How Congress’ Budget Bills Could Impact Employers

This post was authored by Dan Colacino, Vice President of Underwriting and Compliance at Rose and Kiernan, Inc.

Each chamber in Congress has presented their tax cut bills, being euphemistically referred to as tax reform bills – as promised during the 2017 campaign. While much of the discussion in New York State has been about state and local tax deductions, a deeper dive reveals some impacts the two tax bills could have on employee benefits.

The House bill as passed did not touch the ACA Individual Mandate, while the proposed Senate bill repeals that section of the law. The idea behind the repeal – minus the rhetoric – is to save the government from having to pay subsidies to people buying health insurance through the Marketplace. In theory, if people aren’t required to have insurance, they won’t buy it. The Congressional Budget Office (CBO) seemed to buy into that theory initially. However, after a series of polls showed that people purchased insurance because they could now afford it, and not because of a relatively small tax penalty, the CBO is rethinking its position about how much money the proposed tax cut could save.

The individual mandate repeal is not the only impact that employers could feel should tax reform under these bills go through. Under the House tax bill, the deduction for Medical expenses would be eliminated. Additionally, the tax breaks employers get for providing commuter benefits are also targeted. This is a major concern in big cities where employees rely on public transportation.

Finally, for those of you who love the new NYS Paid Family Leave bill, scheduled to go into effect on 1/1/18, the proposed Senate bill provides a tax credit for employers who provide an income replacement benefit for people out of work under the Family and Medical Leave Act (FMLA.)  This provision is not mandatory, unlike NYS’s bill, but it would seem to add another wrinkle to employers who are trying to revise leave policies in light of NYS PFL.

Congress would like to get a bill through both houses and to the President by Christmas. With a list of other priorities to consider, including the budget extender bill and government shutdown, plus a less than stellar record of passing legislation, it seems more likely to occur in early 2018.

Stay tuned for updates.

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