Alert / Retirement, Employee Benefits
A look at the 2018 legislative agenda for health and retirement

2018 Legislative AgendaProposed legislative and regulatory changes in 2018 for sponsors of health and retirement benefits 

Federal legislative and regulatory agendas for 2018 are taking shape, and health and retirement plan policy is likely to remain at the forefront. Political headwinds may limit the number of significant changes in the coming months, but plan sponsors will have plenty to watch in 2018.

Outlook for health and welfare benefits in 2018

Congress has already shaped health policy as part of the government funding legislation passed in January. See our Alert for more details on how that package delayed certain Affordable Care Act (ACA) taxes, including a two-year delay of the Cadillac Tax, and extended funding for the Children’s Health Insurance Program.

It appears, at least for the moment, that comprehensive ACA repeal and replace has fallen from the 2018 legislative priority list. However, several smaller bills have been introduced in Congress that may generate debate this year. We’re most likely to see movement on measures to stabilize the individual health insurance marketplace, but other topics in play include measures to do the following:

  • Allow tax-free reimbursement of over-the-counter medications from accounts like health savings accounts (HSAs) and flexible spending accounts.
  • Expand use of HSAs, including increased contribution limits and coordination with telemedicine and on-site clinics.
  • Provide for streamlined ACA employer mandate reporting.
  • Eliminate the ACA employer mandate, or at least delay it.
  • Change the ACA definition of full-time employee from 30 hours per week to 40 hours per week.

At least in the near-term, health and welfare plans are more likely to be impacted by action from federal agencies including:

  • Finalization of association health plan regulations, which allow employers to form associations solely to save on benefit costs (see our Alert and Webcast).
  • IRS’s issuance of  226J letters enforcing the ACA employer mandate for 2015 (see our Blog and Webcast).
  • The EEOC’s response to a federal court striking down its wellness plan regulations beginning in 2019 (see our Blog).
  • Regulations allowing large employers to pay individual health plan premiums in response to a prior Executive Order (see our Alert).

Outlook for retirement benefits in 2018

Democrats and Republicans often sharply disagree on health policy but are frequently able to find common ground on retirement policy, which makes it more likely we will see bipartisan retirement legislation. Currently there are six different bills in committee (see our Alert), each with significant bipartisan support, which could bring welcomed changes to retirement plans, including:

  • Increasing the automatic IRA rollover limit from $5,000 to $7,600.
  • Removing required minimum distributions on accounts below $250,000.
  • Increasing the required minimum distribution age to 73 with periodic increases.
  • Removing the 10 percent cap on automatic increases.
  • Simplifying required participant disclosures.
  • Making electronic disclosure the default for plans.
  • Increasing safe harbor limits.
  • Allowing open multiple employer plans where unrelated employers can pool assets in a single plan.
  • Providing a safe harbor to satisfy fiduciary duties in selecting an annuity provider.
  • Allowing the transfer of an employee’s unused flexible spending account balances directly to a retirement plan.
  • Pension Benefit Guaranty Corporation premium reforms.

While none of these proposals will likely make it into law as stand-alone bills, retirement plan changes could easily be added to a larger package focused on infrastructure, immigration or farming.

Tax reform aftermath

The Department of Treasury and IRS continue to sort through the Tax Cuts and Jobs Act of 2017 (see our Alert and Webcast). Some guidance, such as updated withholding tables, has been issued. Little remains known on when we can expect guidance on other important tax law changes like the tax credit for paid family leave and taxation of pass-through entities.

Lockton comment: We understand Republican lawmakers are also considering a technical corrections bill to clean up drafting and other unintended errors. Thus far, Democrats have shown little interest in backing such legislation. They may be hoping Republicans pay a political price for the tax overhaul and don’t want to be viewed as making it better after staunchly opposing it in December. If technical corrections are to be made, they might have to be negotiated piecemeal into other bipartisan bills.

Political constraints will dictate movement on capitol hill

The ongoing debate about government funding, which dominated the legislative agenda in January, is expected to continue over the next couple of months. That debate could severely restrict how much Congress acts on health and retirement policy.

What’s the holdup to funding the government? In short, differences in immigration policy and military and domestic spending limits.

Democrats are pushing to strengthen the Deferred Action for Childhood Arrivals (DACA) policy that allows undocumented immigrants who arrived as minors to work, go to school and avoid deportation. Republicans are seeking significant immigration reforms in exchange, including funding for a southern border wall and changes to how family members of resident immigrants can be fast-tracked for immigration.

Republicans want a deal on budget caps, which establish upper limits on how much Congress can spend on military and domestic programs. Failure to reach a budget cap deal will result in a “sequester,” which requires automatic cuts to most spending limits. Republicans want a substantial increase for military spending, and Democrats are pushing for a substantial increase in domestic spending.

Congressional appropriators need to know the budget cap numbers to write the long-term omnibus spending bill, but Democrats are demanding a deal on DACA before negotiating on budget caps.

Government funding, immigration and budget caps will likely continue to dominate the legislative agenda into March, but the dominos may start to fall soon, as DACA expires on March 5. Additionally, legislators will be back in their districts for two and a half weeks beginning in late March and will be looking for accomplishments they can tout, especially to generate constituent support in advance of the upcoming 2018 midterm elections.

Lockton comment: About those midterm elections. Significant legislative action is rare in election years as the two major political parties dig in their heels on policy issues to energize their party-line voters. This year is shaping up to be particularly combative as current polling numbers suggest Democrats have an opportunity to win back both chambers of Congress.

Republicans hold a slim 51-49 seat majority in the Senate. Up for grabs in November are 34 Senate seats, 26 of which are currently held by Democrats, and 10 of those are in states that voted for Trump in 2016. All 435 House seats are up for grabs with Republicans currently having a 238-193 majority.

 

Scott Behrens, J.D.
Compliance Services

Sam Henson, J.D.
Retirement Services

Not Legal Advice: This communication is offered solely for discussion purposes. Lockton does not provide legal or tax advice. The services referenced are not a comprehensive list of all necessary components for consideration. You are encouraged to seek qualified legal and tax counsel to assist in considering all the unique facts and circumstances. Additionally, this communication is not intended to constitute US federal tax advice and is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending any transaction or matter addressed herein to another party.

This document contains the proprietary work product of Lockton Government Relations and is provided on a confidential basis. Any reproduction, disclosure or distribution to any third party without first securing written permission is expressly prohibited.

Investment advisory services offered through Lockton Investment Advisors, LLC, an SEC-registered investment advisor. For California, Lockton Financial Advisors, LLC, d.b.a. Lockton Insurance Services, LLC, license number 0G13569.

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