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Pension plan changes also made
The budget deal—the Bipartisan Budget Act of 2015 (H.R. 1314), signed into law by President Barack Obama on Nov. 2, 2015—repeals one section of the Affordable Care Act (ACA) and increases premiums for the Pension Benefit Guaranty Corp (PBGC).
This deal was the result of weeks of negotiations among the White House; outgoing Speaker of the House John Boehner, R-Ohio; Senate Majority Leader Mitch McConnell, R-Ky.; House Minority Leader Nancy Pelosi, D-Calif. and Senate Minority Leader Harry Reid, D-Nev.
The deal repeals the ACA automatic-enrollment mandate, which requires employers with more than 200 employees to automatically enroll new full-time equivalents into a qualifying health plan, if offered by that employer, and to automatically continue enrollment of current employees.
The requirement could be confusing and cause complications for employees and employers, noted Chatrane Birbal, senior advisor, government relations for the Society for Human Resource Management (SHRM). In particular, if employees are automatically enrolled in an employer-sponsored health plan but have coverage elsewhere, such as under a spouse’s plan, they may find themselves in a plan they do not need or want. In addition, new employees could potentially lose access to health care providers they have long depended on, who may not be participants under the employer-sponsored health plan, she said.
The implementation of the auto-enrollment provision has been “a very low priority for the administration, and its repeal will not seriously affect the general scheme of the ACA,” predicted the
Health Affairs Blog.
The budget deal also raises premiums paid to the PBGC for single employer pension plans for both flat- and fixed-rate premiums.
Flat-rate premiums will increase 22 percent, while variable rates will increase 24 percent from 2016 levels (equal to a $4 to $5 increase depending on year), said Kathleen Coulombe, SHRM senior advisor, government relations. (Current 2015 flat-rate levels are at $57.)
The employer community has issues with these hikes because the money does not actually fund the PBGC, but instead is a revenue-raiser for the Treasury Department, Coulombe pointed out. She noted that such hikes often are stuck in bills to offset the costs of increasing the spending caps. “By tinkering with the rates, they bring in extra revenue,” she said.
The due date for PBGC premiums for 2025 was changed, moving it forward by a month, Coulombe added. Employers generally are required to make a premium payment by Oct. 15 of each plan year. The Bipartisan Budget Act of 2015 moves the payment date to Sept. 15 to include one additional year within the 10-year budget window, thereby increasing the amount of revenue generated to the Treasury.
In addition, the law extends pension-smoothing, which lets employers reduce their pension liability. In doing so, it increases their tax responsibility to the Treasury. ”Employers and Congress both enjoy pulling this funding lever, as it ensures that pension plans stay funded at acceptable levels, while generating tax revenue,”Coulombe noted.
Social Security Reforms
According to Coulombe, the budget agreement accomplishes some Social Security reforms because it:
The reforms are being touted as the first significant reforms to Social Security since 1983, expecting to result in $168 billion in long-term savings.
Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him
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