Developments in Washington Impacting Group Benefit Plans

April 25, 2019

Some important updates at the federal level for your consideration:

Cadillac Tax May Be Going Away? – Recently, US Senators Mike Rounds (R-SD) and Martin Heinrich (D-NM) introduced a bipartisan bill with 23 Republican and Democrat co-sponsors to repeal the 40% “Cadillac” tax on the value of health benefits above a government-determined amount. This tax was included in the Affordable Care Act (ACA). Companion legislation in the House has picked up 62 bi-partisan co-sponsors, bringing the total to 242. If enacted, employers and employees would gain permanent relief and clarity that the ACA’s Cadillac tax will not impact their health benefits and health care strategy. With the Cadillac tax scheduled to begin in 2022, the absence of timely action could make it more difficult for employers to plan health care strategy, which often requires an 18-24-month lead time for planning. While bipartisanship seems lost in Washington of late, the elimination of the Cadillac tax seems to be gaining bipartisan momentum. We’re monitoring these important developments closely.

Federal Family Leave Bill Looming – Last week, President Trump released the Administration’s 2020 Budget, with an accompanying Fact Sheet, calling for at least 6 weeks of paid family leave for new parents, including adoptive parents, to recover from childbirth or to bond with their new child. Including this in the budget signals that the President supports parental leave but favors state control over federal action. More state parental leave laws could increase variability of the benefit across the country, leading to administrative challenges for employers and offering different benefits for employees, depending on where they live or work. This situation would be similar to what is happening with mandated paid sick leave laws. Existing state paid parental and family leave laws have different funding mechanisms, but generally are funded via payroll taxes, which raise employer and employee costs. If the legislation is enacted, depending upon access to existing benefits, some employees becoming new parents could receive additional benefits, while others could experience a net loss as employers adjust existing programs. Employers could see increased FMLA claims for new parents and a jump in employees taking parental leave, leading to higher labor costs and productivity impacts. Employers would also face an increased administrative burden, brought on by the need to verify leaves and deal with tax and payroll adjustments. Some form of action on a family leave bill seems imminent as progressives in the Congress are also in favor of action as well.

Modernization of HSA Plans – Last week, President Trump’s proposed 2020 Budget also called for health savings account (HSA) enhancements. If enacted, employers would have much greater flexibility to adopt innovative plan designs, such as greater pre-deductible coverage for chronic conditions and greater generic drug substitution that could lower costs and improve access to needed care for employees and their families. Additionally, more employees, retirees and their families would be able to make HSA contributions. This is a positive development for employers, plan sponsors and plan members. 

 We are monitoring all three developments and will share updates accordingly. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions.

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