Amidst questions coming out of last week’s Senate vote-a-rama, one thing is clear: Information reporting obligations for Applicable Large Employers and providers of health insurance coverage will remain in place for the foreseeable future.
Congress and the Administration are divided on how to proceed after multiple health care bills failed last week in the Senate. Regardless, Congressional Republicans have again declared that Obamacare will remain “the law of the land” pending Congressional action.
What’s Next for Reporting?
Employers should plan to fulfill their reporting obligations for the current tax year, which will be due to the IRS in early 2018. Those who are required to submit corrections and replacements for their 2016 returns should continue to comply with relevant requirements to provide accurate and complete information. In addition to assessing penalties under §§ 6721-6722 for missing and late ACA returns, the IRS will also continue to enforce the mandate penalties for individuals and employers who fail to maintain or provide coverage.
Both the Senate and House “repeal” bills sought to eliminate the mandate penalties. Without legislative action, the elimination of these penalties is no longer feasible. Regardless, the IRS may still grant widespread exemptions from compliance with the mandates pursuant to President Trump’s Executive Order. However, such an action would not relieve employers of their information reporting obligations under the ACA.
What’s Next for Congress?
Although Congress failed to pass an ACA repeal through the budget reconciliation process, there is still a possibility that Republicans may push through reforms as standalone bills or as amendments to future bills aimed at stabilizing the insurance markets. However, these measures would require a supermajority (60 votes) to pass – unless Republicans were to invoke the “nuclear option,” which would reinstate a simple majority requirement for the passage of all bills.
Congressional Republicans remain uncertain as to future plans for healthcare legislation. Some are hopeful this failure will lead to bipartisan collaboration on health care reform, while more conservative Republicans are just hoping for a more transparent drafting process. There seems to be a consensus that a broad ACA repeal is simply not possible at this point in time. Nonetheless, Republicans and some Democrats have committed to continuing the conversation to effectuate reform.
Meanwhile, the House of Representatives has taken no further action on the appropriations bill that, in its current form, would defund the IRS’s ability to enforce the individual mandate and some reporting obligations.
What’s Next for the Administration?
Messaging from the Trump Administration has been mixed. While the President’s immediate reaction was to leave the ACA “as is,” later statements from White House Budget Director Mick Mulvaney have signaled the Administration will continue to press the Senate to pass healthcare reform. He indicated the President still regards an ACA “repeal and replacement” as a legislative priority.
Despite Senator McConnell leaving the issue open-ended, Senate leadership as a whole appears prepared to move on to other priorities. In addition, President Trump’s unofficial spokesperson in the House of Representatives, Congressman Chris Collins, declared Obamacare “is the law of the land for the foreseeable future,” and that the House is ready to move on to tax reform and other matters.
However, the President may force Congress to act by threatening to withhold payments to insurers – causing markets and exchanges to “implode.” White House Counselors noted the President is deciding whether to end the cost-sharing reduction payments aimed at mitigating out-of-pocket expenses for lower-income Americans, with a decision to come later this week.
Such an action would be within the President’s sole discretion – as these payments began pursuant to an Obama-era executive order. Senator Susan Collins, who voted against the Senate bill, indicated she will not reconsider her vote in light of the President’s threat to end these subsidies. As such, it remains uncertain whether the Senate will reattempt in response to this warning from the White House.
Bottom Line: The “repeal and replace effort” appears to be indefinitely stalled, and the Affordable Care Act will remain the law of the land for the foreseeable future. All employer reporting obligations and penalty assessments will continue to be enforced, as will the mandate penalties (barring any exemptions granted by the IRS and HHS).
Learn more about how Sovos ACA solutions can improve your reporting process.
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About the Author
Tom Hospod is a member of the Tax Research Team for the Direct Tax division at Sovos Compliance, where his main areas of focus are Tax Withholding and Automatic Exchange of Information (AEOI). Prior to Sovos, Tom worked as a legislative aide in the Massachusetts House of Representatives. He also has experience in securities law—focusing on broker-dealer disputes and representing clients in FINRA arbitration. Tom is a member of the Massachusetts Bar, earned his B.A. from Boston College and his J.D. from the University of Miami.More Content by Tom Hospod