As 2019 draws to a close and we gear up for another year, it is a nice opportunity to reflect on what changes have taken place in employee benefits.
We have seen a number of developments that could affect your bottom line. After all, that is what an employee benefit is — a “perk” that is above and beyond what employers are required to do — except that is not really the case anymore.
- ACA penalty notices galore! President Obama’s signature legislation of the Patient Protection and Affordable Care Act has changed the employee benefits framework. Large employers no longer have the flexibility to decide whether or not their margins enable them to offer coverage to their full-time employees, as a decision may result in a substantial Employer Shared Responsibility Payment.
When President Trump’s efforts to have the ACA repealed were met with resistance at every turn, the administration resolved to go ahead and collect the penalties. During 2019, we have seen countless proposed ESRP notices describing amounts due ranging from a few thousand to hundreds of thousands of dollars. Employers scramble to cobble together a response to prove that they did what they were supposed to do, spending professional fees and time away from business objectives. The good news is there often is an easy explanation to the IRS to justify the removal of the penalty.
- Innovative new premium payment plans: An employer-sponsored alternative to group health coverage. Since the “pay or play” concept of the ACA was first introduced, many employers — especially those in the 50 to 200 employee range — have been yearning for a way to simply provide employees with cash with which they can buy their own health insurance. Now, employers can do just that.
Effective Jan. 1, 2020, employers now can offer what is called an “individual coverage health reimbursement account.” In simple terms, this account holds money that employees can apply toward the costs of their individual health insurance premiums. The employer does not offer a group health plan at all with this arrangement. There are rules that employers have to follow in terms of the amount they must contribute to the plan to meet the “affordability” requirements under the ACA, as well as a number of eligibility and notice requirements. However, a premium payment plan is now a viable option.
- The bipartisan retirement plan legislation may not survive the distracted congress. The Setting Every Community Up for Retirement Enhancement Act of 2019 passed the House by a vote of 417-3 on May 23. Yet, in spite of this substantial bipartisan support, it has been stalled in the Senate for months. The chances of it becoming law in 2019 grows slimmer by the day. But, it does illustrate important policy points that will be the focus of any new retirement plan legislation. These include:
- Encouraging additional 401(k) plan savings with automatic enrollment and safe harbor contribution formulas.
- Broadening participation to include part-time employees.
- Providing distribution planning mechanisms for employees to spread their account balances over their lifetimes.
- Other changes are afoot. When Congress doesn’t act, the states do. We have seen a number of changes being implemented in other states that may make their way to South Carolina, all of which are taking the term “optional” out of an employer’s vocabulary. These include: