American Benefits Council
Benefits Byte


March 12, 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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Council Elects New Officers and Executive Board, Reports Record Membership Growth

At its Winter Board of Directors meeting, March 3 and 4, the Council’s board elected a new slate of officers and two new members of its Executive Board. Officers serve for one year terms and then are eligible for election to other officer roles. Executive Board members serve three year terms.

Elected to serve as Chair of the Board is Janet Boyd, Director of Government Relations, Tax and Benefits for The Dow Chemical Company. She succeeds Wilma Schopp, Global Lead, Compensation, Benefits and HR Operations for Sigma-Aldrich Corporation, who assumes the post of Past Chair and remains an officer.

“Wilma has provided wisdom and vision as the Council has begun development of a long-term public policy strategic plan to shape our priorities and guide our advocacy for the next several years. This effort is critical to strengthening our role as an effective voice for major employer sponsors of benefit plans” Council President James Klein said.

“As an effective advocate for employer sponsors of health and retirement plans, the Council is doing incredibly important work for American business,” Schopp said. “I am proud to have led the Council’s talented staff and its board of directors, comprised of so many companies committed to sound employee benefits policy.” 

“Fortunately, Wilma is succeeded by Janet, who combines deep substantive background in employee benefits with extensive experience in public policy in Washington, D.C. Both these skills will be essential to guide the Council through the challenging year ahead,” Klein added.

Boyd added, “It is honor to chair the Council, which has a proven track record of success and is highly respected in both the legislative and executive branches of government. The Council’s expertise is sought by policymakers on both sides of the political aisle because of its pragmatic approach to solving problems for its corporate members.”

Joining Boyd and Schopp among the Council’s board leadership are:

  • Vice Chair Jay Kirschbaum, Senior Vice President & National Practice Leader, Employee Benefits Legal & Research Group, Willis Corporation
  • Vice Chair Bob Holcomb, Executive Director, Legislative and Industry Affairs, J.P. Morgan Retirement Plan Services
  • Treasurer Kate Ranalli, Regional Benefits Director for the Americas, AstraZeneca
  • Secretary Allison Klausner, Assistant General Counsel, Benefits, Honeywell

New members to the Council’s 14-member Executive Board are:

  • Tresia Franklin, Director, Rewards and Employee Relations, Hallmark Cards, Inc.
  • Mark Poerio, Partner, Paul Hastings LLP

Additionally, four current members of the Executive Board were elected to a second term:

  • Camille Donald, Assistant Vice President & Counsel, MassMutual
  • Marianne McManus, Director of Benefits, IBM
  • Boon Ooi, Vice President, Compensation and Benefits, Ryder System, Inc.
  • Dave Sherwood, Senior Director, Employee Benefits Tax, Microsoft

2013 was another year of record growth for the Council – the seventhconsecutive year the organization has reached an all-time high in terms of member companies. From the depths of the recession in December 2008 until today, Council membership has steadily grown by 39 percent from 274 to 383 member organizations; and the number of benefits professionals within those organizations directly served by the Council has more than doubled from about 3,000 to over 6,000.

“Our board leadership possesses both domestic and global expertise in the range of issues on which we engage: health and welfare, retirement and compensation. The Council’s members are fortunate to benefit from such talented and dedicated leaders,” Klein said. For more information on the Council’s governance, contact Klein at (202) 289-6700.

Agencies Request Information Regarding Provider Nondiscrimination under PPACA

The U.S. departments of Treasury, Labor, and Health and Human Services (the departments) are requesting comments on the provider nondiscrimination provisions under the Patient Protection and Affordable Care Act (PPACA), according to a March 12 formal request for information (RFI).

Under Section 2706(a) of the Public Health Service (PHS) Act, added by PPACA, “a group health plan and a health insurance issuer offering group or individual health insurance coverage shall not discriminate with respect to participation under the plan or coverage against any health care provider who is acting within the scope of that provider’s license or certification under applicable state law.” The PHS Act does not require “that a group health plan or health insurance issuer contract with any health care provider willing to abide by the terms and conditions for participation established by the plan or issuer,” and nothing in the PHS Act prevents “a group health plan, a health insurance issuer, or the Secretary from establishing varying reimbursement rates based on quality or performance measures.”

In April 2013, the departments issued Frequently Asked Questions (FAQ) Part XV, confirming that the provision applies to non-grandfathered group health plans and health insurance issuers for plan years beginning on or after January 1, 2014. The FAQ clarified that until further guidance is issued, plans and issuers “are expected to implement the requirements of Section 2706(a) using a good faith, reasonable interpretation of the law.” The FAQ stated that, “for this purpose, to the extent an item or service is a covered benefit under the plan or coverage, and consistent with reasonable medical management techniques specified under the plan with respect to the frequency, method, treatment or setting for an item or service, a plan or issuer shall not discriminate based on a provider’s license or certification, to the extent the provider is acting within the scope of the provider’s license or certification under applicable state law.”

The FAQ further stated that Section 2706(a) of the PHS Act “does not require plans or issuers to accept all types of providers into a network” and also “does not govern provider reimbursement rates, which may be subject to quality, performance, or market standards and considerations.”

In a July 2013 report (Page 126), the Senate Committee on Appropriations expressed concerns that the FAQ advises insurers that “this nondiscrimination provision allows them to exclude from participation whole categories of providers operating under a State license or certification.” According to the report, Section 2706 of the PHS Act “prohibits certain types of health plans and issuers from discriminating against any healthcare provider who is acting within the scope of that provider’s license or certification under applicable State law, when determining networks of care eligible for reimbursement. The goal of this provision is to ensure that patients have the right to access covered health services from the full range of providers licensed and certified in their State. The Committee is therefore concerned that the FAQ document issued by HHS, DOL and the Department of Treasury on April 29, 2013, advises insurers that this nondiscrimination provision allows them to exclude from participation whole categories of providers operating under a State license or certification.”

The report further directed HHS to work with DOL and the Treasury Department “to correct the FAQ to reflect the law and congressional intent.” The RFI, issued pursuant to this report, requests comments “on all aspects of interpretation, including, but not limited to access, costs, other federal and state laws, and feasibility.

Comments are being solicited by HHS through June 10. To provide input for consideration in a Council comment letter, or for more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

Senate Banking Committee Discusses Retirement Security, Plan Fees

The U.S. Senate Banking, Housing and Urban Affairs Committee’s Economic Policy Subcommittee held a hearing on March 12 to examine The State of U.S. Retirement Security: Can the Middle Class Afford to Retire? During the question-and-answer period, a great deal of the discussion focused on plan fees for 401(k) plans and Individual Retirement Accounts (IRAs).

The Senate Banking Committee does not have direct jurisdiction over employee benefit plans. But Chairman Jeff Merkley (D-OR), citing the economic recession, the state of the Social Security program and student loan debt, said in his opening statement, “I hope we can have a robust conversation about the changes facing American families and how we can enhance U.S. retirement security as a whole.”

The panel heard testimony from the following witnesses:

  • Ted Wheeler, treasurer for the state of Oregon, described his ongoing efforts, as part of a state retirement savings task force, to analyze current trends and provide reform recommendations to the state assembly. In particular, this task force is examining how Oregon “can help incent more retirement savings” and “expand the availability of pooled and professionally managed funds for workers.”
  • Monique Morrissey, an economist at the Economic Policy Institute, described a “retirement crisis” in which she argued that many segments of the population are ill-served by the defined contribution system. She called for Social Security reform, preservation of defined benefit plans and sweeping reforms to 401(k) plans. In particular, she criticized the tax incentives that encourage sponsorship of workplace retirement plans.
  • Robert Hiltonsmith, policy analyst at Demos, echoed many of Morrissey’s criticisms of 401(k) plans and IRAs, citing “four major types of risk that 401(k)s face … market risk, longevity risk, leakage risk and contribution risk.” He also suggested that “a new system to replace 401(k)s is urgently needed.”
  • Kristi Mitchem, executive vice president of State Street Global Advisors and head of the Americas Institutional Client Group, described how large employers are leveraging new tools and designs to improve defined contribution plan success. She also suggested ways that small businesses can adopt some of these strategies, including through multiple-employer plan designs with features such as automatic enrollment and automatic escalation.

During discussion, Senator Elizabeth Warren (D-MA) agreed that pooling of small business resources is the key to improving the system, but also criticized the effect of plan fees on balances. She asked if the recent regulatory effort to improve fee transparency had an effect on aggregate fee levels overall. Mitchem cited research that indicated fees have been lowered by 20 to 25 percent in the years since the disclosure requirements were finalized. In particular, Warren suggested that IRAs should be subject to the same kind of fee disclosure as 401(k) plans, since many 401(k) fees are rolled over into IRAs.

Hiltonsmith and Morrissey both argued that fee disclosure for 401(k) plans should be enhanced and prioritized on participants’ benefit statements. Morrissey also recommended limiting investment options within plans.

In response to a comment from Morrissey that regulation of IRA fees was minimal, “like the wild, wild west,” Mitchem noted that mutual fund rules already have comprehensive fee disclosure requirements and suggested that efforts should really focus on educating employees and user-friendly plan features.

Ranking Republican subcommittee member Dean Heller (R-NV) asked Hiltonsmith how he would replace the 401(k) system; Hiltonsmith said that the ideal system would adopt many features of the current system, incorporating risk pooling, portability and low-cost investment alternatives.

For more information on legislative activity related to retirement plans, contact Diann Howland, vice president, legislative affairs, 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).