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How will the election impact employee benefit plans?
By Douglas Neville on November 11, 2016 at 9:43 AM

"What's next" on American flagDonald Trump’s victory in the presidential election, combined with the Republican Party’s retention of a majority in both houses of Congress, is likely to lead to significant changes in laws, regulations and policies that will impact many aspects of life and business in the United States for the foreseeable future. In the coming weeks and months, many employers will be asking how the election will affect the benefits they provide to employees.

Although it is impossible to predict what will happen with any reasonable degree of certainty, the following are a few possible areas of change.

1. The Affordable Care Act (ACA)

The ACA (or “Obamacare,” as many have called it) was the subject of much discussion during the campaign and has been criticized recently for rising premiums and insurers dropping out of the health insurance marketplaces. Trump has explicitly stated that he will “ask Congress to immediately deliver a full repeal of Obamacare.”

A complete repeal of Obamacare may not be possible because, even with a majority in the House and Senate, Republicans do not have the 60 votes needed to overcome a Democratic filibuster of a repeal bill. However, Republicans most likely can pass legislation that modifies or eliminates key provisions of Obamacare through a budget reconciliation bill that cannot be filibustered. Such a bill would require only a majority vote, which the Republicans will have (absent any defectors).

Therefore, it is likely we will see significant changes to Obamacare in the coming year that will be tantamount to a repeal. Some provisions (such as limits on pre-existing condition exclusions and coverage of children up to age 26) have been widely popular and might be retained. Other more controversial provisions will likely be eliminated. Trump’s position paper on health care specifically identifies the individual mandate as a provision that must be eliminated. Trump also has said he will seek to eliminate the “Cadillac tax.” While Trump’s position paper does not specifically list the employer mandate as a provision to be eliminated, in light of the stated desire to “completely repeal Obamacare,” an effort to eliminate the employer mandate is likely as well. The employer mandate and corresponding penalty and annual reporting provisions are among the provisions that are of the greatest concern to employers.

If Obamacare is repealed (or effectively repealed), Congress and the president will seek to replace it with other initiatives. Trump has outlined plans that will expand the use of consumer-driven health plans (such as HSAs) and provide tax deductions to individuals for health insurance premiums. He has also stated that he will seek changes to the health insurance industry that are designed to increase competition and reduce costs for individuals and employers.

2. Department of Labor Fiduciary Regulations

Trump hasn’t specifically addressed the DOL’s fiduciary regulation in any position papers or during his campaign. However, he has said he will seek to eliminate wasteful, unnecessary and intrusive regulations. The DOL’s fiduciary regulation, which is scheduled to take effect in April 2017, expands ERISA’s definition of fiduciary and creates additional standards for investment advisors. It has been very controversial. Opponents of the regulation cite increased compliance expenses and higher costs of providing investment advice (which undoubtedly will be passed on to investors such as retirement plans) as a primary reason why the regulation should be eliminated. Congress even passed a Republican-sponsored bill to halt implementation of the regulation. As expected, President Obama vetoed the bill.

In light of the widespread criticism of the rule and the efforts to stop its implementation, it is possible that the fiduciary regulation will be among the regulations that will be targeted for elimination. However, this is probably relatively low on Trump’s list of priorities (if it appears on the list at all). Therefore, the rule will likely take effect and could remain in place for some time.

3. DOL Enforcement Activities

Throughout the last decade, the Employee Benefits Security Administration (EBSA) of the DOL has become increasingly aggressive in investigating the operation of ERISA plans and the activities of plan fiduciaries. The time and cost involved in responding to DOL requests have skyrocketed. Although EBSA’s investigations involving all types of plans have become more difficult to deal with, investigations of employee stock ownership plans have become particularly onerous.

In light of Trump’s stated goal of reducing wasteful, unnecessary and intrusive regulations, it is possible that his administration will refocus EBSA’s compliance efforts into more productive and reasonable inquiries that will efficiently identify areas of noncompliance without wasting valuable government and employer resources.

4. Public Company Executive Compensation

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires public companies to make certain disclosures regarding executive compensation and to “claw back” incentive compensation from executives in some circumstances. Trump has been critical of certain aspects of Dodd-Frank and is likely to seek to repeal or significantly weaken the law and its impact. Although it is not clear whether efforts to weaken the law would include its provisions regarding executive compensation, a complete repeal would obviously eliminate those provisions.

The election’s impact on other areas of concern for employers (such as regulation of retirement plans and multiemployer withdrawal liability, for example) are almost total unknowns. Trump has not taken any specific positions regarding these issues (nor has he even mentioned them, to my knowledge). We will have to stay tuned to see how the new administration and Congress will change these areas, if at all.

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