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2016 ACA (mis)Management: What Everyone's Learned & The
Game Plan for 2017Larry Grudzien
Attorney at Law
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• Three Proposals
Trump Proposals During the Campaign
House GOP Proposals
Price Proposal
• Possible changes
Health Care Reform
Other Welfare Benefits
Individual Income Tax
Retirement Income
Executive Rewards
Worker Protections
• Employer Next Steps
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Agenda
Three Proposals
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Key Finding of Trump’s Proposals:
• His plan would significantly reduce income taxes and corporate taxes, and eliminate the estate tax.
• His plan would reduce federal revenue by between $4.4 trillion and $5.9 trillion on a static basis. The amount depends on the nature of a key business policy provision.
• His plan would also significantly reduce marginal rates and the cost of capital, which would lead to higher long-run levels of GDP, wages, and full-time equivalent jobs.
• After accounting for the larger economy and the broader tax base, His plan would reduce revenues by between $2.6 trillion and $3.9 trillion after accounting for the larger economy, depending on the nature of a key policy provision.
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Tax
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Key findings:
• The plan reduces revenue by substantially less than his plan proposed by Trump last year, on both a static and dynamic basis.
• On a static basis, the plan would lead to at least 0.8 percent higher after-tax income for all taxpayer quintiles.
• The plan would lead to at least 10.2 percent higher incomes for the top 1 percent of taxpayers or as much as 16.0 percent higher, depending on the nature of a key business policy provision.
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Tax
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Individual Tax:
• Consolidates the current seven tax brackets into three, with rates on ordinary income of 12 percent, 25 percent, and 33 percent
• Adapts the current rates for qualified capital gains and dividends to the new brackets
• Eliminates the head of household filing status
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Tax
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Tax
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Individual:
• Eliminates the Net Investment Income Tax
• Increases the standard deduction from $6,300 to $15,000 for singles and from $12,600 to $30,000 for married couples filing jointly
• Eliminates the personal exemption and introduces other childcare-related tax provisions
• Makes childcare costs deductible from adjusted gross income for most Americans (above-the-line), up to the average cost of care in their state. The deduction would be phased out for individuals earning more than $250,000 or couples earning more than $500,000.
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Tax
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Individual:
• Offers credits (“spending rebates”) of up to $1,200 a year for childcare expenses to lower-income families, through the earned income tax credit
• Creates new saving accounts for care for children or elderly parents, or school tuitions, and offers a 50 percent match of contributions (not modeled)
• Caps itemized deductions at $100,000 for single filers and $200,000 for married couples filing jointly
• Taxes carried interest as ordinary income
• Eliminates the individual alternative minimum tax
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Tax
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Business:
• Reduces the corporate income tax rate from 35 percent to 15 percent
• Eliminates the corporate alternative minimum tax
• Allows firms engaged in manufacturing in the U.S. to choose between the full expensing of capital investment and the deductibility of interest paid
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Tax
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Business:
• Eliminates the domestic production activities deduction (section 199) and all other business credits, except for the research and development credit
• Enacts a deemed repatriation of currently deferred foreign profits, at a tax rate of 10 percent
• Increases the cap for the tax credit for employer-provided day care under Sec. 205 of the Economic Growth and Tax Relief Reconciliation Act of 2001 from $150,000 to $500,000 and reduces its recapture period from 10 years to 5
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Tax
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• Repeal the ACA. President-elect Trump has vowed to completely repeal the ACA as his first order of Presidential business
• Allow health insurance to be purchased across state lines
• Allow individuals to fully deduct health insurance premium payments from their tax returns
• Allow individuals to use health savings accounts (HSAs) in a more robust way than regulation currently allows. President-elect Trump’s proposal specifically mentions allowing HSAs to be part of an individual’s estate and allowing HSA funds to be spent by any member of the account owner’s family.
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Benefits
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• Require price transparency from all healthcare providers
• Block-grant Medicaid to the states. This would remove federal provisions on how Medicaid dollars can and should be spent by the states.
• Remove barriers to entry into the free market for the pharmaceutical industry. This includes allowing American consumers access to imported drugs.
• Postponement or elimination of the recently issued Department of Labor fiduciary regulations
• Loosening of executive compensation rules
• Further cutbacks in IRS guidance and audit activity
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Benefits
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Increased hostility to consideration of noneconomic factors in selecting retirement plan investments
Increased activity at the state level, including establishment of state-sponsored retirement plans for private employers
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Benefits
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• A hiring freeze on all federal employees, to reduce federal workforce through attrition (exempting military, public safety, and public health)
• A requirement that for every new federal regulation, two existing regulations must be eliminated
• Cancel every “unconstitutional” executive action, memorandum and order issued by President Obama
• Affordable Childcare and Eldercare Act
• Executive Compensation
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Trump’s Other Proposals
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• Expands flexibility of HSAs
• Prohibits pre-existing condition exclusions
• Requires standard premium rates of individuals with continuous prior coverage, regardless of applicant’s medical conditions
• Provided one-time open enrollment
• Allows dependents up to age 26 to stay on their parent’s plan
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House GOP Plan
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• Bars the practice of imposing lifetime coverage limits on individuals
• Bans coverage rescission and cancellations, except in certain circumstance
• Provide monthly refundable tax credit to purchase coverage
• Caps employee’s annual income tax exclusion at a level that would ensure continued job coverage
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House GOP Plan
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• Makes it easier for states to enter in interstate compacts for pooling
• Allows people to purchase a plan licensed in another state
• Changes current federal Medicaid funding
• Combines Medicare Parts A &B
• Beginning in 2020 , increases eligibility age for Medicare benefits to align with eligibility age for Social Security
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House GOP Plan
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• Beginning in 2024, give Medicare beneficiaries a choice of private plans or traditional Medicare program on a newly created Medicare exchange
• Imposes caps on noneconomic damages
• Provides 25 billion in federal funding for state risk pools
• Modifies rules for wellness programs
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House GOP Plan
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Encourages HSAs
• Provides a one time credit
• Increase maximum contribution
• Allows rollovers from FSAs to HSA
• Allows HSA contributions for those covered by TRICARE or Medicare Part A
Provides enhanced premium and benefit protections in individual marker with continuous coverage
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Price Plan
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• Provides advanceable refundable annual credits adjusted for age to purchase individual market policies
• Allows individuals to decline Medicare, Medicaid, TRICARE and Vet benefits in favor of credits
• Caps employee’s annual income tax exclusion are $8,000 individual/ $20,000 for family
• Allows employees to use pretax employer dollars to purchase individual market policies
• Allows insurers licensed in one state to sell policies to residents of any state
• Authorizes interstate compacts to enable cross-border sales
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Price Plan
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• Repeals all ACA Medicaid/CHIP provisions, including Medicaid expansion
• Eliminates current restrictions on certain physician charges payable by Medicare patients
• Change legal of proof for establish medical malpractice
• Allows individuals and small businesses to band together to buy health insurance
• Increases HIPAA wellness incentive maximum to 50% of the coverage cost
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Price Plan
Possible Changes
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• Employer Mandate
• Individual Mandate
• Reporting (1094 1095)
• Nondiscrimination rules
• Cadillac tax
• Essential Health Benefits –small plan market
• Preexisting Conditions
• Expansion of Medicaid
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Health Care Reform
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• Dependent Age 26
• Marketplace
• Full-time Employee definition
• Health FSA Limitation
• Free standing HRAs
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Health Care Reform
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• Eliminate the expansion of Form 5500 reporting
• Wellness rules
• Contraceptive Coverage
• Gender transition services
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Other Welfare Benefits
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• Allow the deduction of individual premium
• Limit or eliminate deductions
• Eliminate credits to broaden tax base
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Individual Income Tax
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• Rollback or eliminate fiduciary rule
• Weaken financial disclosure protections
• Expand multiple employer plans
• Encourage state IRA initiatives
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Retirement Income
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• Repeal or Modify Dodd-Frank
• Lower tax rete could bake deferred compensation plans less attractive
• Elimination of alternative minimum tax could make incentive stock options more attractive
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Executive Rewards
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• Repeal or replace DOL final overtime rules
• Slow Increases minimum wage
• Delay any pay equity and equal employment opportunity issues
• Leave Paid Leave to state and local
• Lessen enforcement of Independent contractors and the gig economy
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Worker Protections
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Employer-sponsored healthcare
• Mandates may stay in place for 2017
• Reporting in place for 2016, but for 2017?
• HSAs and HRAs may be favored
Retirement income
• Reporting and fiduciary rule may change
• Limits may change
• Roth may not be favored
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Employer Next Steps
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Executive rewards
• Disclosure rules may be lessen
• With lower taxes, cash may be preferred
Worker protections
• Overtime rules –take time to repeal
• Minimum wage and pay equity pressure off
• Paid leave –watch state and local developments
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Employer Next Steps
Questions?
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Larry GrudzienAttorney at Law
(708) [email protected]
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Contact Information
