Freeze on 401k Contribution COLAs Removed from Stimulus Bill: ARA – The 401(k) Specialist


The American Retirement Association announced Thursday that, after a week of intense lobbying by the industry advocacy organization, the freeze on the annual cost-of-living adjustments (COLAs) for contributions to defined contribution plans contained in the stimulus bill supported by President Biden has been pulled.

Retirement plan advocates were concerned about provisions included in the $1.9 trillion American Rescue Plan Act of 2021, which passed in the House of Representatives on Saturday. Under the proposal, the $40,000 amount, as well as the $160,000 amount applicable to a defined benefit plan, would not be adjusted for cost-of-living increases after 2030.

Senate Majority Leader Chuck Schumer, D-NY, offered a substitute amendment that ARA says removes the COLA freeze limit from the underlying bill, and “because it was offered by the Majority Leader as a substitute to the underlying bill, it appears very likely it will pass.”

“This was a tremendous victory for the ARA and the retirement plan system,” Brian Graff, CEO of the American Retirement Association, said in the announcement posted to ARA’s website. “The government affairs team worked tirelessly to make this happen knowing that it would have been extremely challenging to get this fixed in the future, especially without the support of unions which were exempted from the freeze.”

Controversy continues over bill’s passage

The American Rescue Plan Act has come under fire from Republicans for its size and what they claim is a “wish list” of Democrat spending priorities unrelated to COVID relief. Democrats point to direct stimulus money to Americans hard-hit by the pandemic and billions for small business relief.

Sen. Ron Johnson, R-Wisc., led a successful effort by Republicans to read the entire 600-plus page bill on the Senate floor Thursday, something they said will highlight the unnecessary spending it contains. Democrats objected, calling it nothing more than a cynical delay at the expense of those in need.



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