American Benefits Council
Benefits Byte

2015-114

December 3, 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.

Follow us on Twitter at @BenefitsCouncil

‘Cadillac Tax’ Update: Overwhelming Support for Repeal in Senate Vote; Fight the 40 Earns Media Coverage

Efforts to repeal the so-called “Cadillac Tax” received strong support in a December 3 Senate vote, with Democrats and Republicans joining to approve an amendment to permanently repeal the tax by a 90 to 10 vote.

The “Cadillac tax,” enacted as part of the Affordable Care Act (ACA), is a 40 percent non-deductible tax on the cost of employer-sponsored health coverage exceeding certain limits – $10,200 (self-only coverage) and $27,500 (family coverage) starting in 2018.

A provision to delay the tax for ten years was already included in the Restoring Americans’ Healthcare Freedom Reconciliation Act (H.R. 3762), the budget reconciliation bill that also includes repeal of the ACA’s employer “shared responsibility” mandate, the individual mandate and the medical device tax, among other provisions. Senator Dean Heller (R-NV) introduced an amendment to repeal the tax permanently, which received overwhelming, bipartisan approval. (Technically, the provision was originally written as a delay in the underlying reconciliation bill rather than a repeal to avoid parliamentary procedural objections. But the effect of the provision would be to permanently repeal the tax.)

The budget bill is expected to pass the Senate but President Obama has vowed to veto it due to the principal components of the measure. Republicans do not have sufficient votes to override the expected veto. Thus, this particular measure will not be the legislative vehicle to actually achieve repeal of the 40 percent tax. Nonetheless, the vote today puts 90 Senators on record as supporting full repeal. This bodes well for further consideration of repeal efforts.

As Congress moves closer to adjournment prior to the Christmas holiday and considers certain “must-pass” legislation, the Council continues to pursue full repeal of the tax – both as part of our own advocacy strategy and as part of the Alliance to Fight the 40.

As of this writing, the two House bills that would repeal the tax collectively have 283 cosponsors (seven short of a veto-proof majority) and the two Senate bills collectively have 38 cosponsors. The Council and the Alliance are working closely with the bills’ sponsors to include repeal of the tax in a widely supported legislative vehicle such as the tax “extenders” bill (to extend tax provisions that are scheduled to expire at the end of this year). A two-year delay of the tax is also under serious consideration by Congressional leaders as part of the tax extenders effort (see the November 25 Benefits Byte). These negotiations are very fluid. The Council will keep members informed of developments.

As part of our continued efforts to seek repeal, the Council convened a Capitol Hill press conference hosted by the Alliance to Fight the 40 on December 2. Senators Heller and Martin Heinrich (D-NM) and Representatives Joe Courtney (D-CT) and Frank Guinta (R-NH) – all lead sponsors of repeal legislation – accepted the Alliance’s invitation to participate in the media event A number of organizations representing the diversity of stakeholders that are members of the Alliance coalition also participated and provided compelling arguments for repeal of the tax. The Congressional sponsors fully committed themselves to seeking repeal and reiterated their desire to work with the White House on the issue. Coverage of the event appeared in The Hill, Bloomberg BNA (subscription required) and Inside Health Policy (subscription required).

We will report to our membership on any emerging developments as they occur. For more information on the 40 percent tax and the Council’s repeal efforts, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.



Supreme Court Hears Oral Arguments in Case with ERISA Preemption Implications

The U.S. Supreme Court heard oral arguments on December 2 in Gobeille v. Liberty Mutual Insurance Company, a case with substantial implications for ERISA’s federal preemption standard.

In this case, Liberty Mutual sponsored a self-insured employee health plan administered by a third-party administrator. Vermont state law requires that all health plans, including self-insured plans, file informational reports (including claims data) for the state’s all-payer claims database. Liberty Mutual ignored Vermont’s subpoena of claims data and sued the state, arguing that ERISA preempted Vermont’s all-payer claims database law. The federal district court ruled in in favor of the state, holding that ERISA did not preempt the Vermont statute. The U.S. Court of Appeals for the Second Circuit reversed in a divided decision, holding that ERISA preempted the Vermont law because the state statute’s requirements were connected to the ERISA requirements.

Vermont appealed the 2nd Circuit decision to the U.S. Supreme Court. The American Benefits Council –joined by five other employer and insurer groups – filed an amicus (“friend of the court”) brief describing the importance of ERISA preemption as it applies to self-funded employers. The brief argued that Vermont’s all-payer claims database and similar state programs undercut ERISA’s objectives by subjecting self-insured plans to a morass of state reporting requirements that Congress neither intended nor allowed in enacting ERISA. The brief described the increasing number of states that have adopted or are considering all-payer claims databases, many of which have conflicting and overlapping reporting requirements with respect to the content and format of data reporting.

Kathryn Wilber, the Council’s senior counsel, health policy, attended the Supreme Court’s oral arguments during which the justices questioned whether the collection of health care data represents a “core ERISA function” and whether the U.S. Department of Labor could adopt a regulation requiring collection of claims to make collections consistent and less burdensome.  The justices’ questioning also focused on the potential burden that multi-state plans would be subjected to if Vermont and other states were permitted to impose reporting requirements on self-insured ERISA plans.

As discussed in the Council’s amicus brief, statutes like Vermont's all-payer claims database "impose a substantial and unwarranted burden on self-funded employer plans" and the brief further noted that "the exclusive purpose of ERISA benefit plans is to provide benefits, not to be laboratories for state experimentation."

State “experimentation” where imposed on self-funded benefit plans has the potential to create compliance challenges for multi-state employers as states grow impatient or dissatisfied with Congressional action. Beginning in 2017, states will be permitted to seek “state innovation waivers” under Section 1332 of the Affordable Care Act (ACA). Under this provision, the Treasury and Health and Human Services departments may waive certain aspects of the law including qualified health plan standards and employer and individual responsibility standards where certain criteria are met.

The Council’s public policy strategic plan, A 2020 Vision, called for limiting the applicability and scope of State Innovation Waivers because such initiatives could erode the ability of multi-state employers to uniformly administer their benefit plans consistent with ERISA preemption. It is essential that multi-state employers’ ability to uniformly administer employee benefits plans be preserved and not undermined, whether as a result of a decision in Gobeille v. Liberty Mutual, or the Section 1332 waiver process.

A decision in Gobielle is expected by June 2016. For more information on health care litigation matters or the Council’s amicus brief program, contact Kathryn Wilber, senior counsel, health policy, or Jan Jacobson, senior counsel, retirement policy at (202) 289-6700.



Transportation Bill Conference Agreement Mostly Free of Benefit Provisions

U.S. Senate and House of Representatives conferees have reached agreement on a measure to fund highway and other transportation projects for five years. The legislation comes at a cost of $305 billion over 5 years.

It had been speculated that negotiators might include certain benefits-related, revenue-raising provisions to offset the cost of the bill, such as additional insurance premiums paid to the Pension Benefit Guaranty Corporation (PBGC) by sponsors of defined benefit plans, since such increases were enacted as part of the 2012 transportation bill. We thank all the Council members that assisted our advocacy efforts by responding to our October 28 Action Alert opposing further premium increases.

The final measure does not include the provision that was included in the Senate version that would have provided for an automatic 3½-month extension of the due date for filing the Form 5500 Annual Return/Report. However, a provision that is included in the agreed-upon final deal may have some future application to benefit plans.

Specifically, the measure includes a clarification with regard to consumer annual privacy notices, limiting the requirement to issue such notices only to instances in which disclosure policies change after the relationship begins, and to the extent an institution shares sensitive personal information with third parties for marketing purposes. This provision is worth noting because it suggests a precedent for perhaps making benefit plan reporting requirements less burdensome.  The reduction of regulatory burdens is, of course, a long-standing objective for the Council and we will pursue opportunities to build upon this provision included in the highway measure. 

The House and Senate are expected to approve the negotiated final deal before December 4, when the Highway Trust Fund is slated to expire. For more information, contact 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).