If you think your Affordable Care Act compliance worries are over, you’re in a very small minority of optimists.
Only 15% of some 844 executives and attorneys who deal with benefits and employment legal issues recently surveyed by Littler Mendelson, the law firm, believe the ACA will have “no impact” on them over the next year. Nearly one-third (31%) expect it to have a “significant” impact, even though all key provisions of the law have already gone into effect. Meanwhile, the rest (54%) are “moderately” concerned.
The impending presidential election is casting a shadow not only over the ACA but a broad spectrum of employment regulatory matters, according to Littler Mendelson’s 2016 Executive Employer Survey Report.
The poll asked employers to handicap which key facets of the ACA would change if the next president were a Republican. A majority (53%) anticipate a permanent repeal of the 40% excise tax on so-called Cadillac health plans. But even under a Democratic president, odds of repeal are considerable, suggests Ilyse Schuman, a shareholder of Littler Mendelson and co-chair of the Workplace Policy Institute. “Secretary Clinton has expressed displeasure with the Cadillac tax,” she says.
Cadillac tax repeal?
On Wednesday, the “Alliance to Fight the 40,” a coalition of lobby organizations announced that more than 300 members of the House of Representatives have pledged to support legislation killing that tax instead of allowing it to take effect in 2020, as current law allows.
Meanwhile, nearly half (48%) of survey respondents also anticipate changes in the ACA’s bedrock play-or-pay provision. What kind of changes?
“Very much depends upon who’s in the White House and who controls Congress,” Schuman says. (House Speaker Rep. Paul Ryan’s blueprint for replacing the ACA unveiled last month does not feature an employer mandate.)
Still, only 34% of survey respondents anticipate a complete repeal of the ACA.
Overtime rule concerns
One hot-button compensation issue addressed in the survey is the Department of Labor’s updated regulations establishing a higher income threshold below which employees will automatically be deemed non-exempt, and thus eligible for overtime pay.
On December 1, the threshold will jump to $47,476 from today’s $23,600 standard. Nondiscretionary bonuses and commissions, if they are paid out at least quarterly and don’t exceed 10% of compensation, are included in the exempt/non-exempt status determination test.
The regulations were proposed in June of 2015, and did not change substantially when finalized. Nearly two-thirds (65%) of the survey respondents have already conducted an audit to assess how many employees would be affected by the higher threshold.
Time to prepare
“I was surprised by the number of employers (28%) who have done nothing yet to prepare” for the changes, says Lee Schreter, co-chair of Littler Mendelson’s wage and hour practice, and chair of the firm’s board of directors. “Some employers might be underestimating the amount of time it will take to analyze the regulations and make any necessary changes,” she adds.
One potential “hidden cost” of the regulations, warns Schreter, is the “cascade effect” employers will experience if they opt to raise some currently exempt employees’ salaries to reach the higher threshold to maintain their exempt status. Doing so could change the relative earnings of supervisors and the employees they supervise.
Supervisors whose incomes had been only slightly above $47,476 would not appreciate seeing their direct reports’ salary levels nearly reach their own. That might require raising those supervisors’ salaries to maintain the original spread--an effect that could cascade up the organizational chart at great expense, Schreter says.
Following are some actions already taken by relatively small minorities of survey respondents in response to the new overtime pay eligibility rule:
· Reviewed and updated job descriptions for exempt employees (28%),
· Raised salaries or reclassified some employees as non-exempt in anticipation of the rule going into effect (18%),
· Updated internal systems to better track hours for employees that will be reclassified as non-exempt (14%), and
· Revised or adopted new wage-hour policies (8%).
One employee benefit-specific implication of the new rules pertains to employers whose 401(k) plans include participant overtime pay in the base of income used when determining fixed income-based contribution amounts. If such plan sponsors anticipate a significant increase in overtime pay obligations due to newly reclassified non-exempt workers who regularly put in more than 40 hours a week, they need to project increases in those higher 401(k) obligations.
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