American Benefits Council
Benefits Byte


September 28, 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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House Committees to Consider Reconciliation Legislation Repealing ACA 40 Percent Tax, Automatic Enrollment, Individual and Employer Mandate

In a series of “mark-up” sessions during the week of September 28, committees in the U.S. House of Representatives will consider legislation that proposes to repeal certain provisions of the Affordable Care Act (ACA), including the individual and employer mandates, the 40 percent so-called “Cadillac Tax” on health plans and the automatic enrollment requirement.

Virtually all Democrats are expected to oppose the overall reconciliation measure because it will contain numerous provisions to which they are opposed, and President Obama is likely to veto any legislation that repeals the ACA whole or in part, as well as makes other changes that are contrary to Democratic policy positions. Consequently, the proposed legislation and committee activity may be little more than a political exercise. Nevertheless, the formal consideration of repeal language may be a significant step in focusing attention on the effort to repeal  certain ACA provisions.

The joint budget resolution that was passed by the House and Senate in April included instructions for a budget “reconciliation” process. Under Senate rules, a reconciliation bill cannot be filibustered but, rather, would only require a simple majority (rather than 60 votes) for passage in the Senate. (Republicans only have a majority of 54 seats in the Senate.)

Reconciliation bills can only include provisions that have an effect on the federal budget. The joint resolution directs the committees of jurisdiction over health care (and retirement plans as well) to save $1 billion (each) over the ten-year budget period. Republicans have voiced their intention to use the reconciliation to dismantle the budgetary portions of the ACA.

House Ways and Means Committee: Repeal of Individual and Employer Mandates, Medical Device Tax and 40 Percent Tax

On September 29, the House Ways and Means Committee, which has jurisdiction over tax legislation, will review a set of reconciliation recommendations and vote on a substitute amendment with those recommendations.

The Ways and Means recommendations include:

  • Repeal of the ACA individual mandate (Internal Revenue Code Section 5000A)
  • Repeal of the ACA employer “shared responsibility” mandate (Code Section 4980H)
  • Repeal of the 40 percent excise tax on high-cost plans (Code Section 4980I)
  • Repeal of the medical device tax (Code Section 4221)

Repeal of the 40 percent so-called “Cadillac Tax” is a Council priority. The Council – as part of its own advocacy strategy and as the organizer of the broad-based Alliance to Fight the 40 coalition– has already expressed its support for bipartisan legislation in the House and Senate to eliminate the tax (see the September 17 Benefits Byte). Repeal of the 40 percent tax has been newly estimated to cost $91 billion over ten years.

Recognizing that repeal of the employer mandate is highly unlikely, the Council has focused its attention on elements of that provision that continue to present administrative challenges for employers. In a package of legislative recommendations issued earlier this year, the Council suggested modifying the employer “shared responsibility” requirements to relieve the burdens on employers that, among other implications, create disincentives for employing "full-time employees" as defined by the law.

House Education and the Workforce Committee: Repeal of Automatic Enrollment Provision

On September 30, the House Education and the Workforce Committee will review its own reconciliation recommendation, which includes only one item: repeal of the requirement that employers automatically enroll new full-time employees in the company health plan (Section 18A of the Fair Labor Standards Act).

The Council has repeatedly noted that the automatic enrollment provision is unnecessary since virtually everyone is legally required to have coverage, and because automatic enrollment could, under certain circumstances, have adverse consequences on employees' eligibility for premium tax credits and cost-sharing reductions.

House Energy and Commerce Committee

On September 29 and 30, the House Energy and Commerce Committee will also discuss reconciliation recommendations, although none of these recommendations directly affect employee benefit plans. They include repeal of the Prevention and Public Health Fund, repeal of federal funding for Planned Parenthood (or similar organizations that perform abortions) and repeal of funding for community health centers.

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

PBGC Projects Improvement in Single-Employer, Multiemployer Pension Plan Programs

The Pension Benefit Guaranty Corporation (PBGC) issued its Fiscal Year 2014 Projections Report on September 28, revealing that the financial condition of the single-employer pension insurance program “continues to be likely to improve” and “is highly unlikely to run out of funds in the next 10 years.” Indeed, the agency reported that of the more than 5,000 different simulations performed, none showed the single-employer program running out of money within 10 years.

While the official financial position of PBGC and its programs will not be announced until the agency’s annual report is issued later this year, PBGC projects that the program's reported 2014 deficit of $19.3 billion would shrink to, on average, $4.9 billion at FY 2024 (measured in present value). The report notes that it does not take into account “risk transfer activity.”

The Council has consistently noted that the PBGC’s ability to pay these benefits well into the future has never truly been in doubt. Additionally, the agency’s approach for estimating and evaluating its financial position has inherent problems that can exaggerate deficits and the method has never been fully examined by Congress.

The PBGC also announced modest improvement in its projections for the multiemployer pension program, estimating that the program’s 2014 deficit of $42.4 billion will decrease to, on average, $28 billion (measured in present value) for FY 2024. However, the agency also projects that the multiemployer program’s assets will be depleted in 2025, a slight improvement over the prior projection that the program would become insolvent starting in 2022.

The PBGC attributes the multiemployer plan improvements to the increased premiums and other measures permitted under the Multiemployer Pension Reform Act of 2014 (MPRA)

The overall positive report should lessen any potential momentum for increases in premiums (at least for the single employer program). But concerns, especially about the long-term status of some multi-employer plans, still persist. Moreover, since projected surpluses or deficits are particularly sensitive to changes in interest rates and the stock market, the projections from year to year can change dramatically.

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, Allies Offer Comments on Proposed PBGC Actuarial Reporting Rules

In a September 25 group letter to the Pension Benefit Guaranty Corporation (PBGC), the Council – along with the Financial Services Roundtable and the U.S. Chamber of Commerce – suggested alternatives to the agency’s proposed information reporting requirements under Section 4010 of ERISA.

On July 27, the PBGC proposed amendments to the existing Annual Financial and Actuarial Information Reporting rules under section 4010 of ERISA, incorporating applicable provisions from the Moving Ahead for Progress in the 21st Century (MAP-21) Act of 2012 and the Highway Transportation and Funding Act (HATFA) of 2014. (See the July 30 Benefits Byte for more details.) ERISA Section 4010 authorizes the PBGC to require certain underfunded defined benefit plans to report on specific financial and actuarial information.

In the proposal, the PBGC asked for recommendations regarding whether to use a different participant count threshold or tie the $15 million aggregate underfunding waiver directly to non-stabilized rates. Rather than requiring one technique over the other, the group letter recommends that the PBGC allow the option to use both.

The letter also recommends that PBGC increase the dollar threshold from $15 million to perhaps $25 million and increase the participant threshold to at least 1,000 participants. These recommendations could be combined so that a plan with at least 1,000 participants would have the option of using the waiver if it complies with a $25 million aggregate underfunding waiver if non-stabilized rates are used.

The letter also recommends that PBGC provide “alternate methods of compliance” to reduce the burden of 4010 reporting for all filers.

For more information, contact Jan Jacobson, senior counsel, retirement policy, or Lynn Dudley, senior vice president, global retirement and compensation policy. Both can be reached 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).