Compliance Issues to Watch for in 2017
Organizations are already grappling with an uncertain legislative and regulatory landscape. And as the New Year gets closer, possible changes to federal and state human resources and health compliance laws are looming large.
There’s uncertainty around potential changes to health care systems, tax regulation and employment law, as well as the constant vigil that’s under way to see what decisions the incoming Trump administration will make – and their impact. Clearly, it’s still too early to know exactly what will change or to what extent. But there are certain laws and regulations that appear destined to be altered. That includes the Affordable Care Act (ACA), the revised Employer Information Report (EEO-1) and related pay equity regulations, the federal tax code, retirement plans, and the Fair Labor Standards Act (FLSA).
While we’re all waiting to see how changes to these business-critical regulations may impact us, here are six considerations to keep in mind:
1. A complete and immediate repeal and replacement of the ACA is unlikely, but changes to the law are all but certain. The ACA is one of the most debated pieces of legislation in the United States today. But what does that mean for the future of health care reform in the near term?
First and foremost, it’s important to focus on facts versus speculation:
- The Affordable Care Act is the law, and will remain so until it’s not.
- Change won’t happen overnight. Any transition to a new structure will likely take time – by some estimates up to two or three years.
- Approximately 10 million people are getting subsidized health coverage through the ACA marketplaces (aka exchanges), and another 10 million are insured through the ACA’s expansion of Medicaid. Certainly, no one wants to see these people lose their health coverage as a result of an ACA repeal.
- A wholesale replacement of the ACA would require congressional action.
It’s also important to remember that any change to the ACA will bring its own set of new compliance complexities and challenges. Regular monitoring of these initiatives is one of the best ways to inform your understanding of the complex compliance, financial, and strategic issues that may impact your clients’ workforce.
2. Changes to the EEO-1 form could proceed, be delayed, revised or completely withdrawn. However, states are expected to continue pay-equity efforts in the foreseeable future. Each year, businesses are required to file an EEO-1 report with the U.S. Equal Employment Opportunity Commission. Revisions to the report will now require companies to include information on wages and hours worked along with longstanding reporting of workforce characteristics by gender, race/ethnicity, and job category.
Employers are preparing to comply with the published EEO-1 revisions that take effect in 2017 by merging data from HR, payroll and timekeeping systems, and evaluating how compliance will impact their 2017 budgets. It’s too early to determine the specific changes to federal and state pay equity laws and reporting, but an examination of the issue and potential legislative and regulatory responses is expected to continue.
3. Comprehensive tax reform is likely. This should come as no surprise to finance and HR leaders. A new presidential administration or shift in political party control in Congress often precipitates tax reform. This year, elements that could affect employer sponsored benefits include proposed caps on the tax preference for employer health benefits, limits on the tax preference for retirement plan savings and employer contributions, and expanded health savings accounts. We may also see reform elements that directly affect businesses, individuals, and international business taxation.
Business leaders should keep abreast of tax reform legislation as it progresses through Congress, and prepare to comply.
4. Currently, one-third to one-half of the U.S. workforce cannot save for retirement through payroll deductions. Automatic-enrollment retirement plan mandates have been enacted by several states. Although these laws are intended to address employers that do not offer a retirement plan, they may affect employers who already sponsor retirement plans. Further, recent U.S. Department of Labor regulations would permit mandates by large cities or counties. These rules may be subject to review or withdrawal by the new administration.
Leaders of large businesses should prepare for compliance with diverse state and local automatic-enrollment retirement plan mandates, and small businesses may want to monitor Congress’s potential to permit multi-employer plans, which might facilitate adoption.
5. Uncertainty surrounds the FLSA overtime rules, with a recent legal injunction putting initial changes on hold. Even though the fate of the proposed FLSA changes is uncertain, it’s still imperative that employers determine who in their workforce could be impacted by the overtime rules, as well as evaluate which benefits they offer that could be impacted. Communication with employees is critical during this time of uncertainty. The new administration could possibly amend the FLSA overtime rules or potentially eliminate the automatic increase clause, which states that salary levels for determining exempt status will automatically increase every three years beginning January 1, 2020.
6. A variety of new paid sick leave and family leave laws have also been proposed, increasingly at state and local levels. Proposed tax rules would allow working parents to deduct from their income taxes child care expenses for up to four children and expenses for elderly dependents. New dependent care savings accounts, tax-deductible contributions and tax-free appreciation year-to-year are potential changes that could materialize.
While there are no immediate actions or changes companies must prepare for on this front, business leaders should remain alert for possible changes.
Keeping a watchful eye on developing and evolving human resources and health care reform legislation only makes sense in an uncertain political climate. In the meantime, however, a prudent path is to comply with existing laws and regulations, while you prepare for potential shifts that could affect your clients and their employees.