As employers start to conduct cost-benefit analysis on providing health insurance under the health law, they should also study some proposals by the National Commission on Fiscal Responsibility and Reform (NCFRR).
To rein in the national debt, which is over $14 trillion dollars and is projected to increase by an additional $1.5 trillion in 2011, NCFRR has recommended some proposals aimed at the tax treatment of employer-provided health insurance and defined contribution plans.
"We expect the tax proposals on the table by NCFRR will affect cost-benefit analysis conducted by employers," said Gretchen Harders, a member of the law firm EpsteinBeckerGreen, during a recent conference on labor and employment law sponsored by her firm.
Last year, President Obama signed an executive order creating
"Some deficit-reduction proposals, if enacted by Congress, would have significant impact on employers’ benefits programs," said Harders. For example, the task force recommends amending tax exclusions and deductions on employer-provided health insurance, which would result in employees being taxed on health care services and employers missing out on some tax breaks for the plans that they currently provide.
Under PPACA, employers will face a 40% excise tax in 2018 on the value of coverage exceeding $10,200 for individual coverage and $27,500 for family coverage to be indexed annually.
The proposal by NCFRR "goes one step further by eliminating the tax exemption for the 75th percentile of premium levels in 2014, which will be frozen through 2018. The tax deductions and exclusions will be phased out by 2038," said Harders at the Washington, D.C. event, which was held at the National Press Club.
On the retirement side, NCFRR proposed capping contributions that can be made to defined contribution plans to $20,000 annually or 20% of income. Currently, the cap is $49,000 annually and 100% of income.
"The proposal would limit elective deferrals to 401(k) plans to $16,500, which would only allow about $3,500 in which employers could make matching contributions and other type of contributions," Harders explained. The 401(k) plan is the principle retirement vehicle for the most employees.
In citing research by the American Society of Pension Professionals and Actuaries, Harders said "when an employer offers a 401(k) plan, the percentage of employees with incomes of $35,000 to $50,000 who stay in the plan increases by 70%. That income range is of most concern when adequately saving for retirement."
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