Republicans Release Health-Care Reform Bill, Remove Affordable Care Act Payroll Elements

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By Howard Perlman

Some payroll-related provisions of the Affordable Care Act, including the additional Medicare tax, would be repealed under a replacement bill released March 6 by congressional Republicans.

The markup process for the American Health Care Act, during which the bill may be debated and amended, is to start March 8 and is to be conducted in the House by the Ways and Means Committee and the Energy and Commerce Committee.

Under the proposal, the additional Medicare tax of 0.9 percent on employees' annual wages of more than $200,000 would be eliminated effective Jan. 1, 2018. The tax took effect Jan. 1, 2013.

Penalties for applicable large employers that do not offer sufficient health coverage to full-time employees and dependents would be eliminated, retroactive to Jan. 1, 2016, under the proposal. Employers no longer would need to calculate whether they had at least 50 full-time equivalent employees in a year, which under the ACA causes them for the next year to be applicable large employers.

The annual limit on nontaxable contributions to employees' health flexible spending accounts, in effect since 2013 and adjusted for inflation, would be eliminated by the bill, effective Jan. 1, 2018. The limit for 2017 is $2,600.

Annual limits on nontaxable contributions to health savings accounts connected to high-deductible health plans would significantly increase because the bill would set the limits based on the sum of an annual deductible and out-of-pocket expenses. Under the measure, for 2018, the limit for self-only coverage would increase to $6,550, up from $3,400 for 2017, and the limit for family coverage would increase to $13,100, up from $6,750 for 2017, the Ways and Means Committee said March 6. HSA limits are adjusted for inflation.

Applicability of an excise tax of 40 percent on employer-sponsored benefits from certain high-cost health plans, also known as the “Cadillac” tax, would be delayed to Jan. 1, 2025, from the current effective date of Jan. 1, 2020.

Congressional Republicans plan to use the budget-reconciliation process to expedite legislative proposals for the ACA and limit how much congressional Democrats may influence the process.

Trump Emphasizes ACA Repeal, Other Payroll-Related Policies

During a Feb. 28 address to a joint session of Congress, President Donald Trump emphasized that he sought to repeal the ACA and highlighted other policies he supports that may affect payroll processing.

Trump said he wants a “stable transition” regarding the ACA's elimination. Repeal of the ACA is a priority for Trump, emphasized by the focus of his first executive order, issued Jan. 20, on repealing the law.

Deregulation. Trump said Feb. 28 that his administration created “a deregulation task force inside of every government agency” as part of a broad effort to eliminate federal regulations that he views as unnecessarily burdensome for businesses. Myriad regulations affecting payroll have been issued and enforced by federal agencies.

Work performed by the deregulation task forces in conjunction with an executive order Trump issued Jan. 30 that called for the elimination of two regulations for every new regulation issued could lead to the elimination or modification of federal regulations affecting payroll.

Federal income taxes. Trump clarified to Congress that he sought not just moderate reduction to federal income taxation, but “massive tax relief for the middle class” in addition to lowering federal taxes on business income. His proposal to reduce federal income taxes on the middle class may result in lower rates applicable for income withholding.

During his presidential campaign, Trump proposed reducing the number of federal income tax brackets to three from seven, with the minimum rate increased to 12 percent from 10 percent and the maximum rate lowered to 33 percent from 39.6 percent.

Paid family leave. Trump also said Feb. 28 that he wants “to help ensure new parents have paid family leave,” which is not required under federal law, although the federal Family and Medical Leave Act generally requires employers with at least 50 employees to provide eligible employees with up to 12 weeks of unpaid leave.

Implementation of a federal paid family-leave requirement or parental-leave requirement would require modification of payroll processes to achieve compliance, as has been done for numerous states that require such leave to be provided.

Trump proposed during his campaign a modification of the federal unemployment tax program to accommodate six weeks of paid maternity leave as a federally required benefit for employees whose employers do not offer paid maternity leave.

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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