Administration to Delay New Benefits Rules : Plan Under Fire for Paper Work Required

Rather than support outright repeal of a controversial law affecting the health benefits of millions of workers, the Bush Administration will put off implementing the measure while it works with Congress on needed changes, Treasury Secretary Nicholas F. Brady announced Monday.

The decision to delay the new health and life insurance regulations until Oct. 1 to permit revisions represents the Administration’s alternative to a drive in Congress for outright repeal of the law.

The law, which has generated an avalanche of protests from small business owners, requires every firm that offers fringe benefits to demonstrate through a series of complex tests that its health and life insurance plans do not exclude or discriminate against lower-paid workers.

The law was intended to spur companies to make health benefits more widely available to the estimated 35 million people who are not covered by insurance.

The regulations carrying out the law were to take effect on Jan. 1, but the Internal Revenue Service announced early this year that it would delay putting them into effect until July 1.

Brady’s announcement now suggests that the law--which would have imposed an immense paper work burden on millions of U.S. companies--will never actually be carried out.

Intense Lobbying Effort

The provision, Section 89 of the 1986 tax reform act, has been the focus of an intense lobbying effort by business groups up in arms over its costly and complex requirements. Most groups had been trying to persuade Congress to repeal the law entirely, and Rep. John J. LaFalce (D-N.Y.) had gathered support from more than half the members of the House to do just that.

“The cost of compliance with Section 89, as it presently stands, is excessive,” Brady told an appreciative audience at the annual meeting of the U.S. Chamber of Commerce. “The law needs to be changed, and we stand ready to encourage, support and work with Congress to revise and improve it.”

Although the Chamber had been at the forefront of the repeal effort, Brady’s announcement that the Administration would seek to rewrite the law instead appeared to satisfy most of those attending the meeting.

The Administration has fallen in line behind the efforts of House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) to modify the law without eliminating it entirely.

$10 to $25 a Week

Under Rostenkowski’s proposal, firms no longer would have to figure out exactly what health insurance coverage each of their employees is actually receiving to determine whether they are in compliance with the law.

The new proposal would require companies to make available a health insurance program in which the contribution of employees would be no more than $10 a week for single coverage and $25 a week for a family. The cost to companies is usually much more than that. Under the new proposal, part-time employees who work more than 25 hours a week would have to be covered. The current law would cover employees who work more than 17 hours a week.

The plan would also limit the amount of fringe benefits highly paid employees could receive on a tax-free basis.