Most Americans (other than those focused solely on the resolution of the NFL lockout) have taken notice of the partisan scramble going on here in Washington these days over the debt ceiling limit and our seemingly out-of-control federal deficit. As I write this, partisan bickering and veto threats are the order of the day—even as the August 2 debt ceiling deadline looms.
Political shenanigans such as this often leave little time for policy driven legislation–and that certainly seems the case this year. Still, I thought it might be helpful to take a quick glimpse at the health care and retirement issues that are being considered.
The Senate has begun to consider the Family and Retirement Health Investment Act of 2011, which is a bill sponsored by Republican Senator Orrin Hatch from Utah and appears to be attracting co-sponsors (although, in a far too familiar story, so far no Democratic co-sponsors). The bill generally attempts to expand the usage of health savings accounts (“HSA’s”), by making a series of modest reforms in the market for HSA’s and by expanding the group of individuals who could adopt and contribute to such accounts. The bill also contains a few direct repeals of provisions contained in last year’s health care reform legislation, including the repeal of the prohibition for the payment of over the counter drugs from a flexible spending account without a doctor’s prescription. While a priority to Sen. Hatch, at this point it is unlikely that this bill will get to the Senate floor this year (although it is possible that some provisions in the bill could get included in a larger bill that might move this fall).
There are in fact a series of bills pending in both houses of Congress that would repeal other provisions in the health care reform legislation, such as the individual mandate (now an issue in several court cases), the employer mandate and the medical device tax. Most observers, including this author, think that it is extremely unlikely that legislative action on any of these bills takes place this year. In effect, Congress seems to have decided to wait to discover the fate of the health care legislation in an expected Supreme Court decision in 2012.
It is simply impossible to determine what areas, if any, related to health care might be affected by any deal on the deficit and the debt ceiling (should that deal emerge). Only a very select few at the highest levels of elected government know what actually has been discussed, and movement away from a large scale deficit reduction plan might mean tax expenditures related to health care coverage would emerge untouched (at least for the time being. (For details about a recent decision by the Sixth Circuit Court of Appeals declaring the health reform law’s individual mandate constitutional, I encourage you to read our recent blog post.)
Frankly, there is very little going on legislation-wise related to retirement issues at this point. What activity there is seems focused on the Senate. There are two bills under consideration that merit mention, as follows: (1) the Lifetime Income Disclosure Act (designed to required affected plans to express accrued benefit benefits in the form of a lifetime distribution stream) and (2) the Savings Enhancement by Alleviating Leakage in 401(k) Savings Act (often referred to as the “SEAL Act”), which focuses on distributions from plan and the allowable frequency of participant loans from plans. While these bills are under review, it seems unlikely either would be enacted this year.
While not a legislative matter (or not yet anyway), there is a lot of discussion here in Washington about the proposed regulation issued by the Department of Labor (“DOL”) that expands the definition of fiduciary under ERISA (some of which might even be positive ). Judging from the letters sent to the DOL from Capitol Hill, it seems that both Republican and Democratic members are not happy with the proposed regulation. There have been repeated requests for the proposed regulation to be changed or withdrawn. Even in the face of such criticism, the DOL seems determined to get the regulation into final form by the end of the year. Efforts to block this are on-going. There have been discussions about coupling the issuance of the final regulation with the contemporaneous issuance of class exemptions under ERISA (potentially providing some protection for certain service providers and other involved parties who otherwise might get caught up in the expanded definition).
Just as with health care, there is a potential for retirement issue to get swept up into the debt ceiling talks. Some around Washington have raised the prospect that two proposals contained in the Deficit Reduction Commission report (which seems to be generally ignored these days) might come up, including (1) granting to the PBGC the ability to set premium rates (this proposal has created a lot of concern among practitioners and plan sponsors) and (2) a reduction to the Section 415 limits for defined contribution plans (generally, the lesser of 20 percent of includible compensation or $20,000). Both of these changes could be significant, but currently seem less likely with the apparent (and perhaps temporary) movement away from a large scale deficit reduction plan.
As with all things in Washington, change is constant and often unpredictable (and sometimes even beneficial). My best advice is to stay vigilant and watch the media for future developments (as a helpful aside, David Letterman and Jay Leno always are good to provide a unique and refreshing perspective on the activities of our politicians).