Aon Washington Report
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October 16, 2017
Legislative/Executive
President Trump Discontinues ACA CSR Payments to Insurers
On October 13, 2017, President Trump announced that effective immediately, the Administration would be discontinuing cost-sharing reduction (CSR) payments made to insurers as part of the Affordable Care Act (ACA). For details about this latest development, please see the Aon bulletin Trump Administration Ends ACA Cost-Sharing Reduction Payments to Insurers found in the Publications section.
The news release is available here.
The legal opinion is available here.
President Trump Signs Executive Order Directing Departments to Review ACA Provisions
On October 12, 2017, President Trump signed an Executive Order instructing the Departments of Treasury, Labor, and Health and Human Services to review various ACA provisions. For additional information on this Executive Order, please refer to the Aon bulletin President Orders Departments to Relax and Reverse ACA Rules on HRAs, AHPs, and Short-Term Health Insurance, found in the Publications section.
The Executive Order is available here.
The news release is available here.
Retirement
IRS Releases Guidance on Funding Methods for Retirement Plans
On October 10, 2017, the Internal Revenue Service (IRS) released two pieces of guidance (Revenue Procedure 2017-56 and Revenue Procedure 2017-57) related to funding methods for retirement plans.
- Revenue Procedure 2017-56 provides automatic approval for certain changes in funding method for plans subject to the minimum funding requirements of Internal Revenue Code Section 430. For example, the Revenue Procedure provides automatic approval for certain changes in asset valuation method, actuarial firm, and/or valuation software. Certain restrictions apply to the use of these automatic approvals. The Revenue Procedure is generally effective for plan years beginning on or after January 1, 2018, but taxpayers may apply it to earlier plan years.
- Revenue Procedure 2017-57 sets forth the procedure for obtaining IRS approval for a change in the funding method used for a defined benefit plan, in cases where the automatic approvals under Revenue Procedure 2017-56 are not available.
Revenue Procedure 2017-56 is available here.
Revenue Procedure 2017-57 is available here.
Other HR/Employment
Social Security Administration Releases 2018 Indexed Figures; Announces 2.0% Benefit Increase
The Social Security Administration (SSA) released the Social Security 2018 indexed figures on October 13, 2017. The SSA announced that there will be a 2.0% Cost-of-Living Adjustment (COLA) for 2018. Some other changes that take effect in January of each year are based on the increase in average wages. Relevant figures are shown below.
COLA: Based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, Social Security and Supplemental Security Income beneficiaries will receive a 2.0% COLA for 2018. (The 2017 COLA was 0.3%.)
Wage Base: The 2018 Social Security wage base is $128,700. (The 2017 amount was $127,200.)
FICA/Medicare Tax Rate: The FICA tax rate remains at 7.65%: 6.20% for Social Security and 1.45% for Medicare combined.
Beginning in 2013, the Affordable Care Act increased the Medicare tax rate on wages by 0.9% (from 1.45% to 2.35%) for higher-income individuals. The payroll tax increase applies to wages over $200,000 for single tax filers and $250,000 for couples filing jointly ($125,000 for a married individual filing separately). The tax rates above do not include the 0.9%. The Internal Revenue Service has provided frequently asked questions on the Medicare tax increase, available here.
Maximum Monthly Benefit: For someone retiring at full retirement age in 2018, the maximum benefit is $2,788. (The 2017 amount was $2,687.)
Annual Earnings Test Limit: For individuals under full retirement age, the annual earnings test limit is $17,040. (The 2017 amount was $16,920.) For individuals attaining full retirement age in 2018, the annual earnings test limit for the months prior to attaining full retirement age is $45,360. (The 2017 amount was $44,880.) There is no annual earnings test for individuals who have attained full retirement age.
More information on the SSA COLA is available here.
A fact sheet on the SSA's 2018 Social Security changes is available here.
The October 13, 2017, news release is available here.
A more detailed Aon bulletin on the 2018 SSA indexed numbers is available here.
Aon Publications
Trump Administration Ends ACA Cost-Sharing Reduction Payments to Insurers
On October 13, 2017, the Trump Administration announced that, effective immediately, it would be discontinuing cost-sharing reduction (CSR) payments to insurers under the Affordable Care Act (ACA), stating that the CSR payments were illegal because Congress had not appropriated funds.
The CSR payments are part of the subsidy structure of the ACA and were the subject of a federal court decision in 2016, which held that Congress had not appropriated funds for the CSR payments. The ACA requires insurers offering policies through the public Exchanges to reduce copayments and other out-of-pocket costs for certain low-income policyholders. The ACA also authorizes the federal government to make payments directly to insurers to offset the lost revenue caused by the CSRs.
The Aon bulletin, which summarizes this decision, is available here.
President Orders Departments to Relax and Reverse ACA Rules on HRAs, AHPs, and Short-Term Health Insurance
On October 12, 2017, President Trump signed an Executive Order directing the three federal departments administering the ACA to “consider proposing regulations or revising guidance, to the extent permitted by law,” relaxing and reversing a series of health insurance rules under the ACA.
While the Executive Order is the most significant effort to date by the Trump Administration to undo various ACA regulations, the Executive Order, by itself, does not change any rules or regulations. Rather, the Executive Order requires the Departments of Treasury, Labor, and Health and Human Services (the Departments) to “consider” proposing regulations implementing the policies set forth in the Executive Order regarding association health plans (AHPs), short-term health insurance, and, in a potentially significant move for employer group health plans, the use of health reimbursement arrangements (HRAs) to purchase individual health insurance policies.
This Aon bulletin summarizes the Executive Order’s provisions on:
- AHPs;
- Short-term health insurance; and
- The expansion of HRAs, including the ability to use HRAs to purchase individual health insurance policies.
The bulletin is available here.