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ERISA Industry Committee Update: Health and Retirement Legislation, House Budget FY 2015, and ACA Court Cases

In this update, learn about the latest health and retirement legislation, House Budget FY 2015, and the ongoing court cases challenging the ACA. Stay informed on the ERISA Industry Committee's social media channels.

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ERISA Industry Committee Update: Health and Retirement Legislation, House Budget FY 2015, and ACA Court Cases

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  1. The ERISA Industry Committee Washington Update April 7, 2014

  2. Participation Procedure • Procedure for audience participation • Audience will be in a “listen-only” mode • If you wish to ask a question or make a comment, press *6 on your telephone to “un-mute” your telephone • After speaking, please press *6 again to re-enter “listen-only” mode

  3. Washington Update Agenda Welcoming Remarks Hill Briefing: Dani Kehoe Health Update Retirement Update Legal Update Concluding Remarks/Questions

  4. ERIC on Social Media • ERIC is on Twitter and Facebook and has a blog! • Please follow us (and tell your friends and colleagues). https://twitter.com/ERISAIndCmte https://www.facebook.com/ERISAIndCmte http://erisaindustrycommittee.blogspot.com/ • More information is available at http://www.eric.org/about/eric-social-media/.

  5. Health

  6. State of the Exchanges • Exceeds expectations • 7.1M have signed up through Exchanges through March 31 • No numbers on how many of these have paid • Those “in line” on March 31 have until 4/15 to finish applying • 3M additional have enrolled in Medicaid and CHIP as of end of February

  7. Health legislation • Changes sought to the definition of full-time employee in the ACA • Would raise limit from 30 to 40 hours per week • HR 2575 passes House by vote of 248 – 179 • Nebulous future in Senate for similar bill, S 1188 • Changes sought to transitional risk reinsurance fee • HR 3489 would repeal fee on plans; no action yet • Senate bill (Franklin – Kirk) would impose a 3-year collection delay to find better funding mechanism • Teeny changes to ACA pass House

  8. House Budget FY 2015 • Republican budget spearheaded by Rep. Paul Ryan (R-WI) • Decreases federal deficit by $5.1 T > 10 years • Adds to defense spending • No tax increases

  9. House Budget FY 2015, cont. • Changes to Medicaid • Block grant • Combine with CHIP • Expand state flexibility • Repeal ACA expansion • Repeal Exchange subsidies and other ACA-related spending

  10. House Budget FY 2015, cont. • Premium-support system for Medicare • New system for those turning 65 after 2023 • Those 55 or older in 2013 could stay on old system • Choice of private plans or existing FFS on new Medicare Exchange • Premium support adjusted for income and health status; also would be means-tested • Medicare Exchange: guaranteed issue; community rating; no pre-ex exclusions

  11. House Budget FY 2015, cont. • Age of eligibility for Medicare would increase to align with Social Security • Repeal IPAB • Reform medical liability lawsuits • More means-testing for Medicare Parts B and D • Repeal ACA

  12. FSA “taint” of HSAs • Notice 2013-71 permits $500 rollover from one year to next of unused funds in FSA; potentially disqualifies HSA contributions in next year • New IRS Chief Counsel memorandum sanctions certain practices; not binding precedent • Memo’s conclusions: • Rolled-over FSA funds preclude individual from making HSA contributions in next year, even after FSA funds run out • Would be OK to roll over unused FSA funds to HSA-compatible health FSA for next year and then may contribute to HSA • Plans may do this automatically for those who elect HDHP in next year • Participants in health FSA may waive or decline rollover before year-end and then contribute to HSA in next year • Also explains overlapping run-outs and rollovers

  13. HIPAA • HHS issued a proposed rule that would require health plans to certify that they comply with certain electronic transaction requirements under HIPAA • ERIC filed a comment letter, including recommendations that: • HHS should limit the application of the proposed regulations to major medical coverage, in accordance with the approach provided in the regulations outlining the transitional risk reinsurance fee • Plans should be subject to the certification requirement only to the extent that they provide medical care • The number of individuals used to calculate the penalty should be based only on the number of individuals covered by or enrolled in insurance policies that are major medical policies • The regulations should be re-proposed, and the deadline for compliance should be extended

  14. The ACA and the courts • Fate of individual tax subsidies in federally run Exchanges • Under consideration in 2 U. S. District Courts and two circuit courts • Administration’s views upheld in Halbig v. Sebelius and King v. Sebelius • DC Circuit Court heard oral arguments in Halbig case March 25 • King plaintiffs filed appeal in 4th Circuit • Could topple the ACA • 80+ cases challenge ACA rule that health plans cover contraceptives (and more) at no cost • Split in 4 Circuit Courts that have decided • SCOTUS heard oral arguments on March 25 • Core issue: do companies have same right as people to free exercise of religion? • Would alter, but not dismember, ACA

  15. New ERIC poll • ACA reporting • 75% found reporting reg one of three most challenging ACA regs • Major implementation problems • Cost • Integrating data from different systems • Securing consent for electronic reports • Gathering dependent TINs • Looked at who can use “simple” certification methods • Choice of profession for last 4 years

  16. Big match-up: Football vs. the ACA • Recent NLRB ruling finds that Northwestern college students on football scholarships are employees • Huh!

  17. Retirement

  18. Retirement – Legislative Update Congress/Tax Reform Camp Tax Reform “Discussion Draft” • Retirement announcement • Hearings • House/Senate reactions • Coalition to Protect Retirement (Letter to Rep. Camp)

  19. Retirement – Legislative Update • Unemployment Insurance Extension (H.R. 3979) • Interest stabilization (10% thru 2017; 30% after 2020) • Pre-pay of flat premiums up to 5 years at current rate • Extenders (includes extension under PPA for multi- employers) • PBGC premiums

  20. Retirement – Regulatory Update • Notice 2014-19 Windsor Application • Clarifies that the Windsor decision applies to same-sex married couples for retirement qualification purposes • Dates: no 401(a) failure for non-recognition of same sex spouses prior to 6/26/13; • Dates: no 401(a) failure for recognition of same sex spouses only in states that recognized same sex marriage – prior to 9/16/13

  21. Retirement – Regulatory Update • Deadline for plan amendments: year end 2014 • Special rule for single employer DB plans & section 436(c): Windsor decision amendments regarding spousal definition that takes effect on 06/26/13 – does not require adjusted funding target percentage to be sufficient (or additional er contributions)

  22. Retirement – Regulatory Update Treasury Department/IRS Still Waiting on: • Hybrid Plan Regulations • Treasury Lifetime Income rules (proposed rules and Revenue Rulings released 2 years ago) • Potential DB Plan De-Risking rules?

  23. Retirement – Regulatory Update, cont. Department of Labor • Disclosure Guide – 408(b) Round II • Brokerage Window project? • Lifetime Income • Conflict of Interest

  24. Retirement – Regulatory Update, cont. PBGC • Proposed regulations • Treatment of amounts rolled from DC plans into DB plans if the DB plan is terminated. • Rollover amounts attributable to employee contributions are treated like mandatory employee contributions. • But, participants would not be able to receive a lump sum return of the rollover amounts. • Special rules regarding how limits apply.

  25. Legal

  26. Severance Pay • The U.S. Supreme Court recently held severance payments made because of involuntary separation from employment are considered “wages” and therefore subject to the FICA payroll tax • ERIC had filed an amicus brief with the Supreme Court in the case as well as when the case was before the 6th Circuit Court of Appeals in support of Quality Stores • In its decision, the Supreme Court ruled that all severance payments not directly tied to the receipt of state unemployment benefits are subject to FICA • The Court’s decision was based on statutory construction of two provisions of the Internal Revenue Code (income tax withholding and FICA) • The Court held that the term “wages” should be interpreted the same under both provisions despite the different statutory language U.S. v. Quality Stores, Inc., ___U.S. ___ (2014)

  27. Stock Drop • Most courts have held that fiduciaries are presumed to have acted prudently when the value of the company’s stock declines • In Fifth Third Bancorp v. Dudenhoeffer, the Sixth Circuit Court of Appeals held that the presumption of prudence does not apply at the pleading stage of a lawsuit • ERIC filed an amicus brief (with other associations) in the case • The U.S. Supreme Court heard oral arguments on April 2nd • The Justices seemed to acknowledge the dual purpose of employer shares funds and how the fiduciary rules apply differently to such funds • The Court seemed to focus on a fiduciary’s duties when the company stock is declining and on whether fiduciaries are required to act upon inside information • Court did not really focus on substantive or technical aspects of presumption addressed by various courts of appeal • This case will likely have a significant impact on whether the presumption of prudence still applies and on the cost of litigation Fifth Third Bancorp v. Dudenhoeffer, 692 F.3d 410 (6th Cir. 2012), cert. granted

  28. “Excessive” Fees • The Eighth Circuit Court of Appeals’ held that the deference provided for fiduciaries’ decisions is not necessarily limited to benefit claims • The Second, Third, Sixth, and Seventh Circuits (but not the Second Circuit) had all previously held that deference for fiduciaries’ decisions also applied • The 8th Circuit remanded the case as it found that the District Court may have ruled differently regarding the selection of investment options and mapping if it had given the fiduciaries deference • The Court also overturned the lower court’s decision regarding float income • However, the 8th Circuit found that (even giving deference to the fiduciaries’ decisions) the fiduciaries were liable for failing to control plan expenses where services were also provided to the company’s other benefit plans and for corporate matters • A recent NY Times article highlighted the fee cases and encourages the DOL to act. Tussey v. ABB, Inc., 2014 WL 1044831 (8th Cir. Mar. 19, 2014)

  29. Upcoming ERIC calls • FocusOn call: Benefits, Compensation, and Payroll Tax Aspects of the Proposed Tax Reform Act of 2014 • Presented for ERIC by the lawyers of the Miller & Chevalier Employee Benefits Group • Thursday, April 24, 2:00 – 3:30 p.m. EDT • Washington Update call • Monday, May 5, 11:00 a.m. – noon EDT

  30. Upcoming ERIC meetings • ERIC Health and Retirement Committee meetings • Wednesday, April 9 (afternoon) • ERIC General Membership meeting • Thursday, April 10 (all day) • ERIC Legal Committee meeting • Thursday, May 8, 10:00 a.m. – 3:00 p.m. EDT

  31. To receive ERIC updates • If you are an employee of an ERIC member company and would like to receive your own copy of our emails and notifications of future events, please let us know by writing to Adreanne Cooper at ERIC (acooper@eric.org.)   • In this email, please include your contact information or signature block, and please indicate whether you wish to receive information on retirement issues, health issues, legal issues, or all of the above.

  32. For further information • Debra Davis, Vice President, Benefits • ddavis@eric.org • Direct dial: 202/627-1925 • Kathryn Ricard, Senior Vice President, Retirement Security • kricard@eric.org • Direct dial: 202/627-1930 • Gretchen Young, Senior Vice President, Health Policy • gyoung@eric.org • Direct dial: 202/627-1920 • ERIC main phone: 202/789-1400

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