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Council Working with SEC on Dodd-Frank Pay Ratio Issues January 23, 2012As federal regulators work to implement the various elements of the Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act, the Council is actively working to address employer concerns with the statute’s many requirements, including those requiring disclosure of CEO “pay ratio.” The Dodd-Frank Act includes a provision that requires all public companies to calculate the median compensation of all employees other than the CEO and disclose that number and the ratio of the median employee’s pay to total compensation of the CEO as part of the companies’ filings with the U.S. Securities and Exchange Commission (SEC). Compliance with this requirement may be extremely difficult for most companies to satisfy, in part because compensation of non-U.S. employees must be included in the calculation. The Council previously submitted written comments to the SEC identifying several compliance problems with the statute as written. On January 19, the Council was joined by 22 other trade groups in sending a letter to the SEC, urging the SEC to not issue guidance until after there has been a significant further examination of the costs relative to the benefits of the provision. The letter suggested that the SEC take several procedural steps to facilitate this examination. See the January 23 Benefits Byte for more information. Council Requests Extension of Fee Disclosure Effective Dates January 19, 2012: The Council has written a letter to U.S. Department of Labor (DOL) Assistant Secretary for the Employee Benefits Security Administration (EBSA) Phyllis Borzi, formally asking the agency to delay implementation of defined contribution plan fee disclosure regulations. In July 2011, EBSA issued regulations extending the effective date for disclosure of defined contribution plan fees by service providers to plan fiduciaries under ERISA Section 408(b)(2) to April 1, 2012, and the transition rule for the initial disclosure under the participant fee disclosure regulations to 60 days after that (or, if later, 60 days after the first day of the first plan years that begins on or after November 1, 2011). Under these rules, quarterly disclosures will be due 45 days after the end of the quarter in which initial disclosures are required. Therefore, for calendar year plans, the initial disclosure to plan participants is due by May 31, 2012, and the first quarterly participant fee disclosure is due August 14, 2012. The Council’s letter notes that the final fiduciary-level disclosure regulation has not been published, warranting an extension of the effective date of the fiduciary-level disclosure regulation. “Considering the time it takes to implement programming changes, it would be impossible to revise already prepared disclosure forms to comply with any new requirements set forth in the final regulation by April 1, 2012,” the letter reads. The Council’s letter also recommends a delay in the effective date of the participant-level disclosure regulation, which “would give the Department breathing room to finalize necessary guidance (formal or informal) on the numerous interpretive questions that have arisen,” and notes the importance of finalizing regulations relating to participant disclosure rules for target date funds. CFTC Releases Final Rules for Business Conduct Standards; EBSA Affirms No Conflict with Fiduciary Rules January 18, 2012: The Commodity Futures Trading Commission (CFTC) has released final regulations relating to business conduct standards for swap dealers and major swap participants in their dealings with counterparties, including ERISA plans, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act). The CFTC approved these final regulations in a January 11 public meeting, at which they also released a fact sheet and questions-and-answers document. The final business conduct rules have been revised to provide increased flexibility for ERISA plans utilizing swap trades, as the Council has been advocating for a year. The Council’s February 2011 letter to the CFTC identified a number of challenges posed by the CFTC’s original proposed rules, issued in December 2010. ERISA plans commonly use swaps to hedge or mitigate risks endemic to plan liabilities and investments. In numerous meetings with the regulatory agencies, the Council has consistently argued that without the use of swaps, defined benefit pension funding obligations would become more volatile and force employers to find other less efficient ways to manage that risk – including setting aside large sums of cash to cover potential funding obligations. In response to the adoption of the final regulations, U.S. Department of Labor (DOL) Assistant Secretary for the Employee Benefits Security Administration (EBSA) Phyllis Borzi formally wrote the CFTC to affirm that the final regulations “do not require swap dealers or major swap participants to engage in activities that would make them fiduciaries under the [DOL’s] current five-part test defining fiduciary advice … In the Department's view, the CFTC's final business conduct standards neither conflict with the [DOL’s] existing regulations, nor compel swap dealers or major swap participants to engage in fiduciary conduct.” Council commends CFTC’s revision of business conduct standards Employer-sponsored retirement plans rely on swap trades to mitigate funding risk, preserve benefits January 11, 2012: “The American Benefits Council commends the Commodity Futures Trading Commission (CFTC) for its work to help preserve pension plans through revision of business conduct standards under the Dodd-Frank financial reform law,” Council President James A. Klein said today. At a public meeting to discuss regulatory implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, CFTC officials indicated that the business conduct rules have been changed to provide increased protection for pension plans utilizing swaps trades. The business community’s concerns that the rules would effectively preclude the ability of plans to use swaps were acknowledged and the CFTC officials acknowledged the intent to revise the rules to provide greater flexibility so that plans are protected while still being able to use swaps. “Many workplace retirement plans commonly use swaps to mitigate plan funding and investment risk. Without the current availability of swap trades, defined benefit pension funding obligations would become more volatile and force employers to find other less efficient ways to manage that risk –including setting aside large sums of cash to cover potential funding obligations,” Klein said. “We are pleased that the CFTC is revising the business conduct standards to reflect this practice, which helps sustain defined benefit pension plans, which in turn allow employers provide valuable, long-term retirement security for their employees.” Recent health care reform guidance released January 3, 2012: In recent weeks, regulators have issued two important guidance documents affecting employer-sponsored health care plans under the Patient Protection and Affordable Care Act (PPACA). On January 3, the Treasury Department and Internal Revenue Service (IRS) issued Notice 2012-09, which restates and amends interim guidance regarding informational reporting to employees of the cost of their employer-sponsored group health plan coverage. Section 6051(a)(14) of the Internal Revenue Code, as added by PPACA, requires employer health plan sponsors to report the cost of coverage under an employer-sponsored group health plan on the Form W-2. For more information, Council members should see the January 4 Benefits Byte. On December 16, the U.S. Department of Health and Human Services issued the Essential Health Benefits Bulletin (EHBB), which describes the agency’s intended approach toward developing regulations defining “essential health benefits” (EHB). As required under the Patient Protection and Affordable Care Act (PPACA), the essential benefits package will establish the minimum benefits – including preventive, diagnostic, and therapeutic services and products – that must be covered by certain health plans, including those participating in state-based health insurance exchanges. An official fact sheet is available on the HealthCare.gov website. For more information, Council members should see the December 16 Benefits Byte. Ten reasons to doubt PBGC’s reported deficit Huge increase in premiums, grant of new powers to agency unjustified by misleading figure November 15, 2011: “The real deficit here is a deficit of understanding” American Benefits Council James A. Klein said today upon the Pension Benefit Guaranty Corporation’s (PBGC) announcement that its deficit has risen to $26 billion. “Typically, when a government report is not accurate, it makes a serious situation appear better than it really is. In this instance, flaws in the way PBGC’s financial condition is reported makes the situation appear far worse than reality; and the deficit is now being used to justify an enormous premium increase and to convince Congress to give the agency sweeping new powers,” noted Klein. “Since Congress has not examined the assumptions PBGC uses to assess its financial position, it is important to set the record straight and explain why the purported “deficit” is simply not correct and – even if it were correct – would not be a justification for raising premiums or for giving PBGC authority to set premiums in the future ,” Klein said. Click here to read the full statement and the ten reasons to doubt PBGC's reported deficit. For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at 202-289-6700. |
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Benefits Byte (12/22/11)
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Health Care Reform: Employers Enter Compliance Phase The Council's Health Care Reform Issue Page The U.S. House of Representatives and Senate have voted, and President Obama has signed into law the Patient Protection and Affordable Care Act (PPACA), as enacted and amended by the Health Care and Education Affordability Reconciliation Act. This action finalizes the new health care reform law, bringing to a close more than a year of legislative debate. While the Council retains many concerns about certain elements of the final statutory language and will continue to pursue efforts to overturn those elements, we are pleased that we were able to avoid some of the more onerous provisions that had been included in the earlier House bill. We are also now focused on the compliance phase of the law. The Council has prepared a comprehensive PPACA implementation chart (for Council members only) that summarizes regulatory guidance and council activity related to health care reform implementation. The chart covers:
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