- Supreme Court to Review Latest ACA Challenge: The Supreme Court has announced that it will review a 5th Circuit Court of Appeals ruling that the Affordable Care Act’s (ACA) Individual Mandate is unconstitutional. In 2012, the Supreme Court ruled in a different case that Congress cannot require individuals to purchase health insurance, but nonetheless allowed the individual mandate to stand because it was a tax consistent with Congress’s taxing powers. In 2017, Congress amended the ACA to eliminate any penalty associated with the mandate, which prompted this latest lawsuit. Basically, the argument is that the individual mandate without a penalty is not a tax, and thus is unconstitutional. The 5th Circuit Court of Appeals agreed, but refused to rule on the issue of whether the individual mandate could be severed from the rest of the ACA. If the Supreme Court upholds the 5th Circuit’s ruling and determines the individual mandate is not severable from the rest of the ACA, then the employer shared responsibility rules and group health plan mandates would be invalidated as well. A final decision is expected sometime in 2021.
- GAO Issues report on Executive Retirement Plans: The Government Accountability Office issued a report in January 2020 on the oversight of Executive Retirement Plans. Some employers sponsor retirement plans covering only a select group of employees. These types of plans are designed to ignore statutory limits on compensation and amount of benefits but at the same time do not include the same statutory protections offered for qualified private sector employer sponsored plans.
The GAO report looked at the following elements: 1) prevalence, advantages and revenue effects of these types of plans and 2) how federal oversight prevents ineligible participation and protects benefits. Based on these elements, the following four recommendations were offered: 1) the IRS Commissioner should develop a specific process including training manuals to enable examiners to obtain and evaluate information on whether a company with a single employer defined benefit plan has a restricted period during which assets are set aside for the purpose of paying deferred compensation under an executive retirement plan, 2) the Secretary of Labor should review the reporting requirements of these plans to determine if they can be modified to gather additional data useful for the DOL in the oversight of eligibility requirements, 3) the Secretary of Labor should review ways in which the agency could implement actions to help prevent inclusion of rank-and-file employees and determine which of those possible actions to implement, and 4) the Secretary of Labor should provide corrective guidance for situations where rank-and-file employees are found to be participating in executive retirement plans and coordinate as appropriate with other federal agencies on this guidance. For a copy of the full report, see https://www.gao.gov/assets/710/704097.pdf.
Robert Davis is a managing director in Deloitte Consulting LLP and leads the Washington Rewards Policy Center of Excellence, dedicated to informing practitioners and clients about legislative and regulatory developments relating to employer-sponsored rewards programs.
Christine Drager is a specialist leader in the Human Capital practice of Deloitte Consulting LLP focusing on pension actuarial consulting and assisting employers with the design, valuation, and financial management of pension and other postretirement benefit plans.
Maria Moliterno is a manager in the Human Capital practice of Deloitte Consulting LLP and specializes in actuarial consulting for pensions and other employee benefits.