The year in regulation: ACA remains, GOP tax bill succeeds
Since the beginning of 2017 regulation, particularly in healthcare, has been on a rollercoaster ride filled with twists and turns with no sign as to when the ride will finally end.
As 2017 comes to a close, the recently signed tax reform bill eliminated the individual mandate many of the key elements of the Affordable Care Act remain intact.
Because of near constant gridlock at the federal level, many state and local governments took it upon themselves this year to create regulations focused on paid family and medical leave, retirement plans and pay equality in order to make some form of change within their own jurisdictions.
Regardless of what did or did not occur within 2017, it is likely the end of the year will not bring an end to regulatory uncertainty.
No other regulation in the entire country had more attention than the ACA at the beginning of 2017. From the moment Donald Trump was sworn into office, many experts in the employee benefits industry assumed Obamacare would be the first item to go, especially with Republicans controlling the majority of the House and the Senate.
It came to the surprise of many when the repeal did not occur. With so much uncertainty within the Republican Party, not one healthcare proposal could be agreed upon to replace the ACA.
“President Trump’s promise to repeal it on day one was always more bluster than reality,” says Shan Fowler, owner and principal of Four8 Insights, a benefits and HR consultancy. “But Congress moved from repeal to repeal-and-replace, to repeal-and-delay, and back again over the course of the year. Ultimately, nothing happened.”
Late in the year, Trump signed an Executive Order taking aim at several key components of the ACA, including expanding association health plans, allowing multi-state plans and expanding HRAs for individual coverage.
“These, along with the ongoing will-he-or-won’t-he-pay-the-CSRs saga adding uncertainty to both individual and employer markets that will get a lot of focus in 2018 and the potential to change market dynamic drastically,” Fowler says.
State retirement plans
Amid growing concern of a retirement savings crisis in the U.S., due, in part, to lack of access to retirement savings plans, several states implemented or passed legislation to create individual state retirement programs.
Additionally, the discontinuation of the federal myRA workplace savings program prompted additional states to look at creating their own plans. Nine states have passed legislation to create individual retirement plans.
Oregon, Illinois and California have all passed Roth IRA programs with specific contribution and enrollment criteria, set to take effect in the next two years. Vermont has passed legislation for the creation of the Green Mountain Secure Retirement plan, the first multiple employer plan design among state plans, which will allow for employer participation as well as high contribution limits than IRA programs allow.
Equal pay laws and salary history restrictions
On the federal level, covered employers must comply with the Equal Pay Act, enforced by the Equal Employment Opportunity Commission, which requires men and women in the same workplace to be given equal pay for equal work.
In addition, while nearly every state and Washington, D.C., has pay equity laws, gender-based pay discrimination continue to be an area of great concern for states. Several states including Massachusetts, Maryland, California, New York and Oregon, are looking to more aggressively address the gender pay gap and ensure pay equity in the workplace, passed legislation to expand their existing equal pay laws to increase employer obligations and penalties, and change the way claims of pay discrimination are analyzed under the law.
There is also a trend at the state and local level to limit salary history inquiries until a certain stage of the recruiting process and prohibits the use of salary information in employment decisions. Delaware, Massachusetts, New York City, Oregon, Philadelphia and San Francisco have passed legislation in this space with many other jurisdictions, including California, New York, Illinois, North Carolina and Pennsylvania, having proposed similar bills.
Another regulatory matter that trended over the course of 2018 — and will very well continue into the coming year — was state and locally regulated family and/or medical leave law. At least nine states as well as Washington, D.C., have enacted some form of mandatory paid leave policy either within a particular city or county if not the entire state.
Recently, three Republican lawmakers — Mimi Walters (Calif.), Elise Stefanik (N.Y.) and Cathy McMorris (Wash.) — have sponsored the Workflex in the 21st Century Act which could require mandatory paid leave for the entire United States.
This new bill leaves many employers wondering, if it should pass, whether state or federal leave regulations would take precedence in situations where laws differed.
On the federal level, employers would be exempt from state paid leave law requirements however; since the bill only reaches employees eligible for employer-provided benefits, employers would still have to comply with state and local leave laws for employees ineligible for company benefits.
In early October, new guidance greatly expanded employers’ eligibility for an exemption from the ACA mandate to provide contraceptive coverage under group health plans.
Under the ACA, an employer must provide certain preventative services, including contraceptive services, at no out-of-pocket cost. Those employers, who held strong religious beliefs on the matter, could be exempt from offering the benefit.
Under the new rules, an eligible employer may claim the exemption based on sincerely held religious beliefs or sincerely held moral convictions. Based on either of these grounds, the employer must object to establishing, maintaining, providing, offering or arranging coverage, payments or a plan that provides coverage or payments for some or all contraceptive services.
Chris Beinecke, employee benefits attorney for Haynes and Boone LLP, says there will be some employers who will take advantage of this expansion to opt-out of offering contraceptive coverage. However, he does not consider it to be a significant regulation moving forward into 2018.
In November the Internal Revenue Service began issuing assessment letters to employers who are not in compliance with the employer shared responsibility mandate.
Beinecke says he has addressed several of these letters for his clients because of the noncompliance ramifications that follow suite should the employer not abide by the mandate.
“These are employers who were assessed penalties for 2016 because of Forms 1094 and 1095,” Beinecke says. “Many employers are receiving these letters even though in many cases these employers are receiving these letters due to an error in their reporting.”
Beinecke adds that many companies can correct or adjust their reporting in order to remain in compliance, but some could be left with a penalty of $173.33 per month for each full-time employee who was not offered minimum value affordable coverage, according the penalties assigned by the IRS for 2015.
The recently sign tax reform bill stands out among the top items in the employee benefit regulation field this year not for what it did, but rather for what it did not do.
The signed bill doesn’t touch the Affordable Care Act’s Cadillac tax which, remained on track to go into effect in 2020. This month, Representatives Mike Kelly (Pa.) and Devin Nunes (Calif.) unveiled a series of measures, including H.R. 4616, which provides relief from the ACA employer “pay or play” requirements for 2015 through 2018 and delays the 40% Cadillac Tax on employer-sponsored coverage for one additional year.
“It is essential that [Congress] provide relief from the employer mandate penalties,” says James Klein, president of the American Benefits Council. “Employers are already receiving enforcement notices from the IRS requiring employers to review complex reporting and respond within extremely short deadlines. [This makes] relief an urgent necessity.”
“Guidance for the Cadillac tax is expected for next year and will probably scare some people to death,” Beinecke says. “But if the Senate and the House had tried to do anything about it, it might have made the tax reform bill a little bit harder to get through”
He adds, “It is still hanging around like a zombie.”