American Benefits Council
Benefits Byte


April 30, 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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A Bit About Your Benefits: Survey Reminder

The Council needs your help with a critically important project specifically designed to improve the value of your membership. On April 24, we sent you a brief survey that will help us learn how best to serve you and your colleagues. We are conducting this as part of a larger effort to gauge the value of various resources we provide and to consider possible new services we could unveil in the future.

You should have received an invitation to complete the survey with a customized link. If you began the survey but did not complete it, simply return to the email, click the link and you will automatically return to where you were in the survey.

The survey takes fewer than ten minutes. In appreciation of your feedback and because we know your time is valuable, everyone who completes the questionnaire will be entered into a drawing for one of five $100 Amazon gift cards. Responses can be made until Friday, May 8.

If you have questions or did not receive an invitation to participate, please contact Deanna Johnson, director, membership, or Jessica Chirico, communications assistant. Both can be reached at (202) 289-6700.

House-Senate Budget Agreement Includes Reconciliation Instructions for Health Reform

Republican leaders in the U.S. Senate and House of Representatives have reached agreement on a joint budget resolution.

Budget resolutions are non-binding, need not be signed by the President and do not become law, although they do establish a framework for a legislative policy agenda by setting specific spending levels for various executive branch agencies. The budget “resolution” sets the stage for a budget “reconciliation” process, where legislative policy changes are spelled out more precisely.  Like President Obama’s proposal released earlier this year, the original Senate and House resolutions express general views on the health care law and tax reform (see the March 27 Benefits Byte for more details).

Most notable is that the budget resolution agreement reached by the Congressional leaders follows the Senate approach regarding the reconciliation process. Under Senate rules, a reconciliation bill can not be filibustered but, rather, would only require a simple majority (rather than 60 votes) for passage in the Senate. This is highly relevant, because the Republicans only have a majority of 54 seats in the Senate. The most recent budget resolution, passed by both the House and the Senate in 2009, included a reconciliation instruction. Democrats, who at the time also held a majority, but did not have 60 seats, used the reconciliation process to achieve final passage of the Patient Protection and Affordable Care Act (PPACA) in 2010.)

The approach adopted in the final agreement this year (see Page 56 of the official conference report) provides general reconciliation instructions for the House committees of jurisdiction over health care (and retirement plans as well) to save $1 billion (each) over the ten-year budget period. The Senate Finance Committee and the Senate Health, Education, Labor and Pensions (HELP) Committee are also directed to save $1 billion (each) over the ten-year budget period. It is expected that such instructions could be used to make changes to PPACA, especially if the U.S. Supreme Court’s decision in the King v. Burwell case strikes down the subsidies provided in federally facilitated exchanges.

For more information, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.

House Subcommittee Hearing Discusses Additional Multiemployer Pension Reform, Alternate Savings Plan

In an April 29 hearing, the U.S. House of Representatives Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions heard testimony from employers and union groups on what reforms were still necessary for the success of multiemployer pension plans. The hearing focused on alternative savings plan designs, including a proposed hybrid plan designed for multiemployer plan participants.

Many multiemployer plans struggled with underfunding prior to the enactment of the Multiemployer Pension Reform Act of 2014 (MPRA). MPRA was enacted as a part of the Consolidated and Further Continuing Appropriations Act (see the December 15, 2014, Benefits Byte). One provision in MPRA allows trustees in financially distressed multiemployer plans to intervene and make changes to already 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 (PMRS), which includesunions 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 recently released Benefits Blueprint, prepared for the Council by multiemployer benefits plan experts at Venable LLP, which outlines key provisions of MPRA (see the April 22 Benefits Byte).

In convening the hearing, subcommittee Chairman Phil Roe (R-TN) noted the successful enactment of MPRA and stated that in order to complete the necessary reformation, Congress needs to “modernize the multiemployer pension system” by providing workers with alternative savings plan designs, such as the “composite” model included in the PMRS proposal.

The composite plan is a hybrid model with features of both defined contribution and defined benefit plan features, including annuitized benefits to employees, but does not subject employers to many of the drawbacks associated with traditional multiemployer plans. According to the PMRS proposal (which refers to the composite plan as a “target benefit plan”), the composite model would “combine the retirement income security and economic efficiency of defined benefit plans with the predictable employer costs of defined contribution plans.”

Ranking Democratic member Jared Polis (D-CO) said in his opening statement that “Phase II” of reforming the multiemployer pension system should encourage innovative new plans that provide some flexibility to employers while also providing employees with financial security in retirement. He suggested that these new plans could provide options to strengthen employer-sponsored retirement plans.

The subcommittee heard testimony from the following witnesses:

  • Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans (NCCMP), a key member of the PMRS, commended the subcommittee for its work on the passage of MPRA and stated that alternative plan designs remain as the last step of needed reform. He said that the composite model is the “next logical step” in the evolution of multiemployer plans and noted that it supplies “the best of both worlds” as it provides employees with lifetime income and eliminates extended employer financial exposure beyond contractually negotiated contributions, as the plan is not a defined benefit plan and therefore is not subject to guaranty by the Pension Benefit Guaranty Corporation (PBGC) and also does not expose employers to withdrawal liability.
  • Andrew Scoggin, executive vice president of human resources, labor relations, public relations & government affairs at Albertson’s LLC, noted in his testimony that despite the improvements made under the Pension Protection Act of 2006 (PPA) and MPRA, there remains a need to modernize the regulatory framework for multiemployer plans and to provide employers with the flexibility to make changes to benefit programs.
  • Mark McManus, general secretary treasurer of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the U.S. and Canada, described the negative effect withdrawal liability has on multiemployer plans. He noted that many new employers do not enter multiemployer plans in fear of withdrawal liability, which erodes the contribution base of a plan as employers increasingly leave multiemployer plans. He encouraged Congress to expand the options available to employers in multiemployer plans, including implementing the composite model.
  • Stephen Sandherr, chief executive officer of the Associated General Contractors of America, also encouraged Congress to act and recognize the composite plan as an alternative plan design. He stated that having a “broader variety of retirement plan models, including the composite plan model, will minimize employer and PBGC liabilities in the future and provide more certainty for workers.”

In the question-and-answer portion of the hearing, Roe asked witnesses to discuss the benefits of pooling longevity risk, a feature of the composite plan. DeFrehn said that as the plan provides lifetime income, pooled longevity risk helps retirees with longer lives avoid financial insecurity due to their increased longevity, a possible concern for plans with lump-sum distributions.

Polis asked whether the composite model appealed to both labor and management; all witnesses responded that it appeals to both parties.

Roe asked how quickly this issue needed to be addressed by Congress. Scoggin replied that from an employer standpoint, they are “at a precipice” and that resolving this problem quickly is essential.

The Council recently published the latest edition of its Pomeroy Perspectives series, which featured an interview with Education and Workforce Committee Chairman John Kline (R-MN), in which he described the legislative and political maneuvering leading up to passage of MPRA, as well as the importance of continued attention to multiemployer plan issues (see the April 22 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.

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).