House Bill Could Significantly Alter Retirement, Paid Leave and Health Benefits

The bill, while not yet finalized, is advancing through House committees

Stephen Miller, CEBS By Stephen Miller, CEBS September 24, 2021
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House Bill Could Significantly Alter Retirement, Paid Leave and Health Benefits

The wide-ranging spending and tax bill now moving through the House, if passed by Congress and signed into law, would require most employers to provide an automatic enrollment retirement plan and creates a federally funded paid-leave program for private-sector workers. It would also weaken the "firewall" that prevents employees from receiving tax credits when purchasing Affordable Care Act (ACA) marketplace plans if their employer offers "affordable" health coverage, among other changes.

The House Ways and Means and Energy and Commerce committees on Sept. 15 advanced parts of the Democrats' $3.5 trillion budget reconciliation package, also known as the Build Back Better Act. "The House Budget and Rules committees will assemble the legislation passed by House committees into a consolidated bill," the Washington, D.C.-based Groom Law Group reported. "The Senate is nearly certain to amend the legislation to insert desired policies and to trim the package's cost to attract moderate votes"—a process that could take until the end of the year.

While the ultimate fate of the bill isn't known, it's prudent for HR professionals to be aware of key employee benefits changes that might become law.

For more information on the legislative package and its employee benefits provisions at this stage, SHRM Online has gathered the following articles and analyses.

A Mandate for Automatic Enrollment Retirement Plans

The legislation requires employers with more than five workers to provide access to a retirement plan that automatically enrolls employees by 2023. Governments and churches are exempt from the mandate. The automatic contribution percentage would start at 6 percent for qualified employees and would auto-escalate up to 10 percent during the fifth plan year. Employers would not be required to make contributions to the plan.

Employees would be able to opt out and could change their investment election and deferral rate. Employers that do not offer an automatic contribution plan or arrangement would be charged an excise tax of $10 per day per employee for noncompliance (with certain exceptions and adjusted for inflation). To offset costs for employers, the bill provides an enhanced employer plan startup credit.

Employers could comply by sponsoring a defined contribution plan, being part of a multiple employer plan or participating in a state-facilitated automatic individual retirement account (IRA) program, as long as these options meet the specified requirements.

(Groom Law Group and the National Association of Plan Advisors)

A Limit on the Size of 401(k) Accounts

If a worker's combined retirement account balances—including 401(k) and other employer-sponsored defined contribution plans and IRAs—exceeded $10 million (as adjusted for inflation) at the end of a taxable year, the account holder would have to reduce his or her combined account sizes by taking a distribution in the following year. The minimum distribution generally is 50 percent of the amount by which the individual's prior year aggregate account balances exceed the $10 million limit.

Other distribution requirements apply to combined aggregate account balances that exceed $20 million. The new limits would be effective for plan years beginning in 2022.

(Ropes & Gray LLP)

A National Paid-Leave Program

Beginning in July 2023, the bill provides up to 12 weeks of federal benefits to replace lost wages due to time off for medical leave or caregiving for an ill relative. The taxpayer-funded program covers all full-time and part-time workers without regard to employer size, although employers with fewer than 50 workers may be eligible for assistance grants.

While the bill follows the Family and Medical Leave Act (FMLA) in terms of leave events, it goes beyond the FMLA by including a much broader definition of covered family members. Bereavement would also qualify, but it is limited to three work days.

Eligible workers can apply for benefits if they have at least four caregiving hours in a week. Benefits would replace 85 percent of lost wages for the lowest-income workers and gradually decrease, replacing just 5 percent of wages for workers earning up to $250,000.

(Ballard Spahr)

Lower Affordability Threshold for Employer Health Plans

Under the ACA, the lowest-cost, self-only health plan option an employer offers cannot charge employee premiums that exceed 9.5 percent of an employee's income. The threshold is adjusted each year based on premium rates and in 2021 rose to 9.83 percent. It is set to fall to 9.61 percent in 2022.

The Ways and Means Committee proposal would permanently reduce the affordability threshold to 8.5 percent of an employee's income and eliminate the indexing requirement, so the 8.5 percent requirement would not increase over time. This change would go into effect beginning with the 2022 plan year.

The proposal would also make permanent the American Rescue Plan Act's increased federal subsidies for low- and moderate-earners who purchase ACA marketplace plans.

(Health Affairs)

Allowing Employees to Purchase ACA Marketplace Coverage

The Ways and Means version of the bill would amend the ACA employer "firewall" rules so that premium tax credits would be available to those whose income generally does not exceed 138 percent of the federal poverty line, regardless of whether the individual's employer offers affordable, minimum value coverage as required by the ACA. In addition, an employer would not be subject to a shared-responsibility penalty with respect to employees who purchase an ACA marketplace plan and receive premium tax credits.

(Groom Law Group and The Commonwealth Fund)


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