American Benefits Council
Benefits Byte


July 31, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

Click here to read past issues on the Benefits Byte Archive page.

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House Sends Transportation Funding Measure Back to Senate with Pension Funding Stabilization Restored

In response to the U.S. Senate’s amendment and passage of H.R. 5021 on July 29, the U.S. House of Representatives voted 272-150 on July 31 to reject the Senate’s changes to the measure and send the House-passed version of H.R. 5021 back to the Senate for final approval.

The House-passed bill includes a five-year extension of the pension plan funding stabilization (or “smoothing”) measure originally passed as part of the previous transportation bill, the Moving Ahead for Progress in the 21st Century (MAP-21) Act of 2012. The Senate, during debate on July 29, effectively stripped out the pension provisions, arguing that they would jeopardize the retirement security of defined benefit plan participants.

The original MAP-21 provision stabilized interest rates for purposes of calculating defined benefit plan funding by constricting the segment rates used to determine funding status within 10 percent of a 25-year average of prior segment rates. The subsequent phase-out of the original MAP-21 stabilization provision – under which the 10 percent corridor is gradually increased to 30 percent – has reduced the effectiveness of the measure.

The House is expected to adjourn for the remainder of the summer on August 1 (returning on September 8). The Senate is expected to vote on the House version of H.R. 5021 before adjourning. If the two chambers unexpectedly fail to reach agreement on a single measure before adjournment, funding for highway projects is expected to cease within weeks and Congress will need to return to the matter in the fall.

President Obama issued a Statement of Administration Policy earlier in July supporting House passage of H.R. 5021, which suggests that he would sign the measure into law quickly upon Senate approval.

For more information, contact Lynn Dudley, senior vice president, global retirement & compensation policy, or Diann Howland, vice president, legislative affairs, at (202) 289-6700.

House Committee Approves ABLE Act

In a bipartisan voice vote on July 31, the House of Representatives Ways and Means Committee approved an amended version of a bill extending savings assistance to families with disabled children.

The Achieving a Better Life Experience (ABLE) Act (H.R. 647) authorizes the creation of special savings accounts that would permit a beneficiary to save for expenses such as education, medical and dental care, community support services, employment training and support, moving and assistive technology, housing and transportation. These accounts, structured like 529 college savings accounts, would be available to individuals eligible to receive supplemental security income benefits under Title XVI of the Social Security Act.

A Joint Committee on Taxation (JCT) description of the substitute amendment is available.

The JCT estimates that the key provisions of H.R. 647 will cost just over $2 billion over ten years. Committee Chairman Dave Camp (R-MI) noted in his opening statement that H.R. 647 is not offset, but said he was confident that the committee would find “bipartisan pay-fors” that can pass the House and U.S. Senate before proceeding to the full House for consideration. The measure already has 379 cosponsors.

The measure has also been introduced in the U.S. Senate as S. 313, sponsored by Subcommittee Chairman Bob Casey (D-PA). This legislation was the subject of a Senate Finance Committee’s Taxation and IRS Oversight Subcommittee hearing on July 23 (as we reported in the July 23 Benefits Byte). S. 313 has 74 Senate cosponsors, including Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY).

For more information, contact Diann Howland, vice president, legislative affairs, at (202) 289-6700.

House Formally Authorizes Lawsuit Against President Obama on Party-Line Vote

The U.S. House of Representatives formally approved a resolution authorizing Speaker of the House John Boehner (R-OH) to sue President Obama on July 30 by an overwhelmingly partisan vote of 225-201. (Five Republicans voted “no” with all Democrats: Representatives Paul Broun (R-GA), Scott Garrett (R-NJ), Walter Jones (R-NC), Thomas Massie (R-KY) and Steve Stockman (R-TX).)

As we reported in the July 11 Benefits Byte, House Republicans intend to file a lawsuit against the president to protest the Administration’s delay of the employer “shared responsibility” provisions of the Patient Protection and Affordable Care Act (PPACA). The resolution charges the president and his administration with failure “to act in a manner consistent with that official’s duties under the Constitution and laws of the United States with respect to implementation of (including a failure to implement) any provision of the [PPACA].”

In July 2013, following an informal announcement by the U.S. Treasury Department,  the Internal Revenue Service (IRS) issued Notice 2013-45 delaying for one year (until January 2015) the mandatory employer and insurer reporting requirements under sections 6055 and 6056 of PPACA, as well as the associated "employer shared responsibility" penalties under Section 4980H. The Council applauded this delay by the administration after having communicated to executive branch officials the untenable implementation burdens that would have otherwise been imposed on employer health plan sponsors.

There is no timetable for the filing of the lawsuit yet. For more information, contact James Klein, president, at (202) 289-6700.

Ways and Means Subcommittee Talks Retirement, Social Security

In a July 29 hearing, the U.S. House of Representatives Ways and Means Committee’s Social Security Subcommittee examined the possible implications of the Social Security Program’s financing challenges on individuals’ retirement security. The subcommittee hearing featured testimony from economists and other academic experts.

The hearing was intended as an analysis of the financial status of Social Security programs, the factors influencing the benefits paid, the status of Americans’ retirement readiness and how workers can be helped to better plan for their retirement.

As we reported in a July 28 Benefits Byte story, the Social Security Board of Trustees released the 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance (OASI) and Federal Disability Insurance (DI) Trust Funds on July 28. The combined retirement and disability trust funds are estimated to be completely exhausted by 2033, identical to the previous projection. Taken separately, the DI Trust Fund will become insolvent in late 2016  and the OASI Trust Fund will remain solvent through 2034.After 2033, incoming revenue into the combined trust funds will be sufficient to pay only about three quarters of promised benefits.

The subcommittee heard from the following witnesses:

  • Charles P. Blahous III, public trustee on the Social Security and Medicare Boards of Trustees, described the findings released by the Board of Trustees on July 28 and asserted that “the uncertainty about how the crisis is to be resolved is a threat to retirement security.”
  • Sylvester J. Schieber, an independent consultant, discussed the current retirement preparedness of American workers, through Social Security and employer plans. He noted that “conventional measures of Social Security replacement of earnings result in replacement rates 15 to 20 percent higher than those presented by the Trustees for full-career workers retiring at normal retirement age.”
  • C. Eugene Steuerle, fellow and Richard B. Fischer Chair of the Urban Institute, focused on issues of fairness, efficiency, and adequacy raised by the Social Security program. He argued that the Social Security program as currently constructed is discriminatory, overly generous to middle-aged workers and overly burdensome on younger generations.
  • Joan Entmacher, vice president for family economic security at the National Women’s Law Center, explained how women, in particular, rely on Social Security benefits to avoid poverty in old age. She recommended long-term reform to shore up the program, but in immediate terms she recommended reallocating payroll taxes to the most appropriate programs and increasing funding for the Social Security Administration.
  • Andrew G. Biggs, resident scholar at the American Enterprise Institute, refuted the notion of a present “retirement crisis,” noting that overall retirement security – including private and workplace savings – is strong. He urged caution when reforming Social Security so as not to disrupt personal retirement savings in 401(k) plans and IRAs.
  • Laurence J. Kotlikoff, William Fairfield Warren Professor at Boston University, described both generational and intra-generational inequities contributing to, and resulting from, the underfinancing of the Social Security program. He described how the program’s financing methodology is overly complex and should be reformed.

During the question-and-answer period, Republicans and Democrats agreed that changes to the Social Security funding regime will need to be reformed soon. There was general disagreement on the strategy for doing so, however, with Republicans warning against tax increases and Democrats warning against benefit cuts.

In describing the importance of the Social Security system and the danger of privatization, Becerra invoked historical instances of dramatic retirement savings losses (such as the Enron scandal).

There is currently minimal political appetite for broad entitlement reform, although it could be incorporated as part of potential comprehensive tax reform discussions in the coming years. For more information, contact Diann Howland, vice president, legislative affairs, at (202) 289-6700.

House Committee Approves Legislation Addressing PPACA Grandfathering, Health Data After Wide-Ranging Hearing on Health Reform

The U.S. House of Representatives Energy and Commerce Committee approved two measures on July 30 addressing health care policy, including a bill that would essentially allow health insurance issuers to continue offering existing plans even if those plans do not meet certain minimum standards under the Patient Protection and Affordable Care Act (PPACA).

  • On a 27-20 (mostly party-line) vote, the committee approved the Employee Health Care Protection Act (H.R. 3522): The bill would allow health insurance issuers to continue to offer group coverage that was in effect during 2013, including plans that do not comply with the PPACA requirements. Frank Pallone, Jr. (D-NJ), the ranking Democratic subcommittee member, criticized the committee leadership for not following regular order for bills and not holding a hearing or a markup on H.R. 3522  in the subcommittee before the full committee markup.

In convening the markup session, Chairman Fred Upton (R-MI) noted the committee’s record of bipartisan success but stated that “our work is not done.” There is no timetable for consideration of these bills by the full House.

H.R. 3522 had been discussed in a July 28 hearing of the House Energy and Commerce Subcommittee on Health, which focused on the possible taxpayer liability under the PPACA risk corridor program. As one of the risk mitigation provisions in PPACA designed to protect insurers while the data on expected health care enrollees is limited, risk corridors provide a payment to insurers if their losses exceed a certain amount, and are also used to limit an insurer’s gains by requiring insurers to make payments if their gains exceed a certain threshold. (For more information on the risk mitigation programs, see June 25 Benefits Byte.)

The July 28 hearing also focused on the losses of health care coverage for individuals and small businesses with non-PPACA compliant health care plans, including testimony on additional legislation addressing certain elements of the Patient Protection and Affordable Care Act (PPACA):

  • Taxpayer Bailout Protection Act (H.R. 4406): The bill amends PPACA’s risk corridor program to require the Department of Health and Human Services (HHS) to ensure that the amount of payments to plans for a plan year beginning during calendar years 2014 through 2016 does not exceed the amount of payments to HHS for such plan year.

Chairman Joseph Pitts (R-PA) said in his opening statement that the legislation amending the risk corridor program under PPACA would protect taxpayer dollars. “If done in a budget-neutral fashion, taxpayers would have little to be worried about when it comes to risk corridors,” he said.

The subcommittee heard testimony from the following witnesses:

  • Edmund Haislmaier, senior research fellow at the Heritage Foundation, stated that the first two risk mitigation programs under PPACA, reinsurance and risk adjustment, are more than adequate to mitigate risk and therefore make the risk corridor program unnecessary.
  • Stan Veuger, resident scholar at the American Enterprise Institute, said that despite the assurance that previously insured Americans could keep their plans, millions of Americans may still lose their insurance, citing professor Jonathan Gruber of the Massachusetts Institute of Technology, one of Obamacare’s chief architects He recommended enacting H.R. 3522 as well as repealing both the employer and individual mandates.
  • Jack Hoadley, research professor at Georgetown University, said that the risk corridor program under PPACA functions the same as the risk mitigation programs under the Medicare Modernization Act and Medicare Part D, and testified that the experience in Part D suggests that these programs have already protected taxpayers.

The question-and-answer session focused on the differences between the risk corridor programs in Medicare Part D and PPACA and whether Congress should have realized that Americans would lose previous health care coverage after PPACA was enacted due to non-PPACA compliance. Haislmaier stated that while the risk corridor programs are similar in the two acts, the issue is whether risk corridors are appropriate with PPACA. Venger stated that the members of Congress who had drafted PPACA should have realized that Americans were likely to lose coverage due to plans with non-PPACA compliance.

For more information, contact Katy Spangler, senior vice president, health policy, at 202-289-6700.

House Subcommittee Hears PPACA Implementation Updates from CMS, GAO

In a July 31 hearing, the U.S. House of Representatives Energy and Commerce Subcommittee on Oversight and Investigations discussed the continued implementation of the Patient Protection and Affordable Care Act (PPACA), including the upcoming open enrollment period and whether to expect similar website malfunctions as were experienced in the first open enrollment period.

The subcommittee heard testimony and updates from officials from the Centers for Medicare and Medicaid Services (CMS) and the Government Accountability Office (GAO). The hearing was intended to examine the status of completion of the back-end payment and verification systems as well as the recent GAO report outlining the issues with from the first open enrollment period and the incurred cost.

In his opening statement, Chairman Tim Murphy (R-PA) described his ongoing concern with the PPACA website and the extensive issues experienced during the first open enrollment period, despite the assurances from the Administration last year that the website was ready for the first open enrollment period in October 2013. He also stated that he hoped to hear from the witnesses what the public could expect when the employer mandate is enforced, but neither of the witnesses commented on the possible effect of the employer mandate or whether a further delay is expected.

Ranking Member Diana DeGette (D-CO), in her opening statement, described the PPACA rollout in 2013 as a “disaster” but said that with the recent improvements, she hoped to hear the CMS’ plan to move forward for the next enrollment period.

The subcommittee heard from the following witnesses:

  • Andy Slavitt, principal deputy administrator for CMS, testified that CMS is committed to building on the successes and lessons learned from the first open enrollment period. He stated that CMS is focused on three priorities: increasing the value to consumers by continuing to improve the information, plan options and affordability of the shopping experience, continuing to automate the incomplete back end systems of the Marketplace and addressing the execution and technology issues with a more disciplined, highly accountable and visible management structure.
  • William T. Woods, director of acquisition and sourcing management for GAO, testified on the July 30 report concerning the contract management issues with the building of The report concluded that CMS undertook the development without adequate planning or oversight practices, leading to significant cost increases, improper approvals of contractor requests and a range of contractor performance issues. He stated that the GAO gave five recommendations to CMS to better manage the development of the Marketplace, including that CMS take immediate steps to assess the causes of the continued cost increases and develop a plan to ensure a timely and successful open enrollment period.  

In the question-and-answer portion, members of the subcommittee asked whether would be fully ready this fall, to which Slavitt answered that CMS can expect a vastly difference situation than the last October, taking into account all the improvements, but he expects that there will still be some “bumps.” Slavitt responded to queries that the GAO report and recommendations were not news to CMS and actions to resolve the issues had already been underway.

Both Slavitt and Woods said, in response to questions from the panel, that they had no information on delay or repeal of the employer mandate.

For more information, contact Katy Spangler, senior vice president, 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.

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