Compliance January 27, 2021

Rep. Neal Releases Policy Priorities for Equity in Retirement Security

The Ways and Means Committee chairman sets out goals for Social Security benefits, MEPs and automatic features in his list.

Reported by

House Ways and Means Committee Chairman Richard Neal, D-Massachusetts, has laid out his party’s vision for economic equity in health care and retirement.

In a letter included in his Policies and Priorities report, Neal says one of their priorities is increasing retirement security for U.S. workers, which would be achieved by policies strengthening Social Security benefits, growing multiple employer plan (MEP) participation and mandating automatic enrollment for 401(k) plans.

Get more!  Sign up for PLANSPONSOR newsletters.

In recent years, Social Security forecasts have diverged greatly, with some expecting to depend on the benefit for future income and others believing it will be severely reduced or completely diminished by the time their retirement comes. The financial crisis caused by COVID-19, which fueled millions of layoffs and furloughs, might have driven an increase in Social Security claims that could lead to decreased benefits.

On this topic, Neal says two goals are improving Social Security benefits for low-wage workers and protecting disability benefits from regulations designed to reduce access.

The Democrats’ other goals include implementing automatic individual retirement accounts (IRAs) and 401(k)s in more workplaces and requiring auto-enrollment in 401(k)-type plans. There’s been a growing push to mandate auto-enrollment in 401(k) plans in recent years, and many have touted the benefits of automatic features in retirement savings plans. A 2017 report by the Defined Contribution Institutional Investment Association (DCIIA) found that among plans with automatic enrollment and escalation, 70% are saving 10% or more, and a 2018 survey by JPMorgan suggested that implementing automatic features can boost retirement confidence.

Neal also lists increasing participation in MEPs and improving education on the retirement vehicles as top priorities. He says the party wants to ensure that small business can take full advantage of the startup credit when participating in a MEP and receive education about the advantages and availability of these benefits and groups of plans.

He also hopes to address the inequity families of color face, especially regarding access to retirement savings and employer-based retirement plans. Neal notes that several of his party’s highlighted policies may help increase retirement savings for these families, including making the Retirement Savings Contribution Credit (the Saver’s Credit) refundable, and directing the U.S. Department of the Treasury to raise awareness of the credit in minority communities. He also says helping American families build emergency savings, while increasing targeted financial wellness advice and assistance with saving, debt and budgeting, is another key goal.

Creating children’s savings accounts, adjusting the new Setting Every Community Up for Retirement Enhancement (SECURE) Act provision for part-time worker eligibility in 401(k) plans to require only two years of service, and easing the path for military spouses to save within their employer-sponsored retirement plans are additional pieces of action Neal says the party will advocate for.

More information on the Democrats’ policy approaches can be found here.

Compliance January 27, 2021

Lawmakers Want No ‘Surprise Billing’ for Health Benefit Plan Sponsors

Health benefit plan service provider disclosures have been added to ERISA Section 408(b)(2).

Reported by

A portion of the Consolidated Appropriations Act, 2021, addresses the problem of surprise medical billing to individuals, but lawmakers don’t want sponsors of Employee Retirement Income Security Act (ERISA) health benefit plans to be surprised by their bills either.

A part of the broader bill, the No Surprises Act, includes provisions requiring service providers to ERISA group health benefit plans to begin disclosing direct and indirect compensation to plan sponsors. The new law amends Section 408(b)(2) of ERISA, under which service providers to retirement plans have been disclosing compensation since 2012, to include providers to group health plans.

Get more!  Sign up for PLANSPONSOR newsletters.

Starting on page 4,475, the bill says, “No contract or arrangement for services between a covered plan and a covered service provider, and no extension or renewal of such a contract or arrangement, is reasonable … unless the requirements of this clause are met.” The bill defines “covered service provider” as a service provider that enters into a contract or arrangement with the covered plan and reasonably expects $1,000 or more in compensation, direct or indirect, to be received in connection with providing broker or consulting services. The bill notes that the secretary of labor may establish in regulations an amount higher than $1,000 in later years to account for inflation.

The bill defines “compensation” as anything of monetary value, but does not include non-monetary compensation valued at $250—an amount which also may be adjusted for inflation by the secretary of labor—or less. “Direct compensation” is compensation received directly from a covered plan. “Indirect compensation” is defined as “compensation received from any source other than the covered plan, the plan sponsor, the covered service provider or an affiliate. Compensation received from a subcontractor is indirect compensation, unless it is received in connection with services performed under a contract or arrangement with a subcontractor.”

Disclosures must include the following:

  • A description of the services to be provided to the covered plan pursuant to the contract or arrangement;
  • If applicable, a statement that the covered service provider, an affiliate or a subcontractor will provide, or reasonably expects to provide, services pursuant to the contract or arrangement directly to the covered plan as a fiduciary;
  • A description of all direct compensation, either in the aggregate or by service, that the covered service provider, an affiliate or a subcontractor reasonably expects to receive in connection with the services to be provided to the ERISA health plan as described in the contract or arrangement;
  • A description of all indirect compensation that the covered service provider, an affiliate or a subcontractor reasonably expects to receive in connection with the services to be provided to the ERISA health plan as described in the contract or arrangement;
  • A description of any compensation that will be paid to the covered service provider, an affiliate or a subcontractor in connection with the services to be provided to the ERISA health plan as described in the contract or arrangement if such compensation is set on a transaction basis (such as commissions, finder’s fees or other similar incentive compensation based on business placed or retained), including identification of the services for which such compensation will be paid and identification of the payers and recipients of such compensation (including the status of a payer or recipient as an affiliate or a subcontractor), regardless of whether such compensation is also disclosed by one of the methods above; and
  • A description of any compensation that the covered service provider, an affiliate or a subcontractor reasonably expects to receive in connection with termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded upon such termination.

Disclosures of changes in compensation must be made as soon as practicable, but not later than 60 days from the date on which the covered service provider is informed of such change.

Service providers must furnish any other information relating to the compensation received in connection with the contract or arrangement that is required for the covered plan to comply with its reporting and disclosure requirements under the law upon the written request of the responsible plan fiduciary or administrator.

«