What to expect after the November election is currently a hot topic of conversation among clients, benefits lawyers and other interested parties. A quick search of the Internet demonstrates that speculation runs high. But for the most part, it is just that - speculation. No one really knows what legislation will be enacted, which regulations will be issued (or revised), what executive orders are yet to be issued (or even, when they are issued, what they will mean). Likewise, no one really knows what the reaction or unintended consequences of all of the changes might be. This article is intended to help our readers navigate the choppy benefits related seas of a new administration.
What we know
The new administration has clearly communicated that it is committed to repealing the Affordable Care Act (or at least large portions of it). On January 20, 2017, the new President issued an executive order with respect to the enforcement of the ACA Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal, Executive Order No. 13765, 82 Fed. Reg. 8351 (January 20, 2017). It orders the respective federal agencies to:
exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.
It is not clear what this means - we will need to wait for further guidance on that. In the meantime, and until further guidance is issued, all requirements of the ACA remain in full force and effect, including mandatory reporting and tax payments.
What we suspect
Although no one can predict exactly how things will change, we can predict that changes will be coming. In addition to stating its intention to repeal the ACA, the new administration has publicly stated its interest in comprehensive tax reform, including lower corporate income tax rates. If both of those goals are accomplished, the loss of revenue from the repeal of the ACA and the lowering of rates will need to be made up for somewhere. Currently, the highest tax subsidies in the tax code are for health care costs and retirement plan contributions. Source: U.S. Office of Management and Budget (OMB), Analytical Perspectives, Budget of the United States Government, Fiscal Year 2017.
President Trump has issued an executive order establishing a regulatory cap on new regulations. The order requires any federal agency proposing a new regulation, must identify at least two existing regulations to be repealed. Executive Order Reducing Regulation and Controlling Regulatory Costs (January 30, 2017). And, some tax reform related benefits proposals have been made over the last few years, which could provide a hint of what is to come, including the Camp Proposal in 2014 (“Tax Reform Act of 2014”) (the “Camp Proposal”), (released February 26, 2014). There are several drafts of proposed legislation aimed at making changes to the Affordable Care Act including the “State Age Rating Flexibility Act of 2017” (released January 4, 2017), the “Plan Verification and Fairness Act of 2017” (released January 4, 2017), the “Preexisting Conditions Protection and Continuous Coverage Protection Act of 2017” (released January 26, 2017), and the “Health Coverage State Flexibility Act of 2017” (released January 26, 2017). So, while we don’t know exactly what is coming, we do expect that there will be changes to the tax treatment for most employee benefit plans and likely other non-tax related changes such as possible delays in the enforcement of or legislation changes to the Department of Labor’s new fiduciary definition that takes effect in April of 2017 (Definition of the Term ‘‘Fiduciary’’; Conflict of Interest Rule—Retirement Investment Advice, 81 C.F.R. 68, 20946 (April 8, 2016).), and legislation allowing open multiple employer pension plans (Interpretive Bulletin Relating to State Savings Programs That Sponsor or Facilitate Plans Covered by the Employee Retirement Income Security Act of 1974, 80 Fed. Reg. 222, 719367 (November 18, 2015).
What employers can do now to prepare
Even though we do not have a crystal ball, we do have some suggestions about how employers can prepare for the expected changes:
Allocate some resources to keeping up with and adapting to the changes – put some time and money in the budget for education, advice and execution;
Sign up for some quality newsletters from benefits organizations, e.g., http://www.benefitslink.com (an aggregator that publishes daily with both a retirement and a health and welfare edition), attend conferences and webinars, etc.
Get involved. There are many ways to get involved and it really does make a difference. For example, following years of input from the benefits community, the IRS just reversed its longstanding hardline position on the use of forfeitures in 401(k) plans (more detail on that to follow in our next monthly newsletter). Here are some suggestions:
Listen to your employees, take surveys, etc. – find out what is important to them;
Communicate changes to your employees as soon as you reasonably can – they may have important decisions to make based on the changes that are coming;
Join and get involved in benefits related trade associations and organizations –they are a good source of information and often also have influence in Washington, DC;
Call, write or email your congresspersons about the issues that matter to your company – let them know your concerns and how you will be impacted;
Pay attention to the websites of congressional committees tasked with writing new legislation;
Join benefits related groups on social media (such as “LinkedIn”);
Submit comments on proposed regulations: all new regulations are required to have a period for public comment – and the regulators charged with drafting and implementing the regulations are required to consider the comments made. (Note - comments are a part of the public record, so make sure yours are professional and well written).
Please feel free to contact our firm for more information about how these changes affect your employee benefits plans.
© Boutwell Fay LLP 2017, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of January 31, 2017.