hen Barack Obama assumes the presidency in January, the employee benefits legislative landscape in Washington will change dramatically.

    For the first time since the early 1990s, the nation's top elected official will be committed to moving the country close to universal health insurance coverage. "This will be a president whose vision is one of a move towards universal coverage, with the federal government playing a much larger, though not an exclusive, role," said Frank McArdle, a consultant with Hewitt Associates Inc. in Washington.

    The stage also is set for consideration of legislative initiatives that could have a major impact on corporate retirement savings plans. In addition, some say the chances increase significantly that Congress will pass legislation to expand the Family and Medical Leave Act—the first major piece of legislation to clear Congress the last time a Democrat was in the White House.

    Also in store could be an expansion of a huge federal/state program that provides health insurance coverage for millions of children in lower-income families, while lawmakers may be looking—as a potential revenue-raiser—at ways to trim a rapidly growing federal program through which millions of Medicare beneficiaries receive coverage from commercial health insurers.

    To be sure, while the legislative landscape may have changed, that by no means guarantees passage of employee benefit-related initiatives backed by the incoming president. Benefit experts haven't forgotten, for example, the lofty and numerous predictions of sweeping health-care reform legislation following the election of Bill Clinton in 1992. What couldn't have been predicted then were a series of political and policy mistakes by Mr. Clinton and then-First Lady Hillary Clinton that effectively killed the chances for reform.

    As in 1992, though, health reform is expected to be a major priority of the incoming administration. On the campaign trail, Sen. Obama outlined his vision: a system along the lines of a 2006 Massachusetts law that has moved the Bay State very close to universal health insurance coverage.

    Like Massachusetts, Sen. Obama backs a system in which employers—except for smaller firms—would have to offer coverage meeting certain standards or pay a fee that would be used to fund coverage for the uninsured. Lower-income uninsured individuals would have their premiums subsidized by the federal government, with the government contracting with insurers to offer coverage.

    While such a program may be Sen. Obama's current broad vision, that isn't to say that he won't be open to change. Unlike the Clintons, who believed they could force their health care reform plan through Congress without support from key legislative leaders, Sen. Obama, who has spent four years in the U.S. Senate, appears far more willing to work with the legislative branch to develop a consensus.

    "He understands that health-care reform can't be engineered top-down. It has to be an inclusive process in which the administration works with legislators and major stakeholders," said Paul Dennett, senior vp-health reform for the American Benefits Council in Washington.

    Although Sen. Obama may be wiser in the ways of Washington than the last Democrat was when he entered the White House, no one is yet banking on enactment of a Massachusetts-type coverage law.

    "While there may be interest, there is not a consensus. And as to an employer mandate, the great majority of employers will fight that tooth and nail," said James Gelfand, senior health care policy manager at the U.S. Chamber of Commerce in Washington.

    At the same time, some business groups worry that one of the Bush administration's signature health-care measures—tax-favored health savings accounts linked to high-deductible health insurance plans—face an uncertain future under President-elect Obama.

    Many congressional Democrats, especially those in the House of Representatives, are no fans of HSAs, which employers have embraced as a way to provide lower-cost coverage. The House in the last session approved a bill that effectively would have increased the costs associated with administering HSAs.

    But the Senate never considered that measure, at least in part due to veto threats by President Bush.

    While Sen. Obama has said little about HSAs, at a minimum he lacks President Bush's enthusiasm for the arrangements. And that could embolden congressional opponents to press for legislation to curb, if not kill, the appeal of HSAs.

    "It could be a death by a thousand cuts," said the Chamber's Mr. Gelfand.

    Others, though, doubt that legislators, fearful of a public backlash, will want to put HSAs on their reform agenda.

    "I don't see them going away. While I don't see anything being done to make them more attractive, I also don't see how Congress would want to antagonize" the 6 million people enrolled in health plans linked to HSAs, said Steve Raetzman, a senior consultant with Watson Wyatt Worldwide in Arlington, Va.

Retirement plan mandate
    On the retirement side, a key proposal by Sen. Obama would require many employers for the first time ever to offer their workers a retirement plan.

    Sen. Obama's retirement plan mandate essentially would require all employers that have been in business for two years, have at least 11 employees and don't already offer a work-sponsored plan to provide an automatic individual retirement account program to their employees.

    Employees could opt out of the program. But for employees who opt in, the employer would have to automatically deduct IRA contributions from the employees' paychecks.

    Another major Obama retirement proposal would dramatically expand the federal government's existing saver's credit to provide a refundable annual tax credit to families earning less than $75,000 a year. The refundable tax credit would be for half of the first $1,000 that the workers contribute to retirement plans each year. Up to $500 would be automatically contributed to their retirement accounts.

    The existing saver's credit, which is not refundable, is limited to families earning at most $53,000 a year. But, under the program's sliding credit scale, families earning $53,000 receive a maximum credit of only 10% for the first $1,000 they contribute to a 401(k) plan or IRA. Families earning less can receive a credit of up to 50% of the first $1,000 contributed. Because the credit is not refundable, workers at the lowest end of the earnings spectrum who pay no taxes would get no benefit.

    Proponents contend that the automatic IRA program would dramatically increase the number of workers covered by retirement plans, because more than half of the estimated 78 million workers currently without work-based retirement plans would be eligible for the new IRAs.

    In addition, proponents contend that Sen. Obama's expansion of the saver's credit would dramatically increase the nation's pool of retirement savings.

    "Despite the current financial downturn, there's a broad recognition that these two initiatives, by promoting broad-based saving, are the kind of fundamental improvements that should contribute, along with many other measures, to a healthier economy in the long term," said Mark Iwry, a nonresident senior fellow at the Brookings Institution, a Washington think tank.

    Mr. Iwry, one of the key architects of the automatic IRA proposal, was an adviser to the Obama campaign.

    Nonetheless, prospects for an automatic IRA mandate are at best uncertain, in part because retirement benefits are completely voluntary for employers, and employer groups want to keep it that way.

    A mandate "is a very troubling precedent," said Ed Ferrigno, vp-Washington affairs for the Profit Sharing/401k Council of America.

    "There will be pushback," added Kathryn Ricard, vp-retirement policy for the ERISA Industry Committee, a Washington-based benefits lobbying group.

    Along with fears about the mandatory nature of the proposal, there is also concern that automatic IRAs could spur some employers to drop existing 401(k) plans. That's because an automatic IRA could be easier to administer and present less regulatory red tape to employers that offer 401(k) plans, particularly to those that provide minimal or no matching contributions.

    "There's a potential for a significant crowd-out of existing pensions, particularly 401(k)s," said Mark Warshawsky, director of retirement research at Watson Wyatt Worldwide in Arlington, Va.

    Mr. Obama's proposal to revamp the existing saver's credit, meanwhile, is also expected to be resisted by free-market Republicans on Capitol Hill.

    "Some people call it a refundable tax credit and other people call it welfare," said Bill Sweetnam, a partner with The Groom Law Group in Washington.

    At least two retirement-related proposals promoted by Sen. Obama, however, could become law even before the president-elect officially steps into the Oval Office Jan. 20.

    The first would temporarily suspend the required minimum distribution from retirement plans in the year when participants turn 70½. The proposal aims to protect participants from having to withdraw retirement savings in a down market. For those who need to take the distributions, however, the proposal would provide a tax break, Mr. Iwry said.

    Sen. Obama's second proposal would suspend the existing 10% tax penalty on plan hardship withdrawals for up to 15% or $10,000, whichever is less, in 2009.

    Both of Mr. Obama's retirement plan proposals have largely been included in a package of legislation that a coalition of employer groups is lobbying for, seeking relief from the new funding requirements of the Pension Protection Act of 2006 at least through next year. The coalition's plan is to include relief from the act's funding requirement in economic stimulus legislation, or any other measure that Congress considers in a lame-duck session.

    "This is urgent," an ABC spokesman said. "We're going to pursue every avenue available to get this passed before the end of the year," he added.

Expanding FMLA
    Although President-elect Barack Obama did not give issues in employee leave top billing in his quest for the White House, there is little doubt he will pursue them.

    He has indicated strong support for expanding the Family and Medical Leave Act to encompass more companies and more reasons for time off—such as parent/teacher conferences. He also backs mandatory paid sick days.

    Even if reviving the moribund economy consumes the launch of the Obama administration, leave legislation could gain traction quickly, thanks to increased Democratic majorities in Congress and its limited impact on the federal budget.

    "Obama has been thinking in enough detail on these policies," said Vicky Lovell, acting director of research at the Institute for Women's Policy Research in Washington. "There are bills that have been introduced. There's been a lot of outreach in the House and the Senate to educate policymakers."

    The bill that could move quickly is the Healthy Families Act, which would require companies with 15 or more employees to provide seven paid sick days annually or a prorated amount for part-time workers. The Senate measure has 24 co-sponsors, including Sen. Obama, while the House version has 106.

    Business groups are leery about how the bill would affect employers that provide paid time off. Under PTO systems, which are growing in popularity, an employer does not differentiate between a vacation day and a sick day.

    Mike Peterson, director of labor and employment policy at the HR Policy Association in Washington, said the bill would discourage the use of paid time off.

    "It would inhibit the flexibility of a company in designing its benefit plans," Mr. Peterson said. "In its present form, the measure has a lot of sharp edges that need to be smoothed out."

    How the Healthy Families Act would mesh with established PTO policies is not clear, according to Jocelyn Frye, general counsel at the National Partnership for Women and Families in Washington.

    "There's not a clean answer to it," Ms. Frye said. "It will depend on how the employer's programs are constructed."

    Business and advocacy groups engaged in tough but successful negotiations in the current Congress over a measure to ensure parity between mental health and other medical conditions and another bill to expand the Americans with Disabilities Act. Both have become law.

    A similar process may be followed on paid sick days. But—if the most recent developments at the state level on the issue are a guide—the bill is not a slam dunk, even with Sen. Obama in the White House. Democratic Ohio Gov. Ted Strickland, in the face of fierce business community objections, took off the ballot this fall an initiative that would have required Buckeye State employers to provide paid sick days. He pledged support for a federal measure.

    —Crain's Benefits Outlook Online,  November 2008