Potential Employer Penalties Under the Patient Protection and Affordable Care Act (ACA)

[Excerpt] The Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) was intended to expand insurance coverage in the U.S. To ensure that employers continue to provide some degree of coverage ACA includes a “shared responsibility” provision. The provision does not explicitly mandate that employers offer their employees acceptable health insurance. However, it does impose penalties on certain firms with at least 50 full-time equivalent employees, if one or more of their full-time employees obtain a premium tax credit through the newly established health insurance exchanges. An individual may be eligible for a premium tax credit if his or her income is below certain thresholds and the individual’s employer does not offer health coverage, or offers insurance that is “not affordable” or does not provide “minimum value,” as defined by ACA. The employer penalties are effective beginning in 2014. This report describes the potential employer penalties, as well as proposed regulations to implement the ACA employer provisions. The regulations address insurance coverage requirements; methodologies for determining whether a worker is considered full time; provisions relating to seasonal workers and corporate franchises; and other reporting requirements

Converting Retirement Savings into Income: Annuities and Periodic Withdrawals

To a worker contemplating retirement, there is perhaps no more important question than “How long will my money last?” Congress has a strong interest in the income security of older Americans because much of their income is either provided directly from public programs like Social Security, or in the case of pensions and retirement accounts, is subsidized through tax deductions and deferrals. Many retirees must decide how to convert retirement account balances into income and how to preserve the accounts in the face of several kinds of risk. * Longevity risk is the risk that the individual will exhaust his or her account before death and experience a substantial decline in income. * Investment risk is the risk that the assets in which the individual has invested his or her retirement account will decline in value. * Inflation risk is the risk that price increases will cause the individual’s retirement income to decline in purchasing power. * Unexpected events such as divorce, the death of a spouse, the cost of medical care, or a need for long-term care services are also risks. There are strategies for dealing with each of these risks, but no single strategy can deal effectively with all of them. For example, purchasing a life annuity insures against longevity risk and it shifts the investment risk to the insurer. However, purchasing an annuity depletes the purchaser’s available assets by the amount of the premium. These assets are no longer available to the retiree in the event of a catastrophic illness or other unexpected major expense. To date, the demand for annuities has been low. There are many reasons for the low demand for annuities, but one of the most important has been that many potential annuity purchasers do not value the longevity insurance provided by annuities at its market price. Retirees who choose not to purchase life annuities must decide how much to withdraw from their retirement accounts each year. Because they face uncertainty with respect to both life expectancy and the rate of return on investment, this decision carries its own risks. If withdrawals are too large, retirees risk spending down their savings too quickly, possibly leaving them impoverished. If withdrawals are too small, they might spend too little and leave substantial assets unspent when they die. An analysis conducted by CRS indicates that under specific conditions there is a 95% or greater probability that a man who retires at age 65 will not exhaust his retirement account before the earlier of death or age 95 if his initial withdrawal does not exceed 5% of the account balance and later withdrawals are the same in inflationadjusted dollars. Under the same conditions, there is a 95% or greater probability that a woman who retires at age 65 will not exhaust her retirement account before the earlier of death or age 95 if her initial withdrawal does not exceed 4.5% of the account balance and later withdrawals are the same in inflation-adjusted dollars

Federal Programs Available to Unemployed Workers

[Excerpt] Four groups of federal programs target unemployed workers: unemployment insurance programs, health care assistance, job search assistance, and training. This report describes these programs, how they interact with each other, and their funding. Unemployed workers and their families may experience substantial income loss. If the unemployed worker’s family income is low enough, there are a number of means-tested benefits and programs for which the unemployed worker’s family might qualify (e.g., Temporary Assistance for Needy Families, SSI, or Medicaid). Eligibility for such benefits is not conditional on an individual’s current employment status. This report does not attempt to discuss these means-tested benefits and programs

Federal Programs Available to Unemployed Workers

[Excerpt] Four groups of federal programs target unemployed workers: unemployment insurance, health care assistance, job search assistance, and training. This report presents information on federal programs targeted to unemployed workers specifically, but does not attempt to discuss means-tested programs (such as Medicaid or SSI) that are available regardless of employment status. This report will be updated with major new legislation

Strategies to Retain Older Workers

As the aging baby boom generation approaches retirement, employers are confronting an evertightening labor market. Defined benefit pensions have long been important source of retirement income, and many employers would like to continue offering this valuable benefit to their employees. Yet many of these plans provide strong incentives to retire early, which may not be consistent with workplace needs. In this chapter we explore options employers face when redesigning their pension plans to create positive incentives for workers to voluntarily work past traditional early retirement age. Incentives may also include work life programs such as eldercare and phased retirement, to help older workers balance their work and family responsibilities

Possible Implications of Mandating Choice in Corporate Defined Benefit Plans

Defined benefit (DB) plans have been applauded as the mainstay of the US pension system for many years, but increasingly such plans have been replaced with defined contribution (DC) pensions. One exception to the downward DB spiral has been the development of “hybrid” plans. Technically, these are pensions where the benefit accrual is communicated as a lump sum and not in the form of an annuity as is done with traditional pensions. In the transition to this new plan structure, some employees at some firms have contended that they would have accumulated retirement benefits more quickly under the old DB plan – assuming they remained employed – than under the new hybrid design. In response, some legislators have attempted to force companies transitioning from a traditional DB to a hybrid plan to offer all workers the open-ended choice of remaining in the old DB plan, versus switching to the new hybrid plan. In this paper we explore some of the possible consequences of mandating plan choice in this fashion. We conclude that regulators seeking to mandate pension choice should take into account the potential undesirable outcomes of such a law

Health-Related Revenue Provisions: Changes Made by the Reconciliation Act of 2010 to Senate-Passed H.R. 3590

This report summarizes the health-related revenue provisions in the Reconciliation Act of 2010, introduced in the nature of a substitute to H.R. 4872

Private Health Insurance Provisions of H.R. 3962

[Excerpt] This report summarizes key provisions affecting private health insurance, including provisions to raise revenues, in Division A of H.R. 3962, the Affordable Health Care for America Act, as introduced in the House of Representatives on October 29, 2009. H.R. 3962 is based on H.R. 3200, America’s Affordable Health Choices Act of 2009, which was originally introduced on July 14, 2009, and was reported separately on October 14, 2009, by three House Committees— Education and Labor, Energy and Commerce, and Ways and Means. Division A of H.R. 3962 focuses on reducing the number of uninsured, restructuring the private health insurance market, setting minimum standards for health benefits, and providing financial assistance to certain individuals and, in some cases, small employers. In general, H.R. 3962 would require individuals to maintain health insurance and employers to either provide insurance or pay a payroll assessment, with some exceptions. Several insurance market reforms would be made, such as modified community rating and guaranteed issue and renewal. Both the individual and employer mandates would be linked to acceptable health insurance coverage, which would meet required minimum standards and incorporate the market reforms included in the bill. Acceptable coverage would include (1) coverage under a qualified health benefits plan (QHBP), which could be offered either through the newly created Health Insurance Exchange (the Exchange) or outside the Exchange through new employer plans; (2) grandfathered employment based plans; (3) grandfathered nongroup plans; and (4) other coverage, such as Medicare and Medicaid. The Exchange would offer private plans alongside a public option. Based on income, certain individuals could qualify for subsidies toward their premium costs and cost-sharing (deductibles and copayments); these subsidies would be available only through the Exchange. In the individual market (the nongroup market), a plan could be grandfathered indefinitely, but only if no changes were made to the terms and conditions of that plan, including benefits and cost-sharing, and premiums were only increased as allowed by statute. Most of these provisions would be effective beginning in 2013. The Exchange would not be an insurer; it would provide eligible individuals and small businesses with access to insurers’ plans in a comparable way. The Exchange would consist of a selection of private plans as well as a public option. Individuals wanting to purchase the public option or a private health insurance not through an employer or a grandfathered nongroup plan could only obtain such coverage through the Exchange. They would only be eligible to enroll in an Exchange plan if they were not enrolled in Medicare, Medicaid, and acceptable employer coverage as a full-time employee. The public option would be established by the Secretary of Health and Human Services (HHS), would offer three different cost-sharing options, and would vary premiums geographically. The Secretary would negotiate payment rates for medical providers, and items and services. The bill would also require that the Health Choices Commissioner to establish a Consumer Operated and Oriented Plan (CO-OP) program under which the Commissioner would make grants and loans for the establishment of not-for-profit, member-run health insurance cooperatives. These co-operatives would provide insurance through the Exchange. Only within the Exchange, credits would be available to limit the amount of money certain individuals would pay for premiums and for cost-sharing (deductibles and copayments). (Although Medicaid is beyond the scope of this report, H.R. 3962 would extend Medicaid coverage for most individuals under 150% of poverty; individuals would be ineligible for Exchange coverage if they were eligible for Medicaid.

Factors Affecting the Demand for Long-Term Care Insurance: Issues for Congress

This report will discuss the role of long-term care insurance (LTCI) in financing long term care (LTC) costs and current trends in the LTCI industry; factors affecting the demand for LTCI, including cost and complexity of the product and adequacy of consumer protections; and key features of legislative proposals in the 111th Congress to address these issues

Individual Mandate and Related Information Requirements under ACA

Report that describes the individual mandate under Section 1501 and Section 10106 of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended)