American Benefits Council
Benefits Byte


June 26, 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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Council Joins Group Letter Urging Congress to Repeal 40 Percent Tax

The Council joined 17 other business trade associations and organizations in June 25 written comments to Congress, urging for repeal of the 40 percent tax on health benefits.

The 40 percent tax, scheduled to be implemented in 2018, is a nondeductible 40 percent excise tax created under Internal Revenue Code (IRC) Section 4980I, as added by the Patient Protection and Affordable Care Act (PPACA). The tax will be imposed on “applicable employer-sponsored coverage” in excess of statutory thresholds (in 2018, $10,200 for self-only, $27,500 for family). A Benefits Blueprint reviewing the statutory requirements of the 40 percent tax and a companion document with answers to certain “Frequently Asked Questions” , are available on the Council website (see the March 30 Benefits Byte).

The Council filed extensive comments on May 15 to the U.S. Department of the Treasury and the Internal Revenue Service (IRS), urging the Obama Administration to implement the 40 percent tax on health coverage “in a manner that is least disruptive to the long-term viability of employer-sponsored health benefits coverage” (see the May 18 Benefits Byte). The Council has also released a summary of the results from a Council member survey on the 40 percent tax, a primer on how the 40 percent tax will eventually hit more and more health plans and Fast Facts on the 40 percent tax.

The Council is strongly advocating for repeal of the tax and has expressed support for legislation such as the Middle Class Health Benefits Tax Repeal Act (H.R. 2050) and the Ax the Tax on Middle Class Americans' Health Plans Act (H.R. 879). As Council President James Klein noted in an April 28 news release, “research estimates that, in 2018, more than one-third of employer-sponsored plans will trigger the tax unless the value of those plans is significantly reduced. But the greater long-term concern is that because of the way the cost thresholds that trigger the tax are indexed, eventually even plans that only meet the minimum value required by the law will cross the thresholds.”

The group letter notes that “while this tax was supposed to be levied on only a small number of ‘Cadillac plans,’ current projections, as well as our actual experience with health care costs, show that this 40 percent tax will affect the health plans of all types of employers and a wide range of workers, including low- and moderate-income families, retirees, as well as the self-employed.”

The letter also notes that “the tax, which is complicated to calculate and administer, applies not only to insurance premiums but also to contributions to health savings accounts and flexible spending arrangements, on-site wellness clinics, certain wellness plans and other pre-tax health benefits.” The groups expressed concern that employers are already changing plans and designing benefits to avoid being hit by the tax and urged Congress “to take quick action to protect the employer-sponsored health care of millions of workers by repealing this tax.”

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

Senate Committee Hearing Discusses Work in Retirement

The U.S. Senate Special Committee on Aging held a June 24 hearing on the changes on how seniors approach and work in retirement. The hearing, “Work in Retirement: Career Reinventions and the New Retirement Workscape,” discussed the reasons more seniors continue to work during retirement as well as ways to make returning to work easier for older workers.

In her opening statement, Chairwoman Susan Collins (R-ME) noted the rise of retirement-age individuals remaining in the workplace. She stated that this trend has occurred for a number of reasons, but stressed financial security. She referred to the “three-legged stool” of retirement security and suggested that a “fourth leg” may be continuing to work. She also noted that older workers are valuable employees who have high skill qualifications and remain highly engaged, but expressed concern that it still takes seniors twice as long to find a job as younger workers. She stated that employers should recognize that seniors are returning to work not because they have to, but because they want to, and that they are looking for flexible workplaces where their skills are valued.

Ranking Democratic member Claire McCaskill (D-MO) said in her opening statement that while older workers are in a much different landscape than when they began working, she does not agree that seniors have trouble adjusting to the new workplaces, especially regarding technology. She noted that while employers may have been more concerned about hiring an older worker when defined benefit plans were predominant, with the shift to defined contribution plans, it isn’t more expensive for employers to hire older workers over younger. She also stressed that many retirees have to return to work out of necessity, however, due to insufficient savings and increased longevity, and noted some possible solutions to make it easier on older workers to continue working, including phased retirement as well as adjusted benefits and allowing flexibility.

The committee heard testimony from the following witnesses:

  • Sara Rix, working and aging consultant, noted the trend of increasing numbers of retirement-age individuals in the workforce. She attributed this trend to both the need for additional financial security as well as more individuals attaining higher levels of education. She offered a number of suggestions for ways to aid older workers who wish to continue working past retirement, as well as suggested the need for “more and better information on how employers are responding to today’s economic and demographic challenges” in order to create the best programs and policies to keep seniors engaged.
  • Kerry Hannon, contributing editor for Forbes, testified that while seniors increasingly continue to work past retirement, particularly to provide financial security, age discrimination (even unintentional) continues to be a hindrance to older individuals looking for work. She suggested that career coaching tailored for a retiree audience could help. She also stressed the need for more flexibility in the workplace for older workers.
  • Susan Nordman, owner of Erda Handbags, testified on her personal experience as a small business owner with a predominately older workforce. She said that older workers do not cost more, “they cost different,” noting that while she may need to purchase more expensive equipment, it yields higher productivity and return-on-investment, as well as allows her to retain workers longer.
  • James Godwin, Jr., vice president of human resources at Bon Secours Virginia Health System, also shared his organization’s experience with older workers in the workforce and said that they value the experience, knowledge and expertise of older workers, as well as how they contribute to the organization’s success and culture. He also noted how allowing for flexibility is a large factor in helping seniors work longer and can also benefit other employee populations, including working mothers.

In the question-and-answer session, Collins asked whether there is less turnover with older employees.

Collins also asked about federal skills and employment programs. She noted that they are often aimed at younger workers and asked whether they also help older populations. Rix responded that she recommends adding older worker specialists in existing job and career coaching centers. Hannon noted the importance of helping seniors realize the skills they already have to bring to the workplace through working with a skills coach and referenced that the tax incentive for employers to help employees afford such training programs is helpful.

McCaskill asked about the challenges of acquiring health care for older workers, particularly those between 50 and 65 years old, before they are eligible for Medicare. She noted that this can be a particular problem for small businesses.

McCaskill also asked about how prior to the enactment of the Patient Protection and Affordable Care Act (PPACA), many older workers were hesitant to retire or change careers before becoming eligible for Medicare at age 65 because of losing their health insurance. She asked about the increase in flexibility and portability now. Rix and Hannon both responded that health insurance still has a cost and can be difficult to afford.

Senator Bob Casey (D-PA) asked what legislators can do to help older workers. Rix responded that additional training and re-training resources would be most helpful, but that other recommendations would be expanding the Age Discrimination In Employment Act’s jurisdiction to businesses with 15 or more employees and requiring employers to provide paid family leave to older workers.

Rix stressed that most of the burden of hiring older workers rests with employers providing job opportunities for older workers. She stated that if employers do not want or need older workers, policy will not be very effective in changing that.

Collins closed the hearing by noting that older workers can be highly dependable employees who bring certain skills and prevent high turnover. She stated that there is “a tsunami of retirees” that find they need to continue to work in retirement age to maintain financial security and stressed that flexibility is key for older workers.

The Council continues to advocate for the plan sponsor’s interest increasing flexibility around phased retirement and our recent strategic plan, A 2020 Vision, includes a recommendation to allow employ employers to develop benefit plan designs that facilitate succession planning or help employees transition to retirement or a new career.

For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy, or 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).