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Tuesday September 16, 2014

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Affordable Care Act (ACA) Premium Tax Credits

On September 5, House Ways and Means Chairman Dave Camp (R-MI) and Education and Workforce Committee Chairman John Kline (R-MN) sent a letter to Congressional Budget Office Director Douglas Elmendorf and Joint Committee on Taxation Chief of Staff Thomas Barthold. Camp and Kline asked whether the White House planned to add multi-employer plans to the Affordable Care Act. If the White House were to do so, that may enable union members covered in the multi-employer plans to benefit from the ACA premium tax credits. This also would involve a substantial additional cost for the budget.

In a July 17 letter to Senators and Representatives, Edwin Hill, President of the International Brotherhood of Electrical Workers, and John Grau, Chief Executive Officer of the National Electrical Contractors Association, explained the problem.

Many unions in the construction industry use multi-employer health plans to provide affordable healthcare coverage. Hill and Grau note, "Unfortunately, implementation of the ACA is jeopardizing multi-employer plans and the individuals the plans cover. We believe it will be impossible for our funds to survive if the administration continues ACA implementation."

Because construction firms with less than 50 workers are not required to have coverage under ACA, there is a "vast competitive disadvantage for the 4,500 NECA contractors nationwide that responsibly provide coverage for their employees."

Hill and Grau request modification of ACA. If there is no modification, the contracting companies that have the multi-employer plans and cover many union members will be at a major economic disadvantage. This could lead to a reduction in union jobs.

The Congressional Research Service (CRS) report explained the provisions of ACA. After reviewing the bill, CRS stated, "Because a multi-employer health plan would seem to constitute minimum essential coverage for purposes of the definition for a coverage month, it seems unlikely that an individual who is enrolled in a multi-employer health plan would be eligible for a premium tax credit."

CRS was referring to the ACA plan that individuals who purchase health insurance through one of the state insurance exchanges will be permitted to receive a tax credit. The credit will be available for individuals who have income up to 400% of the federal poverty level.

Editor's Note: The ACA implementation date is October 1, 2013. Union leaders are concerned that larger employers may either reduce the number of jobs or eliminate their health coverage and send all employees to the exchange. However, this could involve payment of penalties and may not be possible under the contracts between employers and the unions. The CRS memorandum suggests that multi-employer plans will not qualify for ACA tax benefits. The administration continues to develop guidelines for ACA implementation.

Senate and White House Tax Meetings End

For the past three months, there have been a series of meetings between White House staff and key Republican Senators. The White House was represented by Chief of Staff Denis McDonough, Deputy Chief of Staff Rob Nabors and Office of Management and Budget Director Sylvia Mathews Burwell. The eight Republican Senators were Kelly Ayotte of New Hampshire, Daniel Coats of Indiana, Bob Corker of Tennessee, Lindsay Graham of South Carolina, John Hoeven of North Dakota, Johnny Isakson of Georgia, Ron Johnson of Wisconsin and John McCain of Arizona.

The eight Republican Senators had hoped to develop an agreement with the White House for both budget and tax reform. However, the White House continued to advocate a major tax increase as part of the process. The Republican Senators favored either a modest tax increase or no tax increase as part of the tax reform. As a result of the inability to come to agreement, all parties agreed to end the series of meetings.

Sen. Bob Corker stated, "It's very evident that there just isn't common ground at present and we've all agreed there's no reason for these talks to continue."

Editor's Note: Congress and the White House face two pressing deadlines. The continuing resolution to operate the government ends on September 30, 2013. When the new fiscal year starts on October 1, there will need to be new authorization for federal spending. The larger problem is likely to be the debt limit. The nation currently has reached the $16.7 trillion debt limit that was previously authorized. Treasury has been borrowing from retirement funds to continue to operate. By mid-October, those internal funds will be exhausted and it will be necessary to increase the authorized debt level or reduce government operations.

Published September 6, 2013

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