January 29, 2004
In this issue:
- EBSA Releases Rule to Extend Sunset Date for Mental Health Parity Law
- Form 5500 Change Means Auditors Will Help Enforce Late Deposit Regulations
- Senate HELP Committee Holds Hearing on the Uninsured; Summary Available
- PBGC Announces More Conservative Investment Policy with Longer Duration Bonds, Fewer Equities
- Californians to Vote on Repealing Employer Mandate for Health Insurance Law in November 2004
EBSA Releases Rule to Extend Sunset Date for Mental Health Parity Law
On January 23, the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL) released an interim final amendment to modify the sunset date of interim final regulations under the Mental Health Parity Act (MHPA) to comply with legislation passed by Congress to extend the current law for an additional year. The current law now sunsets on December 31, 2004.
The current law mandates parity in annual and lifetime dollar limits between medical and surgical benefits covered by a health plan and any mental health benefits covered by the same plan. Senators Pete Domenici (R-NM) and Edward Kennedy (D-MA) have introduced the Mental Health Equitable Treatment Act (S. 486) which would expand the mandate, but are also working on a compromise plan. The compromise would reportedly eliminate the requirement that all mental health diagnoses in the "DSM-IV," the compendium of mental health disorders, be included in the parity requirement and would permit some limits on mental health benefits if the health plan includes these limits on "substantially all" medical and surgical benefits, a term which is undefined.
The Council continues to point out to policymakers that these modifications do not address all of the concerns that plan sponsors have raised with the expanded parity proposal. For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.
Form 5500 Change Means Auditors Will Help Enforce Late Deposit Regulations
The Department of Labor (DOL) has added language to the 2003 Form 5500 instructions to require plan auditors to review deposits of 401(k) elective deferrals and to confirm that the employer has deposited the contributions on a timely basis. In effect, the DOL has enlisted plan auditors to assist in enforcing the timing of deposits deadline in the DOL regulations.
The regulations require that employee deferrals be deposited on the earliest date the employer can reasonably segregate the contributions from its general assets, but in no event later than the 15th business day of the month following the month in which the employer withheld the contributions from the employees' paychecks.
Prior versions of Schedules H and I of the 5500 asked whether the employer had deposited the contributions within the "maximum" time period permitted by the regulations and some employers interpreted the question as asking whether contributions had been deposited by the 15th business day of the next month. However, in 2002, the DOL removed the word "maximum" from the question and now simply asks whether the employer has failed to deposit participant contributions in accordance with the time period prescribed by the regulations.
The language added to the instructions in 2003 requires the plan auditor to determine whether the employer has responded to the question in accordance with the regulations. This means the auditor will have to review the deposits to determine whether they were made timely and include that information in the auditor's report. The Council will continue to monitor developments in this area and will keep you posted. For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.
Senate HELP Committee Holds Hearing on the Uninsured; Summary Available
On January 28, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing to examine health issues relating to health care costs and the uninsured. The witnesses all presented statistics on the makeup of the uninsured, the factors contributing to the rising costs of health care, how the two are linked, and what solutions Congress may want to consider to help address both problems.
Council staff have prepared a comprehensive report on the hearing, detailing the issues and testimony presented by the witnesses. We hope to provide similar reports as future hearings occur on this and other benefits issues. For more information, contact Susan Relland, Council health policy legal counsel, at (202)289-6700.
PBGC Announces More Conservative Investment Policy with Longer Duration Bonds, Fewer Equities
The Pension Benefit Guaranty Corporation (PBGC) announced on January 29 that has adopted what it described as "a less volatile investment policy" for the assets it uses to fund benefit liability payments. The PBGC will more heavily allocate its investment portfolio toward duration matched fixed-income securities over the next two years, resulting in a decline in equities held to between 15 and 25 percent of the total portfolio. At the end of October 2003, the agency's most recent fiscal year, 37 percent of its assets were invested in equities.
Agency officials said the new policy is designed to continue taking advantage of the return from equities during strong markets, while reducing the impact of the current low rates of return on shorter-term bonds and other fixed-interest investments. However, changing the policy for the PBGC's own investments may also give the Administration more support for advocating funding rule changes and the selection of a permanent interest rate for calculating liabilities, which would result in private sector plans reducing their equity holdings. The new investment policy resulted from a two-year review by the agency and was recently approved by the PBGC's board of directors, composed of the secretaries of Commerce, Labor and Treasury.
For more information, please contact Lynn Dudley, Council vice president and senior counsel, at 202-289-6700.
Californians to Vote on Repealing Employer Mandate for Health Insurance Law in November 2004
Opponents of the California pay-or-play health care law prevailed in court the week of January 19 and succeeded in securing a spot on the November 2004 ballot for their referendum to repeal the new health care law. The law would require companies with 50 or more California employees to either provide their employees (and dependents, in the case of large employers) with health insurance or pay into the State Health Purchasing Program. Californians Against Government Run Health Care started collecting signatures to challenge the new health care law almost immediately after former Governor Gray Davis (D) signed S.B. 2 into law this past fall. The wording of the referendum is such that a "No" vote will be a vote to prevent the pay-or-play law from going into effect.
The pay-or-play health care law applies to employers with 200 or more employees by 2006 and employers with 50-199 employees by 2007. The bill does not apply to employers with 49 employees or fewer until a 20 percent tax credit is enacted to assist them with their costs. Employers who provide health coverage that meets certain minimum requirements established in the law would be eligible for a credit against the "fee" or tax for the State Health Purchasing Program. Once referendum is certified to be put to a vote, the implementation of the health care law will be "stayed" so that it can not even begin to be implemented until after the November referendum.
The Council is researching the federal ERISA implications of the new California health insurance law and will make these findings available to inform parties in California and interested federal policymakers, who have already requested the Council's perspectives on the California law. For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.