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Article | Global News Briefs

United States: Government-paid family leave among proposed benefit changes

Retirement|Health and Benefits|Total Rewards
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By Ann Marie Breheny , Bill Kalten , Kathleen Rosenow and Steven Seelig | September 30, 2021

U.S. Congress is discussing legislation, not yet finalized, that could significantly alter the employee health and benefit landscape.

Employer Action Code: Monitor

Various benefit and compensation legislative provisions — including some potentially significant changes — are under active discussion in Congress. Some versions of these could be included in infrastructure, budget reconciliation, government funding, debt ceiling or other legislation that Congress will debate — and in some cases, must finalize — in the coming weeks.

Key details

Some of the more significant preliminary provisions currently being considered are summarized below. In some cases, competing versions are being put forward, and the final provisions included in legislation, if any, may differ.

Retirement

  • Mandatory automatic enrollment (AE) of employees into defined contribution (DC) plans or mandatory payroll deduction contributions into individual retirement accounts (IRAs) for new retirement plans. An alternative option would create a new AE “safe harbor” plan design to increase money saved through AE.
  • Delay in the widening of the interest rate corridor used in defined benefit retirement funding rules, which was introduced in the American Rescue Plan Act enacted in March 2021
  • Limit on total accumulations in DC plans and IRAs to $10 million and limits on Roth IRA conversions

Paid leave and other workforce provisions

  • Budget reconciliation legislation from the House of Representatives would establish a federal program to provide up to 12 weeks of paid family and medical leave. Under the program, employers that offer qualifying leave could receive federal grants to offset up to 90% of the cost of their benefits, and the existing tax credit for employers that provide paid family and medical leave would sunset after 2023. The legislation would make the $10,500 limit for dependent care flexible spending accounts permanent and adjust the limit annually for inflation. Paid leave will be a key issue when the Senate debates its budget reconciliation package. President Biden and key lawmakers consider paid leave a high priority.

Healthcare

  • The budget reconciliation legislation from the House would extend recently enacted expanded access and make other modifications to healthcare coverage under the existing Affordable Care Act.
  • Numerous bills intended to reduce prescription drug costs have been introduced. The House budget reconciliation legislation includes provisions that would allow the Secretary of Health and Human Services to negotiate the prices for some prescription drugs.

Executive compensation

  • Legislation enacted in March expands, after 2026, the group of employees for whom employers cannot deduct more than $1 million in compensation. The House budget reconciliation would expand the group beginning in 2022 and make other changes.

Employer implications

The proposals under consideration range from fairly minor reforms to what would be landmark reforms (e.g., the introduction of paid parental leave in the U.S.). Prospects for the various measures are naturally just as wide ranging. As it’s not clear at this point what form the final benefit-related provisions may take, employers should monitor the progress of the proposed changes.

Contacts


Bill Kalten
Senior Director, Retirement and Executive Compensation

Senior Regulatory Advisor, Health and Benefits

Senior Director, Executive Compensation (Arlington)

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