January 7, 2015
- Council Letter Supports Legislation Marking 40 Hours as 'Full Time,' Calls for Additional Changes to Related Employer Responsibility Provisions
- House Passes Bill Exempting Veterans When Determining Employer Mandate Applicability
- First State-Mandated Employer Retirement Plan Signed Into Law in Illinois
Council Letter Supports Legislation Marking 40 Hours as 'Full Time,' Calls for Additional Changes to Related Employer Responsibility Provisions
In a January 7 letter to the U.S. House of Representatives, the Council urged passage of a measure to establish 40 hours as the benchmark for “full time” work under the Patient Protection and Affordable Care Act (PPACA) and recommended other necessary modifications to related aspects of the employer shared responsibility provisions. The House is expected to vote on the measure on January 8.
The PPACA "shared responsibility" employer mandate under Internal Revenue Code Section 4980H, which took effect on January 1, requires employers with 100 or more full-time (or equivalent) employees to offer health coverage that satisfies affordability and minimum value requirements to their full-time employees or pay a penalty if even one full-time employee receives a premium tax credit for health coverage obtained through a health insurance exchange. (The 100 employee threshold is applicable only under transition relief for 2015; after 2015, the threshold is 50 employees.) Under PPACA’s statutory language and final regulations, “full-time employee” is defined as one who works, on average, at least 30 hours per week.
The Save American Workers Act (H.R. 30), introduced by House Ways and Means Committee member Todd C. Young (R-IN), would replace the number 30 (hours per week) with the number 40 (hours per week) for purposes of identifying full-time employees, and modify the calculation of full-time equivalent workers by requiring employers to divide the aggregate number of hours of service of employees who are not full-time employees by 174 rather than 120. The House approved a prior version of the bill (H.R. 2575) in April 2014.
The Council letter noted that that many employers are concerned they could be subject to penalties given the complexity of administering coverage to comply with the law, particularly with respect to employees who work a variable schedule, short-term employees, temporary, seasonal or similar contingent workers. “Because final regulations implementing the employer mandate include many complex standards for determining whether an individual is a ‘full-time employee,’ passage of H.R. 30 is one helpful step Congress can take to alleviate employer concerns,” Council President James A. Klein said in a January 7 media statement.
The Council letter also supported modifying the employer shared responsibility provisions in other ways to minimize administrative burdens on employers, such as extending the transition relief for the final 4980H regulations.
For 2015, an employer that offers coverage to at least 70 percent of its full-time employees (and applicable dependents) will not be subject to a penalty. In 2016 and beyond, however, the 4980H regulations prescribe that the coverage offer must be made to 95 percent of full-time employees. The Council recommends extending the standard of 70 percent beyond 2015, and/or implementing a glide path that gradually phases the percentage from 70 to 95 over several years.
Senators Susan Collins (R-ME) and Joe Donnelly (D-IN) have introduced a companion bill in the U.S. Senate, the Forty Hours is Full Time Act (S. 30), but legislative text was not available at press time. For more information, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.
House Passes Bill Exempting Veterans When Determining Employer Mandate Applicability
On January 6, the U.S. House of Representatives passed the Hire More Heroes Act (H.R. 22) by unanimous, bipartisan vote of 412-0.
The measure, sponsored by Representative Rodney Davis (R-IL), would exempt veterans already enrolled in coverage under TRICARE or the U.S. Department of Veterans Affairs (VA) from being taken into account for the purposes of determining if an employer is subject to the employer mandate under the Patient Protection and Affordable Care Act (PPACA).
The PPACA "shared responsibility" employer mandate under Internal Revenue Code Section 4980H, which took effect on January 1, requires employers with 100 or more full-time (or equivalent) employees to offer health coverage that satisfies affordability and minimum value requirements to their full-time employees or pay a penalty if even one full-time employee receives a premium tax credit for health coverage obtained through a health insurance exchange. (The 100 employee threshold is applicable only under transition relief for 2015; after 2015, the threshold is 50 employees.)
The bill would allow businesses to hire veterans covered by TRICARE or the VA without counting them as full-time employees. Supporters of the measure point out that it will help some small businesses stay below the mandate threshold as well as encourage the hiring of veterans.
The bill was previously introduced in the House in the 113th Congress and approved by a vote of 406-1. The measure was not considered by the Senate.
For more information, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.
First State-Mandated Employer Retirement Plan Signed Into Law in Illinois
On January 4, Illinoisbecame the first state in the nation to require employers to automatically enroll employees in Roth Individual Retirement Accounts (IRAs).
Governor Pat Quinn (D) signed into law the Illinois Secure Choice Savings Program Act (S.B. 2758), stating that the new measure would provide access to an employer-sponsored retirement plan for almost 2.5 million employees. According to the governor’s office, 44 percent of Illinois workers currently do not have access to an employer-sponsored retirement plan. The law applies primarily to those employers that do not offer a retirement plan but does not require employers to make contributions on behalf of their employees.
Below are some key features of the program:
- The program applies only to private employers with 25 or more employees that have operated for two or more years and offer no retirement plan outside of Social Security.
- Employers must administer payroll deductions and deposits into “Secure Choice” Roth IRA accounts using their existing payroll systems.
- Employees are automatically enrolled, but may opt out at any time.
- Employee contributions are automatically set at three percent unless the worker designates a different amount.
- Employees will be able to retain their Secure Choice accounts when moving from job to job.
The law is effective June 1, but employers will have two years to fully implement the program.
State-level retirement plan initiatives have raised questions about the responsibilities they might impose on employer plan sponsors, as well as possible concerns about the erosion of ERISA’s federal framework for benefits plan administration. While encouraging savings is crucial for Americans’ retirement security, the creation of state laws establishing mandates over retirement policy may pose issues of concern for the business and benefits community.
Variations in state laws will create substantial administrative burdens and costs on multi-state employers sponsoring employee benefits. In the Council’s new strategic plan, A 2020 Vision: Flexibility and the Future of Employee Benefits, the Council emphasizes that uniform plan administration is essential for multi-state employers, and recommends that state mandates and other state-run initiatives should be evaluated in the context of the overriding need for national uniformity.
Additionally, as we reported in the January 5 Benefits Byte, the U.S. Treasury Department recently launched the myRA program to provide savings vehicles similar to Individual Retirement Accounts (IRAs), targeted at individuals who do not already have access to an employer plan. In a December 15 letter to the Treasury, the U.S. Department of Labor’s decision to not rely more directly on the existing exemption for payroll deduction IRAs and instead create an exemption for federal government-run programs raises some potential questions concerning the application of ERISA to state-run retirement arrangements for those without access to employer-sponsored retirement plans.
For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy, at (202) 289-6700.