Binders Urged to be Aware of Legislation Affecting the Industry
The Binding Edge
Discussions on ways to aid the ailing United States Postal Service have ranged from the cessation of Saturday delivery service to significant changes in the prefunded retirement account for postal employees.
At the Binding Industries Association Annual Conference, Jim Kyger, assistant vice president of human relations, Printing Industries of America, presented a legislative update. Among the topics addressed were patent litigation reform, the Affordable Care Act and the impact of the upcoming 2014 elections as key Senate and House of Republican seats are in play.
Of particular interest to anyone involved in the printing industry was a discussion about the impact of pending postal industry reform. Discussions on ways to aid the ailing United States Postal Service have ranged from the cessation of Saturday delivery service to significant changes in the prefunded retirement account for postal employees. The 112th Congress left Washington, D.C. without taking action, leaving the 113th Congress to find a compromise.
Kyger urged conference attendees to monitor the proposed legislation in all categories closely. The Binding Edge has provided this update as a summary.
2014 midterm elections
The 2014 midterm elections will have an impact on future legislation. In the House, there have been 21 retirements to date, of which 10 are Democrats and 11 Republicans. In the Senate, 36 seats are up for election – 33 as a result of the regular six-year cycle and three due to special elections. While the general prediction is that the House will remain in Republican control, the Senate is a much closer race, with a predicted margin of only two or three seats determining party control.
Patent trolls have become a significant issue for US companies. Generally, patent trolls seek damages against a company for purported infringements against a patent. These may or may not be legitimate claims. According to the legislation update provided by Kyger, the number of defendants sued by patent trolls has quadrupled since 2005. In 2012, trolls sued more non-technology (end user) companies than technology companies, affecting more than 7,000 companies or individuals, and it’s estimated that troll activity cost the US economy more than $80 billion in 2011.
PIA’s Michael Makin has testified before the Senate Judiciary Committee regarding patent troll abuse and its damaging effect on the printing and graphic communication industry. Potential legislative solutions address bad faith demand letters, litigation and fee-shifting reforms to remove financial incentives for trolls, more transparent patent ownership and education outreach to smaller businesses that often are a target.
Affordable Care Act
Highly divisive, the Affordable Care Act (ACA) contains positive actions, including extending coverage for dependents and covering pre-existing conditions, while also including the individual mandate, employer mandate and taxes or fees for non-compliance. Uncertainty about the ACA has driven responses from the health insurance market, medical practitioners and patients that have complicated implementation.
Implementation delays have included stays that allow individuals and companies with 50-99 employees to keep existing health plans. The minimum “essential coverage” guidelines do not apply in most cases. The employer mandate has been delayed twice for companies with 50-99 employees and now is scheduled to take effect in 2015. Larger companies (those with 100+ employees) can avoid fines if 70 percent of employees are eligible for coverage in 2015. In 2016, the compliance level increases to 95 percent, which was the level established in the original law.
Other changes include simplified employer health care coverage reporting rules to the IRS, and a one-year delay on the rule prohibiting employers from providing better health benefits to top executives than to other employees.
The Tax Reform Act of 2014 was introduced on Feb. 26. It is revenue- and distribution-neutral, covering both corporate and individual payers. Pluses and minuses for manufacturers include a top corporate tax rate of 25 percent, phased in over five years; a top tax rate of 25 percent for S Corporations’ domestic manufacturing income; a modified, permanent R&D tax credit; and a repeal of the corporate AMT.
Of major concern to the printing industry is a proposed Ad Tax. This would cut the advertising deduction by 50 percent in year one, with the remainder amortized over several years. As a small business concession, companies could expense the first $1 million of advertising, provided the total advertising budget does not exceed $2 million. This proposed legislation would have significant impact on all members of the printing and graphic communications industry. Kyger recommended that attendees learn more by visiting www.nam.org and exploring the Issues: Tax and Corporate Finance area.
Despite finding common ground on the need for postal reform, Congress has yet to pass any legislation. Negotiations have been taking place for three years, but separate plans in both chambers have significant differences on how to fix the US Postal Service. Lawmakers from both parties say they are committed to finding a compromise, but roadblocks continue to hinder efforts to stabilize the ailing agency, which reported a $5 billion loss last year.
The Senate, after long negotiations, passed a postal bill in 2012, but the House bill never left committee, effectively killing any hope of compromise in 112th Congress. The Senate version would have refunded to USPS overpayments made to the federal pension fund, created a separate health insurance program for postal employees and allowed the agency to offer buyouts to 100,000 retirement-eligible employees. The House Oversight and Government Reform Committee proposed deferring near-term payments on retiree health care benefits, allowing the agency to move to a five-day delivery week and creating an independent board to recommend facility closures.
Efforts have been revived in the 113th Congress and reform has been listed as a priority in the Obama administration’s 2015 budget. Most notably, ending Saturday delivery is one of the reforms with widespread, bipartisan support. Not only is it listed in the President’s budget, but also in the House bill currently in committee, as well as the bill a Senate committee passed by a vote of 9 to 1 in February. The postal service already has a plan in place to phase out Saturday delivery as part of a comprehensive overhaul – once Congress passes its legislation.
Since the BIA Annual Conference updates provided by the PIA, additional moves have been made. In April, Brian Deese, deputy director of the White House Office of Management and Budget, testified before the House Committee on Oversight and Government Reform. The President’s plan and the plan before the Oversight committee are similar in wanting to end Saturday letter delivery and stretch the prefunding of the postal service’s future retiree healthcare benefits out over a much longer period.
In early May, Rep. Darrell Issa, R-CA, the committee’s chairman, postponed the scheduled mark-up session for the committee’s revised postal reform bill. Congressional aides told The Washington Post that Issa hoped a bill that more closely aligns with the White House plan would attract more support from Democrats.
In a letter announcing the postponement, Issa said, “At the committee’s April 8, 2014, hearing, when the Office of Management and Budget testified in support of President Obama’s plan, I indicated a willingness to move forward with that plan as a compromise effort. This new proposal contains some provisions I do not support, but it is a compromise I could accept to help us enact necessary bipartisan reforms to save the Postal Service. These include a transition to five-day mail delivery that has been included in bipartisan Senate legislation.”
Issa said his staff had consulted with Democratic committee staff about a proposal that would have implemented a majority of the President’s reforms. “The most significant of these changes would have been to require the Postal Service to continue to deliver packages on Saturday for at least five years and to mandate that there could never be more than two consecutive days without mail delivery as a result of the change to a five-day delivery schedule,” the letter continued. “In response to concerns offered by Democratic committee staff, however, I subsequently revised the proposal to eliminate any variations at all with the President’s budget.”
Issa intended to review the revised language during the mark-up session, but “neither during the April 8, 2014, hearing nor since, however, have I received an indication that any Democratic members of the Committee would support the president’s proposal.”
Postal unions say moving to a five-day delivery schedule would cut USPS jobs and provide further encouragement for USPS customers to find mail delivery alternatives. Postmaster General Patrick Donahoe and other USPS officials have repeatedly asked Congress to give the Postal Service authority to move to five-day mail delivery while maintaining package delivery on Saturdays.
Calling the USPS “an essential supply chain partner for the printing and graphic communications industry”, PIA has not opposed a move to five-day delivery, but has expressed concerns about the budgetary commitments of the USPS retirement plan, as well as the suggestion of further increases in postal rates.