Health benefits taxation takes center stage

After Sen. Edward Kennedy (D-Mass.) released his version of a health care reform bill last week, the Help, Education, Labor and Pensions Committee met to discuss the bill’s provisions.

Although the American Health Choices Act does not address how to pay for health care reform, the issue came up quickly in the opening minutes of a June 11 hearing.

“This is -- let’s be clear -- a sweeping new burden on employers of unprecedented proportion in the benefits area,” testified Randel Johnson, vice president for labor, immigration and employee benefits for the U.S. Chamber of Commerce.

Gerald Shea, assistant to the president of AFL-CIO, framed the issue in context of employees who already have health insurance that’s too expensive for them to use. “To ask them to pay more money for that health coverage is not only unfair, we think it is really, politically, very volatile,” he said.

Referring to his 2008 presidential campaign proposal of providing a $5,000 refundable tax credit in exchange for taxing employee benefits, Sen. John McCain (R-Ariz.) questioned Dr. Scott Gottlieb, a resident fellow at the American Enterprise Institute, on whether or not it would work.

Gottlieb reflected the question and urged the committee to focus on leveling the playing field for individuals purchasing insurance outside of the workplace. “One of the reasons why insurance is so unaffordable in the private market is because people don’t have the benefit of the tax subsidy that’s being afforded when they purchase it through their workplace,” he said.

Janet Trautwein, executive vice president and CEO of the National Association of Health Underwriters, agreed. “I would agree relative to the individual market, at a bare minimum we’ve got to make sure that we have tax equity in every market so that individuals can have the same benefit that those on employer-sponsored plans have.”

However, Dr. Jonathan Gruber, associate head of Massachusetts Institute of Technology’s Department of Economics felt McCain’s proposal would be “a win-win source of financing for the kind of bill we’re talking about.” He called the current financing structure “regressive” and “inefficient in reducing excessive health insurance consumption.”

The debate over taxing employee benefits continued over the weekend, with White House representatives coming out strongly against the idea, just as President Barack Obama did during the presidential campaign.

"The president starts with the premise that 180 million Americans have health coverage through their employer, that attacks on those benefits may dismantle that marketplace," Health and Human Services Secretary Kathleen Sebelius told CNN.

Meanwhile, Sen. Max Baucus (D-Mont.), chairman of the Finance Committee, is expected to come out with legislation as early as this week that will contain provisions to tax employee benefits, various news outlets report.

House panel approves 401(k) transparency bill

A bill advanced by a House subcommittee seeks to make 401(k) participants more aware of plan fees and, hopefully, rebuild confidence in their retirement programs.

The 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984) will aid employees in managing their investment options by giving them access to information previously sealed or difficult to obtain. Action is heating up on Capitol Hill because, despite recent market setbacks, two-thirds of workers with retirement plans still rely on 401(k)s as their primary retirement safety net and need help understanding their returns.

"When a worker spends most of their lifetime investing their hard-earned dollars into an account for their retirement and later discover they were being charged fees that contributed to a significant loss of their nest egg, they understandably lose trust and confidence in the system,” said U.S. Rep. Rob Andrews (D-NJ), chairman of the House Subcommittee on Health, Employment, Pensions and Labor and cosponsor of H.R. 1984. “The lack of transparency in the 401(k) system is unacceptable and must end now."

The stakes are even larger than most participants realize, and the push for reform may heighten with awareness that even a 1 percentage point difference in fees can reduce retirement benefits by nearly 20% over the course of a career, according to the U.S. Government Accountability Office. Other estimates show that approximately 80% of workers don’t know the impact of fees taken out of their 401(k) accounts.

“I'm pleased that the subcommittee moved quickly on this urgent priority,” said Rep. George Miller (D-CA), chairman of the full committee and sponsor the bill. “Americans should be entitled to clear and complete information on the fees taken from their hard-earned retirement savings.”

In detail, the act would:

Ensure that workers receive principal information, including information on risk, return, complete fees, and investment objectives before electing a plan;
Insist that all fees that are charged against a worker’s 401(k) account be included under one number in the participants quarterly statement;
Require all service firms to expose all fees workers are charged on all investment options into four categories: administrative fees, investment management, transaction, and other fees;
Make the offering of at least one low-cost index fund mandatory in order to receive protection against liability for holders’ investment losses;
Require service providers to make financial relationships public so companies that sponsor 401(k) plans can be sure that there are no conflicts of interest;
Give the Labor Department authority to enforce new disclosure rules and fine service providers who violate them.

The 401(k) Fair Disclosure for Retirement Security Act is endorsed by a multitude of consumer and shareholder rights groups, including the AARP, Consumer Federation of America, and the Pension Rights Center. For a complete list, click here. In general, supporters hope the measures will improve 401(k) communication and empower plan participants to make more informed decisions affecting their investment returns.

Workers cherish a head start on summer vacation

Simply allowing employees to leave a few hours before the official end of the work day on Fridays will lift dulled spirits, according to a survey by OfficeTeam, a staffing service firm.

Of the 457 workers polled, 32% said they would like to see their employer implement for the summer an early leave policy on Fridays. “Many workers schedule weekend trips during the summer and appreciate a head start on their travels,” says Robert Hosking, director of OfficeTeam.

Speaking of vacations, CareerBuilder.com’s annual summer vacation survey has found that more than one third of workers (35%) are not planning on taking a vacation this year. In addition, those who will be indulging will be reporting back to the office fairly often. What is the reason for the frequent check-ins or no vacation at all?

Many are afraid of losing their jobs, especially those who happen to be working for companies that are barely staying afloat. Three out of every ten workers say they will check into their office during their time off, whether working on a project or not.

But Rosemary Haefner, vice president of human resources at CareerBuilder, notes: “A break from work is essential for maintaining healthy productivity levels in the office.”

She suggests a few tips for a successful vacation from the office.

Start preparing the office today: As soon as you have vacation dates in mind, talk to your boss to make sure that the dates you want are available.
Leave a plan behind: In the weeks before vacation, write down important information, vital contacts, and any deadlines that will occur while you are away. Show this information to a co-worker who can fill in for you while you are away.
Stick to a schedule: If you must work during your break, keep a limit for both yourself and your coworkers. Do not let fun and breezy vacation activities be interrupted by a buzzing cell phone or a beeping laptop.
Set a good example: If you are a supervisor or boss, set an example and put a restraint on your contact with the office. Employees will feel much better about enjoying their vacations if they know their boss is doing the same.

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House panel approves 401(k) transparency bill