June 15, 2001


In this issue:


Senate Will Begin Patients' Bill of Rights Next Week; House May Also Act Quickly

The Kennedy-McCain "Patients' Bill of Rights" was reintroduced with some changes yesterday as S. 1052. These changes will allow the bill to by-pass the committee process and be called up for consideration by Senate Majority Leader Tom Daschle (D-SD) early next week.

It is yet unclear if any Republicans will object to proceeding to consideration of the bill. Both parties are expected to offer amendments to modify the bill during floor debate. For example, the Council expects amendments on liability and the external review process to require exhaustion of this expanded appeals process before a lawsuit could be initiated. Also expected is an amendment to require coverage decisions made by external reviewers to be bound by a plan's definition of medical necessity and similar contract provisions if it meets a safe harbor standard specific in the legislation. There may also be amendments to expand access to health insurance, add new benefit mandates such as an expanded requirement for mental health parity, and provisions unrelated to the managed care debate. Once begun, the floor process could take up to several weeks to complete. The White House has made its position very clear that the Kennedy-McCain bill would be vetoed if it remains in its current form, and now it is up to the Senate to decide whether it will pass a bill the President will sign.

Meanwhile, Speaker of the House of Representatives Dennis Hastert (R-IL) has directed the Chairmen of the Ways & Means, Education & the Workforce and Energy and Commerce committees to craft a bill to offer Members, particularly Republicans, as an alternative to the Ganske-Dingell bill (the House companion to the Kennedy-McCain bill). The House may also consider Patients' Bill of Rights next week in an effort to resolve the issue and perhaps finish consideration before the Senate.

Social Security Commission Meets, President Nominates Social Security Commissioner

President Bush's Social Security Commission met for the first time on June 11, focusing on the future insolvency of the Social Security system and the benefits of creating individual accounts within the system. As reported in the May 2 Benefits Byte, the commission is a bipartisan, 16-member commission to "study and report back this fall with specific recommendations to preserve Social Security for seniors while building wealth for younger Americans." The commission is co-chaired by former Senator Daniel Patrick Moynihan (D-NY) and Dick Parsons, co-chief operating officer of AOL Time-Warner. President Bush's executive order establishing the commission is currently available on the Council Web site.

At the meeting on June 11, commission members directed the commission staff to prepare a draft interim report by July 10, to focus on the challenges facing the Social Security program and the criteria by which the commission will evaluate reform proposals.

The final report, which will include a legislative proposal, is due in late fall of 2001. Early indications from Monday's meeting suggest that the commission will seriously consider increases in the retirement age and reductions to cost-of-living adjustments (COLAs). The Council has formed a Social Security Working Group to develop testimony for submission to the commission.

In other Social Security news, on June 7 President Bush announced his intention to nominate Jo Anne Barnhart as Social Security Commissioner. Barnhart served in a variety of government positions during the Reagan and first Bush administrations and was a longtime aide to former Senator William Roth (R-DE). She has been a Member of the Social Security Advisory Board since 1997. The Social Security post carries a term of six years.

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

Council Provides Input Regarding Needed Guidance Under Retirement Savings Provisions of Tax Bill

On June 11, Council staff met with Treasury and IRS officials to provide our input regarding the need for various items of regulatory guidance under the retirement savings provisions of the recently enacted Economic Growth and Tax Relief Reconciliation Act (EGTRRA). Agency officials indicated that issuing guidance regarding the following provisions of the new law were among their highest priorities: increases in the defined benefit and considered compensation limits, catch-up contributions, expanded notice requirements for cash balance conversions and other defined benefit plan amendments, the expanded rollover notice, the tax credit for low- and moderate-income savers, and the timeline and process for plan amendments necessary to implement the new law. On this last issue, agency officials made clear both that they do not plan to extend the GUST remedial amendment period and that they believe the normal remedial amendment period rules should apply.

The Council's Retirement Income Task Force will be leading our efforts concerning regulatory guidance issues under EGTRRA and we are eager to hear from member companies about the issues on which they believe regulatory guidance is needed. To provide this input or for more information, please contact James Delaplane, Council vice president, retirement policy or John Scott, Council director, retirement policy at (202) 289-6700.

HHS Secretary Announces New Name for HCFA

On June 14, Health and Human Services (HHS) Secretary Tommy Thompson and Health Care Financing Administration (HCFA) Administrator Thomas Scully announced a new name for the Health Care Financing Administration. HCFA will now be known as the Centers for Medicare and Medicaid Services (CMS). The name change is the first step in a proposed overhaul of the agency, under which CMS will be divided into three parts to better serve the public.

The "Center for Beneficiary Choices" will oversee the Medicare+Choice program and help educate beneficiaries about their health care options. The "Center for Medicare Management" will handle Medicare's traditional fee-for-service program. And the "Center for Medicaid and State Operations" will handle state-administered programs, including Medicaid, the State Children's Health Insurance Program (CHIP), insurance regulation and the Clinical Laboratory Improvement Act. Thompson has said that the CMS will devote significant resources to educating and assisting beneficiaries and promised that the agency will be more responsive to Congressional requests. For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.

Council Meets with Treasury on New Stock Option Reporting Requirement

On June 13, Council staff and several Council member companies met with officials from the Treasury Deparment and IRS concerning the agencies' plan to require employers to report the amount of employee income received as a result of the exercise of nonqualified stock options as a separate item on form W-2. Currently, compensation resulting from the exercise of nonqualified options is grouped with all other forms of wage income in box 1 on the W-2. The IRS announced the new reporting requirement in Announcement 2000-97, declaring that compensation derived form exercising nonqualified options would have to be separately reported in box 12 of the W-2 and denoted with a "Code V." In reponse to concerns about the new requirement, however, the IRS quickly released Announcement 2001-7, making the new reporting requirement optional for W-2 forms issued in 2001.

The purpose of the Council's recent meeting was to urge the government to abandon this new reporting requirement as an unnecessary burden on employers. Agency officials maintain that the separately reported information is needed for general tax policy purposes and to ensure corporate compliance regarding corporate tax deductions for the exercise of nonqualified options. The Council is hopeful that new Bush Administration Treasury officials will revisit these positions and consider withdrawing the new notice requirement. If not, under Announcement 2001-17 the reporting requirement will take effect for W-2s issued in 2002. For more information on this issue, contact John Scott, Council director, retirement policy at (202) 289-6700.