Data and Research January 7, 2021

Data Provides Reasons for Encouraging the Offering of DB Plans

In addition to providing a secure source of retirement income for employees, a report shows benefit payments support the economy and contribute to job growth.

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Many plan sponsors seem to want to stop or offload their defined benefit (DB) plan obligations. An annual report from the National Institute on Retirement Security (NIRS) demonstrates one reason lawmakers should do what they can to encourage the continued offering of DB plans and the annuitized payments they provide to retirees: support for the economy.

In “Pensionomics 2021,” Ilana Boivie, a labor economist with a specialization in retirement and health benefit plans who is currently the director of 401(k) and special projects for the IAM National Pension Fund, and Dan Doonan, the executive director of the NIRS, say, “DB pension benefits not only provide a secure source of income for many retired Americans, they also contribute substantially to local, state and national economies. DB pensions play a vital role in sustaining consumer demand that ultimately supports millions of jobs.”

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The authors add that pension expenditures might be especially vital to small or rural communities, and reliable pension income can be especially important for stabilizing local economies during economic downturns.

The analysis for the 2021 report finds that, in 2018, $578.7 billion in pension benefits were paid to 23.8 million retired Americans, including:

  • $308.7 billion paid to some 11 million retired employees of state and local government and their beneficiaries (typically surviving spouses);
  • $105.9 billion paid to some 2.6 million federal government beneficiaries; and
  • $164.1 billion paid to some 10.1 million private sector beneficiaries, including $44.2 billion paid out to 3.8 million beneficiaries of multiemployer pension plans and $119.9 billion paid out to 6.3 million beneficiaries of single-employer pension plans.

Expenditures made with those payments collectively supported:

  • 6.9 million American jobs that paid nearly $394.2 billion in labor income;
  • $1.3 trillion in total economic output nationwide;
  • $703.9 billion in value added gross domestic product (GDP); and
  • $191.9 billion in federal, state and local tax revenue.

In addition, according to the report, each dollar paid out in pension benefits supported $2.19 in total economic output nationally. Each taxpayer dollar contributed to state and local pensions supported $8.80 in total output nationally. “This represents the leverage afforded by robust long-term investment returns and shared funding responsibility by employers and employees,” the report authors note.

The largest employment impacts from pension benefits occurred in the real estate, food services, health care and retail trade sectors.

The full report is available here.

Compliance January 7, 2021

EEOC Issues Notices of Proposed Rulemaking on Wellness Program Rules

The action comes after much back and forth and legal action regarding incentives employers may provide employees to participate in wellness programs.

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Some U.S. employers offer health wellness programs to keep their workforces healthy and to try to save on the cost of providing health benefits. However, wellness program practices have come under scrutiny, especially as it relates to incentives provided for participation in them.

In another attempt at defining the rules for such programs, the Equal Employment Opportunity Commission (EEOC) has forwarded to the Federal Register its Notices of Proposed Rulemakings (NPRMs) on wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). The NPRMs have been cleared by the Office of Management and Budget and sent to the Federal Register for publication.

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Previously approved by the EEOC, the proposed rules address what level of incentives employers may lawfully offer to encourage employee participation in wellness programs that require disclosure of medical information, without violating the ADA or GINA.

The NPRMs respond to a decision by the U.S. District Court for the District of Columbia that vacated a portion of the EEOC’s previous ADA and GINA regulations. Although the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Patient Protection and Affordable Care Act (ACA), allows employers to offer incentives up to 30% of the total cost of health insurance to encourage participation in certain types of wellness programs, the ADA requires that employee participation in a wellness program that includes medical questions and exams be “voluntary.”

Because the ADA and GINA do not define “voluntary,” the NPRMs propose that, to comply with the ADA and GINA, employers may offer no more than a de minimis incentive to encourage participation in wellness programs, with the exception of certain wellness programs that would be permitted to offer the maximum allowed incentive under the 2013 HIPAA regulations.

Prior to 2016, some employers that established wellness programs under the rules then in place found themselves faced with discrimination lawsuits filed by the EEOC. After the Health, Education, Labor and Pensions (HELP) Committee urged clarification of the wellness program rules, the EEOC issued final rules in 2016.

That October, the AARP filed a lawsuit alleging that the final wellness program rules were arbitrary, capricious, an abuse of discretion and not in accordance with law. The AARP asked that the rules be invalidated.

In August 2017, a federal court ruled in favor of the AARP. However, saying it is “far from clear that it would be possible to restore the status quo ante if the rules were vacated; rather, it may well end up punishing those firms—and employees—who acted in reliance on the rules,” it did not vacate the rules, instead remanding them to the EEOC for reform and/or elucidation. In 2018, the EEOC issued new final rules which removed incentive sections of its previous final rules about wellness programs under the ADA and GINA.

Unofficial versions of the latest NPRMs are available at https://www.eeoc.gov/regulations/wellness-rulemaking.  After the Federal Register publishes the proposed rules, the public will have 60 calendar days to submit comments for those comments to be considered by the EEOC. Members of the public may submit electronic comments about the proposed rules at www.regulations.gov in the rulemaking dockets RIN 3046-AB10 and RIN 3046-AB11.

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