Will the "CLASS" Program Succeed? Is It Sustainable?
Both the House and Senate health care reform bills currently being debated would establish a new voluntary long-term care insurance program. Called CLASS, the new program would be offered to all workers through the Department of Health and Human Services (DHHS). CLASS is significant for at least three reasons.

Health Care Reform Bills Have Important Implications for Retiree Health Plans
The Affordable Health Care for America Act (H.R. 3962) approved by the House on Nov. 7 and the Patient Protection and Affordable Care Act (H.R. 3590) now under debate in the Senate would affect retiree health plans significantly. Some of the changes — such as taxing the retiree drug subsidy (RDS) provided to employers and prohibiting employers from reducing benefits after employees retire — could have a chilling effect on the sponsorship of retiree health benefits. On the other hand, a proposed reinsurance program for early retirees would (temporarily) reward sponsors of employment-based plans.

Retirement Plans on Legislative Radar Screen for Late 2009
Health care reform has dominated the legislative agenda for much of 2009 — especially as legislation moved through committees and floor debates during the late summer and fall sessions. But retirement issues are also receiving attention and might see some action before the 2009 session ends. Defined benefit (DB) plan sponsors are hoping for funding relief, and lawmakers may discuss legislation to address disclosure of 401(k) fees. In addition, a new bill recently introduced in the House would change the nondiscrimination rules for qualified retirement plans.

Hybrid Plans in 2010 and Beyond
A new study by Watson Wyatt highlights the wide-ranging variations in hybrid pension plans, reflecting the spectrum of sponsors’ workforce planning, compliance and other needs and goals. It examines eligibility requirements, definitions of applicable compensation, benefit formulas, interest rates and transition methods for cash balance plans (CBPs) and pension equity plans (PEPs).

Legislation to Extend, Expand
COBRA Subsidy Introduced
The Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy enacted as part of the American Recovery and Reinvestment Act (ARRA) in February (see Watson Wyatt Insider, March 2009) will begin to phase out at year's end. ARRA provides a 65 percent premium subsidy for qualified beneficiaries who lose their health coverage and become eligible for COBRA following an involuntary termination of employment by Dec. 31, 2009. The premium subsidy is available for the first nine months of COBRA coverage, so the subsidy has already ended for those who began receiving it immediately after enactment. Others will continue receiving the subsidy into 2010.

Legislation Introduced to Mandate
Paid Sick Leave
On Nov. 3, House Education and Labor Committee chair George Miller (D-Calif.) introduced the Emergency Influenza Containment Act to ensure that employees sent home by their employers because of a contagious illness receive paid sick leave. On Nov. 17, Senator Chris Dodd (D-Conn.) and Representative Rosa DeLauro (D-Conn.) introduced the Pandemic Protection for Workers, Families and Businesses Act, which shares many of the same goals, although there are important differences between the two bills as well. Paid sick leave has been receiving more attention from lawmakers recently, and legislative action is possible.

House Approves Health Care Reform; Senate Begins Debate
On Nov. 7, in a rare Saturday vote, the House of Representatives approved the Affordable Health Care for America Act (H.R. 3962) by a tally of 220 to 215. While the vote represents an important step forward in the health care reform debate, lawmakers still have a long and difficult battle ahead.

Pay Czar Reduces Executive Pay for Firms Receiving Exceptional TARP Assistance
In an effort to tie compensation more closely to long-term performance and appropriate competitive levels, Special Master for TARP Executive Compensation Kenneth R. Feinberg has directed companies that received exceptional Troubled Asset Relief Program assistance to cut compensation for top executives by an average of 50 percent. While the pay cuts apply to only seven firms, the levels and structures could become a template for compensation at other financial institutions that participate in TARP. Feinberg also clarified that these firms are subject to the same corporate governance provisions that apply to other TARP recipients, including say-on-pay votes, clawbacks, compensation consultant disclosures, risk reviews, perquisite disclosures, prohibition on tax gross-ups and chief executive officer/chief financial officer certifications.

IRS Releases Regulations on Employer Comparable Contributions to HSAs
The IRS has released final regulations on employer comparable contributions to health savings accounts (HSAs). The regulations also provide guidance on the method and timing of reporting and paying excise taxes due under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Health Insurance Portability and Accountability Act (HIPAA) and the HSA (and Archer medical savings account) comparable contribution rules.

Intranet Posting of Schedule SB
The 2008 Form 5500 instructions direct defined benefit (DB) pension plan sponsors (or plan administrators acting on their behalf) to display actuarial information from the form on their intranets. The instruction reflects a new PPA disclosure requirement for DB plan sponsors that maintain intranet Web sites for their employees. The DOL is also currently posting scanned versions of 2008 Schedule SB filings on a Web site that may be viewed by the general public.

FAS 123(R) Option Assumptions: The 2008 Results
Watson Wyatt recently completed its third annual analysis of stock option valuation assumptions and results under Statement of Financial Accounting Standards (SFAS) 123(R). From 2007 to 2008, the percentage of companies disclosing option fair values decreased from 73 percent to 72 percent. The median percentage increase in stock compensation expense from 2007 to 2008 was 2.4 percent.

New Law Expands Military FMLA Leave Rights
The National Defense Authorization Act for Fiscal Year 2010 (H.R. 2647) expands eligibility for certain rights under the Family and Medical Leave Act (FMLA). The new law will increase the number of employees who qualify for leave on account of a family member's deployment and will broaden the circumstances in which employees may take leave to tend to a family member with a service-related injury or illness. The provisions took effect when President Obama signed the legislation on Oct. 28, 2009.

Mental Health Parity: What Employers Need to Know
After more than a decade of discussion, Congress finally enacted legislation mandating full parity for mental health and substance abuse benefits. The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (MHPAEA) became law on Oct. 3, 2008, as part of the Emergency Economic Stabilization Act. The law, which generally becomes effective in 2010, affects insured and self-insured group health plans provided by employers.