Nonprofit Organization Employee Benefits

“ASAE supports quality, affordable, accessible health care for all Americans. ASAE supports national uniform standards for funding benefits and employee protections. ASAE further believes that association health care plans possess many years of proven experience in the delivery of benefits through purchasing coalitions. As such, association health care plans can lead the way to the reform goals of providing the efficient delivery of quality health care to more citizens.” – ASAE Board Approved Position Statement #6

Overtime Rule The Department of Labor released a proposed rule last summer that would require businesses to pay overtime wages to employees making $50,440 or less per year, which would be a 113 percent increase over the current threshold. In addition, the minimum salary would automatically increase each year to match the 40th percentile of the average salary earned by full-time employees in the United States.

More than 250,000 organizations, including ASAE, submitted comments on the proposed rule to DOL last year. ASAE believes the new rule would adversely affect many nonprofit organizations and other employers with limited revenues and could harm many affected employees as well. To contain payroll costs from increased overtime obligations, employers would have to either lay off employees or exclude reclassified employees from telework and career growth opportunities outside of core business hours, ASAE said in its comments. ASAE also noted that the $50,440 salary threshold amounts to a “one-size-fits-all” measuring stick and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences.

DOL has yet to suggest what changes, if any, might be made to the final rule, but has indicated it may issue a final rule as soon as July 2016. American Associations Day gives our fly-in participants the opportunity to weigh in on this issue with members of Congress who could potentially draft legislation blocking DOL from implementing a final rule. Recently, 108 members of Congress sent a letter to Labor Secretary Tom Perez expressing serious concern with the Administration’s efforts to finalize a new overtime rule this year.

Cadillac Tax An issue of concern to the association community is the Cadillac tax, a 40 percent non-deductible excise tax on high-cost health plans that was set to go into effect in 2018. The omnibus spending bill passed by Congress in December delayed implementation of the tax for two years. Postponing the start of the Cadillac tax from 2018 to 2020 should lessen the incentive for employers to make changes now to their benefit plans and give opponents additional time to repeal the tax altogether. The tax is projected to raise $87 billion over the next ten years.

Under the ACA provision, both fully insured and self-funded employer health plans will be assessed a nonrefundable 40 percent excise tax on the dollar amount of any employee premiums that exceed annual limits of $10,200 for individual coverage and $27,500 for family coverage. While stand-alone dental and vision plans are excluded from the cost limits triggering the tax, the law does include several other costs paid by employers and employees such as contributions to flexible spending accounts or health savings accounts.

Dislike of the Cadillac tax has become pervasive among Republican and Democratic lawmakers alike, as it would likely result in a reduction of benefits for millions of Americans. ASAE filed two sets of comments with the IRS last year, suggesting that employers will look to make changes to their benefit plans to avoid the tax. These changes will reduce benefits and transfer the cost of insurance to employees through increased deductibles, reduced covered services, use of private exchanges, and the reduction or elimination of flexible spending accounts (FSAs), ASAE argued.

President Obama remains in support of the tax in some version. The President’s FY17 budget included a proposal to modify the Cadillac tax to account for regional differences in health care costs.

ASAE is working with a broad coalition to further address this issue in Congress.

Federal Tax Issues for Associations and Members

“ASAE opposes any increased or additional federal income tax burden on associations. ASAE supports the “relatedness test” — continuation of the present system for determining areas of tax-exempt organization activity that are taxable because they are not related to the purposes for which exempt status was granted. Association activities, which benefit not only association members but also the entire United States economy and society, include education, publications, government affairs, conventions, trade shows, standards-setting, credentialing, research, joint marketing, charitable and community service, and other products and services. Any new tax for associations would threaten those activities and might require replacement of the programs by tax-supported government programs..” – ASAE Board Approved Position Statement #5a

Tax Reform Comprehensive tax reform remains a priority for congressional leaders, but it appears that the agenda has been narrowed to a tax extenders package until the 2016 presidential election. In June House Ways and Means Committee Chairman Paul Ryan (R-WI) reiterated his belief that comprehensive tax reform can’t be done until 2017 when there is a new occupant in the White House. Referring to President Obama’s unwillingness to cut individual tax rates, Ryan said, “There is an impasse that is impassable.”

Charitable Deduction An issue within tax reform that ASAE has been working diligently on is protecting the charitable deduction. President Obama’s Fiscal Year 2017 budget proposed a cap on all tax deductions for wealthy taxpayers, including the charitable deduction. President Obama argues this change will only impact taxpayers in the top 3 percent. This is the eighth year that the Obama administration budget has moved to cap the charitable deduction.

ASAE has signed on to multiple letters from the Charitable Giving Coalition to Congress at each step of the tax reform process in order to explain the value of the charitable deduction to society. ASAE will continue to monitor this issue closely.

Permissible Political Activity by Tax-Exempt Organizations

“ASAE opposes expanding the definition of candidate-related political activity by tax-exempt organizations to include candidate forums and issue-related communications sent out close to elections. Recent efforts to restrict political activity by 501(c)(4) social welfare groups would regulate far more speech and advocacy than is warranted and could create a chilling effect on the role nonprofit organizations play in fostering civic engagement and democracy. ASAE also opposes any extension of new restrictions on 501(c)(4) political activity to trade associations and professional societies.” – ASAE Board Approved Position Statement #1

Another issue that may have implications for associations is the IRS’s expected release of new 501(c)(4) political activity rules. Treasury’s first draft of nonprofit political activity rules was released in 2013, but drew intense criticism from groups across the political spectrum. While the earlier rules applied only to 501(c)(4) organizations, IRS Commissioner John Koskinen has confirmed that the agency plans on broadening the new rule to apply to 527 political groups, 501(c)(6) trade associations, labor unions and other tax-exempt organizations.

A key concern for many tax-exempt organizations, including ASAE, will center on how the IRS chooses to define political activity. In the initial rulemaking, the IRS expanded the definition of candidate-related political activity to include activities such as candidate forums or meet-and-greets, voter registration and even legislative alerts sent within 60 days of an election. ASAE said in its comments to the IRS this expanded definition amounted to a clear restriction on speech.

The omnibus spending and tax package passed by Congress in December included a major win for association on this issue. A provision was included that would prohibit the IRS from issuing a final rule governing the political activities of 501(c)(4) nonprofit organizations. This likely ends the IRS’s attempts to restrict nonprofit political activity under the current Administration.

Prior Approval

ASAE is helping to lead a coalition to address the FEC’s prior approval requirement for trade associations. The Prior Approval Reform Coalition is working to achieve legislation to amend the Federal Election Campaign Act to eliminate the requirement that trade associations have prior approval from member companies before soliciting their eligible employees. The coalition believes the requirement is inequitable and restricts First Amendment rights. In addition, ensuring compliance with the regulation is costly and burdensome. The coalition is working to secure a diverse group of Congressional sponsors for this legislation.

Travel and Meetings

“As the association community depends on a viable travel and tourism industry and vice versa, ASAE supports advancing domestic and international travel initiatives that balance the need for homeland security with the business needs of associations. ASAE also acknowledges the particular needs of the meetings industry and understands the importance of sustaining fundamental relationships when negotiating, developing and executing events. – ASAE Board Approved Position Statement #10

Federal Employee Travel to Conferences and Meetings While ASAE has made progress in educating Congress about the value of face-to-face meetings and why government employees need to attend outside conferences for their own professional development purposes and to exchange information with their private sector counterparts, government spending on travel and conferences continues to be a concern for many lawmakers.

Government-wide budget cuts and exorbitant spending on certain internal federal conferences have led government agencies to vastly tighten travel budgets. In response to these issues, the Office of Management and Budget (OMB) and the Administration have taken a number of aggressive steps to cut waste, including requiring all agencies to reduce conference and travel budgets for all agencies to 70 percent of FY 2010 levels and keep those reduced budgets in place through FY 2016. The Administration has also instituted a series of internal controls to tighten the approval process for travel and conference-planning. Current guidance from OMB has helped agencies reduce travel spending by $3 billion compared to FY 2010 levels, but has also dramatically impacted the ability of government employees to attend educational meetings and conferences.

ASAE is working on a letter to OMB with Members of Congress that are willing to speak publically in defense of the value of federal employee attendance at association meetings.

In February, ASAE was part of a group that met with Regina Kearney, a senior advisor with the Office of Federal Financial Management within OMB. Kearney has been with OMB since the 2012 memo was first conceived, and is very much aware of ASAE’s position on the OMB memo and its impact on government attendance at conferences in recent years. ASAE’s most recent meeting with Kearney was encouraging as she shared that OMB is in fact looking at changes to the OMB directive on travel and conference spending. The Administration is looking to potentially change the funding level for federal agencies’ travel and conference spending; reduce the paperwork burden for agencies; and potentially create a pre-approval process for some meetings attended by government employees.

ASAE will continue to monitor this issue closely.

Diversity and Inclusion

“In principle and in practice, ASAE values and seeks diverse and inclusive participation within the field of association management. ASAE promotes involvement and expanded access to leadership opportunity regardless of race, ethnicity, gender, religion, age, sexual orientation, nationality, disability, appearance, geographic location, or professional level.” – ASAE Diversity and Inclusion Statement

State Religious Freedom Protection Laws Last year Indiana Governor Mike Pence signed legislation that many viewed would allow businesses to discriminate against individuals based on sexual orientation. In a letter to Governor Pence ASAE pushed for clarifying language and a clear anti-discrimination carve out in the legislation. In April Governor Pence signed a measure stating that the Religious Freedom Restoration Act does not authorize businesses or individuals to refuse to offer or provide services, facilities, goods or public accommodations to any member of the public based on sexual orientation or gender identity, in addition to race, color, religion, ancestry, age, national origin, disability, sex or military service.

ASAE is committed to diversity and inclusion practices in all of our meetings and events. Laws that permit discrimination are not only regressive, they put ASAE members at risk of being denied service anywhere from restaurants to meetings and convention facilities, and it sends a harmful message that fairness, equality, and the principles of our Constitution are secondary to personal prejudice.

State and Local Association Issues — Washington, DC

Paid Leave ASAE testified before the DC Council Feb. 11 on the District of Columbia’s newly-revised plan to establish a paid family and medical leave benefit for private sector employees in the city.

The latest hearing – the third such hearing on the District’s proposed Universal Paid Leave Act – provided stakeholders an opportunity to comment on a new discussion draft released Feb. 9 by DC Council Chairman Phil Mendelson. Though modestly scaled back from the original plan, the bill still raises serious concerns for ASAE and other District-based associations.

The draft legislation would now allow DC employees to take up to 12 weeks of paid leave for a qualifying event, but that is still twice as generous as three other states with a paid-leave program – California, New Jersey and Rhode Island. The participant pool in the new discussion draft has been narrowed to include only private sector employees working in the District. District residents who work outside the city, Federal employees and District government employees are excluded.

The new draft also requires District employees to exhaust their accrued paid leave under the existing District Accrued Sick and Safe Leave Act first before they can access the new universal paid leave benefits. In addition, the new draft drops the prior proposal to expand DC FMLA coverage to employees who have worked only six months for their employer, rather than the current twelve month eligibility threshold. Despite these changes, District employers still have serious concerns about the plan, including the proposed third-party administrator for the paid leave benefit and how that would mesh with their own employer-administered leave policies.

Above all, there remain serious questions about the cost of District’s paid leave plan. The funding mechanism for the paid leave benefit – a 1 percent tax on District employers – remains unchanged in the new draft. DC’s own chief financial officer Jeffrey Dewitt has warned the Council that the expected cost of the benefit would likely exceed anticipated revenue from the employer tax. Importantly, there was no cost analysis of the revised legislation available in time for the Feb. 11 hearing.

Chairman Mendelson has said that there could be changes made to the latest version of the bill and possibly additional hearings as well, and ASAE will be closely watching any developments on this issue.