Will Employers’ ACA Obligations Change Under the Trump Administration?

by Perkins Coie

Perkins Coie

During his campaign, President-elect Trump promised to make the repeal and replacement of the Affordable Care Act (ACA) a priority. Now that the election is over, what should employers expect? We don’t have a crystal ball, but we’ve been listening to what the president-elect’s team and members of the U.S. Congress are saying, and our best advice right now is for employers to stay the course until the government takes action to change ACA obligations. Here are our initial thoughts on some specific obligations:

Must employers still provide employer shared responsibility statements to employees and file reports with the IRS regarding whether minimum essential coverage was offered to full-time employees? If so, by when must employers comply?

Yes, employers must continue to comply with these requirements until we have authority stating otherwise. However, IRS Notice 2016-70, published on November 18, 2016, extended the due date for furnishing the employer shared responsibility statements to employees by 30 days, from January 31, 2017 to March 2, 2017. Under this guidance, no further extensions will be available for such statements. The notice does not extend the deadline for filing the reports with the IRS, so employers filing on paper must still file by February 28, 2017, and those filing electronically must file by March 31, 2017, but the automatic extension of 30 days by filing Form 8809 will be available for the IRS reports.

In addition, the notice extends the good faith relief from filing penalties that was in place for last year’s filings. The relief is available for an employer whose reports contain incorrect or incomplete information if the employer made good-faith efforts to comply. In determining good faith, the IRS will take into account whether the employer made reasonable efforts to prepare for reporting and the extent to which the employer is taking steps to ensure that it will be able to comply in the future.

Will the employer shared responsibility penalties be repealed?

Probably, but we don’t know what the timeline will be. Eliminating the penalties was part of a bill that was passed by Congress earlier this year but vetoed by President Obama, and it will almost certainly be part of any new legislation. The effective date of any penalty repeal is unknown at this time.

Will the contribution limits on Health Savings Accounts (HSAs) and Health Flexible Spending Accounts (FSAs) be raised?

Possibly, but whether there will continue to be limits and the amount of any limits are unknown. We recommend honoring the contribution limits currently in place until there is definite action to change them. If the limits are changed, employers will need to review and potentially amend plan documents and summary plan descriptions to take advantage of any such changes.

Will the restriction on using Health FSAs and Health Reimbursement Arrangements to pay for over-the-counter (OTC) medications without a prescription be repealed?

Possibly, but the timeline is uncertain. We don’t recommend making any changes to plans regarding OTC medications until there is definite action changing the rules.

Will the Medicare surtax of 0.9% on high-income individuals be repealed?

Probably, but the timeline is uncertain. We recommend honoring the surtax until there is definite action to change it.

Will the excise tax on high-cost health coverage (the “Cadillac Tax”) be repealed?

Probably. There was strong support for repeal from both Republicans and Democrats, businesses and unions. The effective date of the tax was deferred to 2020, so no immediate action is necessary.

Will the benefits mandated by the ACA, such as preventive care with no cost-sharing if rendered in-network and availability of coverage for children up to age 26 if the plan covers dependents, be repealed? And will the ACA’s cost-sharing limits and prohibitions on preexisting condition exclusions and annual and lifetime limits be repealed?

Maybe but unlikely. These provisions of the ACA were popular with many constituencies, and repealing or revising them might create dissatisfaction. In addition, Congress is widely expected to use the budget reconciliation process to address changes to the ACA, and budget reconciliation probably could not be used for these provisions since they do not involve federal government expenditures. Finally, these provisions carry their own penalties that are not part of the employer shared responsibility penalties, so they would have to be addressed separately from a repeal of the employer shared responsibility penalties. We recommend continuing to offer coverage that complies with these provisions until there is definite action to change them.

What will replace the ACA?

We’re waiting to see, and we’ll keep you posted as things develop.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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