The U.S. Presidential Election's Impact on Benefits: 3 Ways to Prepare for Coming Changes
As a new administration takes the reins of the country, along with Republican majorities in both houses of Congress, the election's impact on benefits could be significant. In what was a divisive election, Americans on both sides of the political spectrum responded strongly. According to a recent survey by Gallup, 75% of Americans remain "surprised" by the results, approximately 40% are "relieved," and 42% are "afraid."
Just like you can't predict each individual's reaction to the election results, you won't be able to foresee every possible outcome that will come out of this change in administration. You can, however, do your best to make sure your organization is prepared for the election's impact on benefits. "Much remains to be seen with the new president and the new Congress. There will continue to be uncertainty as the U.S. political landscape continues to evolve and until we start to see new Executive Orders and legislation issued," says Ellen Feeney, vice president, counsel, in ADP's Global Compliance group.
To be prepared, organization's should start by taking inventory of health care plans, retirement plans and executive compensation plans.
1. Health Care Plans
One significant change could be the repealing and replacing of the Affordable Care Act (ACA). While this change will certainly not occur overnight and it is not clear what exactly any replacement will include, changes could include heavier use of Health Savings Accounts (HSAs), the ability to purchase insurance across state lines and the allowance of states to manage Medicaid, according to information from DonaldJTrump.com.
Organizations don't have enough to go on to determine which of these changes is most likely, but they can begin the process of planning for some of them. One important task will be to confirm that your plan documents are current and being administered in accordance with plan terms. Adopting new changes to plans will be easier if your organization doesn't have to look backward and correct current compliance issues.
Additionally, the expansion of HSAs and their tax incentives gives organizations an opportunity to plan for future benefit offerings. HSA contributions are tax favorable and the amounts contributed can roll over with tax-free growth. If HSA funds are used for nonqualified medical costs, those amounts will be taxed accordingly. Thus, HSAs give organizations another option for planning for health care expenses as well as retirement.
2. Retirement Plans
Organizations should also examine their retirement plan offerings because potential tax changes could affect retirement participation and the way workers plan for retirement, according to Forbes. In addition, state activity in the retirement plan arena could also change. Currently, both the Internal Revenue Service (IRS) and the Department of Labor (DOL) are heavily auditing retirement plans. But because it is unclear what, if any, change the new administration could bring to this process, organizations should continue to diligently check their current retirement plans — from documents to administration — to confirm compliance with applicable regulations. This should allow for more flexibility if future changes need to be adopted quickly.
3. Executive Compensation Plans
Organizations would also be wise to review their current executive compensation plans. For example, there could be changes to the Dodd-Frank Act, which focuses on an array of executive compensation issues and disclosures for public businesses. Additionally, changes may impact Section 409A and 457(f)s along with other executive compensation rules under Sections 162(m) and 280G.
Although a repeal of these sections seems unlikely, revisions to these sections could be significant, thus impacting executive compensation for public and nonpublic businesses. Much like health plans and retirement, organizations should take time to assess their executive compensation arrangements to confirm current compliance and make the necessary preparations to be ready to pivot as necessary.
"Uncertainty on changes that may impact HR, payroll, and benefits will continue as Republicans work through the complex policy, political and practical ramifications of deciding what's next in these areas, including the future of the ACA," Feeney says. "Both employers and employees will be impacted by all the changes that have yet to be defined." By conducting a comprehensive review of current compliance needs, HR leaders should be able to help their organization be prepared for the election's impact on benefits in the short term and ready for whatever future changes may occur down the line.