Pension Plan Funding Increases in September

In “Milliman analysis: Corporate pension funded status improves by $26 billion in September, the best month of 2014 so far”, Milliman indicates that the funded status of large companies’ defined benefit plans improved by $26 billion during September. Milliman reports that “The deficit dropped to $253 billion from $279 billion at the end of August, primarily due to an increase in the benchmark corporate bond interest rates used to value pension liabilities.”

To read more, click here.

ERIC Applauds House and Senate Tax-Writing Committees for Not Including PBGC Premium Increase in Highway Bill

The ERISA Industry Committee (ERIC) applauds the House Ways and Means Committee and the Senate Finance Committee for not including in the highway funding legislation another increase in premiums paid to the Pension Benefit Guaranty Corporation (PBGC) by companies that sponsor pension plans.

To read more, click here.

ERIC Expresses Concern with Ways & Means Committee Chairman Camp’s Tax Reform Discussion Draft

ERIC President and CEO Scott Macey made the following statement in response to the release of a tax reform “discussion draft” by House Ways and Means Committee Chairman Dave Camp (R-MI):

“Chairman Camp should be applauded for his efforts on trying to simplify the tax code and lower the overall tax rates. We respect the time, effort, and thoughtfulness that Chairman Camp and Committee members invested in developing this plan, but nevertheless, we do have concerns with his proposed changes to the current tax incentives for retirement policy. "

To read ERIC's press release, click here.

The following documents were published regarding the Discussion Draft:

• Chairman Camp’s Press Release
• Executive Summary
• Section-by-Section Summary of the Draft
• Legislative Text
• JCT’s Estimates of the Draft

ERIC members and trial members can read more about the Discussion Draft here.

Senators Urge Treasury Department to Issue Guidance on Frozen DB Plans

A recent press release titled “Portman, Cardin Urge Treasury Sec. Lew to Fix A Regulatory Flaw that Threatens the Retirement Security of American Workers” states that:

“U.S. Senators Rob Portman (R-Ohio) and Ben Cardin (D-MD) sent a letter to U.S. Secretary of the Treasury Jacob Lew expressing concern with a regulation that could unintentionally weaken the retirement security of many American workers…In the letter, Portman and Cardin, both members of the Senate Finance Committee, warn that this technical glitch might inadvertently incentivize companies to hard-freeze the defined benefit pension plan of long-time employees and urge Lew to fix it…”

The press release is available here.
The Senators’ letter is available here.

Congressional Hearing Witnesses Say the Exchanges are on Track for October 1st

The House Committee on Energy and Commerce hearing yesterday on "PPACA Pulse Check: Part 2" examined whether the Administration was on track for the roll-out of the Exchanges on October 1st.

The hearing was well-attended by both members of Congress, their staff, and the regulated community. Witnesses included representatives from Equifax, Serco, CGI Federal, Leavitt Partners, American Staffing Association, and Pennsylvania Health Access Network.

As expected, the hearing was fairly partisan. Republican members of Congress predominantly focused on the Administration's delays in implementing the Affordable Care Act (ACA) and whether the Exchanges would be ready in three weeks. They were concerned about the complexity of the Exchanges, whether the law would be implemented properly, and how fraud could be prevented. They also expressed concerns about the ACA reducing the amount of available jobs and reductions in the number of hours available to Americans with jobs.

Democratic members of Congress were also focused on the readiness of the Exchanges. There was concern that House Republicans were trying to intimidate and interfere with implementation of the ACA by investigating navigators (the organizations that help educate the public about the ACA) at a critical time. One member of Congress referred to the Republicans' actions as a "phishing expedition". They noted that investigations historically have occurred after the work has been performed -- and that there have been no allegations of wrongdoing. They also focused on the benefits of the ACA and the protections against fraud built into the system. They also stated that they expected the Exchanges to be ready, but noted that there would likely be a few "hiccups".

The witnesses that were involved with implementation of the Exchanges assured the Committee that they were all on schedule and would be ready on October 1st. However, one witness indicated that no states are completely ready yet and that he expected a rocky start. Other witnesses emphasized the positive impact of the law on Americans and expressed disappointment in the Governors who failed to created exchanges in their states. Representatives of employer groups expressed concern about the definition of full-time employees under the ACA and impact on jobs.

The overall take-away from the hearing was that the Exchanges appear to be on track, but that there may be a somewhat bumpy start.

The hearing and written testimony are available here.
Information about the investigation of navigators is available here and here.

ERIC Joins Group Trade Association Letter on “Blank Slate” Approach to Tax Reform

ERIC recently joined a group of business trade associations on a letter to the Senate regarding the “blank slate” approach to tax reform, urging the lawmakers to preserve the current tax treatment related to retirement savings.

“While we work to enhance the current [employer-sponsored retirement] system and reduce the deficit, we must not eliminate one of the central foundations – the tax treatment of retirement savings – upon which today’s successful system is built,” the letter argues. It adds that, “The effects of such a change for individuals, employers and the system as a whole are simply too harmful and must be avoided.”

ERIC members and trial members can read more here.

The Group Trade Letter to Senate is available here.

The Baucus and Hatch Dear Colleague Letter is available here.

Senate Confirms New Secretary of Labor

The Senate confirmed Tom Perez today as the U.S. Secretary of Labor. There was a party-line vote of 54-46, with no Republicans supporting President Obama's nominee. 

Mr. Perez has been serving as the Assistant U.S. Attorney General for the Civil Rights Division at the U.S. Department of Justice since 2009. He previously served as Maryland Gov. Martin O’Malley’s Labor Secretary from 2007 until 2009.

For more information, click here.

Key Treasury Official Testifies Before Ways and Means Committee

J. Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary for Retirement and Health Policy, U.S. Department of the Treasury, testified yesterday before the Health Subcommittee of the U.S. House of Representatives Ways and Means Committee.

In Notice 2013-45, the Treasury announced that the information reporting requirements and employer mandate penalties of the Affordable Care Act (ACA) would be delayed until 2015. The hearing, “Delay of the Employer Mandate”, focused on the Obama Administration’s decision to delay these provisions of the ACA.

Chairman Kevin Brady (R-TX) as well as several other Congressman expressed concern about the Administration not being prepared for the effective date of the ACA. They also questioned why the employer mandate was delayed, but the individual mandate was not.

However, Ranking Member Jim McDermott (D-WA) and other Congressman emphasized the benefits of the ACA for Americans and the need to reduce the number of uninsured individuals. They noted that the system needs to protect against adverse selection of benefits, which drives up health costs.

Mr. Iwry testified that the Administration was responding to the requests of employers who indicated that additional time was needed to implement the law. He indicated that the Treasury Department wanted to ensure that companies could comply effectively and efficiently. They wanted to allow time for companies to adapt their systems and conduct testing. He stated that the Treasury Department is confident that they have the legal authority to postpone the mandate under Internal Revenue Code section 7805(a). Mr. Iwry emphasized the importance of the individual mandate and indicated that the key insurance market reforms in the ACA don’t work without it.

More in-depth coverage is available here for ERIC members and trial members.
General information about the hearing is available here.
Mark Iwry’s testimony is available here.
Chairman Kevin Brady’s testimony is available here.
Ranking Member Jim McDermott’s testimony is available here.

Senate Legislation Would Amend Definition of Full-Time Worker under ACA

Legislation recently introduced by Senators Susan Collins (R-ME) and Joe Donnelly (D-IN) would amend the definition of a full-time employee for purposes of the employee shared-responsibility provisions of the Affordable Care Act.

The “Forty Hours is Full Time Act of 2013” (S. 701) would amend the Internal Revenue Code by defining a "full-time employee" as an employee who is employed on average at least 40 hours per week, instead of the current 30 hours, and it would modify the number of hours considered to be equal to one “full-time equivalent” employee from 120 hours a month to 174.

S. 701, “Forty Hours Is Full Time Act of 2013” is available here.

Letter to President Obama is available here.

ERIC members and trial members can read more here.

Hill Letter to Treasury on Frozen DB Plans and Nondiscrimination Testing

Various members of Congress, including Representative Tiberi (R-OH) and Richard Neal (D-MA), sent a letter to Treasury Secretary Jacob Lew urging action on frozen defined benefit plans and nondiscrimination testing.

The letter describes the concerns of companies with frozen defined benefit plans regarding the increased difficulty over time (and currently for some large companies) to pass the nondiscrimination test. In particular, these members of Congress ask Treasury to address the issue “expeditiously” and “to consider non-regulatory approaches that could be implemented more quickly and thus prevent benefit freezes that could otherwise occur very soon.”

A copy of the letter is available here.

ERIC members and trial members can read more here.

Legislation Introduced to Require Plans to Disclose Lifetime Income Annuity Equivalents

Bipartisan legislation was introduced in the Senate on June 12 that would require defined contribution plans to disclose annually to participants the lifetime income stream equivalent of the total benefits accrued. The Lifetime Income Disclosure Act (S. 1145) would require sponsors to illustrate the monthly annuity equivalents of their accrued benefits under a single-life annuity and a qualified joint and survivor annuity. Although the proposed legislation differs in a number of respects from the approach the U.S. Department of Labor (DOL) seems to be developing, it would provide protection from fiduciary liability as long as sponsors use the model notices and assumptions developed by the DOL.

The bill was sponsored by Senators Johnny Isakson (R-GA), Christopher Murphy (D-CT), Bill Nelson (D-FL), Tim Scott (R-SC), and Elizabeth Warren (D-MA). Similar legislation was recently introduced in the House (H.R. 2171) by Representatives Rush Holt (D-NJ), Ron Kind (D-WI), Tom Petri (R-WI), and Dave Reichert (R-WA).

For a copy of S. 1145, The Lifetime Income Disclosure Act, click here.
For a copy of H.R. 2171, click here.

Rep. Neal Reintroduces Retirement Legislation

This week, Representative Neal (D-MA) introduced The Retirement Plan Simplification and Enhancement Act of 2013. This bill is a reintroduction of H.R. 4050 from last year, with some changes. Highlights of the provisions and changes to the bill are as follows:


Expanding Coverage:

• Modify the automatic safe harbor to remove the cap limiting escalation of deferrals to no greater than 10% of pay;

• New automatic enrollment safe harbor (default contributions 6% in year 1; 8% in year 2 and 10% in subsequent years); required employer matching contributions of 50 cents on dollar for first 2% of pay and 30 cents on dollar for next 8% of pay;

• Change coverage rules for long-time part-time workers; and

• Amendment to top heavy rules to allow employers to test participants who have not met the statutory age requirement and service requirements separately to determine top heavy contributions.

Congressman Neal's summary is available here.

A copy of the bill is available here.

ERIC members and guests can read more here.

Senate Finance Releases Option Paper on Retirement & Health Tax Expenditure Changes under Tax Reform

The Senate Finance Committee released its “options” paper on retirement and health policy changes and tax reform. This is option paper number 7 in a series that the Senate Finance Committee has released as a result of its meetings with members and staff on options to consider under tax reform by subject matter.

As in the other option papers released by the Senate Finance Committee, it did not endorse any individual proposal. In this report, staff noted that tax provisions related to employee benefits are often complex and under a cost-benefit analysis, sometimes produce limited benefits when compared to the cost outlay. This report provides a laundry list of possible changes to the tax code relating to retirement plans. In an effort similar to the Ways and Means working group on retirement and pensions, it provides a compilation of alternatives for changes in the tax treatment of retirement plan contributions and distributions.

The report is available here.

ERIC members and guests can read more here.

Senators introduce a bill to end use-it-or-lose-it for health FSAs

Senators are looking to end the days of buying unneeded medical supplies in order to avoid losing the funds in your health flexible spending account. U.S. Senators Ben Cardin (D-MD) and Mike Enzi (R-WY) introduced legislation that would allow workers to keep any unspent amounts in their flexible spending accounts.

Currently, employees can contribute to their health flexible spending arrangements (FSAs) on a pre-tax basis. Workers need to plan carefully as any unused amounts revert to the employer at the end of the plan year.

The Medical FSA Improvement Act of 2013 (S. 966) would allow workers to cash out any remaining amounts in their health FSAs at the end of a plan year instead of having those amounts go to their employers.

This bill would significantly impact company’s health FSAs if passed.

The bill is available here.

The press release issued by Senators Cardin and Enzi is available here.