BENEFITS BYTE

May 13, 2004
BB 04—56

In this issue:

  • Cash Balance Hearing Announced, Council Conference Call on May 14
  • House Approves Batch of Health Care Bills
  • Senate Expected to Consider Mental Health Parity Legislation
  • More Details Available on Exec Comp Provisions in International Tax Bill

Cash Balance Hearing Announced, Council Conference Call on May 14

House Education & the Workforce Committee Chairman John Boehner (R-OH) and Employer-Employee Relations Subcommittee Chairman Sam Johnson (R-TX) announced on May 12 their intention to hear testimony on the status of cash balance pension plans. The hearing will supplement the Committee's ongoing preparation of comprehensive defined benefit pension plan legislation.

The hearing, which is not yet scheduled, will examine the issues surrounding employer conversions to cash balance plans and the benefits of these plans for employees. "We plan to pursue permanent solutions to preserve cash balance pension plans as a viable retirement security vehicle through a careful, deliberative approach," said a joint statement from Boehner and Johnson. "We believe cash balance plans are an important part of the defined benefit pension system." This is certainly one of the few public supportive comments recently made about hybrid plans.

Also on May 12, the Council attended a roundtable meeting hosted by Senator Tom Harkin (D-IA) to discuss his interest in introducing legislation addressing cash balance and other hybrid plans. Representative Bernie Sanders (I-VT) was present at the meeting, as were a number of business and participant groups.

The Council has scheduled a Benefits Briefing conference call for Friday, May 14 at 3:00 p.m. (Eastern Time) to discuss developments in hybrid pension plan legislation. On this call, Council members will also hear from John O'Neill, Tax Counsel for the Senate Finance Committee; David Thompson, Chief Pension Counsel to the Senate Health, Education, Labor and Pensions Committee; and Stacey Dion, Professional Staff Member for the House Education and the Workforce Committee.

To RSVP for the Benefits Briefing and obtain call-in information, click here or paste the following into your Web browser: http://64.78.6.90/abc/index.cfm?fuseaction=home.register&callID=207

A recording of this call will be available for $50.

For more information, contact Diann Howland, Council vice president, retirement policy, at (202) 289-6700.

House Approves Batch of Health Care Bills

On May 12, the House of Representatives approved a number of health care-related bills as part of the "American Careers Initiative," which is the first of eight components of an economic plan being promoted by Republican House leaders. Among the measures passed was H.R. 4279, which allows employees to take up to $500 in unused year-end flexible spending account (FSA) funds and carry them over to the following year or transfer them to a health savings account (HSA). The Council prepared a news release commending the efforts of bill sponsor Representative Jim McCrery (R-LA) and the leadership of Representative Jim DeMint (R-SC), who initially sponsored the Health Flexible Spending Account Enhancement Act (H.R. 1177).

The House also approved both H.R. 4280, which reforms the medical liability system, and H.R. 4281, an association health plan proposal which allows small businesses to band together to offer self-insured health coverage to their members free of state regulation and benefits mandates — though they would still be subject to federal standards under the jurisdiction of the Department of Labor.

This legislative activity follows the May 11 issuance of U.S. Treasury Department guidance on HSAs, FSAs and Health Reimbursement Arrangements (HRAs), as well as the release of recommendations by the Republican Task Force on Health Care Costs and the Uninsured. (See the May 11, 2004 Benefits Byte for details.)

For more information, please contact Maria Ghazal, Council director, health policy, or Susan Relland, Council health policy legal counsel, at (202)289-6700.

Senate Expected to Consider Mental Health Parity Legislation

The Council has learned that the Senate may very soon consider a proposal to significantly expand current law mental health parity requirements. The proposal will be offered by Senator Pete Domenici (R-NM). The measure, originally sponsored with Senator Edward Kennedy (D-MA), reportedly may be a version of a compromise bill that would eliminate the requirement in the Domenici/Kennedy bill (S. 486) that all mental health diagnoses in the "DSM-IV," the compendium of mental health disorders, be included in the parity requirement. It also would permit some limits on mental health benefits if the health plan includes these limits on "substantially all" medical and surgical benefits, a term that is undefined. The Council has emphasized to Senator Domenici and his staff that these modifications do not address all of the concerns that plan sponsors have with the proposal. Senator Domenici would reportedly like to obtain an agreement to limit debate and amendments when the issue is considered. There is no word yet on an agreement.

Even if the Senate approves an expanded mental health parity mandate, the measure will face at least somewhat of an uphill battle in the House where Speaker Dennis Hastert (R-IL) and Ways & Means Committee Chairman Bill Thomas (R-CA) remain opposed to expansion of current law. The Council continues to state a preference for current law and is also working to provide technical assistance on this issue.

For more information, please contact Maria Ghazal, Council director, health policy, at (202)289-6700.

More Details Available on Exec Comp Provisions in International Tax Bill

As we reported in the May 11 Benefits Byte, the Senate adopted a number of nonqualified deferred compensation provisions as part of an amendment to the Jumpstart Our Business Strength (JOBS) Act (S. 1637). The bill was ultimately approved by the Senate by a vote of 92-5.

As we reported, the nonqualified deferred compensation provisions generally mirror those in the National Employee Savings and Trust Equity Guarantee Act (NESTEG) pension bill approved by the Senate Finance Committee in 2003, which were then added to S. 1637 through approval of an amendment offered by Senate Finance Committee Chairman Charles Grassley (R-IA). These provisions are also similar to the provisions contained in the House of Representatives version of the international tax bill, H.R. 2896. The key differences between the Senate-passed and prior versions are:

  • The election period requirement has been changed to require the election in the year before the year services are performed instead of the year compensation is earned.

  • The new rules do not apply to certain nonelective deferred compensation attributable to service performed for a state or local government as a non-employee.

  • Language has been modified to coordinate with the limitations on so-called "excess parachute payments" (certain compensation paid to corporate insiders upon change in control.)

  • The language prohibiting deferrals of stock option gains and restricted stock gains has been modified to apply to exchanges of options, employer securities, or property based on employer securities previously transferred to the taxpayer regardless of whether the exchange is initiated at the election of the taxpayer or by the employer.

  • Several technical drafting changes were also made, including clarification that the nonqualified deferred compensation investment options must be comparable to those under the defined contribution plan of the employer.

A more detailed list of these changes is available on the Council Web site. A side-by-side comparison chart of other deferred compensation proposals, as well as the NESTEG provisions prior to the above-referenced modifications, is also available on the Council Web site.

For more information, contact Diann Howland, Council vice president, retirement policy, or Lynn Dudley, Council vice president and senior counsel, at (202) 289-6700.

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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.