As 2019 came to an end, Congress passed and the President signed two spending bills that not only kept the federal government open for business, but that also changed laws governing employee health and welfare benefits. The table below summarizes these changes. The legislation made additional changes beyond the scope of this bulletin, such as changes to retirement plans (addressed in a separate bulletin here), Section 529 Plans and IRAs. More information on IRA changes that may impact participant estate planning for IRAs is available here.
If you have any questions regarding the impact of these changes, please contact a member of Warner’s Employee Benefits Practice Group.
| Repeal of ACA Taxes | ||
| Change | What It Means | |
| Repeal of Cadillac Tax | This tax would have imposed a non-deductible 40% excise tax on the value of certain high-cost employer group health plans in excess of certain statutory thresholds. After delaying the effective date a number of times, Congress has finally repealed the tax. | |
| Repeal of Medical Excise Tax | This was a 2.3% excise tax on the value of medical devices sold domestically. The tax originally became effective in 2013, but was suspended by Congress twice, including for the time period since January 1, 2016. The tax is now fully repealed. | |
| Repeal of Annual Fee on Health Insurance Providers | This fee applies to certain entities engaged in the business of providing health insurance that covers United States health risks, and is divided among health care insurers based on their market share and their premiums. The insurers have passed this tax through to their insured plans. The fee had been suspended for 2019, but for 2020 the fee is in excess of $15.5 billion. The fee is now fully repealed for calendar years after December 31, 2020. | |
| Extension of ACA Fees | ||
| Change | What It Means | |
| 10-year Extension of PCORI Fees | These fees fund the Patient-Centered Outcomes Research Institute, which was established under the Affordable Care Act (ACA) to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, diagnose, manage or prevent illness or injury. The fees were expiring, with final payments due either in 2019 or 2020 (depending on the plan sponsor’s plan year), but are now extended to continue until 2029 or 2030. The fee will continue to be adjusted for inflation each year. | |
| Other Changes | ||
| Change | What It Means | |
| Extension of Medical Expense Deduction Floor Reduction Amount | The ACA changed the threshold for medical expense deductions from 7.5% to 10% of adjusted gross income. For 2017 and 2018, Congress had temporarily lowered the threshold back to 7.5%. The new spending bills keep the 7.5% threshold in place for 2019 and 2020. | |
| One-Year Extension of Employer Credit for Paid Family and Medical Leave | The 2017 Tax Cuts and Jobs Act established a business tax credit for certain employer-paid family and medical leave under new Tax Code Section 45S. The credit was originally available for 2018 and 2019. The credit will now also be available for 2020. | |
| One-Year Extension of Health Coverage Tax Credit | The Health Coverage Tax Credit (CHTC) is a tax credit that subsidizes the cost of qualified health insurance for certain individuals who are eligible for Trade Adjustment Assistance allowances because they experienced qualifying job losses or because their defined-benefit pension plans were taken over by the PGBC because of financial difficulties. The HCTC was scheduled to sunset January 1, 2020, but is now extended by one year. | |
| Repeal of UBTI on Tax-Exempt Organizations for Qualified Parking and Transportation Fringe Benefits | The 2017 Tax Cuts and Jobs Act required tax-exempt organizations to treat amounts paid or incurred for qualified transportation fringe benefits, and parking facilities used in connection with qualified parking, as unrelated business taxable income. This provision is repealed retroactive to the 2017 law’s enactment. | |