The Highway Trust Fund, which finances construction projects, is expected to run out of money within a few weeks. Congress is expected to adjourn for the August recess this week.
Revenue provisions in House bill
The House-passed version of the highway bill—H.R. 5021 [PDF 154 KB]—includes two revenue provisions that together raise $9.9 billion:
- A “pension smoothing” provision that would reduce companies’ tax deductible payments to fund pension plans, thus increasing the taxable income of employers and employees in the near term
- Extension of custom user fees from 2023 to 2024
The bill does not include the tax compliance measures that were included as revenue measures in the Senate bill.
“Pension smoothing” refers to changes to the actuarial calculations for determining pension funding targets.
Currently, the minimum funding rules for single-employer plans specify the interest rates and actuarial assumptions used to determine the present value of benefits for purposes of a plan’s target normal cost and funding target. Present value is generally determined using three interest rates (“segment” rates)—each of which applies to benefit payments expected to be made from the plan during a certain period.
The proposal would revise the specified percentage ranges for determining whether a segment rate must be adjusted upward or downward. The adjusted segment rates would not apply to determine whether prohibited payments may be made from a plan when the plan sponsor is in bankruptcy. The plan’s adjusted funding target attainment percentage, determined without regard to the adjusted segment rates, would have to be at least 100% in order for prohibited payments to be made during bankruptcy.
Further, the proposal would revise the period of benefit payments to which the segment rates apply.
The adjustment, in general, would reduce tax deductible payments to fund pension plans, increasing the taxable income of employers and employees in the near-term; hence, the change increases federal tax revenue during the 10-year budget window.