The Year Ahead: Benefits Management 2013
December 23, 2012 – 6:00 am ET
Employers also are waiting for Treasury to make clear if a provision that imposes a penalty if coverage is not “affordable” applies to individual and family coverage.Treasury Department guidance said if the share of the premium paid by an employee for individual coverage was at least 9.5% of his or her income and the employee was eligible for and used a reform law subsidy to buy coverage in a public exchange, the employer-offered coverage would be unaffordable. In that situation, the employer would be liable for a $3,000 penalty for that employee.Since then, however, the Treasury Department has said it was reconsidering that rule to examine whether the penalty should also apply if the premium for family coverage is at least 9.5% of employee income. A final decision is expected in 2013, experts say.PRESCRIPTION CONTRACEPTIVE COVERAGE
The courts also will play a role in 2013 in the shaping of the health care reform law. Court rulings are expected next year in a slew of suits challenging an Obama administration rule that requires, generally on Jan. 1, 2014, nonprofit affiliates of religious organizations to offer coverage for prescription contraceptives.“This is one that will be winding its way through the courts,” the ERISA Industry Committee’s Ms. Young said, adding that the issue ultimately may have to be resolved by the U.S. Supreme Court.CASH BALANCE PENSION PLANS
Not all employee benefit regulatory action in 2013 will involve the health care reform law, though. The Treasury Department, for example, is expected to finalize rules involving a provision in a 2006 pension funding law that allows plan sponsors to use a “market rate” to credit interest to participants’ account balances.%%BREAK%%The rules first were proposed in 2010, but the IRS has twice delayed them, giving no indication on when the rules would be finalized and how the final rules would differ from what it proposed.But employers’ wait may end in the coming months. “Regulators have been talking about putting out rules pretty soon,” said Anne Waidmann, a director with PricewaterhouseCoopers L.L.P. in Washington.PENSION PLAN DE-RISKING
Washington, though, isn’t the only place where employee benefit developments will take place in 2013.Experts expect more employers to explore and implement strategies to “de-risk” their pension plans.One de-risking strategy employers are using is giving plan participants an option to convert their monthly annuity benefit to a cash lump sum. Another strategy — used so far by General Motors Co. and Verizon Communications Inc. — is to transfer benefit obligations of selected plan participants to an insurer through the purchase of a group annuity.“It is very clear that employers want to reduce the size of their pension programs,” said Matt Herrmann, St. Louis-based leader of Towers Watson & Co.’s retirement risk management group.By reducing pension obligations, employers face less exposure to increased plan contributions — such as when interest rates fall — which inflates the value of plan liabilities, or when investment results are less than expected.