American Benefits Council
Benefits Byte


April 22, 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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Chairman Kline Talks Retirement, Health Benefits Policy in Exclusive ‘Pomeroy Perspectives’ Interview

In the latest edition of Pomeroy Perspectives – a series of interviews and essays led by former U.S. Congressman Earl Pomeroy , now a member of the Council’s Policy Board of Directors and senior counsel at Alston & Bird LLP – House of Representatives Education and the Workforce Committee Chairman John Kline (R-MN) discussed a wide range of employee benefits policy issues.

Much of Pomeroy’s interview with Kline examines the late-2014 passage of the Multiemployer Pension Reform Act of 2014 (MPRA), which was then enacted as part of the Consolidated and Further Continuing Appropriations Act (see the December 15, 2014, Benefits Byte). The MPRA made a number of critical modifications to the multiemployer pension plan funding rules, described in detail in the Council’s new Benefits Blueprint summary.

Kline described the exhaustive legislative and political maneuvering leading up to the bill’s passage, as well as the importance of continued attention to multiemployer plan issues. In response to Pomeroy’s question about whether there might be a new way to structure pensions where risk is more broadly shared, Kline said, “Well we clearly think there is. … And frankly, there’s another piece that needs to move with that; we’re going to have to continue our efforts to improve the long-term solvency of PBGC. What we did in December was helpful, but, as you know, they’re pretty badly underfunded when you start to project liability.”

The interview also covered:

The Patient Protection and Affordable Care Act’s (PPACA) 40 percent excise tax on high-cost plans:Kline confirmed that the committee would be exploring this issue, along with the broad range of implications that the law has had for employers. “We are looking to put into place steps to fundamentally replace Obamacare,” Kline said. “You wouldn’t have that strange mandate situation which says ‘you must give more than this, but if you try to give more than that, then you’re going to be penalized.’ We won’t let that happen.” (The Council recently released an updated Benefits Blueprint summary and held a Benefits Briefing webinar with Kevin Knopf, senior technician reviewer in the IRS office of Chief Counsel.)

Employer wellness plans:Kline discussed his committee’s interest in the Equal Employment Opportunity Commission’s recent legal action scrutinizing employers’ workplace wellness programs. (The committee’s Workforce Protections Subcommittee held a March 24 hearing at which the Council testified on the value of these programs and the importance of legal and regulatory certainty.) “The Senate is already starting to take action and if EEOC continues taking steps that have a chilling effect on employee wellness programs, I’m sure we will too.” The interview with Chairman Kline was conducted shortly before the release last week of EEOC proposed guidance on wellness plans.

For more information on this series or suggestions for future subjects, contact Jason Hammersla, senior director, communications, at (202) 289-6700.

New Benefits Blueprint Summary Available: Multiemployer Pension Reforms

Now available on the Council website, for members only, is a Benefits Blueprint summary, prepared for the Council by multiemployer benefits plan experts at Venable LLP, outlining key provisions of the Multiemployer Pension Reform Act of 2014 (MPRA).

MPRA was enacted in December 2014 as a part of the Consolidated and Further Continuing Appropriations Act (see the December 15, 2014, Benefits Byte). The provision was added to the act by U.S. House of Representatives Education and Workforce Committee Chairman John Kline (R-MN) and the committee’s former Ranking Democrat George Miller (D-CA) and allows trustees in financially distressed multiemployer plans to intervene and make changes to vested benefits to prevent the plans from becoming insolvent.

Based largely on the Solutions Not Bailouts proposal drafted by the Partnership for Multiemployer Retirement Security, including unions and employers, MPRA made permanent the funding rules in the Pension Protection Act of 2006 (PPA) but also made a number of modifications. These modifications are described in detail in the Blueprint, including:

  • A new remediation option for “deeply troubled” plans: The Blueprint outlines the criteria for a new “critical and declining” funded status, and the process for these plans to “suspend benefits,” or a temporary or permanent reduction of any current or future payment obligation of a plan to any participant or beneficiary under the plan, whether or not in pay status.
  • Revision of plan partition rules.
  • Enhanced plan merger rules.
  • Repeal of the Multiemployer Pension Plan Amendments’ reorganization rules.
  • New disclosure requirements.
  • Increased multiemployer plan premiums to the Pension Benefit Guaranty Corporation (PBGC).

In the Council’s most recent Pomeroy Perspectives interview, Kline discussed the importance of MPRA’s provisions to not only prevent multiemployer pension plans from becoming insolvent but also to prevent the “weight of these plans” from falling on the PBGC.

As we reported in a November 17 Benefits Byte story, $42.4 billion of the PBGC’s reported $61.7 billion deficit was attributable to shortfalls in the multiemployer system. The agency’s annual report noted 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.”

MPRA increased the PBGC multiemployer premium from $13 to $26 per participant for the 2015 plan year and provides that the premium should be adjusted periodically for inflation. MPRA also requires the PBGC to submit a report to Congress by June 2016 to address whether the new premium levels are sufficient for the PBGC to meet its projected benefit guarantee obligations for the 10- and 20-year periods beginning with 2015 and, if not, to propose a schedule of revised premiums sufficient to meet such obligations.

The increase from $13 to $26 is viewed as a temporary fix, and it is likely that there will be pressure to increase PBGC premiums in future years due to concerns that the current premium rate is insufficient to cover the PBGC’s projected obligations. The plan sponsor community also must be attentive to any possible move by lawmakers to also seek increases in premiums for single-employer plans, in concert with multiemployer premium increases, to address shortfalls.

The Council has continuously advocated for appropriate PBGC premium levels and has, with mixed success, vigorously opposed Congressional efforts to raise premiums to finance measures totally unrelated to pension policy. The Council has also sought to educate policymakers about the true nature of the PBGC single-employer program’s financial solvency. The Council commissioned and released an independent research report, Further PBGC Premium Increases Pose Greatest Threat to Pension System, in June 2014, which concluded that frequent single-employer premium increases “threaten the long-term viability of the defined benefit pension system and PBGC’s plan termination insurance program by driving away employers that present no risk to the system.” (See the June 23, 2014, Benefits Byte.)

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.

Council Submits Amicus Brief in Case Regarding Whether Providers are Statutory Beneficiaries under ERISA

In an amicus (“friend of the court”) brief submitted on April 21, the Council urged the U.S. Seventh Circuit Court of Appeals to reverse a lower court ruling that health care providers who receive direct payments from health plans automatically become plan “beneficiaries” with an array of ERISA rights. The amicus brief, filed in support of Independence Blue Cross, argued that deeming healthcare providers that receive direct plan payments to thereby become ERISA “beneficiaries” would have enormous implications for ERISA plans. Providing to healthcare providers the ERISA rights now generally understood to be owed to plan participants and their dependents would lead to wide-ranging disputes and potential litigation as to who has the proper claim to a particular ERISA right under the plan.

The litigation arose in the context of disputed recoveries by Independence Blue Cross of overpayments to chiropractic providers. As explained in the brief, the case is not about whether providers have a right to sue health plans when disputes arise over reimbursement amounts. Network providers such as the plaintiffs are reimbursed pursuant to the terms of network contracts and can (and do) pursue reimbursement disputes in state court to enforce the terms of the contracts. This case instead raises the question of whether these disputes should be brought within the ambit of ERISA.

The U.S. District Court for the Northern District of Illinois (Eastern Division), in its March 2014 ruling for the plaintiff chiropractors in Pennsylvania Chiropractic Association et al. v. Blue Cross Blue Shield Association et al., held that a payment of money for medical services covered in the relevant insurance plans constitutes a ‘benefit’ under ERISA and that the providers should be considered beneficiaries because the plan expressly designates them to receive payment directly, and those payments constitute ERISA benefits.  

The Council’s brief argues that the district court’s holding must be reversed because it fundamentally misconstrues ERISA’s statutory definition of “beneficiary,” which applies only to those persons who are “entitled” to benefits under the terms of a plan. The brief warns that unless the appeals court corrects the lower court error ERISA plans that want to preclude assignments will be forced to forego direct provider payments entirely. Until now, ERISA plans have participated in a convenient reimbursement system that serves the interests of plans, participants and providers alike by facilitating the prompt resolution and payment of healthcare claims without requiring patients to cover the cost up front. Confronted with the risk of becoming enmeshed in administering unclear and disputed ERISA rights, plans would have strong incentives to opt out of this system, causing additional delay, expense and administrative burden for all.

For more information on this case or the Council’s amicus brief program, contact Kathryn Wilber, senior counsel, health 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.

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