Full Plate: This Year's Legislative Outlook

With the massive health care legislation inching toward completion, the government will soon have a window of opportunity to focus on other issues of importance to the supermarket industry. We are expecting another big year particularly since this is an election year that will result in legislation that has a big impact on retailers and wholesalers, said Tom Wenning, executive vice president, National

With the massive health care legislation inching toward completion, the government will soon have a window of opportunity to focus on other issues of importance to the supermarket industry.

“We are expecting another big year — particularly since this is an election year — that will result in legislation that has a big impact on retailers and wholesalers,” said Tom Wenning, executive vice president, National Grocers Association, Arlington, Va.

With the 2010 congressional elections looming, NGA and Food Marketing Institute, also based in Arlington, are expecting a compressed agenda of legislative action that will consolidate activity into the first half of the year before the final stretch of the campaign season.

“Democrats control the Congress and they control the agenda, so while it could be compressed, we could see things continue to move on the fast track, like we saw in 2009,” Wenning told SN last week.

With 60 seats in the Senate and 256 of the 435 House seats, plus control of the White House, Democrats are expected to continue to be able to push through a range of legislation, much of which may be of concern to the food-retailing industry. These include labor-related initiatives, tax issues and some aspects of the health care overhaul.

Retailers are also looking forward to the passage of some legislation, such as a food-safety bill that expands the capabilities of the Food and Drug Administration, some relief on pension funding, and a long-awaited measure to regulate credit-card interchange fees.

The health care bill is expected to go into conference to reconcile House and Senate versions soon after the Senate returns this week, and retailers — particularly independents — will be keeping a wary eye out for any employer mandates that are included, as well as the potential new tax on high-income individuals to fund the reform.

The House version, H.R. 3962, dubbed The Affordable Health Care for America Act, proposes requiring employers to cover at least 72% of the health insurance costs for individual workers, or 65% for their families, or pay an 8% payroll penalty, Wenning explained.

Jennifer Hatcher, group vice president, government relations, FMI, said other aspects of the legislation that supermarket operators are concerned about include the waiting period before employers must begin to provide health insurance coverage for new hires; a provision for covering seasonal workers; a menu labeling component; and the ability for customers to buy OTC medications using medical flexible-spending accounts.

The House has proposed requiring employers to provide medical coverage immediately upon hiring full-time workers.

“It may be OK for IBM to start coverage on day one, but unfortunately, in the supermarket industry, we don't always have 100% attendance on day two,” Hatcher noted. “You could spend that first week literally signing up and removing health care coverage at a cost to associates that are long-term employees that deserve good coverage.”

The Senate version of the health care reform legislation proposes a 60-day waiting period before employers must offer insurance to new hires.

Similarly, FMI is keeping tabs on provisions that would mandate insurance coverage for temporary, seasonal workers. Proposed language calls for providing coverage for seasonal workers based on the number of hours they work in a week, while FMI is seeking instead to have such workers defined by the number of hours they work in a quarter.

“In many areas, supermarkets have a need for seasonal workers who are either college students or perhaps from overseas, or maybe teachers who are off from the school year, and we need a different definition in place to recognize those workers,” Hatcher explained. “If we have employees who want to work full time during the week of Christmas, we want to be able to let them do that.”

The menu-labeling provisions of the health care legislation also concern retailers, she said, because of wording that is more favorable to restaurants.

“It needs to be thought out some more in the way it applies to supermarkets, in areas like cakes in the bakery and sliced turkey in the deli,” Hatcher said. “There is just some tweaking that needs to be accomplished.”

Another area of concern in the health legislation is the elimination of OTC products from eligibility for coverage by flexible spending accounts. Retailers only recently had begun to synchronize with a new database that includes some 30,000 products, and now face the possibility that those products no longer will be covered.

“We had to put this elaborate matching system in place, which took a lot of time and resources, and it is unfair for Congress to just abolish it, which is what they are doing [with health care reform],” Hatcher said. “You can't just tell someone to make this huge investment, and then, ‘poof,’ say, ‘We don't want you to do this any more.’”

While all those aspects of health care reform impact independents as well as large chains and wholesalers, the tax provisions in the health care bill are of particular concern to independents.

The House bill proposes a tax on personal income over $1 million per year, while the Senate proposes funding the bill with a combination of both taxes and fees, including a 40% tax on employer-provided health plans that cost more than $8,500 for individuals and $23,000 for families. The latter is opposed by organized labor, reports said, but some combination of the two proposals could end up in the final legislation.

Because many independent supermarket owners choose to file their tax returns as individuals, they could end up paying more to cover their employees and then paying more in taxes besides, FMI and NGA pointed out.

Hatcher said it has been difficult to influence the legislation thus far.

“The unfortunate thing is, this process hasn't been conducive to revising,” she explained. “People have been so focused on the big picture, in terms of the price tag, or will there be a public option, or will it cover abortion, but there are a whole lot of little issues that are going to affect people that really haven't been focused on. Those are the areas we are really going to try to highlight and see if we can get changed.”

LABOR LAWS

The Employee Free Choice Act also appears poised to make a comeback, the associations said. The gist of this proposal, which has been around for a few years but appeared to be inching toward passage in 2009, seeks to allow workers to form unions by simply signing cards, rather than through a secret ballot. Retailers and other businesses oppose this “card check” aspect of the proposal, as well as other elements of the legislation, such as sending employers and workers into third-party arbitration when they cannot reach an agreement and imposing harsher penalties on employers for violations of the organizing process.

“There is no doubt that organized labor's agenda was delayed by the financial crisis and the prolonged consideration of health care reform,” said Wenning of NGA. “Once health care reform is off the table, they will continue to pursue the EFCA in some form. They will give up on the secret ballot, but will press for such quick elections that it won't give employers much time to counter organized labor's promises and fight for mandatory arbitration once an election takes place.”

Neil Golub, chief executive officer of Price Chopper Supermarkets, Schenectady, N.Y., who is leading FMI member opposition to EFCA, said he expects labor and Democrats to push the legislation aggressively this year.

“The bill hasn't lost its energy,” he told SN. “It will still be organized labor's No. 1 objective in Congress this year.”

In addition to EFCA, Wenning said NGA is also concerned about the re-nomination of Craig Becker to serve on the National Labor Relations Board. Becker, an associate general counsel for the Service Employees International Union and staff counsel for the AFL-CIO, was nominated to serve on the board by the White House last year, although opposition from Sen. John McCain, R-Ariz., put a “hold” on his confirmation.

“His opinions and writings lead one to believe he would push many of the things organized labor is trying to push through legislation through regulatory policy at the NLRB,” Wenning said. “We've strongly opposed that nomination.”

It will be up to Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, as to when the nomination comes up again for confirmation. That committee is one of two that have been handling the health care reform legislation.

One aspect of labor-related legislation favored by retailers is pension relief. Last fall Reps. Earl Pomeroy, D-N.D., and Pat Tiberi, R-Ohio, introduced legislation that would allow companies more time to meet funding benchmarks for their pensions, and both FMI and NGA are hopeful for action on the measure this year.

“It is an issue that needs to be addressed,” said Wenning. “Especially in this economy, companies cannot continue to fund the pension liabilities that other companies leave when they go bankrupt.”

INTERCHANGE FEES

Pushing for regulation of credit-card interchange fees also remains high on retailers' agenda in 2010.

“We feel like this the best opportunity we've had yet for relief,” said Hatcher of FMI, noting that Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, said he plans to introduce legislation on interchange this year despite his impending retirement. “He will be the chairman for the next year, and we will certainly pursue all avenues full speed ahead on interchange. This is a big deal.”

A handful of proposals for regulating these fees has been introduced, including one from Rep. John Conyers, D-Mich., chairman of the House Judiciary Committee.

“Honestly, we don't agree with him a whole lot of the time, but we sure do on this one,” Hatcher noted. “We had a solid number of Republicans supporting his bill [H.R. 2695, the Credit Card Fair Fee Act] in the last markup.”

Other legislation includes S. 1212, led by Senate Majority Whip Richard Durbin, D-Ill., which would require banks to negotiate with merchants over interchange fees, and the Credit Card Interchange Act (H.R. 2382), sponsored by Rep. Peter Welch, D-Vt., which would give the Federal Trade Commission power to prohibit interchange fees.

As reported in the Nov. 30, 2009, issue of SN, a recent report by the U.S. General Accounting Office noted that interchange legislation could be difficult to implement.

“The whole issue is difficult, and the main reason is that we have the banking behemoths against us,” said Hatcher. “The reason they are against us is they are making $60 billion a year off of it, and they are using our money against us, in advertising, in paid research studies. … They will go to all lengths. The good news is we are on the right side of this issue, and we have a lot of feet on the ground working on this, and a lot of voices.”

TAX REFORM

As reported in the Jan. 4 issue of SN, the estate tax has lapsed in 2010, but is expected to be restored soon. Retailers will push for the tax, which is levied on inheritances, to be reduced to 35% before it automatically reverts to 55% in 2011.

“It has not been disclosed yet whether that will be addressed separately or if Democratic leadership will enclose it as part of some reconciliation or budgetary action in the early part of this next session,” Wenning said. “The political effects of this will be of major concern to NGA and other family-owned businesses in this election-year session.”

Retailers are also keeping an eye on other tax-related issues, including the possibility a major tax-code overhaul that could include the elimination of the LIFO (last in, first out) accounting method used by many retailers.

“To have to change that overnight would be unbelievably expensive,” said Hatcher.

She said the overall cost for all companies has been estimated at about $60 billion, and “we know it would be in the hundreds of millions of dollars for supermarkets.”

“That could have an impact on jobs, if businesses who are trying to turn things around on the economic side get slapped with that,” Hatcher explained.

Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, has included LIFO repeal in his blueprint for tax reform, although such legislation has not yet been introduced.

Wenning said the potential impact of things like the estate tax and overall tax reform, along with the potential labor costs, has some retailers on edge.

“It's the uncertainty of it all,” he said. “Between health care, the regulatory environment, labor coming back and asking for a higher minimum wage increase eventually down the road, I think employers will be reluctant to increase their employment until sales start to pick up. You can understand why there hasn't been growth in employment.”

OTHER ISSUES

Retailers are confident that food-safety legislation will pass in 2010, and are largely supportive of the House and Senate bills, which would expand the capabilities of the FDA.

The FDA Food Safety Modernization Act was reported by the Senate Committee on Health, Education, Labor and Pensions last year and is expected to pass the Senate in 2010 and be reconciled with a House version, which passed earlier last year.

“Our concern is that it is based on sound science, and that it would enable the industry to implement any requirements in a timely fashion,” Wenning noted.

The bill focuses on expanding the Food and Drug Administration's authority in four key areas: foodborne illness prevention; foodborne illness detection and response; food defense capabilities; and overall resources.

Other issues include WIC (Women, Infants and Children) benefits reauthorization, which is anticipated in early spring.

Hatcher said some proposed changes include expanding the benefit to additional products.

“That would increase the number of products that are eligible from 500 to roughly 12,000 overnight,” she said. “It's good for people, and it's good for the industry. The challenge is to make sure it works smoothly on an operations level. What we are looking for in the reauthorization is more standardization, more electronification and standard operating rules.”

Overall, she said FMI believes WIC reauthorization “will be a positive thing,” and noted that FMI has a team of members and staffers working closely with the U.S. Department of Agriculture on the effort.