Washington “Insiders” provide the latest on benefits-related legislation, court cases and economic policies and how the election could affect each

Attendees of the October 2nd NEEBC 2020 Washington Update – Bringing Washington to New England (at least virtually) program were provided with valuable information and insights from three Washington-based policy experts about recently enacted and potential future employee benefits-related legislation and economic policies.

James Gelfand, Senior Vice President, Health Policy, with ERIC – The ERISA Industry Committee – kicked off the morning by discussing the 2020 health policy landscape from the perspective of the federal legislative, judicial and executive branches, principally focusing on the likelihood of future changes in law and policy.

On the legislative front, Gelfand noted that following the initial COVID-19 legislative packages, progress generally stalled following the House’s passage of The Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which has recently been reincarnated. The updated version includes funds for testing and tracing, Affordable Care Act (ACA) subsidies for the unemployed, requirements for coverage without cost sharing of COVID-19 vaccines and treatments and improvements to the transparency of COVID-19 diagnostic testing pricing. Notably, neither COBRA subsidies nor flexible spending account (FSA) carry-over relief are included.

Gelfand stated his belief that any additional COVID-19 relief legislation is unlikely prior to election day, particularly given the Senate’s focus on the recent Supreme Court nomination of 7th Circuit Court of Appeals Judge Amy Coney Barrett. He noted, however, that legislation, perhaps connected to the need for an additional federal funding measure, may be possible during a post-election lame duck session. Possible issues to be addressed include price gouging for COVID-19 testing and priorities for the distribution of any COVID-19 vaccine.

On the judicial front, Gelfand noted that Texas v. California, pending before the Supreme Court, may well decide the fate of the ACA. If Judge Barrett is confirmed before oral argument on November 10, 2020, she may pave the way for a majority decision for the Court’s conservative block, which may also eventually take aim at the abortion case Roe v. Wade. Gelfand noted that the Supreme Court was about to hear oral arguments on October 6 in Rutledge v. Pharmaceutical Care Management Association, a case involving the Court revisiting its views on ERISA preemption of rate regulation. The case involves an Arkansas statute that regulates pharmacy benefit managers’ drug-reimbursement rates by preventing them from underpaying independent pharmacists.

Finally, Gelfand highlighted a handful of health care related Presidential executive orders, including orders aimed at lowering costs by eliminating kickbacks to middlemen and permitting states to safely import certain drugs from Canada. The order with the largest potential savings for Americans (30%) involves an end to “international freeriding” when it comes to Medicare Part B or Part D prescription drugs and medical products.

Looking ahead to 2021, Gelfand summarized his own views as to the potential for an ACA repeal/replace law (highly unlikely), expansion of Medicare to more Americans (possible), a public option (somewhat likely) and ACA expansion and improvement (highly likely).

Program participants next had the pleasure of hearing from Diann Howland, Vice President, Legislative Affairs at the American Benefits Council. Howland focused her remarks on legislation and regulations affecting retirement plans although she began with an interesting overview of the way in which the legislative process has been changing. Specifically, Howland noted the ever shrinking pool of Senate moderates, who historically held the power and controlled the Senate’s momentum. This results, she explained, in increased power for those at the respective far ends of the political spectrum and a potential loss of truly bipartisan efforts.

Howland agreed with Gelfand’s assessment that any legislation affecting retirement plans before the election is unlikely, as is such legislation during the lame duck session. She noted, however, that if Congress enacted another stimulus package or continuing resolution, it was possible that funding stabilization for multiemployer and single employer defined benefit plans could be included.

According to Howland, the following generally bipartisan retirement plan proposals remain under serious consideration in the House Ways and Means Committee:

  • Support for employer matching contributions of student loan repayments,
  • Expanded self-correction of inadvertent plan violations under IRS correction programs,
  • An increase in the catch-up contribution limit for participants who are at least age 60,
  • Allowing greater flexibility for plans with respect to overpayments of benefits,
  • A further increase in the MRD starting age to 75 (the SECURE Act increased the age from 70½ to 72) and
  • Establishment of a national registry for missing participants/lost accounts.

Howland next turned to the regulators, discussing the recent Department of Labor guidance repudiating Environmental, Social and Corporate Governance (ESG) investing and activist proxy voting, which most notably, represent a reversal of Obama administration policies. Howland noted that the change in position and the lack of clarity on these issues creates an untenable position for employers and participants. Although Howland expects the current guidance to be finalized, she also believes that the DOL will once again change the guidance if Biden is elected. Similarly, if Biden is elected, Howland would also expect to see at least a partial resurrection of the Obama era DOL’s fiduciary rule, as well as enhanced reporting through Form 5500, limitations on defined benefit plan risk transfers and restrictions on brokerage windows.

Looking ahead to 2021, Howland noted that if the Democrats take control of the Senate and repeal the filibuster, Democratic priorities could be passed with ease (as only a simple majority vote would be required). These could result in adoption of Biden/Harris proposals for retirement plans such as automatic 401(k) plans and IRAs, tax incentives for long-term care insurance, support for retirement savings for caregivers without earned income and an expansion of Social Security benefits. Howland notes that we may also see a Biden/Harris administration push for shortening the newly enacted service period for part-time employee access to 401(k) plans, support for state and city sponsored retirement plans, the addition of spousal consent for distributions from 401(k), profit sharing and stock bonus plans, cyber and data security mandates, relief and reform for multiemployer plans and bankruptcy changes to better protect retirement benefits.

Finally, Howland urged attendees to keep an eye on potential legislative proposals for replacing retirement plan tax deferral benefits with a flat tax credit, the imposition of a financial transactions tax, which could discourage rebalancing of retirement plan investments and the possible removal of the taxable wage base limit on the 6.2% OASDI portion of FICA and SECA taxes.

The Program’s final speaker was Marc Goldwein, Senior Vice President and Senior Policy Director at the Committee for a Responsible Federal Budget. Regular attendees of the NEEBC Washington Update program will recall that Goldwein presented at last year’s Program in which he discussed current U.S. debt levels and the potential effects of deficit spending on Social Security and Medicare funding.

In the wake of the COVID-19 pandemic, Goldwein began summarizing the pandemic’s damage to the U.S. economy, noting that GDP shrank by 10% between the first and second quarter of 2020, and a minimum of 22 million people lost jobs. According to Goldwein, this is the steepest and fastest contraction that the U.S. economy has ever faced. The relief measures enacted by Congress, administrative agencies and the Federal Reserve have come at a cost to date of approximately $5 trillion with more relief approved and available for future use. Putting that into historic perspective, Goldwein observed that the U.S. has spent as much as it did in response to the Great Recession, but in a much shorter time (six months versus six years).

Like Gelfand and Howland, Goldwein is pessimistic that more relief from Congress will be provided in the near future. And Goldwein said that although the pandemic relief has clearly helped individuals and businesses, the economy is far from out of the woods as relief programs are running out, joblessness remains high and the virus is still not under control.

According to Goldwein, the pandemic has only compounded already concerning economic circumstances and a burgeoning U.S. debt. As to the latter, Goldwein noted that U.S. debt is now equal to 100% percent of the U.S. economy, which is commensurate with World War II levels. If current trends continue, Social Security will be out of funds in 11 years and U.S. debt will likely equal 2½ times the U.S. economy by 2050. According to Goldwein, the closest comparison to a country with similar debt levels is Japan, which has not experienced economic growth for approximately 25 years.

Goldwein ended by emphasizing that there is not an easy way out of current circumstances. Reducing U.S. debt levels will require taxing more and spending less at the federal level, although this is unlikely to begin until the U.S. has emerged from the pandemic and employment levels are lower, ideally by 2025.

Like prior years, the 2020 Program did not disappoint as those who attended were provided with valuable insights and a thought-provoking discussion.

Jake Lloyd, Esq. specializes in Employee Benefits in Sullivan’s Tax Department in Boston.

Share this post:

Comments on "Washington “Insiders” provide the latest on benefits-related legislation, court cases and economic policies and how the election could affect each"

Comments 0-5 of 0

Please login to comment