Will 2017 be similar to 2010?


By:          Zack Pace, SVP, Benefits Consulting

Four months ago, I congratulated our readers for completing the six-year long Affordable Care Act (ACA) implementation odyssey. What began in 2010 had mostly concluded – all of the major deadlines had passed. However, given last month’s election results, one might wonder if 2017 will begin a whole new benefit compliance and administration marathon.

The morning after the election, I made a list of the ACA components that might now change, adjust, or be repealed. That list became the Employee Benefit News essay – The ACA: Where do we go from here? You may need to register with Employee Benefit News to view it. One question I didn’t consider is the future of Section 125 (i.e., the tax favored status of employer sponsored group health plans). While, the ACA did not materially change Section 125, many of the various Republican policy proposals, including Speaker Ryan’s A Better Way, propose reducing these tax benefits.

We often take for granted that employees will always be able to pay for group health insurance premiums pre-tax and that employers will enjoy the payroll tax benefit from those salary reductions. And, if you attended CBIZ’s post-election legislative update webinar, you may recall that Joel Wood from The Council of Insurance Agents & Brokers was bullish on the staying power of Section 125. Given the lack of enthusiasm for the ACA’s Cadillac Tax and our general disinterest in broad tax increases, Mr. Wood has a point. Moreover, if changes to Section 125 come in the form of tax benefits ending at a certain premium equivalent threshold, folks in my chair and your chair will simply adjust plan design to eliminate the tax increase, just as we were planning to do with the Cadillac Tax. But, as Willie Sutton might point out, as long as policymakers are looking for revenue, Section 125 will be front and center – it’s where the money is. Per slide 37 of CBIZ’s post-election webinar, in FY’14 the aggregate $164.2 Billion Section 125 tax break was the federal government’s largest tax expenditure. By comparison, the mortgage interest deduction yielded $99.8 Billion in the same time period.

If you’re interested in reviewing a summary of the various Republican repeal and replace policy proposals, consider Republicans’ plans to replace Obamacare, explained in 500 words, by Sarah Kliff of Vox. Upon President-elect Donald Trump’s nomination of Tom Price for HHS Secretary, Ms. Kliff then drilled down into more specifics regarding Representative Price’s repeal and replace proposal.

2017 is shaping up to be an interesting year. We’ll keep you posted on the developments.

You can reach me on zpace@cbiz.com or via Twitter. My collection of LinkedIn essays is located here, and my Employee Benefit News articles are available here.

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Zack Pace

Zack Pace, SVP, Benefits Consulting at CBIZ Inc., and his team design, implement, and manage benefits packages that are highly effective at empowering clients to attract and retain the top talent needed in order to outperform competitors, while ensuring that the cost of the overall benefits program and its components are cost-effective.
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