The ERISA Industry Committee (ERIC) Protecting Large Employer - - PowerPoint PPT Presentation

The ERISA Industry Committee (ERIC) Protecting Large Employer Benefits Analysis Collaboration Advocacy

www.eric.org

New England Employee Benefits Council Retirement and Compensation Public Policies Federal and State

Agenda

• Politics driving policy agenda
• Retirement Policy
• Federal legislative and regulatory
• Tax reform
• State employee benefits Policy

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The ERIC Perspective

The ERISA Industry Committee (ERIC) is the only national association that advocates exclusively for large employers

• n employee benefit public policies

at the federal, state, and local levels

• Plan Sponsor perspective
• Organizations with 10,000+ employees
• Members from all industries
• Benefits, legal, and government relations execs

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Poli litic ical Envir ironment --

• - Snapshot
• Recent events and impact on legislating
• Control of U.S. House and Senate – tight margins/2018 election already started – and retirement exodus
• Federal governance vs. States rights movement
• Budget rules impacting legislating
• Campaign promises
• Health care reform – anti-ACA fervor
• Health care costs
• Tax reform
• The Wall
• Trade
• Immigration
• Executive order on regulatory rollback opportunities
• States filling the void
• Not enough Administration positions filled
• Federal policymakers with limited government and policy experience

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Polls indicate public distaste of Congress and President, and that country is on the wrong track

Poli litic ical Control l of f States

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Source: Wikipedia

Federal Retirement Policy

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In Introduced Retir irement Poli licy Legis isla lation

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Bill Senate Sponsor Co-Sponsors House Sponsor Co-Sponsors Pension Budget Integrity Act (PBIA) (creates budget point of order for PBGC premiums)

• Sen. Enzi (R-WY)

3

• Rep. Renacci (R-OH)

12 Employer Participation in Student Loan Assistance Act (extends tax break for debt)

• Sen. Warner (D-VA)

6

• Rep. Davis (R-IL)

91 Retirement Security Preservation Act (DB plan testing for frozen plans)

• Sen. Cardin (D-MD)

1

• Rep. Tiberi (R-OH)

1 Working Families Flexibility Act of 2017 (comp time in lieu of overtime)

• Sen. Lee (R-UT)

20

• Rep. Roby (R-AL)

17 Portable Benefits for Independent Workers Pilot Program Act (gig workers DoL grant)

• Sen. Warner (D-VA)

1

• Rep. DelBene (D-WA)

3 Lifetime Income Disclosure Act (mandated lifetime income on 401(k) statements)

• Sen. Isakson

1

• Rep. Messer (R-IN)

7 Keep Our Pension Promises Act (new PBGC fund and transfer from Multi to single fund)

• Sen. Sanders (I-VT)

9

• Rep. Kaptur (D-OH)

29

Legis isla lation – Retirement Enhancement and Savin ings Act t

• Retirement Enhancement and Savings Act
• Passed 26-0 in Prior Congress from Senate Finance Committee
• What was Included?
• Lifetime Income Disclosure Act – mandates plan sponsors to include lifetime income on (k) plan statements
• Closed Plan Legislation (Non-Discrimination Testing)
• SEAL Act (Plan Loans for Unemployed)
• Streamlined 5500 Reporting for Prototype Plans
• Eliminated 10% Auto Enrollment Cap
• Multiple Employer Plans
• How was it paid for?
• Non-Retirement Related Provisions
• Raised Late Filer Fees for Form 5500 to $100 Per Day/$50,000 Maximum
• Budget Gimmick with Pension Premiums (accelerated payment into 2026 for 2027 variable rate premiums)

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Legis isla lation – Not Yet t In Intr troduced

RETIRE Act (Receiving Electronic Statements to Improve Retiree Earnings) – Leads Rep. Polis (D- CO) and Sens. Brown (D-OH) and Enzi (R-WY)

• Switches the Default to Electronic Receiving of Required Disclosures from Paper

Retirement Savings Lost & Found Act – Leads Sens. Warren (D-MA) & Daines (R-MT) and Reps. Messer (R-IN), Bonamici (D-OR), and Neal (D-MA)

• Mandates Social Security Administration to Create a Publicly searchable Retirement Savings

Lost & Found Database; Mandates Plan Sponsors to Transfer Unclaimed Mandatory Transfers

• f $1,000 or Less to Database or Treasury Department for Investment in IRA

Workplace Flexibility in the 21st Century Act – Lead Rep. Walters (R-CA)

• Amends ERISA to include a “Qualified Flexible Work Arrangement Plan” under the definition
• f an ERISA plan, and preempts all state and local paid leave laws
• Minimum Amount of Paid Leave must be Provided to be Exempt from State and Local Paid

Leave Laws

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Tax Reform – Driv ivers and Dif ifficult ltie ies

• Comparison to 1986 – why is it so different now?
• Budget baseline calculation issue and budget reconciliation process
• Repatriation revenue opportunity
• Lower rates vs. lost deductions
• Specific exclusions for employer-provided benefits include:
• Coverage under accident and health plans,
• Tax benefits for retirement accounts and contributions,
• Accident and disability insurance,
• Group term life insurance,
• Educational assistance,
• Tuition reduction benefits,
• Transportation benefits (parking, van pools, and transit passes),
• Dependent care assistance, adoption assistance,
• Meals and lodging furnished for the convenience of the employer,
• Employee awards, and
• Other miscellaneous fringe benefits

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Big ig Revenue Targets (5 (5 year numbers)

• Exclusion for employer contributions for health care, health insurance premiums and long-term care

insurance -- $863B

• Defined contribution plan exclusion for contributions and earnings -- $583B
• Defined benefit plan exclusion for contributions and earnings -- $424B
• Mortgage Interest Deduction -- $357B
• Reduced rates for dividends and capital gains -- $678B
• Exclusion of benefits under cafeteria plans -- $168B
• Deduction for charitable contributions -- $230B (other than for education and health)
• Subsidies for insurance purchased through health exchanges – $326B
• Tax Social Security benefits -- $214B
• Credit for children under age 17 -- $270B
• Exclusion for life insurance -- $128B
• Health savings accounts -- $15B

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Source: Joint Committee on Taxation FY 2016-2020 Tax Expenditure Estimates

Tax Reform – What is is in in Pla lay?

• “Rothification” – taxation of 401(k) plan contributions
• Will this impact retirement savings?
• Will lower rates make a difference?
• Taxation of other employee benefits – health care?
• Fringe benefit overhaul
• Student loans – relief opportunity?
• Executive Compensation
• De-risking impact with lower corporate rates?
• Trade-offs for lower rates across the board

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Federal Retir irement Regula latory Opportunit ities

• Electronic reporting of required benefit statements (DOL)
• Fiduciary rule (DOL)
• IRS updated Mortality Tables – now at OMB proposed to be a “major” rule
• IRC section 417 Minimum Present Value Changes (IRS)
• Non-Discrimination Testing for Closed Plans (IRS)
• PGBC Early Warning Program
• “Missing Participant” rules and relief
• Duplicative reporting, notice and recordkeeping requirements
• Form 5500 Proposed Changes

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State Emplo loyee Benefi fits Poli licy Activity

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State Emplo loyee Benefits Poli licy Activit ity

• Paid sick Leave
• Paid family leave
• State retirement plans

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Paid id Sic ick Leave: Common Is Issues

• Definitions (e.g. “family member” and “eligible employee”)
• Notice Requirements (e.g. notifying employees of the amount of leave accrued, used, and available)
• Accrual of Leave
• Ability to Front Load All Available Leave Before Accrual
• Carryover of Unused Leave
• Safe Harbor Exemptions for Existing Paid Leave Policies

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Paid id Sic ick Leave: Large Emplo loyer Prio iorit itie ies

• Exempt or exclude employers from procedural requirements under the proposed law—such as notice and

recordkeeping—if they provide a paid sick leave, unlimited paid leave, or PTO policy that offers equivalent or greater leave than what the law would require

• Employers should be able to “front-load” all available paid sick leave that an eligible employee would be

entitled to accrue over the course of a 52-week period, without being forced to allow for carryover of any unused leave

• Employers should have the power to designate which classes of its employees should be eligible to receive

paid sick leave, because mandating coverage for a larger class of employees could result in employers altering the total rewards or employee benefits package they offer

• Employers must have the ability to establish maximums for the following: (i) the amount of paid sick leave

that an employee may accrue beyond a 52-week period; and (ii) the amount, if any, of unused paid sick leave that can be carried over from one year to the next

• Bona fide collective bargaining agreements should preempt any state law or rules regarding paid sick leave

up and until the agreement expires, but where the agreement is silent the state law or rule should control

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Paid id Sic ick Leave: What State/Locality Is Is Next xt?

Maryland

• General Assembly approved paid sick leave bill
• Governor Hogan vetoed
• Not enough time to vote on override
• Next regular session expected to see a vote on veto override

Michigan

• Michigan Board of State Canvassers approved circulation of petition that would require employers to
• ffer paid sick leave

Albuquerque

• Healthy Workforce Ordinance (citizen-based)
• On ballot for October 3
• There are legal issues surrounding the ordinance that will be taken up by the New Mexico State Supreme

Court

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Paid id Famil ily Leave: Overview

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• Through August, paid family leave had been adopted in the following

states:

• California
• Rhode Island
• New Jersey
• New York
• District of Columbia
• Washington

19

Paid id Famil ily Leave: What State Is Is Next xt?

Massachusetts

• Raise Up Massachusetts collecting 64,750 signatures
• Ballot question hoping to be on November 2018 ballot if approved would provide :
• 16 weeks of leave to care for:
• (i) Seriously ill family member,
• (ii) a new child, and
• (iii) Needs arising from a family member in active duty
• 26 weeks of leave for own serious illness or to care for seriously ill service member
• Benefits equal to 90% of average weekly wages (max $1,000)
• Funded through employer contributions, but could require employees to contribute 50%

Pennsylvania: up to 12 weeks proposed in House and Senate bills

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Paid id Leave: In Influence Makes a Dif ifference

• New York
• First set of proposed rules from the Workers’ Compensation Board separated employees into full-time and part-time

based on the number of days worked per week

• ERIC addressed the unworkability of that standard and the need to adjust for various, flexible work arrangements
• Second set of proposed rules amended the distinction to working more or less than 20 hours per week
• Arizona
• Original proposed rules called for two options for carryover: (i) carryover unused, accrued time, or (ii) provide cash in lieu
• f carryover of unused, accrued leave
• ERIC offered a third option: frontloading all available leave without availability of carryover (i.e., “use it or lose it” policy)
• Supplemental proposed rules incorporated the third option
• Nevada
• Original bill would have required employers to provide a written accounting of paid sick leave that an employee has

accrued, used, etc.

• ERIC argued against this approach and the Nevada Senate committee considering the bill later removed the provision
• ERIC raised other objections until the bill was vetoed

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State Retir irement: Overview

State Law Enacted/Adopted Eligible Workers Program Status California September 2016 7.8 Signed a law removing references to the U.S. Department of Labor’s Safe Harbor Rule from the Obama

• Administration. California Secure Choice will be phased in over three years beginning no earlier than

2019. Connecticut May 2016 600,000 The program has a deadline of January 1, 2018, to launch, but is expected to require additional time. Illinois January 2015 1.2 M The Illinois Secure Choice Savings Board has been established and is meeting monthly. Program will begin with a phase one pilot program in 2018. Maryland May 2016 1 M The 11-member Maryland Small Business Retirement Savings Board began organizational meetings in November 2016. Program launch is currently estimated to occur by year-end 2018 or in 2019. Massachusetts March 2012 35,000 – 45,000 A prototype defined-contribution program was authorized to cover nonprofits only with 20 or fewer employees. New Jersey January 2016 1.7 M New Jersey Small Business Retirement Marketplace, for companies with 100 or fewer workers, was established by the legislature and signed into law with modifications by the governor. Oregon June 2015 1 M OregonSaves became the nation’s first auto-IRA program, opening for business July 1, 2017. Vermont June 2017 104,000 First state to enact law creating a multiple-employer plan. Employer participation is voluntary. Washington May 2015 > 1 M The Washington Small Business Retirement Marketplace is creating its blueprint and plans an introductory launch in 2017. Source: National Conference on Public Employee Retirement Systems

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State Retir irement: Oregon Ti Timeli line

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Illinois expected to begin pilot program in 2018 California expected to begin phasing in program no earlier than 2019

23

State Retir irement: Is Issues wit ith Oregon

• State retirement plan rules should not apply to ERISA plans
• Even applying for exemption from the rule violates ERISA
• Oregon rules mandate that employers apply for a conditional exemption every

three years

• Danger that the requirements to receive exemption will change at any point
• Employers already file public documents to federal agencies each year that can

confirm the existence of a tax-qualified retirement plan and automatic exemption from state retirement plan

• ERIC strategy used direct and indirect advocacy to influence state regulators
• The state removed its proposed requirement that employers enroll employees in state run plan

if not yet eligible for employer plan

• Online application for exemption by an officer of the company, certified by the state

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Th Thank you

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Will Hansen whansen@eric.org 202-627-1930 Many opportunities and challenges lie ahead Policies can be shaped to ensure that companies providing benefits have flexibility and minimal burdens – one size does not fit all Your voice matters