Ceridian's Executive Consultant Jim O'Connell spoke to a group of more than 150 customers and prospects in New York City on Nov. 15, 2012, at the Ceridian Takes Manhattan event. Always an audience favorite, O'Connell discussed the status quo election results and the impact they will have on employer compliance responsibilities. 

Election 2012: What the results mean for compliance

jim-oconnell.jpgCeridian's Executive Consultant Jim O'Connell spoke to a group of more than 150 customers and prospects in New York City on Nov. 15, 2012, at the Ceridian Takes Manhattan event. Always an audience favorite, O'Connell discussed the status quo election results and the impact they will have on employer compliance responsibilities.

Health care reform

O'Connell said, "President Obama's re-election cements PPACA. Like FLSA, Medicare, ERISA, etc., it can be amended, but it is permanent law." Implementation of the law will continue to move forward, but we could see delays, he said, as obstacles are encountered and details worked out.

This implementation process will translate into continuing compliance uncertainty and challenges for employers. For example, the following employer compliance milestones are looming on the horizon:

  • W-2 reporting of employer-sponsored health coverage value for 2012 (2013)
  • Annual limit on employee FSA contributions (2013)
  • Additional Medicare tax on wages in excess of $200,000 (2013)
  • Employer "Play or Pay" mandate (2014)

The "Play or Pay" mandate, O'Connell said, will leave employers with a difficult choice: Do you want to play by offering minimum essential health coverage to full-time employees that meets both affordability and actuarial value tests, or refer employees to the state's health insurance exchange for coverage and pay a penalty? Remember, employer plans must be both affordable and of minimum actuarial value.

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A third option some employers may consider, O'Connell said, is to limit their hourly employees to less than 30 hours per week to address the "Play or Pay" mandate. Also, continuing the cost-containment trend of the last few years, we can expect more employers to shift to defined contribution-type health plans, similar to a 401(k), or to consumer-directed health care, such as a high-deductible health plan paired with a health savings account (HSA).

The bottom line is, while employers can expect increased compliance challenges, they will also have benefit design options under health care reform.

The fiscal cliff

Due to a $1.1 trillion FY 2012 budget deficit and exploding public debt, the United States government is in the midst of a fiscal crisis. Like Thelma and Louise, the U.S. is about to drive off of a huge cliff on Jan. 1, 2013 — the "fiscal cliff" we keep hearing about.

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O'Connell said the fiscal cliff is comprised of $668 billion in increased taxes and mandatory spending cuts, including the expiration of Bush-era income tax rates and the expiration of the 2011-2012 payroll tax holiday.

This crisis may force Congress to attempt a "grand bargain" — a comprehensive deficit reduction plan to reduce projected annual deficits over time by cutting entitlement spending and reforming the complicated U.S. Tax Code, including eliminating or curtailing tax incentives, loopholes, deductions and exclusions while possibly lowering middle income tax rates. O'Connell believes there could be a short-term extension of the fiscal cliff to give the new Congress time to reach a bargain by mid-2013. But, he said, "It will take extraordinary political leadership and a new bipartisan spirit to reach a grand bargain."

O'Connell said that a grand bargain could have a big effect on employer-sponsored health and retirement benefits, because as the largest sources of foregone tax revenue, these are prime targets for tax reform. Tax exclusions for benefits could be capped at a certain dollar amount or percentage, or could be replaced by tax credits. Either scenario would involve significant new employer compliance obligations.

For more information:

  • Visit Jim O'Connell's HR Legislation blog
  • Review a health care reform checklist
  • Read a health care reform compliance Q&A with Jim O'Connell