The Impact of PPACA on Retirement Plans

November 2, 2012 ( – Will the financial effects of health care reform cause employers to rethink spending on retirement plan benefits?

This is a question Sheldon H. Smith, of Counsel to Bryan Cave, contemplates. Smith pointed out to attendees of the American Society of Pension Professionals & Actuaries (ASPPA) Annual Conference that health care is already the biggest benefit cost to employers.   

Smith cited a Willis Group study that found a majority (nearly 56%) of employers who have quantified the cost of compliance with the Patient Protection and Affordable Care Act (PPACA) said costs would increase. More than 15% noted that the cost increase was between 2% and 5%, and more than 15% said the cost increase was more than 5% (see “Reform Driving Up Costs for Employers”). “There’s only so much money to go around, so employers will start to prioritize and start to shift costs [for benefits],” Smith commented.  

After reviewing some of the provisions of the PPACA, Smith noted that employers will not only incur costs for taxes and penalties under the law, but there will be more administrative costs for maintaining records and issuing disclosures.  

In response to already increasing health care costs, employers have been shifting more costs to employees, but the “minimum essential coverage” rules in the PPACA will limit employers’ ability to cost share with employees. Smith contended that the financial impact of health care reform could be severe enough to cause employers to look to reduction of contributions to, or elimination of, retirement plans.