American Benefits Council
Benefits Byte


November 17, 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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HHS Extends Deadline for Submitting Enrollment Counts for PPACA Transitional Reinsurance Program

The U.S. Department of Health and Human Services announced late on November 16 that it is extending the deadline for contributing entities to submit their 2014 enrollment counts for transitional reinsurance program contributions until 11:59 p.m. on December 5, 2014. The deadline was originally set for November 15, 2014.

Section 1341 of the PPACA established a transitional reinsurance program (2014 through 2016) intended to stabilize premiums in the individual insurance market. Health insurance issuers and certain self-insured group health plans are assessed a per-enrollee contribution to fund this transitional reinsurance program.  The HHS Centers for Medicare and Medicaid Services (CMS) recently released the form for submitting the TRP annual enrollment count (as reported in the October 24 Benefits Byte).

The current deadlines for remitting the first (or combined) contribution amount (January 15, 2015) and the second contribution amount (November 15, 2015) remain the same. Additional information on the TRP is available on the dedicated CMS website.

For more information on the TRP, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

PBGC Reveals Fiscal Year 2014 Deficit; Multiemployer Plan Legislation Possible

The Pension Benefit Guaranty Corporation (PBGC) released its 2014 Annual Report on November 17, revealing a record total deficit of $62 billion for the agency.

This total deficit is comprised of the single-employer program deficit of $19.3 billion (down from $27.4 billion in 2013) and the multiemployer program deficit of $42.4 billion (a substantial increase from the $8.3 billion reported in 2013).

In a media statement following the release of the report, Council President James Klein said that the substantial change in the single-employer program “validates our longstanding assertion that the funded status of pensions is highly sensitive to changes in interest rates and the stock market and policy concerning long term obligations like pensions should not be determined based on a snapshot moment. At the same time, multiemployer plans operate in the same interest rate and market conditions. So the fact that the multiemployer program deficit rose more than five-fold in one year — from $8.3 billion to $42.4 billion — makes clear that the program has serious challenges.”

The PBGC report notes that “absent legislative changes, the multiemployer program faces a greater than 50 percent chance of insolvency by 2022; that likelihood reaches 90 percent by 2025.” As has been noted by the Government Accountability Office and in congressional hearings, the multiemployer pension funding provisions of the Pension Protection Act of 2006 (PPA) are scheduled to expire after 2014 and a substantial minority of multiemployer plans are reportedly in so-called "critical" condition.

Some lawmakers have expressed interest in passing legislation to stave off this so-called multiemployer “pension cliff” before the end of the year, either as stand-alone legislation or as part of a larger package extending expiring tax provisions.

The PBGC annual report credits the substantial improvement in the single-employer program to “an improving economy,” and an additional $869 million attributable to premium increases enacted in 2012 and 2013. “The fact that the increased premiums account for less than one-eighth of the significant improvement in the program is evidence that the burdens imposed by these increases was not necessary,” Klein said in the Council’s statement.

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

Senate HELP Committee Holds Hearing on EEOC Nominations, Wellness Program Suits

On November 13, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) held a hearing on the nominations of P. David Lopez to serve as general counsel and Charlotte Burrows to serve as a commissioner of the Equal Employment Opportunity Commission (EEOC). During the hearing, members of the committee discussed the recent lawsuits over employer wellness programs, with some Senators criticizing the agency for pursuing litigation in cases where no employee has complained of discrimination and before publishing guidance.

In convening the hearing, Committee Chairman Tom Harkin (D-IA) noted the importance of ensuring equal opportunity for American workers and that the EEOC, as the enforcing agency, is in need of strong leadership.

Ranking Republican Member Lamar Alexander (R-TN) said in his opening statement that the EEOC places too much emphasis on high-profile lawsuits and too little on resolving claims, and that there is a lack of transparency on how the EEOC issues guidance to the public and on its activities, generally. He voiced his concerns about lawsuits recently filed against employer wellness programs despite the lack of guidance from the EEOC.

The committee heard formal testimony from both Burrows and Lopez. In her statement, Burrows noted progress that has been made toward equal opportunity for American workers, but that more effort is needed to eliminate discrimination entirely. Lopez, in his statement, said that litigation is used as an enforcement tool as a “last resort” and that the agency seeks approval from the EEOC commissioners before filing lawsuits, consistent with the EEOC’s published guidelines.

During the question-and-answer session, several members of the committee questioned Lopez on the lawsuits filed by the EEOC on employer wellness programs despite the lack of guidance from the agency. The members specifically asked about the recent EEOC effort to obtain a temporary restraining order agains Honeywell Inc. lawsuit, which was rejected by the U.S. District Court for the District of Minnesota (for more information, see the November 3 Benefits Byte story). Lopez asserted that the Honeywell case differed from the other cases brought by the EEOC, in that the agency did not seek damages or to end the wellness program, but rather to allow the agency a temporary “breathing space” with which to conduct its investigation on whether the program was voluntary.

When asked why the case was not submitted to the commissioners prior to taking legal action, Lopez responded that it was consistent with EEOC regulations to seek temporary relief, unlike the other two previous wellness programs cases against Orion Energy Systems and Flambeau, Inc. (see October 7 Benefits Byte). Asked how the EEOC should best monitor the publishing of guidance, Burrows responded that it is important to collect input from all stakeholders and allow for public comment. “It's clear that this is an area where guidance is necessary,” said Burrows. “The maximum amount of input on something like that makes sense to me.”

Votes were not held for the nominations but are expected shortly.

The Council will host a webinar on December 10 at 2:30 p.m. Eastern Time to discuss wellness programs, EEOC enforcement under the ADA and the outlook for future guidance. We will be joined on the webinar by Jim Paretti, special assistant to EEOC Commissioner Victoria A. Lipnic. An invitation and RSVP link will be sent out shortly.

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

IRS Issues Guidance on IRA Rollover Limit

On November 10, the Internal Revenue Service (IRS) issued Announcement 2014-32, providing further guidance on the application of the Individual Retirement Account (IRA) rollover limit to one 60-day rollover per year beginning in 2015. The guidance clarifies several points, including that traditional IRAs and Roth IRAs are generally aggregated for purposes of the one-per-year rollover rule.

On March 20, the IRS issuedAnnouncement 2014-15to address the policy change inspired by the recent tax court opinion in Bobrow v. Commissioner, which held that the one-rollover-per-year limitation applies on an aggregate basis (see the March 25 Benefits Bytefor more information). Under prior law, IRA owners were allowed one 60-day rollover per IRA per year (for example, one rollover of IRA No. 1 in March and another rollover of IRA No. 2 in September). The new rule allows a maximum of one such rollover per one-year period.

Announcement 2014-32 also provides the following guidance:

  • A distribution from an IRA received at any time during 2014 and rolled over within 60 days to another IRA (even in 2015), will have no impact on any distributions and rollovers during 2015 involving any IRAs that did not make the 2014 distribution or receive the corresponding rollover.
  • The one-rollover-per-year limitation does not apply to a rollover to or from a qualified plan (and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers), nor does it apply to trustee-to-trustee transfers from one IRA to another IRA. In fact, the IRS encourages IRA trustees to offer IRA owners requesting a distribution for rollover the option of a trustee-to-trustee transfer from one IRA to another IRA.
  • Rollovers from a traditional IRA to a Roth IRA (or “conversions”) are not subject to the one-rollover-per-year limitation and are disregarded in applying the one-rollover-per-year limitation to other rollovers.
  • The term “traditional IRA” includes a simplified employee pension described in Internal Revenue Code Section 408(k) and a SIMPLE IRA described in Section 408(p).)

The statutory language for Section 529 plans, Health Savings Accounts (HSAs) and educational savings accounts (ESAs) also contain a similar one-rollover-per-year rule.  IRS has yet to address whether the Bobrow reasoning applies to these other arrangements.

For more information, contact Jan Jacobson, senior counsel, 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).