BENEFITS BYTE

April 22, 2004
BB 04—50

In this issue:

  • EEOC Acts to Finalize Retiree Health Age Discrimination Rule
  • Bipartisan Drug Importation Bill Introduced in the Senate
  • Congress Holds Hearings on Stock Option Expensing
  • DOL Appoints New Executive Director of PBGC

EEOC Acts to Finalize Retiree Health Age Discrimination Rule

The Council strongly supports the EEOC’s action today to finalize its retiree health rule and will continue to work with the other federal agencies, including the Department of Health and Human Services and the Department of Labor, which may elect to comment on the rule during the interagency review process.

At an April 22 meeting, the Equal Employment Opportunity Commission (EEOC) voted 3 to 1 to finalize its July 2003 proposed rule on retiree health benefits.  The EEOC rule would clarify that an employer-sponsored retiree health plan would not violate the Age Discrimination in Employment Act (ADEA) even if it does not provide the same level of benefits to early retirees and to older retirees who are eligible for coverage under Medicare.  The agency's rule is now subject to review and comment by other federal agencies and will not be effective until this review process is concluded and the rule is published in the Federal Register.

At the April 22 session, EEOC Chair Cari Dominguez was joined by Vice Chair Naomi Earp and Commissioner Leslie Silverman in approving the proposed rule.  All three said they had concluded that if employers were required to provide at least the same level of coverage to Medicare eligible retirees as early retirees, the result would be that many early retirees would face a reduction in health benefits or employers might eliminate health benefits entirely for retirees of all ages in order to comply with such a rule.  Each commissioner also underscored that retiree health benefits are provided voluntarily by employers and that the agency needed to finalize its rule to address uncertainty among employers about the applicability of the age discrimination law to retiree health benefits.

The Council strongly supported the EEOC’s action today and had communicated this point of view once again in advance of today’s EEOC session.  We will continue to work with the other federal agencies, including the Health and Human Services Department and the Department of Labor, who may elect to comment on the rule during the interagency review process.

The AARP continues to strongly oppose the EEOC rule and has reportedly already begun urging its members to contact House and Senate members to express concerns that the rule could encourage employers to reduce or eliminate retiree health coverage.  At earlier stages in the agency’s rulemaking process, AARP has also threatened to take legal action to block or rescind the retiree health rule once it becomes final.  We intend to continue our efforts with Congress and, if necessary, the courts to support this important clarification of the age discrimination law and urge Council members to let members of Congress and the Bush Administration know about your support for the EEOC’s action.  We will soon provide you a Capitol Connection letter to assist you in expressing your views on this important issue.

For additional information, please contact Paul Dennett, Council vice president, health policy, or Maria Ghazal, Council director, health policy, at (202) 289-6700.

Bipartisan Drug Importation Bill Introduced in the Senate

On April 21, 2004, a bipartisan group of senators introduced the Pharmaceutical Market Access and Drug Safety Act (S. 2328).  Led by Senator Byron Dorgan (D-ND), the group included Senators Edward Kennedy (D-MA), Senate Minority Leader Tom Daschle (D-SD) and a number of other Democrats, as well as Republicans Olympia Snowe (R-ME), John McCain (R-AZ), Lincoln Chafee (R-RI) and Trent Lott (R-MI). This diverse group indicates that those supporting legislation to permit importation of prescription drugs from Canada and other parts of the world span the political spectrum. 

The bipartisan bill would allow licensed pharmacists and wholesalers to begin importing drugs from Canada within 90 days of the bill’s enactment and from current European Union members, Australia, New Zealand, Japan and Switzerland beginning one year after enactment. Under the bill, imported drugs must be approved by the FDA and manufactured in an FDA-inspected plant.  Pharmacists and wholesalers must register with the FDA and pay an annual fee of up to one percent of the price of drugs imported to the U.S.

Immediately upon enactment, consumers would be permitted to legally import up to a 90-day supplies of drugs from Canada.  Once the FDA has implemented regulations, individuals would be able to purchase drugs directly only from a Canadian pharmacy registered with the FDA.  Individuals would also be able to bring up to 90-day supplies of drugs back to the U.S. from the European Union, Australia, Japan, New Zealand or Switzerland or a two-week supply from another foreign country. To ensure drug manufacturers do not take steps to prevent importation of their products, the bill would amend the Clayton Antitrust Act to permit the government to impose penalties for any anticompetitive practices related to importing drugs to the United States.

The Reliable Entry for Medicines at Everyday Discounts through Importation with Effective Safeguards (REMEDIES) Act (S. 2307), introduced April 8 by Senate Finance Committee Chairman Charles Grassley (R-IA) last week would use a “carrot and stick” approach by offering pharmaceutical manufacturers a 20 percent increase in the research and development (R&D) tax credit if they certify that no actions have been taken, directly or indirectly, to prevent the authorized importation of a qualifying drug into the U.S.  Alternatively, pharmaceutical manufacturers who decline to certify that they are allowing imports would lose the business expense tax deduction for advertising expenses for that year.

Senate Majority Leader Bill Frist (R-TN) has said that any prescription drug importation legislation must go through the Senate Health, Education, Labor and Pensions (HELP) Committee.  HELP Committee Chairman Judd Gregg (R-NH) says he is working on his own bill and plans to hold hearings on the issue next month. For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.

Congress Holds Hearings on Stock Option Expensing

On April 21, the House of Representatives Financial Services Subcommittee on Capital Market, Insurance and Government-Sponsored Entities held a hearing to review the economic and financial reporting effects of the Financial Accounting Standards Board’s (FASB’s) stock option expensing proposal.  The Senate Governmental Affairs Subcommittee on Financial Management, the Budget and International Security held a similar hearing on April 20, but focused on the importance of FASB as an independent entity.  The tenor of the two hearings was significantly different with most witnesses and committee members at the House hearing speaking against the FASB proposal and most witnesses and committee members at the Senate hearing speaking in favor of the FASB proposal.

Twenty-five members of the House Capital Markets Subcommittee have joined Subcommittee Chairman Richard Baker (R-LA) in introducing H.R. 3574, the Stock Option Accounting Reform Act.  The bill requires public companies (except small businesses until 3 years after an initial public offering) to expense stock options granted to their Chief Executive Officer and next four most highly compensated executives.  The bill also precludes expensing for other stock options (essentially negating FASB’s proposal) until a study of the economic impact of mandatory expensing can be completed.  Senator Michael Enzi (R-WY) introduced a similar bill in the Senate (S. 1890) which was discussed during the Senate hearing.  Enzi stated that the Senate Small Business Committee will hold a hearing on the matter on April 28.

In the House, Ranking Subcommittee member Paul Kanjorski (D-PA) asked Chairman Baker to schedule another hearing so that FASB and the Securities and Exchange Commission (SEC) could testify and Representative Barney Frank (D-MA) indicated that the Democrats would formally request the hearing.  In the Senate hearing, FASB Chairman Robert Herz stated that the board plans to complete its deliberations on the proposed rule and issue a final standard in the fourth quarter of 2004. For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.

DOL Appoints New Executive Director of PBGC

U.S. Secretary of Labor Elaine L. Chao today has appointed Bradley D. Belt as executive director of the Pension Benefit Guaranty Corporation (PBGC), replacing acting director Vincent K. Snowbarger, who had assumed the position upon the departure of Steven Kandarian in February.

Belt's government experience includes stints as counsel with the U.S. Senate Committee on Banking, Housing, and Urban Affairs and Securities Subcommittee, as general counsel and legislative director to Senator John McCain (R-AZ), and as counsel to Securities and Exchange Commission head Charles Cox as well as special counsel to the Commission’s mergers and acquisitions group.

Belt’s private-sector experience includes serving as an executive with a financial services company (FolioFN, Inc.), president of a public affairs and management consulting firm (The Washington Capitol Group), and managing director of a government relations firm (The Commonwealth Group). Belt has also served as senior vice president at the Center for Strategic and International Studies (CSIS), a prominent Washington-based think tank, where he headed the international finance and economic policy program. He also served as executive director of the bipartisan National Commission on Retirement Policy and was appointed by President Bush to the Social Security Advisory Board.

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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.