Expert Q&A: What Does Trump’s Executive Order Mean for Employers?

January 23, 2017 Sovos Compliance

President Trump took immediate steps to fulfill his campaign promise to repeal the Affordable Care Act on his first day in office. The President signed an executive order on Friday, which he said was intended to “ease the burdens of the Affordable Care Act.” The broad-reaching order is the manifestation of Trump’s plan to begin stepping back from the ACA, even before Congress has taken the expected “repeal and replace” action.

Under the Constitution, the President does not possess the authority to direct his administration to completely repeal the ACA without a vote from Congress. So, it begs the question, what can this executive order actually accomplish – and what does it mean for employers?

We asked Sovos’ regulatory analyst Thomas Hospod to weigh in:

Q: What are the immediate implications of Trump’s executive order?

A: Due to the constitutional limits on executive authority, this order can be interpreted as powerless in and of itself but having meaningful and significant future consequences for the survival of the ACA — and particularly on the pace at which it can be repealed. In the order, the President has directed his Department of Health and Human Services to prioritize and put the necessary tools in place for the dismantling of the program. So, when Congress does put forward a bill, the path would be paved for an expedient undoing of the ACA regime.

Q: What impact does the executive order have for Tax Year 2016 filling?

A: The order has no effect on the need for a business or an Individual to comply for the 2016 tax year. In addition, the order does not remove reporting penalties. It is designed to target the market place penalties and requirements for all individuals to have health insurance or pay a penalty, which is generally thought of as the “teeth of the law,” however there are still reporting penalties. These have not gone away and insurers and employers could still be subjected to them. Under IRC 6721 and 6722 employers and insurers could face penalties for failure to file correct information returns and failure to provide correct payee statements.

Employers and Insurers must continue to follow the ACA reporting requirements under 6055 and 6056 and file with the IRS all relevant 1094-B and 1095-B or 1094-C and 1095-C.

Q: What does the executive order mean for the future of employer compliance?

A: The crux of this executive order is Section 2, which instructs the HHS Secretary to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay” the provisions of the law that pose the greatest burden to individuals, providers, and states.” It does not mention the employer mandate specifically, and it is unclear what the future might hold.

The best strategy for employers would be to wait for the IRS to announce any changes to reporting requirements before making any changes to reporting and compliance practices. It may even be more prudent to wait until the provisions of the law granting the authority to create the reporting regime is fully repealed because, if Congress does not successfully repeal within 2 years, the next Congress could halt the process and leave remaining provisions in place. And, if we have a change in administration in 4 years it could reverse the repeal and replace process altogether.

Q: Does the executive order change the course or timing for any of the proposed plans?

A: The President’s executive action has signaled to Congress that he wishes to move more quickly on this than originally planned. Though, what that means exactly is still unclear. Robert Laszewski, the President of the consulting firm Health Policy and Strategy Associates, stated that he believes this executive order ensures that the federal and state exchanges will continue through 2018 – as he believes this signals that Republicans are going to need more time to design a replacement plan. In contrast, Pennsylvania Insurance Commissioner Teresa Miller said she believes Trump’s executive action could prompt many insurance companies to abandon state exchanges in 2018 or as early as this year. Even Representative Chris Collins (R – NY), the member of the Trump transition team who had originally publicly states that there would be no changes through 2018, admitted Saturday that when it comes to timeline, President Trump has “consistently moved that needle.”

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Sovos will continue to publish updated regulatory analysis as new information emerges and details are shared for each ACA replacement plan. Follow the Sovos blog for frequent and accurate updates.

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Sovos Compliance

Sovos is a leader in global tax, compliance and business-to-government reporting software, safeguarding businesses from the burden and risk of compliance in thousands of tax jurisdictions around the world.

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