Employee Benefits: The Game Changers Presented by: Michael P. Aitken, Vice President SHRM

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Employee Benefits: The Game Changers Presented by: Michael P. Aitken, Vice President SHRM

U.S. Debt Now Equal to U.S. Economy Environment U.S. Debt Now Equal to U.S. Economy Growth of U.S. Debt Percentage of the economy: Source: Office of Management and Budget 7

Congressional Budget Office Tax and Benefit Issues Congressional Budget Office August 2011

Tax and Benefit Issues

Cumulative Budgetary Effect of Major Income Tax Expenditures Tax and Benefit Issues Cumulative Budgetary Effect of Major Income Tax Expenditures 2010 to 2014

Workplace Flexibility / Leave Benefits Key HR Issues Key Federal HR Issues Tax & Benefits Issues Workplace Flexibility / Leave Benefits Health Care Reform

Public Policy Agenda 2012 Tax and Benefits: Tax Reform: Taxmageddon or Tax Cuts?? Payroll tax and unemployment benefits extension Debt limit increase 2013 Federal Budget Process: Statutory spending caps – 2012 Sequester – 2013

Public Policy Agenda 2012 Workplace Flexibility: Advocates continue to push expansion of FMLA/paid sick leave at state and local level but enactment at federal level impossible. Obama Administration’s focus on work-flex will continue. Proposed regulation at DOL.

Public Policy Agenda 2012 Health Care Reform: “Repeal and Replace” tabled until after 2012 election. Regulatory oversight and guidance. Focused amendments (1099) and some pullback possible (Class Act). Supreme Court to rule on Constitutionality in 2012.

Tax and Benefit Issues Tax and Benefit Issues Bipartisan deal was signed into law in August 2011 to raise the debt limit immediately by $900 billion and cut federal spending. Debt limit may need to be increased before the end of 2012. Current U.S. debt is $15.3 trillion. Failure of the bipartisan, bicameral Congressional Joint Select Committee on Deficit Reduction, “the Super Committee,” triggers $1.5 trillion sequester in both discretionary and direct spending effective in 2013. “Taxmageddon” looms on the horizon as $5 trillion in various tax provisions are set to expire on December 31, 2012. Key tax cuts include: Payroll tax cut Bush Era tax cuts Section 127 Employer-Provided Education Assistance Alternative Minimum Tax Action in Fall after election is likely given debt and tax issues.

Tax and Benefit Issues

Employee Educational Assistance Act of 2012 Tax and Benefit Issues Employee Educational Assistance Act of 2012 To be introduced in the House by Representatives Sam Johnson (R-TX) and Richard Neal (D-MA) this week. The legislation would extend and make permanent Internal Revenue Code Section 127, which allows an employer to provide up to $5,250 per year tax-free in tuition, fees, and books to employees for courses on the undergraduate and graduate levels. Currently, Section 127 is set to expire on December 31, 2012. SHRM is the co-chair of the Coalition to Preserve Employer-Provided Educational Assistance www.cpepea.com.

Middle Class Tax Relief and Job Creation Act (P.L.112-96) Tax and Benefit Issues Middle Class Tax Relief and Job Creation Act (P.L.112-96) Congress passed, and President Obama signed into law, the legislation on February 22, 2012. Key HR elements include: Extending the temporary reduction in FICA taxes for employers and employees to 4.2 percent (from 6.2 percent) through December 31. The payroll deduction is available to all private and non-profit employers but not federal, state or local government employers or employees (other than state colleges or universities). Extending the period for individuals to collect unemployment benefits by one year to December 31, 2012. The law also reduces the maximum number of claimable weeks to 73 (from 99) for individuals residing in states with an unemployment rate above 9 percent and would cap benefits at 63 weeks for individuals in states with a unemployment rate at or below 9 percent.

Workplace Flexibility / Leave Benefits Workplace Flexibility / Leave Benefit Issues Workplace Flexibility / Leave Benefits Advocates continue to push legislation to expand FMLA benefits and require paid sick leave at the state level but highly unlikely at the federal level. Families and Work Institute and SHRM announced new partnership: Moving Work Forward on February 2011 to encourage greater adoption of workplace flexibility programs at worksites. SHRM testified on July 2011 in front of the House Subcommittee on Workforce Protections on challenges with federal law in implementing workplace flexibility programs. DOL announced proposed regulations in February implementing the military leave provisions of the Family and Medical Leave Act.

Department of Labor Family and Medical Leave Act Workplace Flexibility / Leave Benefit Issues Department of Labor Family and Medical Leave Act Published in the Federal Register on February 15, 2012, the proposed rule primarily covers statutorily-required clarifications of military leave created in the National Defense Authorization Act for FY 2010 and flight crew provisions enacted in the Airline Flight Crew Technical Corrections Act. The proposed rule: Clarifies that coverage includes recent veterans; Defines “serious injury or illness” to include preexisting conditions aggravated in the line of duty and; Expands the amount of leave allowed for rest and recovery from “up to 5 days” to “up to 15 days.”

Department of Labor Family and Medical Leave Act Workplace Flexibility / Leave Benefit Issues Department of Labor Family and Medical Leave Act The regulation proposes to modify a provision added to the regulations in 2009, which allows employers to track intermittent or reduced scheduled leave in the shortest period of time that the employers uses to account for other forms of leave (sick, vacation, or personal), provided that it is not greater than one hour. The proposed change would prohibit an employer from requiring an employee to take more leave than is used to address the circumstances that caused the need for leave, provided that the employer counts the leave using the shortest increment of leave used to account for any other type of leave. Comments are due on April 30 and the Coalition to Protect Family Leave and SHRM will submit comments.  SHRM will provide opportunities for state council and chapters to sign onto SHRM’s comments as well as for SHRM members to submit their own.  DOL has also announced that it will launch an employer and employee survey on FMLA use.

Share research and employer best practices Workplace Flexibility / Leave Benefit Issues Share research and employer best practices Recognize exemplary employers through the Sloan Award for Excellence in Workplace Effectiveness and Flexibility Inspire positive change so more organizations understand the benefits of workplace flexibility www.whenworkworks.org

Voluntary approach is preferable to one-size-fits-all mandate Workplace Flexibility / Leave Benefit Issues Encourage employers to voluntarily adopt workplace flexibility programs that work for both employers and employees Allows SHRM to be responsive to policymakers interested in helping employees meet work-life need Voluntary approach is preferable to one-size-fits-all mandate

Workplace Flexibility / Leave Benefit Issues

Health Care Reform Issues While Patient Protection and Affordable Care Act (PPACA) is law, many implementation details remain unanswered. Significant regulatory process is underway that will continue for years to come. Efforts to “repeal” on hold. But… Technical corrections are likely Focused amendments (1099) and some pullback possible (Class Act) Supreme Court to rule on Constitutionality in 2012

Americans Divided On Repeal Of 2010 Healthcare Law Health Care Reform Issues Americans Divided On Repeal Of 2010 Healthcare Law Majority Of Republicans Strongly Favor Repeal if Republican is Elected President

Americans Do Not Think Individual Mandate Passes Legal Muster Health Care Reform Issues Americans Do Not Think Individual Mandate Passes Legal Muster

CONDOLEEZZA RICE MALCOLM GLADWELL JIM COLLINS TOM BROKAW

Mike Aitken Vice President, Government Affairs mike.aitken@shrm.org +1-703-535-6027 1800 Duke Street Alexandria, VA 22314