American Benefits Council
Benefits Byte


August 5, 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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PBGC Premiums Remain a Possible Revenue Raiser Before Year-End

 When the Senate and House of Representatives reconvene after Labor Day, there will be roughly 30 legislative days left in the current Congress, including the post-election “lame duck” session. During that period, legislative priorities may arise requiring “revenue-raisers” – offsets to federal spending or favorable tax provisions.

Although the Council, in concert with allies in the business community, has so far this year successfully resisted efforts to again raise Pension Benefit Guaranty Corporation (PBGC) premiums, it is important that the plan sponsor community remain vigilant on this matter. Among possible initiatives requiring revenue offsets in the coming months is legislation extending tax provisions that expired after 2013 or will expire after 2014. As we have seen in the past, PBGC premium increases have been viewed by some in Congress as a convenient source of revenue to finance measures totally unrelated to pension policy.

Since the beginning of 2014, Council staff members have had 128 separate in-person meetings with Senators, Representatives and/or Congressional staff specifically to discuss our objection to further PBGC premium increases that some policymakers have suggested in addition to the nearly $17 billion worth of increases enacted by Congress over the past two years. A number of these meetings have been in conjunction with our member companies who share this concern, as well as with other allies in the business community. We appreciate that several Council members have devoted time and resources to join us in this effort.

In addition to the numerous in-person meetings with policymakers , the Council has provided extensive written communications to all Congressional offices, including distribution of an important independent research report we commissioned, Further PBGC Premium Increases Pose Greatest Threat to Pension System, which validated that “premium increases threaten the long-term viability of the defined benefit pension system and PBGC’s plan termination insurance program by driving away employers that present no risk to the system.”

Over the course of the past several months the Council and others expressed concerns that premium increases might be used as a partial offset for reauthorization of the federal highway trust fund, as was the case when the trust fund was reauthorized in 2012. As previously reported, in one of its final acts before departing for the August recess, Congress approved the Highway and Transportation Funding Act (H.R. 5021) and President Obama is expected to sign it into law. No premium increases were included in the legislation, but it did include (as a revenue offset) a five-year extension of pension plan funding stabilization (or “smoothing”) measures that had also been incorporated in the 2012 highway bill.

The smoothing provision originally included in the 2012 highway bill, and now extended in the most recently-enacted measure, is based upon a framework developed by the Council’s Retirement Income Task Force and endorsed by our Policy Board of Directors, to provide much-needed stabilization of the funding obligations of a number of pension plan sponsors.

Undoubtedly, efforts to resist PBGC premium increases this year were aided by the release in June of PBGC’s Fiscal Year 2013 Projections Report revealing that the financial condition of the single-employer insurance program is likely to improve dramatically over the next decade. Specifically, PBGC projects that it will decline from a $27.4 billion deficit in 2013 to a $7.6 billion deficit in 2023. However, the multiemployer guarantee program poses serious financial concerns and is the topic of continued Congressional attention.

The Council has prepared a summary and talking points document identifying some of the key findings in the Projections Report, including the true dimensions of the condition of the single-employer program.

As the Council observed in a May 29 analysis of the PBGC’s methodologies and enforcement approach, “today, PBGC’s single-employer program is very strong. If healthy plans and companies are driven out by the continuation of current PBGC policies, PBGC’s revenue sources will dry up, leaving it unprotected against future losses.”

While it is very good news that Congress has so far this year refrained from adopting PBGC premium increases, the need for revenue in the coming months for any number of initiatives – and we note that the highway trust fund reauthorization is only a temporary measure through next spring – could once again put PBGC premiums into play.

The Council welcomes your input and participation as we continue to meet with members of Congress and their staff to resist additional PBGC premium increases. For more information, contact Lynn Dudley, senior vice president, global retirement & compensation policy, or Diann Howland, vice president, legislative affairs, at (202) 289-6700.

Council Voices Support of Senate Measure to Repeal PPACA Auto Enrollment

In an August 5 letter to Senator Johnny Isakson (R-GA), the Council expressed strong support for the Auto Enroll Repeal Act (S. 2546), introduced by Isakson earlier this year. S. 2546 would explicitly repeal the automatic enrollment requirements for large employers under the Patient Protection and Affordable Care Act (PPACA). (An identical bill (H.R. 1254), sponsored by Representatives Richard Hudson (R-NC) and Robert Pittenger (R-NC), was introduced in the House of Representatives in 2013.)

“Automatic enrollment is not necessary for increasing health plan participation and will impose burdensome requirements on employers and potentially disqualify individuals from receiving subsidies for which they would otherwise be eligible,” the letter said.

Current law, as established by Section 1511 of the PPACA, requires employers with more than 200 full-time employees to automatically enroll new full-time employees in health care coverage (subject to any waiting period) and continue the enrollment of current employees, with an opportunity for employees to opt out.

The Council’s letter stated that despite the success of auto enrollment features in defined contribution retirement plans, employees’ enrollment in health benefits is “considerably different from voluntary enrollment in 401(k) plans. As most Americans are now required by law to enroll in a health plan or pay a penalty, there is a compelling incentive that already exists for health coverage that is simply inapplicable in the 401(k) context,” making an auto-enrollment feature unnecessary to increase health plan participation. The Council also observed that required auto enrollment could affect employees’ eligibility for premium tax credits and cost-sharing reductions for health coverage offered in the health care exchanges, as “enrollment in ‘minimum essential coverage,’ regardless of affordability, renders an individual ineligible.”

In addition, the Council warned against the excessive burdens that would be imposed on employers by requiring automatic enrollment. “Employers would be required to make significant changes to their payroll and information technology systems to facilitate the automatic enrollment requirement. To the extent employers are required to allow individuals to opt out of coverage on a retroactive basis, employers would face significant administrative challenges. For example, employers would need to reclassify prior amounts as taxable wages and ensure correct tax reporting and withholding with respect to such reclassified wages.”

This letter follows a previous letter sent on July 22, in which the Council joined with a number of large employers and trade associations to commend Sen. Isakson on his leadership with the bill and urge passage of S. 2546.

S. 2546 has been referred to the Committee on Health, Education, Labor, and Pensions, of which Isakson is a member. The Council will continue working with legislators to reduce unnecessary burdens on employers stemming from PPACA. For more information, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.

IRS to Host Webinar for Employers on Reporting of Health Care Coverage under Tax Code Section 6056

The Internal Revenue Service (IRS) will host a webinar for employers on August 14, 2014, at noon (12 p.m.) Eastern Time to describe how applicable large employers should report health care coverage under Internal Revenue Code Section 6056, as established by the Patient Protection and Affordable Care Act (PPACA).

Code Section 6056 requires every applicable large employer (generally, an employer that employed on average at least 50 full-time employees or equivalents) to file a return with the IRS that reports the terms and conditions of the health care coverage provided to the employer's full-time employees during the year. Form 1095-C is to be used to satisfy this requirement. Form 1094-C is to be used to transmit these returns.

On March 5, the Internal Revenue Service (IRS) issued final regulations on Section 6056 reporting, followed by the release of draft forms on June 23. Official instructions for completing the forms have not yet been released. These reporting requirements will not be effective until 2015 (first reporting is due in early 2016).

The August 14 IRS webinar will cover:

  • Internal Revenue Code Section 6056
  • Who is required to report
  • What elements are required to be reported
  • When Applicable Large Employers must report
  • How do government entities designate reporting

Speakers for the webinar will include Tennille Francis, Tax Law Specialist, IRS office of Federal State & Local Governments; Stephen Tackney, Deputy Division Counsel/Deputy Associate Chief Counsel, IRS office of Chief Counsel; and Ligeia Donis, Senior Technician Reviewer, Employment Tax Branch, IRS office of Chief Counsel. Tackney and Donis have both appeared on the Council’s P4P … Preparing for PPACA webinar series on implementation topics.

Interested employers can register for the IRS webinar here. Please note, this is not a Council webinar. For more information on PPACA employer reporting, contact Kathryn Wilber, senior counsel, 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.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).