Senate Health, Education, Labor, and Pensions (HELP) Committee Chair Bill Cassidy (R-LA) announced the release of a white paper (text available here) on his ideas for Congress to overhaul laws governing independent contractor classification and to provide independent contractors greater access to retirement and health benefits. Central to Cassidy’s proposal is adoption of a single unified test across all areas of federal law for determining whether a worker is an employee or an independent contractor. He suggests two options for doing this: (1) adopting the common-law test focused on control; and (2) an approach “similar to” the two-factor test established under President Trump’s January 7, 2021 final rule on “Independent Contractor Status Under the Fair Labor Standards Act.”
Regarding benefits for contractors, Cassidy wants Congress to enact a federal safe harbor allowing companies to provide benefits to independent contractors without the threat of misclassification lawsuits imposing liability. To expand health benefits for contractors, Cassidy wants to amend ERISA to provide that an independent contractor with no employees is eligible to participate in association health plans (AHPs). He also wants to expand Health Reimbursement Arrangements (HRAs) to allow independent contractors to be included in Individual Coverage Health Reimbursement Arrangements (ICHRAs), through which businesses give workers cash to buy health plans on the Affordable Care Act exchanges.
To provide independent contractors access to defined contribution plans, Chairman Cassidy wants to make it easier for them to participate in pooled employer plans (PEPs) and single employment pension (SEP) IRAs. To reduce costs and barriers to PEP creation, Cassidy proposes that Congress revise ERISA to remove fiduciary responsibilities, audit requirements, and nondiscrimination tests for self-directed accounts. Additionally, Cassidy further proposes allowing banks to create escrow or suspension accounts to address irregular income challenges faced by independent contractors. This would involve companies that use independent contractors depositing a portion of an independent worker’s earnings into these accounts throughout the year, with funds transferred to a SEP before tax filing, and any excess moved to regular bank accounts. Cassidy also wants to enable companies and trade associations to set up PEPs and SEPs on behalf of independent workers, automatically enrolling them without requiring contributions, and offering workers’ advice without creating an employment relationship and compromising their independent status.