American Benefits Council
Benefits Byte


November 3, 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.

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District Court Denies EEOC's Request to Block Employer Wellness Program

On November 3, the U.S. District Court for the District of Minnesota denied a request by the U.S. Equal Employment Opportunity Commission (EEOC) to block an employer wellness program.

As we previously reported in an October 29 Benefits Byte story, the EEOC filed a request for a temporary restraining order and preliminary injunction against Honeywell International Inc.’s wellness program on October 27, alleging that it violated the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) by imposing penalties on employees who decline participation in the company’s biometric screening program.

The district court’s denial of the EEOC’s request for a temporary restraining order and preliminary injunction, relied on a finding that the program does not meet the legal standard that its continuation poses “irreparable harm” to participants.

This is the third lawsuit filed by the EEOC in recent months challenging employer-sponsored wellness programs. As we reported in our October 7 Benefits Byte story, the EEOC is also pursuing a lawsuit challenging a wellness plan sponsored by a Flambeau, Inc. (a Wisconsin-based manufacturer with 1,600 employees) as well as a similar suit against Orion Energy Systems.

The EEOC announced in its most recent semi-annual regulatory agenda that it intends to issue regulations later this year addressing wellness programs under the ADA and GINA. However, the actual timetable for the issuance of such guidance is uncertain.

“Unfortunately, the EEOC decided to pursue litigation before issuing guidance on this matter,” said Council President James A. Klein, in a statement responding to the district court’s ruling. “This is very frustrating for employers who care about the well-being of their employees and take seriously their compliance obligations. It is impossible for employers to abide by rules that do not exist.”  

The Council testified before the EEOC in a May 2013 hearing on this matter, describing employers' strong concern about the ongoing legal uncertainty that exists with respect to the application of the ADA and GINA to wellness programs. The Council also urged “federal agencies promulgating regulations should proceed in a consistent, collaborative manner that supports participatory and outcomes-based wellness initiatives” in our new strategic plan, A 2020 Vision.

For more information on wellness program issues and health policy legal matters, contact Kathryn Wilber, senior counsel, health policy, or Katy Spangler, senior vice president, health policy, at (202) 289-6700.

GAO Issues Report on Public vs. Private Sector Defined Benefit Discount Rates

A new report issued October 30 by the Government Accountability Office (GAO) examined the different approaches used by public-sector defined benefit plans as opposed to private-sector defined benefit plans to determine defined benefit plans' discount rate – the interest rate used to determine the current value of estimated future benefit payments for defined benefit pension plans.

Public-sector defined benefit plans must use higher discount rates than private-sector plans, resulting in pension obligation projections that appear considerably lower than those of private-sector single-employer plans. The GAO report, Pension Plan Valuation: Views on Using Multiple Measures to Offer a More Complete Financial Picture, analyzes the significant implications of this difference on plan funding activity. It also looked at the approaches other countries take in choosing discount rates. The analysis was requested by Senator Tom Harkin (D-IA), chairman of the Senate Committee on Health, Education, Labor, and Pensions.

The report found that large differences in the valuation of a plan’s obligations can cause vast differences in conclusions about a plan’s health, the value of a plan’s benefits, and the funding contributions required to meet them. Some experts interviewed by GAO estimated that public plans' approach to discount rates could provide incentives for them to invest in riskier assets by increasing the assumed-return discount rate and thereby lowering reported liabilities and reducing funding requirements. Public pension plan funding has been the focus of policy debate in Congress over the past few years, resulting in proposed legislation such as the SAFE Retirement Act (S. 1270, introduced by Senator Orin Hatch (R-UT)), which includes provisions intended to reduce underfunding in public plans while preserving life-time income for participants.

“Although our report illustrates the differences of opinion over pension discount rates, we found one significant area where there is some, but not universal, room for agreement. Specifically, many experts supported providing multiple measures of liabilities for different purposes to provide a more complete picture of pension plan finances,” the report said. The report stopped short of making specific recommendations.

The report also examined the different approaches used by selected countries as well, including Canada, the Netherlands, and the United Kingdom. Plans in these countries that use long-term assumed rates of return are generally lower than the 7.5 to 8 percent used by many U.S. public plans under recent market conditions.

For more information, contact Lynn Dudley, senior vice president, global compensation and retirement 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).