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Obama Budget Plan Raises Employer Issues

February 27, 2009
Related Topics: Immigration, Benefit Design and Communication, Future Workplace, Latest News
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Among the most notable ideas proposed by President Barack Obama in his $3.5 trillion budget unveiled Thursday, February 26, is a big-ticket health reform plan and a proposal to require employers to automatically enroll employees in retirement accounts.

Though details remain sketchy, here’s a quick look at some of the ways employers might be affected:

Retirement
Addressing low savings rates among U.S. workers, the proposed budget states that employers that “do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit IRA account that is compatible with existing direct-deposit payroll systems.” Employees could opt out but would automatically be enrolled in a retirement account if they did nothing.

Health care
Among the bigger-ticket items is health care reform. Other than setting aside $634 billion as an initial earmark for reforming the country’s health care system, the budget proposal offers few details.

It does state that the administration’s plan would give workers the option of keeping their employer-based health plan. The proposed budget also mentions—but does not endorse or reject—other health reform ideas such as capping the tax exclusion for employer-sponsored health insurance.

Unemployment insurance
Under the heading “Extend, Expand and Reform Unemployment Insurance Benefits,” the budget proposal would curb benefits fraud that, according to the Office of Management and Budget, cost taxpayers $3.9 billion in 2008. It calls for increased “funding for program integrity” and legislative changes to reduce employer tax evasion.

Immigration
Having taken E-Verify off the table in the stimulus package, the system that checks new-hire information from I-9 forms against Social Security and Department of Homeland Security databases, is now back in the proposed budget with $110 million to expand the program.

Federal wage reporting
The budget contains a proposal to increase the frequency employers report wages to the Social Security Administration. Currently, employers report employee wages to the federal government once a year using W-2 forms. The administration says more frequent reporting would improve tax administration and make it easier to implement their proposal to institute automatic enrollment into retirement savings accounts. The administration says it will work with states so that “the overall reporting burden on employers is not increased.”

—Jeremy Smerd

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