Overviewing the Status of the Overtime Rule and Replacement of the Affordable Care Act

Tuesday March 14th, 2017

RegulationsThe fate of several federal regulations remain unclear as Congress and the Trump Administration work on scaling back or repealing regulations put into place by the former administration.

Following President Trump’s inauguration, pending regulations across all federal agencies were frozen, which often happens following a change in the administration within the White House. Some of these regulations are still up in the air, although new information is released regularly.

Overtime

The revised overtime rule was supposed to go into effect prior to the inauguration, but a federal judge in Texas blocked it just nine days before its effective date. It would have raised the annual salary threshold for those eligible for overtime pay from $23,660 to $47,476. The revised threshold would have made an estimated 4 million Americans eligible for overtime pay.

While the rule did not go into effect, some companies had already changed pay rates to comply. Before it was blocked, Wal-Mart had increased manager salaries to $48,500. After the court injunction, Wal-Mart announced that raises would stay in place.

The Labor Department may issue a more modest rule, and there is some talk of a new threshold in the $35,000 range. But it’s still not clear as to whether the overtime rule will be “repealed and replaced” or eliminated altogether.

The Justice Department requested and was granted a third extension to file a brief in which it would state position on the appeal on May 1.

ACA

Another executive order signed into place by President Trump allowed federal agencies to offer exemptions from, delay provisions of, or waive provisions of the Affordable Care Act. The order doesn’t specifically call out employers but will most likely cover them.

Republicans released their ACA-replacement bill through Congress, titled the American Health Care Act. This bill will likely be debated and amended, but it does include several measures that impact payroll departments.

  • The bill proposes elimination of the additional Medicare tax of 0.9 percent on employees' annual wages of more than $200,000, which is scheduled to go into effect Jan. 1, 2018.
  • The bill proposes elimination of penalties for applicable large employers that do not offer sufficient health coverage to full-time employees and dependents.

    • If this portion of the bill goes through, employers would no longer have to calculate if they have 50 or more full-time equivalent employees in one year.
    • The bill proposes elimination of the annual limit on nontaxable contributions to employees' health flexible spending accounts, along with an increase to the annual limits on nontaxable contributions to health savings accounts with high-deductible health plans.

  • In 2018, HSA limits for self-only coverage would increase to $6,550 (up from $3,400 for 2017) and the limit for family coverage would increase to $13,100 (up from $6,750 for 2017).
    • The bill proposes a delay of the “Cadillac tax,” or 40 percent imposed on employer-sponsored benefits from high-cost health plans, to Jan. 1, 2025.

The AHCA is not yet law, so employers must continue to comply with the ACA provisions that remain in place.