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Election results: What this could mean for HR policy

By Rob Smith, Ceridian manager of Government Relations

In what proved to be a sweeping referendum of President Bush and the Iraq War, voters turned over control of Congress to Democratic hands for the first time in more than a decade. This change in leadership will have many implications for HR and payroll, and trade associations and business groups are struggling to predict what lies ahead in this broadly altered political and policymaking landscape.

To be sure, when any organization undergoes a leadership change, the switch in political control brings new challenges. However, within these challenges lies immense opportunity for progress not seen in recent years. Congress has seemed perpetually bogged down in partisan gridlock; many important issues affecting HR and payroll have been left unresolved. Now, with a change in power, overall approval ratings for both the president and Congress at historical lows, and the 2008 presidential elections approaching, the stars appear to be in line for a break in the roadblock that has shuttered the legislative process for too long. While the war in Iraq and reining in the massively overdrawn federal bank account will be top concerns for the new Congress, the House and Senate are likely to undertake many issues that will affect employers, as well.

Immigration reform
Immigration reform will remain the most significant employment-related matter Congress will consider. Both the House and Senate passed immigration bills, but the House and Senate Republican leadership never convened a conference committee to iron out the differences between the two bodies' legislation. The House bill was crafted by the Republican majority with no input from Democratic members. This legislation, which focused solely on law enforcement and border security measures, did not contain provisions to deal with the estimated 11 million illegal immigrants who currently reside in the U.S. The bipartisan Senate bill was developed by members from both parties, namely Sen. John McCain (R-AZ) and Sen. Edward Kennedy (D-MA), and took a decidedly more comprehensive approach. In addition to security and enforcement measures, the Senate legislation contained measures to create a new temporary worker program and a "pathway to citizenship" process by which unauthorized individuals could earn legal status in the U.S.

President Bush, a large number of congressional Democrats and Republicans, and the business community strongly supported the comprehensive Senate immigration plan; however, the issue stalled out when the Republican House leadership refused to attempt to negotiate a solution that Congress could place on the president's desk to be signed into law. Now that leadership in the House had changed hands, there is a growing consensus among the president and Capitol Hill that 2007 will be the year the government comes through with a meaningful, comprehensive immigration reform measure.

Of chief concern to HR and payroll is a new mandatory Electronic Employment Verification Program (EEVP) that all employers would be required to use to verify the work eligibility of all new hires. While the House and Senate bills took markedly different approaches to the overall immigration issue, the EEVP was a common thread in both measures and saw little to no opposition. Even if Congress is unable to put together a truly comprehensive bill that would include the "pathway to citizenship" that President Bush wants, it is highly likely that the EEVP system will be included in any immigration reform legislation Congress does produce.

Health care
The health care agenda is certain to take a turn when the House and Senate convene in January. However, one issue that both parties agree on is improving health information technology (IT) and health system integration. Congress was very close to passing a bipartisan health IT bill in the 109th Congress, so look for members to pick up where they left off when the 110th begins.

Throughout the Bush presidency, Congress has focused mainly on consumer-directed health plans and personal health savings accounts (HSAs) as means to reduce health care costs for businesses and expand coverage. By and large, while sympathetic to modifying the FSA "use it or lose it" rule, Democrats have been cool to HSAs and are likely to shift the spotlight onto other federal health initiatives.

Since the Medicare Part D program was enacted in 2003, Democrats have been anxious to adjust the gap in coverage, or "donut hole," in which beneficiaries' medications are not covered until they spend a set amount of their own money. Democrats have also pushed to allow the federal government to negotiate with the pharmaceutical companies for lower drug prices. Republicans have steadfastly opposed these efforts, preferring to allow market forces to keep drug prices down; but the program is almost certain to be opened for consideration under a Democratic House and Senate.

Another Medicare-related issue Congress is sure to consider is the program's growing cost. The Medicare Modernization and Prescription Drug Act of 2003, which implemented the Medicare Part-D program, contained a cost-containment trigger. This requires the president to submit to Congress legislation to reduce costs if Medicare spending reaches 45 percent of general tax revenues, which some estimate will happen in April. While lawmakers are not required to pass this legislation, the law will force the issue onto center stage.

The Medicaid SCHIP program that covers children in low income families is up for reauthorization in 2007. Expanding SCHIP has been a consistent Democratic priority, and adjusting and expanding this popular bipartisan program will definitely consume much of the health care agenda next year.

Minimum wage
Congress is also likely to take up a variety of workforce-related items, including an increase in the minimum wage. Democrats across the country campaigned heavily on this issue, and we should look for them to act on minimum wage legislation within the first two weeks of the new Congress. This consideration is likely to attract Republican amendments to create greater flexibility in overtime calculations, especially to authorize comp time in lieu of overtime and flex time in the form of the 80-hour, two-week work period. Both of these initiatives would involve significant payroll compliance implications and complexity. Paid family and medical leave could also appear on the agenda of the new leadership -- a longtime Democratic objective that would require significant payroll and HR administration.

Retirement savings plans
While the massive Pension Protection Act (PPA) enacted into law in 2006 will probably be the last word on retirement issues in the near future, HR managers and Congress are awaiting guidance and regulations from the Treasury and Labor Departments on how the law is to be implemented. Default investment guidance for automatic enrollment options will be a top concern for companies that plan to adopt this structure next year. Retirement plan sponsors are also awaiting regulations on implementing investment advice options for account holders that were included in the PPA. If Congress does consider retirement legislation, it will probably focus on 401(k) plans since the PPA established the plans as the preferred retirement savings vehicle. The Government Accountability Office was set to release a report regarding 401(k) fees at the end of November. Policymakers have been concerned with 401(k) fees and their effect on retirement savings for some time, and this report will likely serve as the basis for measures to regulate further 401(k) administration.

Certainly, the federal government has a lot on its plate. Following the election, President Bush and the new Democratic leadership made commitments to work together in a bipartisan fashion. Both parties have a vested interest in pursuing a robust and productive agenda, and there is some real potential to do away with -- or at least curtail -- the lack of progress that has come to define Congress in recent years. The first few weeks of the 110th session will provide a preview of what we can expect from both sides of the aisle over the next two years and from potential presidential candidates. Ceridian will continue to provide you with our analysis of these developments and the challenges that lie ahead.