American Benefits Council
Benefits Byte


January 23, 2015

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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Senate Committee Hears Testimony on Job-Based Health Insurance, Full-Time Work Week

In a January 22 hearing, the U.S. Senate Health, Employment, Labor and Pensions (HELP) Committee heard testimony from a number of employers on the definition of “full-time” work under the Patient Protection and Affordable Care Act (PPACA) and its impact on employers offering health insurance.

The hearing focused on the Forty Hours is Full-Time Act (S. 30), legislation that would change the PPACA definition of a “full-time employee” from 30 to 40 hours. Introduced in the Senate by Senators Susan Collins (R-ME) and Joe Donnelly (D-IN), the measure is a companion bill to the Save American Workers Act (H.R. 30), which was approved by the U.S. House of Representatives on January 8. The Council sent a letter to the House prior to the vote, advocating for an increase in the number of hours considered as “full-time” and urging passage of H.R. 30 as a helpful step Congress can take to alleviate employer concerns (see the January 8 Benefits Byte).

The PPACA “shared responsibility” employer mandate requires employers with 50 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 an insurance exchange. Under PPACA and Internal Revenue Service Notice 2012-58, “full-time employee” is defined generally as a person who works, on average, at least 30 hours per week. Supporters of S. 30 argue that the current 30-hour limit for a full-time workweek encourages employers to cut employee hours to avoid incurring the employer mandate penalty.

In his opening statement, Chairman Lamar Alexander (R-TN) addressed how the current 30-hour limit is already affecting his home state of Tennessee, with employers being forced to hire more workers to work fewer hours, resulting in thousands of employees making less in wages by being limited to working 29 hours. He also stated that women, low-income earners and workers without higher education are disproportionately affected.

Ranking Democratic member Patty Murray (D-WA) voiced concerns that changing the definition would create the problem S. 30 attempts to solve, with employers limiting Americans working 40 hours a week to 39. She also noted the Congressional Budget Office (CBO) projection that H.R. 30 would increase the deficit by $53.2 billion over the next ten years and would eliminate insurance for 1 million Americans.

The committee heard testimony from the following witnesses:

  • Betsy Webb, superintendent of Bangor School Department in Maine, stated that the 30-hour definition deprives the school system the flexibility it needs to be successful. She noted concerns about the effects on students’ education, especially in the case of substitute teachers, who often work 30 or more hours a week, especially if a teacher is on extended leave. She commented that using one substitute was preferential, as it reduces the disruption for students. However, because the school’s limited budget cannot afford to either sponsor health insurance for substitutes or pay the $2,000 employer penalty, they will need to cut hours and use multiple substitutes if the 40 hour work week is not restored.
  • Andrew F. Puzder, chief executive officer of CKE Restaurants, commented on the challenge of the 30-hour definition in the restaurant industry, where high competition and mostly part-time workers encourages managers to keep costs down by limiting employees to less than 30 hours. He also noted that it should be a minimal concern if employers would cut employees to less than 40 hours if the definition was changed, since they are already cutting thousands of employees to less than 30.
  • Doug Holtz-Eakin, president of the American Action Forum, testified that the 30-hour work week is at odds with labor market data in the U.S., since a majority of Americans work 40 hours or more. He asserted that fewer employees would be at risk of having hours cut to less than 40 than the current number of employees at risk with the 30 hour definition.
  • Joe Fugere, founder of Tutta Bella Pizzeria, argued in favor of the PPACA definition. He noted that the restaurant industry will always be mostly comprised of part-time workers, who are usually scheduled no more than 30 hours a week regardless of the threshold and that offering a robust benefits package leads to higher morale, productivity and retention.

In the question-and-answer period, members of the committee asked about the possible effects of changing the definition of “full-time.” In response to questions about whether the 30 hour definition prohibits small business growth, Holtz-Eakin stated it was “essentially a tax on the growth of small businesses,” limiting small businesses from expanding to more than 50 employees. Fugere responded to questions about whether raising the work week definition would make it much more difficult in such a competitive industry to try and support employees by offering coverage. Puzder noted that workers would prefer the hours and wages earned to the coverage in his experience.

Chairman Alexander closed the hearing by stating that the HELP Committee would be providing input to the Senate Finance Committee, which has jurisdiction over the advancement of S. 30 to the Senate floor. For more information, contact Katy Spangler, senior vice president, health policy, at 202-289-6700.

PBGC Requests Input on Proposed Changes to Reportable Events Forms

On January 22, the Pension Benefit Guaranty Corporation (PBGC) issued a notice of its intention to revise the forms used by defined benefit pension plans under the reportable events regulation and is requesting comments on the proposed changes. The notice also requests approval from the Office of Management and Budget (OMB) for an extension of the current information collection request (ICR) which is due to expire on March 31.

The PBGC issued proposed regulations on defined benefit plan reportable events – events that indicate potential problems and may signal the possible future underfunded termination of a plan – on April 2, 2013. Under the rule, defined benefit plans must report to the agency such events as missed contributions to a plan, a drop in plan funds to a level insufficient to pay benefits and large payouts and such “sponsor events” as loan defaults and controlled group changes. The proposed rule would exempt most companies from reporting events that would not likely put their pension plans at risk and instead would target companies based on their “financial soundness” (see the April 2, 2013 Benefits Byte).

The Council commented on the proposed rule on June 3, 2013, expressing serious concerns with this approach that while the financial soundness test could decrease the reporting burden on some “stronger” companies, the proposal has the effect of increasing the burden on “less strong” companies by imposing more burdensome requirements than would be imposed if the reporting requirements applied equally to all companies (see the June 4, 2013 Benefits Byte).

Because OMB approval of the current ICR will expire before the final rule is published, the PBGC is requesting an extension of the ICR. The notice also indicates the PBGC’s intent to revise the current forms and instructions to:

  • Require that additional supporting information be provided (e.g., event date, notice due date, filing date, and why a filing is late, if applicable).
  • Require more description of the pertinent facts relating to an event (e.g., reason for a late contribution).
  • Add an information requirement included in the regulation to Forms 10 and 10-A (for change in contributing sponsor or controlled group event).
  • Provide enhanced instructions on the type of actuarial information required to be submitted.
  • Include a note in the Form 10-A instructions stating that PBGC typically asks for additional information (which will be specified) to be submitted within seven days (or sooner, in some cases).
  • Remove information requirements that PBGC no longer needs or can gather from public sources.

The PBGC is soliciting comments through March 24. To provide input for a Council comment letter, or for more information, contact Jan Jacobson, senior counsel, retirement policy, or Lynn Dudley, senior vice president, global retirement and compensation policy, at (202) 289-6700.

NTIS Extends Comment Deadline on Proposed Certification for Access to Death Master File

On January 23, the National Technical Information Service (NTIS) released a notice to extend the period for public comment on proposed regulations to provide access to the Death Master File (DMF). The period for public comment is extended from January 29 to March 30.

On December 30, 2014, the NTIS published a proposed rule and request for comments on a proposed certification program to provide access to the DMF (see the January 15 Benefits Byte). The DMF is a list of deceased individuals maintained by the Social Security Administration and distributed through the Commerce Department. These records, updated weekly, contain the full name, Social Security number, date of birth and date of death for listed decedents. Defined benefit and defined contribution plans commonly use these files for administrative purposes, such as determining when benefits to a deceased participant should be terminated or when a payment should be made to a surviving beneficiary.

Under the Bipartisan Budget Act enacted in December 2013 (and effective as of March 26, 2014), the Secretary of Commerce must restrict access to the information in each individual’s DMF for a three-year period beginning on the date of the individual’s death, except to persons who are certified under a program to be established by the Secretary of Commerce.

The new proposed rule would create a permanent certification program to (1) provide immediate access to a “Limited Access DMF” to those users who demonstrate a legitimate fraud prevention interest or a legitimate business purpose for the information and (2) otherwise delay the release of the DMF to all other users to reduce opportunities for identity theft and restrict information sources used to file fraudulent tax returns.

The Council previously filed a comment letter in April 2014 which focused on an issue not adequately addressed in the December proposal (see the April 25, 2014 Benefits Byte).  We understand that a certified service provider or plan would need to share certain DMF information with non-certified entities in order for plans to be properly administered and this practice is arguably not permitted under the Interim Final Rule in effect.  Although the proposal included one new rule that appears to be aimed at solving the problem, it only permits a certified entity to share DMF information with non-certified entities who independently obtained the same information.  This may cover information such as name and social security number but will be unlikely to cover the fact someone has died or the date of death, for example.  The proposed regulation also includes an elaborate new certification process that includes submission of an attestation from an “Accredited Certification Body” (as defined in the proposal) that the applicant meet the requirements for certification.

Comments on the proposal are now due on March 30. To provide input for a Council comment letter, or 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).