American Benefits Council
Benefits Byte


July 15, 2014

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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NOTE: This is the new version of the Benefits Byte

As you may have noted over the past few weeks, you have been receiving two versions of the Council’s Benefits Byte newsletter. This is because we are transitioning to a new third-party e-mail provider and Benefits Byte format. (Click here to see what both versions look like.) We will continue sending both versions of the Benefits Byte for a limited time.

If you are receiving this "new" version normally, no further action need be taken. If you need additional assistance, however, please consult the following Real Magnet Whitelisting Information or have your technical support staff contact Jason Hammersla, director, communications, at (202) 289-6700.

House Approves Transportation Funding Measure with Pension Funding Stabilization

In a 367-55 vote on July 15, the U.S. House of Representatives approved the Highway and Transportation Funding Act (H.R. 5021), extending funding of highway and transportation projects through May 2015. As a revenue offset, H.R. 5021 includes an extension of the pension plan funding stabilization provisions originally passed as part of the previous transportation bill, the Moving Ahead for Progress in the 21st Century (MAP-21) Act of 2012.

The MAP-21 provision, originally advanced by the Council, stabilized interest rates for purposes of calculating defined benefit plan funding by constricting the segment rates used to determine funding status within 10 percent of a 25-year average of prior segment rates. The subsequent phase-out of the original MAP-21 stabilization provision – under which the 10 percent corridor is gradually increased to 30 percent – has reduced the effectiveness of the measure.

H.R. 5021 provides for a five-year extension of the MAP-21 provisions, raising $6.4 billion by essentially delaying the phase-out until 2017.

House Highway and Transportation Funding Act (H.R. 5201)

If the calendar year is:

The applicable minimum percentage is:

The applicable maximum percentage is:

2012 - 2017












After 2020




In a statement during debate on the House floor, Ways and Means Committee Chairman Dave Camp (R-MI) described the House funding plan and the inclusion of pension funding in that proposal as the only funding package capable of securing bipartisan votes in both the House and Senate.

Prior to final passage, the House defeated a motion to recommit the measure back to the committee level with instructions to amend the bill to provide for a shorter extension. Proponents of this motion argued that a shorter extension would apply more pressure to enact a longer-term fix.

As we reported in the July 10 Benefits Byte story, the U.S. Senate Finance Committee has approved a different transportation funding measure, the Preserving America's Transit and Highways (PATH) Act, with a shorter (three-year) extension of the pension funding stabilization provisions.

Late on July 15, however, Senate Majority Leader Harry Reid (D-NV) announced his intention to hold votes on three different approaches: the House-passed bill, the Senate Finance bill and an alternative measure being developed by Senate Environment and Public Works Committee Chair Barbara Boxer (D-CA). The content of the Boxer version of the bill is not yet known. Reid did not provide a timeline for Senate votes.

On July 14, President Obama issued a Statement of Administrative Policy announcing support for passage of the House bill but saying that “Congress should work to pass a long-term authorization bill well before the expiration date set forth in H.R. 5021.”

For more information, contact Lynn Dudley, senior vice president, global retirement & compensation policy, at (202) 289-6700.

Senate Committee Examines Chronic Care; Council Member Testifies

The U.S. Senate Finance Committee held a hearing on July 15 to discuss the challenges faced by chronic illness sufferers and their caregivers. The hearing, Chronic Illness: Addressing Patients’ Unmet Needs, featured testimony from Cheryl DeMars, president and CEO of The Alliance, a Council employer organization. DeMars is also the new chair of the National Business Coalition on Health, also a Council member organization.

Among the challenges posed by chronic illness care are poor communication between multiple doctors and hospitals, conflicting medication programs, overreliance on paper medical records and poor support for family caregivers.

At the outset of the hearing, Committee Chairman Ron Wyden (D-OR) called the management of chronic care “the biggest challenge ahead for Medicare and the future of America’s health care system.” In particular, Wyden noted that “the growing prevalence of chronic disease is also a major driver of rising health care costs that are putting a growing burden on government, business, and family budgets.”

DeMars, in her testimony, urged the federal government to provide:

  • Support for employers’ use of purchasing power to improve the health of employees.
  • Greater access to Medicare data on cost and quality of care.
  • Clear guidance with respect to regulations affecting health plans, with flexibility for plan sponsors to innovate.

She also described the Alliance’s “QualityPath” program to “move market share to doctors and hospitals who offer high-quality, fairly-priced health care for high-stakes procedures.”

Also testifying before the panel were Stephanie Dempsey, a sufferer of multiple chronic illnesses; Mary Margaret Lehmann, a caregiver for her Alzheimer’s-stricken husband; and Dr. William A. Bornstein, chief quality and medical officer at Emory Healthcare. Providing written testimony, but not appearing in person, was Chet Burrell, president and CEO of CareFirst BlueCross BlueShield. These witnesses all discussed their unique challenges navigating the chronic care health system.

During the question-and-answer period, lawmakers talked about improving incentives for “coordinated care,” the organization of patient care between two or more caregivers to facilitate the appropriate delivery of health care services. Earlier this year, Wyden and fellow committee member Johnny Isakson (R-GA) introduced the Better Care, Lower Cost Act (S. 1932), a measure directing the Secretary of Health and Human Services (HHS) to establish an integrated chronic care delivery program that promotes accountability and better care management for chronically ill patient populations and coordinates items and services under Medicare.

Wyden, Isakson and Debbie Stabenow (D-MI) also specifically expressed interest in standalone legislation addressing Alzheimer’s disease. In April 2013, Stabenow introduced the Health Outcomes, Planning, and Education for Alzheimer's Act (S. 709), a measure to improve diagnosis, care and outcomes for affected individuals.

Senator Bob Casey (D-PA) asked DeMars how employers are ensuring that employees with chronic conditions are able to obtain appropriate health coverage. DeMars affirmed companies’ view that business success is closely related to the well-being of the workforce, and cited value-based benefits design and the work of the Patient-Centered Outcomes Research Institute (PCORI) as valuable resources for helping self-insured employers align cost and quality for specific treatment programs. In response to a similar question from Wyden, DeMars noted that many Alliance companies are sponsoring biometric screening and optimal management programs.

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

House Approves Legislation to Install Target Date Fund as Default Investment in TSP

On July 14, the U.S. House of Representatives approved a measure that would formally institute a target date fund as the default investment for the federal government’s own retirement plan. The Smart Savings Act (H.R.4193) was introduced in the House on March 11 by Oversight Committee Chairman Darrell Issa (R-CA) and ranking member Elijah Cummings (D-MD).

An identical bill, introduced in the Senate on March 12 as S. 2117 by Senators Elizabeth Warren (D-MA) and Rob Portman (R-OH), was as approved the Committee on Homeland Security and Governmental Affairs on June 25, though consideration on the Senate floor has not yet been announced.

The bill would change the default investment fund under the Thrift Savings Plan (TSP), the defined contribution plan for federal government employees. Currently, new federal civilian employees automatically enrolled in the TSP who have not specified where to invest their funds are currently defaulted to the Government Securities Investment (or “G”) Fund, a fund designed to produce a rate of return that is higher than inflation while minimizing exposure to credit risk and market price fluctuations.

Under the new legislation, however, such employees would be defaulted into “an age-appropriate target date asset allocation portfolio.”

The Federal Retirement Thrift Investment Board approved the plan to seek this legislative change in December 2013, after the Employee Thrift Advisory Council endorsed the idea in November 2013. A news release announcing the introduction of the legislation notes that “While the G Fund is very safe, it is widely viewed by investment professionals as an overly conservative investment, particularly for younger workers, and can leave many unprepared for retirement.”

While the measure does not affect private-sector plan sponsors directly, the federal government is often held as an example for the private sector. Many private-sector employers already default employees who are automatically enrolled into their plans into target date funds, though some prefer to default automatically enrolled employees into a more conservative fund, despite the lower return on investment.

For more information, contact Diann Howland, vice president, legislative affairs, at (202) 289-6700.

GAO Suggests Revisions to Form 5500

A new report issued on June 5 by the Government Accountability Office (GAO) described problems with the Form 5500 Annual Return/Report of Employee Benefit Plan (Form 5500) and suggests revisions to improve the usefulness, reliability, and comparability of Form 5500 data.

The Form 5500 is the annual report that employee benefit plans file with the federal government and the primary source of information for both the federal government and the private sector on retirement plan assets. The GAO report, Private Pensions: Target Revisions Could Improve Usefulness of Form 5500 Information, was requested by Representative George Miller (D-CA), Ranking Member of the House Committee on Education and the Workforce. The report is based on the results of a GAO online survey of 43 non-government stakeholders and the responses from plan sponsors, service providers, representatives of plan participants and researchers, as well as interviews of agency officials.

The GAO identified three key challenges with Form 5500:

  1. Plan asset categories on Schedule H are not representative of current plan investments and provide little insight into the investments, the level of associated risk or the structures of these investments. In particular, the majority of respondents indicated that the “other” plan asset category in the form is too broad because it can include many unrelated types of investments.
  2. The form lacks detailed information on plan investments because there is no structured, data-searchable format for attachments to the form and the filing requirements on plan investments is limited for small plans. Stakeholders cannot determine administrative expenses deducted from returns when a plan invests with a registered investment company.
  3. The data provided on plan investments is not timely and naming conventions and identification numbers may be inconsistent, making it difficult to collect and accurately match records.

The GAO suggested several revisions to improve the usefulness of Form 5500:

  • Clarify Schedule C instructions for direct, eligible indirect and reportable indirect compensation so plan fees are reported more consistently and better align with the 408(b)(2) fee disclosures. This recommendation had been provided by the Council.
  • Simplify and clarify Schedule C service provider codes to increase reporting consistency, also as recommended by the Council.
  • Revise Schedule H plan asset categories to better match current investment categories and create more transparency into plan investments.
  • Revise the Schedule of Assets attachments to a standard searchable format.
  • Develop a central repository for Employer Identification Numbers and Plan Numbers for filers and service providers to improve comparability of form data across filings.

Of particular note, the GAO report recommends that Congress consider granting Treasury authority to require 5500 data be filed electronically.  This is significant because when the DOL began requiring electronic filing of the Form 5500, Treasury had to remove certain questions and schedules from the form.  Treasury has tried to modify rules to get the return information they need but they are currently prohibited from requiring this kind of filing to be made electronically.

The GAO also recommended that the Department of Labor (DOL), the Treasury Department and the Pension Benefit Guaranty Corporation (PBGC) complete advance testing of users’ perceptions before proposing major changes to the form for public comment.

The Council, in its discussions with GAO, urged – and continues to urge – that regulators provide a substantial amount of lead time before implementation of any changes to reduce burdens on plan sponsors and service providers. For more information, contact Jan Jacobson, senior counsel, retirement 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).