American Benefits Council
Benefits Byte


March 17, 2015

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

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House GOP Unveils Budget Proposal Including PPACA Repeal, Tax Reform

Republicans in the U.S. House of Representatives released a sweeping Fiscal Year 2016 budget resolution on March 17. A Balanced Budget for A Stronger America outlines in broad strokes the Republicans’ policy agenda – including current views on the health care law and tax reform.

Like President Obama’s 2016 budget proposal released earlier this year (see the February 2 Benefits Byte), Congressional budget resolutions are non-binding, although the legislative text of the House GOP resolution includes blank spaces for the insertion of specific spending levels for next year. Title VIII of the legislative text is reserved for “policy statements” on a variety of topics, explained more fully in the plan description.

Under the section “Strengthening Health and Retirement Security,” the authors observe that a “breakdown can be seen in every corner of our health care system – from individuals struggling to purchase health insurance on their own, to employers finding it increasingly difficult to provide insurance for their workers.”

The primary tenet of the Republicans’ health care agenda is full repeal of the Patient Protection and Affordable Care Act (PPACA). “Instead of a complex structure of subsidies, mandates, and penalties, our budget proposes we increase access to quality, affordable health care by expanding choices and flexibility for individuals, families, businesses and states while promoting innovation and responsiveness,” the plan said.

The U.S. House of Representatives approved a measure (H.R. 596) to repeal PPACA on February 3 and a similar measure (S. 339) has been introduced in the Senate, although Obama has announced that he would veto such legislation. The House GOP budget proposal does not contemplate changes to the health care law outside of full repeal, nor does it explicitly set forth “replacement” language, although Republican lawmakers from both chambers recently announced the development of The Patient Choice, Affordability, Responsibility, and Empowerment (Patient CARE) Act. As described in the February 5 Benefits Byte, this measure would eliminate the individual and employer mandates, impose medical liability reforms, revise the age rating rules, transition Medicaid to a “capped allotment” system and impose new limits on individuals’ federal income tax exclusion on the value of employer-provided health insurance coverage.

The “Strengthening Health and Retirement Security” section “calls for a bipartisan path forward in addressing the long-term structural problems within Social Security,” but does not discuss employer-sponsored retirement savings – although the tax incentives for employer-sponsored retirement plans may still be at issue under the Republicans’ tax reform agenda.

The House GOP budget proposal section “Securing Economic Opportunity” includes a subsection on tax reform, which calls for “comprehensive tax reform that would include lower rates for individuals and families as well as large corporations and small businesses” while “broadening the tax base by closing special interest loopholes that distort economic activity.”

A concern about “loopholes” and lost tax expenditures has often been the basis for criticism of certain tax incentives that are viewed as being “regressive,” i.e., giving highly-paid individuals a greater tax benefit than lower-paid individuals. This argument has been applied in raising objections to the income tax exclusion for employer-sponsored health plans as well as the income tax deferral on employer-sponsored retirement plan contributions. Based upon the current method used for calculating “tax expenditures,” the health and retirement benefit tax incentives represent the two largest sources of foregone federal tax revenue.

With regard to the expenditure for employer-sponsored health coverage in particular, the Council has consistently pointed out that the expenditure is actually quite progressive because the value of the “health benefit” it provides is more significant for lower-income individuals – for whom it would be a greater financial burden to purchase coverage absent an employer-sponsored plan. And with regard to the expenditure for retirement plans, the “lost” revenue is largely a matter of timing, given the deferral of tax until benefits are paid.

The House Budget Committee will likely begin hearings on its proposal soon. The Senate Budget Committee has already scheduled a hearing to discuss its own budget proposal on March 18, although that committee has not yet unveiled its proposal publicly. For more information, contact Diann Howland, vice president, legislative affairs, at (202) 289-6700.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

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