Any change in rules or regulations invites uncertainty and skepticism, and the transition to the new Trump administration is no different. President Trump and his cabinet have promised an overhaul of the system and often relied on their controversial rhetoric to drive these intentions forward.
High Ridge Insurance Services understands the forthcoming apprehension in regards to the employee benefits industry. Here we discuss some of the expected changes to better understand how this will impact your business and clients.
Changes to the ACA & Healthcare
One of Trump’s consistent messages throughout his campaign was the promise to repeal “Obamacare,” a.k.a the Affordable Care Act (ACA). Republicans have been attempting to move swiftly to repeal or partially repeal the ACA, but are finding contention within their own party as to how much or what parts of ACA should remain. The following is some of the specific provisions that have been suggested by Republicans:
- Partial repeal of individual & employer mandates
- Changes to Medicare & Medicaid
- New policies aimed at expanding coverage while lowering health care costs.
Trump himself has proposed these changes:
- Scrapping the Exchanges (organizations established to help sign up for ACA)
- Creating tax-free HSAs for those with high deductible health plans (HDHPs)
- Creating state-based, high-risk pools for people with certain medical conditions facing potential difficulty in obtaining coverage.
- Allow insurance companies to sell across state lines
- Repeal the ‘Cadillac tax’ and the individual mandate
Women’s health care issues are also on the table, as preventative care (i.e., access to free birth control methods, etc.) were mandated through the ACA.
The coming weeks will hopefully provide clearer answers in terms of the ACA reform.
Under the Trump’s proposal, maternity leave would secure 6 weeks of guaranteed, paid leave to mothers postpartum. This is only applicable for mothers whose employers do not already offer maternity leave. Additionally, no paternity leave is offered, nor leave for adoptive/foster parents. It is unclear whether single mothers will qualify for this coverage.
Opponents argue that 6 weeks of leave for new mothers is inadequate and that no leave for fathers or adoptive/foster parents is unfair as well. Additionally, his proposed plans did not include sick leave and the reform for unemployment insurance may result in an underfunding of the program.
Rarely do we see bipartisan support on any issue, and paid family leave is no different. Democrats and Republicans approach the topic very differently; however, even the Republican party as a whole does not fully support Trump’s proposed plan. This means any legislation regarding paid leave will likely involve further policy discussion and revision.
Childcare and Elder Assistance Care Programs
In his campaign platform, Trump proposed allowing deductions for child care expenses from people’s income taxes. This would include parents, legal guardians, adoptive and foster parents, and would also cover a stay-at-home parent, relative, or the cost of a nanny or daycare. Deductions for elder care expenses would also be allowed from income taxes but with a cap of $5,000.
The specifics of his proposal detail income tax deductions for individuals with an annual income of less than $250,000 or a couple’s annual income less than $500,000. Deductions will be based on the average care cost for the taxpayer’s home state with up to four children allowed to be claimed.
Further, Trump proposed a child care rebate in the form of an expanded earned income tax credit (EITC). Under the proposal, lower-income taxpayers would receive a credit worth half of the lower-earning parent’s payroll taxes, with an income limitation of $31,200/year.
Trump’s proposal also suggests a dependent care savings account (DCSA) that is separate and complementary to dependent care flexible spending accounts currently available in the benefits industry. However, these DCSAs will not require parents to enroll through their employer.
Child care dependent savings accounts can be used for tuition or extra-curricular enrichment activities and are available until the dependent reaches age 18. After, the funds can be used towards higher education.
Elder care dependent savings accounts are designated for expenses including adult day care, in-home care, or long-term care.
Trump’s proposal affords incentives for employers to offer on-site child care for their employees.
Further tax reductions, plus the ability to share resources for providing communal child care services are among the incentives suggested.
So far, the logistics of funding for these programs have not been released or outlined for the public, but changes do seem imminent as Trump seems determined to reform the healthcare and benefits system specifically regarding more affordable child and elder care for parents and caretakers.
I-9 Forms & E-Verify for Employers
Trump’s immigration stance and recent actions on immigration could impact all employers across the United States. One of the first changes that may occur is mandating that all employers use the E-Verify system to confirm an individual’s eligibility to work in the United States. At present, it is optional for employers to use E-Verify.
This internet-based system uses information from an employee’s I-9 form plus data from the Department of Homeland Security (DHS) and the Social Security Administration (SSA) to corroborate an individual’s eligibility for employment.
Though Congress will need to approve this mandate, Trump’s team has stated that a draft of the bill is in the works.
The Department of Labor (DOL)’s new overtime rule was set to take effect on Dec. 1, 2016, until a Texas federal judge issued a preliminary injunction to block it. This overtime rule would have raised the threshold for overtime exemptions from $23,660 to $47,476 per year.
The DOL is in the process of making an expedited appeal for the injunction. However, as most of us know, dealing with the courts is a drawn-out process and Trump may even attempt to block or have the DOL withdraw its appeal.
Though no detailed plan has been released, Trump said Social Security would remain untouched as far as cutting any benefits or increasing payroll taxes. Furthermore, there was mention of broadening the use of health savings accounts (HSAs) but again, details have yet to be released.
The following is a list of other retirement benefits that may be affected during President Trump’s term.
Fiduciary Rule – As of April 2016, the DOL adjusted their definition of who is a ‘fiduciary’ when offering investment advice regarding retirement plans. This also affects individual retirement accounts (IRAs) and HSAs, and is set to take effect on April 10, 2017, with other provisions going into effect on January 1, 2018.
Tax Exclusions – Much of Congress is dissatisfied with the current tax exclusions, with the sentiment that these exclusions on group health plans and retirement plan contributions are helping increase the national budget deficit.
Retirement Enhancement and Savings Act (RESA) – The Senate Finance Committee voted unanimously in support of RESA in September of 2016. Among other things, this bill would allow unrelated employers (e.g., groups of small businesses) to enter together into a ‘pooled employer plan’ (PEPs) for a retirement plan. Currently, employers are limited by regulations for multiple employer plans (MEPs).
Multiemployer Pensions – House members have been discussing ways to revamp the multiemployer pension system with new legislation. Composite plans designed to serve as a traditional pension could replace failed plans. The caveat here is that the possibility exists that the payouts would decrease if the plan becomes underfunded.
Retirement Security Preservation Act (RSPA) – This bill was introduced to amend the current nondiscrimination rules for defined benefit pension plans and also to rectify problems caused by the original IRS Tax Code of 1986. The Senate Finance Committee and the House Ways and Means Committee have yet to move forward with this.
With so much policy change on the radar, it can be overwhelming to keep up with the newest rulings. High Ridge Insurance Services ensures you will be kept apprised of the latest rules and legislation concerning employee benefits. For more information, explore our website or reach out to us directly by visiting our contact page.