The Empowerment Of Puzder Means the Empowerment of Senate Republicans

Like EPA administrator pick Scott Pruitt’s relationship with Senate Environment & Public Works Chairman James Inhofe, Donald Trump has chosen for his Labor Secretary another man who hails from the same state as the Senator tasked with overseeing the agency he will helm.

Andy Puzder, who was officially announced as the proposed nominee for Secretary of the Department of Labor last week, will work closely with his fellow Tennessean Lamar Alexander (R-TN), who chairs the Senate Committee on Health, Education, Labor & Pensions. In a statement released by Alexander on December 8th, the Senator called Puzder a “respected Tennessee business leader,” a phrase he repeated after meeting with the proposed Labor nominee on Monday.

Alexander’s December 8th statement also notes that CKE Restaurants, the company Puzder is the Chief Executive of, is moving its headquarters to Nashville, Tennessee. Tennessee is one of nine states that do not have a federal income tax.

Opposition to federal income tax, and many types of government regulation, is a hallmark of Puzder’s more than business-friendly philosophy. Near the beginning of the 2015 session, he testified in front of the Senate Committee on Health, Education, Labor and Pensions at a hearing examining a bill called the Forty Hours is Full Time Act. That bill was reported to the Senate Finance committee, but no report was issued or additional act taken.

Puzder’s testimony came shortly after the grace period for the employer mandate on companies with over 100 employees had expired, and a year before it would come into effect for those with 50-99 employees. The bill would have redefined “full-time” work under the Affordable Care Act as 40 hours or more, where the ACA had defined “full-time” as only thirty hours or more.

Senator Elizabeth Warren (D-MA) encapsulated the criticisms of most of the Democrats by calling that redefinition an example of big corporations asking for corporate welfare and by citing Congressional Budget Office figures which asserted the change in eligibility would cause at least 500,000 and up to 1 million people to lose their coverage, as well as shifting health-care funding from business to government to the tune of $53 million.

Puzder disputed that criticism, repeating multiple times “it’s not about corporate welfare” and asking of the CBO “[when] have they ever estimated anything that’s accurate?”

I’m telling you what’s happening in the world, in the business world,” he said. In response to a question from Senator Bernard Sanders (I-VT), who in calling for a universal system asked the assembled witnesses whether they prefer as businesses not to have to be involved in health care at all, Puzder told the hearing “you’re not helping. I know you think you are, I know you want to, I know the intent was there.”

Puzder’s relationship with the Republican controlled Senate committee will serve him well as he advances his anti-regulation agenda. And while Senator Sanders may use his enhanced national role to highlight some of the policy moving through the committee the bare majority will ultimately carry the day, with the Republican membership ideologically congruent with the National Platform on Labor. That will mean a committee committed to minimum wage as a state or local decision, a push of unions out of exclusivity on government projects (something the platform describes as “a form of peonage to the NLRB) and the advancement of so-called “Right-to-Work” laws.

The Platform asserts too that “both the Department of Labor and National Labor Relations Board have scrapped decades of labor law to implement the agenda of big labor.” Through close collaboration between HELP and a Labor Department helmed by corporate free-marketeers like Andy Puzder, the agenda of the Republican National Platform will be implemented aggressively in an effort to scrap the past eight years of Obama administration policy.

by Marlon J. Ettinger

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Subcommittee on Primary Health and Retirement Security Holds Roundtable on Multiple Employer Plans

A roundtable hosted this afternoon by the Primary Health and Retirement Security subcommittee took testimony from retirement plan experts from the public and private sector on plans known as MEPs(Multiple Employer Plans).

MEPs are retirement plans in which multiple employers participate, but which are maintained as a single plan and run by an independent sponsor. They are touted as effective ways for small businesses to offer retirement benefits to their employees without having to face the often intimidating complexity of administrating a plan themselves.

The subcommittee hearing was prompted by what many characterize as a crisis in retirement planning in the United States. A litany of dire facts were presented throughout the hearing. James Kais, the Senior Vice President and National Retirement Practice Leader for TransAmerica, an Insurance, Investments, and Retirement company, cited a figure finding that 59% of households 55 or older have no retirement money saved.

Senator Tim Scott, R-SC, a member of the subcommittee, told the assembled members that one third of the US does not have a single cent saved for retirement, and that another third are without a year’s salary put aside.

A January 26 fact sheet entitled “Building a 21st Century Retirement System” released by the Obama Administration illustrated further the depth of the problem:

Today, one out of three workers does not have access to a retirement savings plan, including half of workers at firms with fewer than 50 employees and more than three-quarters of part-time workers. In addition, contractors and temporary employees are often unable to participate in employment-based plans. Workers without access to a plan at work rarely save for retirement: fewer than 10 percent of workers without access to a workplace plan contribute to a retirement savings account on their own.”

Included in the Administration’s Fiscal Year 2017 budget were proposals to address many of the obstacles cited in the hearing today.

Mr. Kais identified the three obstacles that small business employers founder on when examining an MEP as cost, complexity, and worries about fiduciary liability.

The liability problem is exacerbated by the current policy in place, known as the “bad apple” rule. Under this provision if one employer member of an MEP violates obligations to the agreement the entire MEP can face severe tax fines.

Jeffrey Stacey, the Senior Manager at McGee, Hearne & Paiz, LLP in Cheyenne, WY testified to the harm the rule posed when his firm sponsored an MEP from 2005 to 2010.

It was our expectation that the plan assets would grow to be large enough so that the revenue sharing we received would cover our expenses,” Mr. Stacey wrote. “We expected that having plan assets of at least $10,000,000 would generate sufficient revenue sharing. That growth did not materialize, and plan assets never exceeded $3,000,000. Our firm experienced losses from beginning to end since the time, document, and audit costs far surpassed the revenue sharing we received.”

At its peak the plan covered around 150 employees through 18 separate employers.  Mr. Stacey went on to testify how one of the biggest issues that turned employers off from being a part of the MEP was fear of the “bad apple” rule. In addition, he detailed how it necessitated a particularly hands-on approach for his firm throughout the process, telling how while most members would pay their commitments in a timely manner, he often had to beg some to pay on time because if they didn’t the entire plan would have collapsed. He warned that such a hands-on approach would prove unwieldy for larger MEPs.

Kent Mason, a partner with the law firm of Davis & Harzman LLP who has worked in retirement savings for the past 34 years, spoke of some of the barriers of entry there are to employers who might want to form an MEP. The Department of Labor requires employers who participate in the plans to share some degree of commonality, known as a “nexus,” if they wish to enter into cooperation. Mr. Mason says this limits the options employers have for entering an MEP, and that this limitation harms employers.

The limited availability of MEPs deprives most small employers of the opportunity to band together in a common plan to achieve many of the economies of scale enjoyed by larger companies.”

This economy of scale was also cited by Michele Varnhagen, the Senior Legislative Representative for AARP in Washington DC. She mentioned the amenability of financial firms to lower the fees they charge for administration of plans, which are charged as percentages of the plans, “but only if an employer or another party negotiates it.”

Mrs. Varnhagen recommends that the Department of Labor and Congress set maximum fees that financial firms can charge.

Mrs. Varnhagen was later questioned by a member of the subcommittee, Elizabeth Warren, D-MA. Mrs. Warren questioned whether or not financial services administering plans wouldn’t be a conflict of interest, asking “if financial services do it, who are they negotiating on behalf of?”

Mrs. Varnhagen called a fiduciary standard the “gold standard” for setting a level of trust. Mr. Mason was emphatic in calling financial services unfit to be independent administrators of the plans.

Financial service companies shouldn’t be setting up plans,” he said. “Take them out of the picture.”

Mrs. Warren questioned too Nicola Favorito, the Deputy Treasurer for Retirement Services in the Commonwealth of Massachusetts, on the open MEP plan that their state is developing for the nonprofit business sector. Nonprofits employ 500,000 people in Massachusetts and account for 17% of its economy. Mr. Favorito testified to the fact that 56% of such businesses with budgets beneath $250,000 do not offer retirement plans.

Asked by Mrs. Warren as to why not, Mr. Favorito replied “they don’t have the resources, and as well as that the complexity is intimidating…[there are] also concerns about fiduciary responsibility.”

Mr. Favorito explained that the plan would be for businesses with a maximum of 20 employees.

When asked by Mrs. Warren if there was anything special about nonprofits benefiting from MEPs that would differentiate them from possible benefits a small business could reap, Mr. Favorito answered “no. [The] same characteristics would apply to any small business that size.”

Mike Enzi, R-WY, the chairman of the subcommittee, asked Mr. Favorito if he saw state level plans like the one he was working on as being able to coexist with private plans.

That chapter remains to be written,” Mr. Favorito responded, then went on to say “I think we can work in tandem.”

Mr. Kais ratified Mr. Favorito, asking only that a level playing field be maintained by the government, and saying that more competition improves services.

He finished by stating “anything improving coverage is good.”

by Marlon J. Ettinger