Bipartisan Budget Deal Includes Provisions Impacting Employers

On Monday, President Obama signed into law a two-year bipartisan budget deal that has several implications for employers. The Bipartisan Budget Act of 2015 (H.R. 1314) suspends the debt ceiling limit until March 2017, and eases some of the effects of sequestration. The measure necessarily contains steps to generate revenue to pay for the spending hikes.  In addition to eliminating the risk of a debt default until after the elections, these offsets to pay for the spending increases contain mixed news for employers. 

The bill repeals the Affordable Care Act's automatic healthcare enrollment requirement, raising almost $8 billion in revenue.  This ACA provision would have required employers with more than 200 full-time employees to automatically enroll their employees in health coverage unless the employees opted out. Revenue is raised by the repeal because absent automatic enrollment, fewer employees are expected to enroll in employer health plans, so their health benefits will be diverted to taxable wages. There were many unanswered questions about how the automatic enrollment provision would have worked, and the Department of Labor had repeatedly delayed issuing regulations on its implementation.  

Another budget section allows OSHA to increase fines for safety and health violations based on the inflation rate. Specifically, the budget agreement includes a section that will allow OSHA to raise fines annually in line with the Consumer Price Index, and also provide for a one-time catch-up adjustment, which would take effect by August 2016 through an interim final rulemaking.  This catch-up increase would be capped at 150% of the current penalty amount. OSHA's maximum fines have remained unchanged since 1990, so expect significant increases.

Defined benefit pension plans are another source of revenue used in the budget deal. Provisions increase the amounts single-employer pension plans annually pay to the Pension Benefit Guaranty Corporation (PBGC). Under the budget agreement, the single-employer fixed premium per participant would be raised to $68 for 2017, $73 for 2018, and $78 for 2019, and then re-indexed for inflation. The variable rate premium would continue to be indexed for inflation, but would be increased by an additional $2 in 2017, an additional $3 in 2018, and an additional $3 in 2019. Also, the due date for premium payments would be accelerated. The interest rate for valuing single-employer defined benefit pension liabilities in 2012-2017 is expected to not vary more than 10% from the average interest rate over the past 25 years. The budget agreement delays an increase in the variance until 2019. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.