American Benefits Council
Benefits Byte


November 17, 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 Criticizes Budget Process Leading to PBGC Premium Increases; PBGC Releases FY 2015 Deficit

In a November 13 letter to congressional leadership, the Council sharply criticized the crafting of the newly enacted Bipartisan Budget Act (H.R. 1314), in which defined benefit pension plan insurance premiums were increased despite a lack of evidence that increases were needed.

As we reported in the October 28 Benefits Byte, Congress offset some of the cost of H.R. 1314 with more than $4 billion in increased premiums paid to the Pension Benefit Guaranty Corporation (PBGC) by employers who sponsor defined benefit pension plans.

The Council’s letter notes that that Congress ignored the PBGC’s most recent 10-year projections, which show a very healthy single employer program, as well as a report commissioned by the Council that showed a correlation between premium increases and a shrinking base of premium payers, with continued increases driving employers away from pension plan sponsorship.

The Council’s letter also expressed serious concern about the process by which the budget agreement was reached, noting that the relevant committees of jurisdiction with expertise over pension matters were side-stepped in the effort to quickly assemble a deal.

“The trend over the past few years to increase PBGC premiums to offset deficit spending elsewhere in the federal budget, without regard to the true financial condition of the PBGC, reflects poorly on the legislative process,” Council President James Klein said in the letter.

The Council also signed on to a similar letter to Congress organized by the Pension Coalition, an alliance of employers and employer groups (of which the Council is a founding member). The group letter, signed by more than 100 organizations, urges lawmakers to protect job-creators, workers, retirees, and their retirement security by opposing any further increases in premiums paid to the PBGC by sponsors of single-employer defined benefit plans. “Additional premium increases will only add unneeded uncertainty for employers, stifle job creation, and encourage sponsors to exit the defined benefit pension system,” the letter said.

In related news, the PBGC released its 2015 Annual Report on November 16, including its deficit calculations for the single-employer and multiemployer plan programs. The agency reports that its single-employer program deficit grew to $24.1 billion, up from $19.3 billion reported in 2014, while the multiemployer insurance program deficit increased to $52.3 billion, compared with $42.4 billion in 2014.

PBGC attributes the single-employer deficit increase largely to “changes in interest factors that increased the value of single-employer program liabilities,” while the multiemployer deficit was driven by interest factors as well as “the identification of 17 additional multiemployer plans that are newly terminated or are projected to run out of money within the next 10 years.”

The Council has consistently asserted that the funded status of pensions is highly sensitive to changes in interest rates and the stock market, making a “snapshot” deficit calculation very misleading. In a media statement, the Council’s Lynn Dudley, senior vice president, global retirement and compensation policy, expressed concern “that policymakers may be tempted to use these deficits as justification for the constant hikes in insurance premiums paid to the PBGC by plan sponsors. We urge them to reject that impulse, for the sake of pension plan sponsors and participants,”

For more information on the budget deal, contact Diann Howland, vice president, legislative affairs. For more information on defined benefit plan matters, contact Lynn Dudley, senior vice president, global retirement and compensation policy. Both can be reached at (202) 289-6700.

Council Comments on IRS Proposals for Clarifying MEC Reporting Requirements

In November 16 written comments to the Treasury Department and Internal Revenue Service (IRS), the Council supported proposals for additional IRS guidance on reporting of minimum Essential Coverage (MEC) as required under the Affordable Care Act (ACA).

The letter was a response to IRS Notice 2015-68, issued on September 17. The notice explains that the IRS intends to propose regulations in the future addressing several specific issues related to MEC reporting requirements under Internal Revenue Code Section 6055, as added by the ACA (See the September 17 Benefits Byte). The reporting of MEC under Code Section 6055 and the reporting of health insurance coverage under Code Section 6056 are first effective for 2015, with initial reporting to occur in early 2016.

Anticipated IRS proposed regulations are expected to address:

  • reporting of catastrophic coverage by insurers.
  • electronic delivery of statements under expatriate health plans unless the recipient explicitly refuses consent or requests a paper statement.
  • allowing filers reporting on insured group health plans to use a truncated taxpayer identification number (TTIN) to identify the employer on the statement furnished to a taxpayer.
  • specifying when a provider of minimum essential coverage is not required to report coverage of an individual who has other minimum essential coverage. The notice also invited comments on issues relating to solicitation of taxpayer identification numbers (TINs) of covered individual.

“We have previously conveyed our concerns about the new information reporting requirements under the ACA and their implementation,” the Council wrote. “Employers have expended a considerable amount of time and resources on these reporting requirements and there continue to be unanswered question as the initial deadline for reporting rapidly approaches.”

The Council’s comment letter addresses the following:

  • MEC reporting for supplemental coverage: Notice 2015-68 generally reflects the approach laid out in the final instructions for Form 1094-B and 1095-B (issued September 16, 2015). Specifically, Notice 2015-68 indicates that the IRS anticipates proposing regulations that would replace the current regulations to provide that “(1) if an individual is covered by multiple minimum essential coverage plans or programs provided by the same provider, reporting is required for only one of them; and (2) reporting generally is not required for an individual’s minimum essential coverage for which an individual is eligible only if the individual is covered by other minimum essential coverage for which § 6055 reporting is required.” Consistent with Notice 2015-68, the final instructions clarified that an employer with a self-insured major medical plan and an HRA is required to report the coverage of an individual enrolled in both types of MEC under only one of the arrangements. An employer with an insured major medical plan and an integrated HRA is not required to report the HRA coverage if the individual is eligible for the HRA because the individual is enrolled in the insured major medical plan. The Council’s letter expressed support for the IRS clarification of when MEC reporting is required for supplemental coverage and requested flexibility in the application of the rule.
  • TIN solicitation: The Council agrees with the view expressed in Notice 2015-68 that the current rules for TIN solicitation are “not practical in the context of Section 6055 reporting.” The Council would support a permanent rule that is similar to the proposals in Notice 2015-68, in which the employer could solicit a TIN at three different stages within a relatively short time period and (if no response was received after three solicitations) use the DOB for the covered individual going forward. We also support the rule set forth in Notice 2015-68 providing that no solicitation is necessary after an individual’s coverage is terminated.
  • Statements to individuals covered by expatriate health plans: The Council supports the suggested rule providing that statements reporting coverage under an expatriate health plan may be furnished in electronic format unless the recipient affirmatively refuses consent or requests a paper statement (consistent with recent legislation) and encouraged the IRS to consider ways in which rules could be liberalized to allow domestic health plans additional leeway to furnish statements to individuals in electronic format.

For more information Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

Congressional Income Protection Caucus Launched

A bipartisan, bicameral caucus has been established in Congress to raise awareness about the risk of disability and the importance of financial preparedness.

The Congressional Income Protection Caucus was founded on November 6 by Senators Mark Kirk (R-IL) and Gary Peters (D-MI) and Representatives Stephen Fincher (R-TN) and Alma Adams (D-NC). In a “dear colleague” letter to their fellow lawmakers, they noted the value of private disability insurance, citing a study that shows “employer-sponsored benefits like disability insurance save the government up to $4.5 billion per year by reducing pressure on the public safety net.”

The Council issued a letter of support, thanking the caucus’ founders for their efforts in this area. “A key theme of the Council’s strategic plan, A 2020 Vision: Flexibility and the Future of Employee Benefits, is that the purpose of employer-sponsored benefits should be to help workers and their families achieve health and financial well-being. One very valuable means to do so is disability coverage through a plan voluntarily offered by an employer,” the letter said.

For more information on income protection and disability policy, contact Lynn Dudley, senior vice president, global retirement and compensation policy.

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).