Effect of the Biden Administration on Health and Retirement Benefits

What President-elect Joe Biden’s administration will be able to get done regarding health care and retirement policy will depend much on the political tone in Congress.

Control of the Senate is hinging on two Georgia runoff elections in January, notes Geoff Manville, partner and government relations leader in Mercer’s Law and Policy Group. He says most observers believe Democrats will lose one of those races, which would give Republicans Senate control.

“That would make it all but impossible for the Democrats’ progressive agenda to bring expansion of the ACA [Patient Protection and Affordable Care Act] and to introduce a public health care option to move forward,” Manville says.

Proposals to roll out a public health option and to lower the Medicare age are “dead in the water,” says Kim Buckey, vice president of client services at DirectPath. “But Biden has bigger fish to fry with the pandemic and the Supreme Court ruling on the ACA.” For his more sweeping proposals, she says, “Biden may have to take a page from [President Donald] Trump’s book and issue executive orders to get things going.”

The week after the election, the U.S. Supreme Court took up a case about the validity of the ACA. Buckey points out that the law will be massively difficult to unwind. “It’s been in place for years. Employers have designed plans and programs by it and have invested millions, if not billions, to comply with its reporting requirements,” she says. “The health industry has made investments as well. Not only will it be difficult to unwind, but unwinding it will garner a tremendous amount of resentment. So, employers and the industry will be resistant to making sweeping changes if the ACA is struck down.”

Buckey’s prediction is supported by responses to a Mercer poll. The vast majority of the employers polled say they would retain some of the ACA’s patient protections even if the U.S. Supreme Court strikes down the law. Respondents said they would most likely retain preventive care in-network with no cost sharing, allowing child coverage eligibility to extend to age 26 and a ban against pre-existing condition exclusions. They said they would reconsider annual dollar limits; out-of-pocket maximums at or below the current limit, with minimal annual increases; and eligibility for full-time medical benefits at 30 hours.

Buckey says some employers no longer required to provide coverage might back away from doing so; it would be a cost savings for small and mid-sized employers that may be struggling financially. “There might be an effort to redesign health plans going forward. Health care is a hugely popular benefit and a big reason employees choose a job, so I can’t see employers backing away from particularly popular provisions,” she says.

Manville says he believes the health care policy path will be determined by the COVID-19 pandemic response. “We in the employer plan space are hoping for some things like eased restrictions on cafeteria plans and HSAs [health savings accounts] and extensions for coverage of telehealth by HSAs,” he says. “I think this will spill over into 2021 and will be job No. 1 for Congress.”

Manville says after working on a COVID-19 aid package, Congress will work on more limited things, such as how to stop surprise medical bills, strengthening behavioral health laws and increasing transparency in health care. The task then will be addressing the Medicare trust fund. Manville notes that the Congressional Budget Office (CBO) recently projected the fund will be insolvent by fiscal year 2024.

Buckey says even if the Georgia runoff races go Democratic, there won’t be sweeping changes. But one thing that has bipartisan support is surprise medical bills. “This was a priority before everything shut down because of COVID-19,” she notes.

“Reducing drug prices is at the top of everyone’s list as well,” Buckey adds. “Not only does it have bipartisan support, but also employers’ support. Headway on that will reduce costs for employees and employers, especially in self-funded plans.”

She notes that the uncertainty makes proper communication even more important than it was previously.

“Because there’s so much up in the air and confusion about what it all means, it is so important for employers to be communicating proactively with employees about what is on the table, what is being considered, what decisions are being made and why,” Buckey says. “Employers should continue to educate employees about buying and using health care and doing what they can when shopping to reduce their own costs.”

Retirement Policy in the Biden Administration

As for retirement policy, Manville says he thinks Biden’s proposal to change the tax treatment of retirement plan contributions is “out the window.” He adds that he thinks Biden’s proposals to increase Social Security benefits and the taxes on higher-paid individuals in order to pay for those benefit increases, as well as a proposal for a financial transactions tax, also have no chance of getting through the next Congress.

The most workable way to equalize tax credits for retirement plans between lower- and higher-income workers would be to expand the Saver’s Credit, says Catherine Reilly, director of retirement solutions at Smart. She notes that there are proposals to make the tax credit available to pay into a retirement plan.

Manville also says he thinks the Biden administration will probably put a freeze on regulatory activity pending a review. “Any proposed regulation could be killed, but it would be harder to roll back rules that are final,” he says, noting that it can be done, but the process would have to start over. “I think that’s what the Biden administration will do with respect to ESG [environmental, social and governance] investing,” Manville says. “It will probably move to roll back the DOL’s [Department of Labor] ESG and proxy voting rules in pretty short order.”

Reilly says she would expect the Biden administration to roll back the DOL’s ESG rules potentially to where they were before, when the regulations said ESG factors could be a tie breaker if all else was equal between investment options. “I could see even further-reaching requirements, where plan sponsors are required to take into account longer-term ESG considerations of investments and document that,” she says. Reilly notes that this is the policy in the UK. Smart is a UK-based company.

Manville expects regulations regarding pooled employer plans (PEPs) and electronic disclosures of retirement plan notices will proceed intact. “The Democrats are more suspicious of PEPs, so the Biden administration may be less inclined to introduce PEP-friendly rules, but I don’t think there will be a change in direction,” he says.

Additional pension funding relief and relief for struggling multiemployer plans could be included in the mix with any COVID-19 relief that is passed, Manville says. However, he’s more unsure about whether a relief bill will include retirement plan or financial wellness provisions, such as more relief on student loans. “Republicans are pushing for a smaller package,” Manville notes. “However, if Congress goes with something like the Democrats’ Heroes [Health and Economic Recovery Omnibus Emergency Solutions] Act, we may see a much larger stimulus package.”

Retirement is one of the few legislative areas that enjoys bipartisan support, says Reilly. She notes that passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act is an example, and now Congress is working on the Securing a Strong Retirement Act, which some are calling the SECURE Act 2.0.

Manville says he expects a continuation of bipartisan efforts on retirement policy, and that the Securing a Strong Retirement Act will help lay the legislative groundwork for next year.

“I don’t expect the Biden administration to do something totally different than Trump, but it will have an impact on some areas,” Reilly says. “One is more interest in creating access to retirement plans.” She notes that the SECURE Act offered an incentive tax credit for employers to start offering a retirement plan to employees, and the Securing a Strong Retirement Act would expand those credits.

In addition, Reilly says there is a high probability Representative Richard Neal, D-Massachusetts, Chairman of the House Ways and Means Committee, will reintroduce his Automatic Retirement Plan Act (ARPA), which would require employers to have a retirement plan, either a 401(k) or 403(b) plan, and automatically enroll participants into the plan. “There’s a higher probability of progress with Democrats in control of the House,” she says.

Reilly adds that Biden is more favorable to state-run plans, which are currently not subject to the Employee Retirement Income Security Act (ERISA). “Biden is more supportive of that stance and could potentially expand those plans,” she says.

“The good thing is that retirement policy is a bipartisan issue, and we’ve been able to make progress even though the political landscape is challenging,” Reilly says. “I’m hopeful the Biden administration will be able to further expand access” to retirement plans.