Executive Orders on the ACA and the Fiduciary Rule

Executive Orders on the ACA and the Fiduciary Rule

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Written by: Joseph Camilli

Date published: February 8, 2017

Reading time: 8 Minutes

 

On January 20th, President Trump issued one of his first Executive Orders and in it he addressed the Affordable Care Act (ACA). The order “seeks to minimize any burdens caused by the Affordable Care Act,”[1] but what, if any, practical application this order has on the law is still unknown. Already there has been a deluge of articles written about this order and the state of the ACA.[2]  Here’s the best summary I can provide: Nothing has changed for the time being because the order is vague.

Things that could possibly change in the short term include the IRS unilaterally doing away with the employer reporting requirements under the Internal Revenue Code (IRC) Section 6055 and 6056 (those pesky 1094- and 1095- forms).[3] That said, employer penalties for non-compliance would have to be removed via the rulemaking procedures, so to the extent that the IRS would be complying with their enforcement mandate, this seems difficult to imagine. Moreover, the IRS has not announced any ACA penalties for employers who were out of compliance from their 2015 plan year filings (filed in early 2016), so it remains to be seen whether the IRS can enforce the penalties as they stand already. A few ACA fees, such as the PCORI fee and a portion of the 2016 Transitional Reinsurance Fee, may be scrapped early.

Timothy Jost J.D.[4], an Emeritus Professor at Washington and Lee University School of Law, wrote, in my opinion, the best practical summary of the order and its legal ramifications that I’ve come across The intricacies of Administrative Law and Federal Rule Making are not things easily discussed on the nightly news, but Jost does a great job of boiling down the ramifications of the order in fairly plain English. Some of his observations include the following: (1) The order instructs federal agencies and departments to abide by the formal notice-and-comment requirements of federal rulemaking, which is fairly time-consuming and arduous process; (2) that any changes are to be made “to the maximum extent permitted by law,” which in and of itself acknowledges the legitimacy of the ACA; and (3) to the extent that that the order commands for the reduction of hardship on businesses and individuals caused by the ACA, the individual mandate in-and-of-itself likely cannot be construed as a hardship because that requirement is embedded in law and would take Congressional action to repeal.[5]

This latter point is particularly interesting because Jost posits that if Congressional proponents of “repeal and replace” move too quickly or aggressively, the individual mandate could become a major source of litigation which would further delay those very same repeal and replace efforts. I strongly recommend looking into Jost’s blog for a legal scholar’s perspective on this issue.

As far as President Trump’s recent Executive Order (EO) delaying the enforcement of the Fiduciary Rule, this has a bit more teeth, though it’s also debatable how much effect the enforcement delay will have in the short term. The President’s EO doesn’t say anything about putting a formal delay of the Fiduciary Rule’s implementation in place.  Rather, it asks the DOL to review the rule to determine whether it complies with the Administration’s three goals: (1) to maintain access to retirement services, (2) to avoid causing harm to the financial services industry, and (3) to avoid increasing litigation and retirement plan costs for individual consumers.[6] Should the review find that the rule does not promote these stated goals, the DOL is then tasked with altering the rule or revoking it altogether.

This EO, therefore, is not the death knell for the Fiduciary Rule that some expected, either in substance or effect. Additionally, the financial services industry has already taken numerous steps towards compliance with this new rule because, as one might expect, effecting change in the financial services industry is not like turning a sports car on a dime. Rather, changing the way a trillion-dollar industry operates is far more akin to steering an ocean liner: big, slow, calculated turns. As many industry insiders and observers will note, these proposed changes have been around for years and many companies and non-federal regulatory bodies already have begun following these rules.[7] The biggest takeaway from a practical, employer-specific point of view is that you should be engaged with your financial advisor, both on an individual basis and as an employer. Ask him or her to identify the plan costs and fee structures as transparently (and in as plain language) as possible. He or she should be able to provide this information fairly quickly, as in, a day or two. It’s the age-old exercise of following-the-money.

From a regulatory perspective, the DOL and President Trump’s administration have a lot of work to do around the ACA and the Fiduciary Rule. Until more concrete regulations or administrative guidance are provided, keep following the rules that are on the books. If you have any questions or would like some assistance with a retirement plan review, my associates and I at Infinity Benefit Solutions are happy to help.

 

[1] Trump signs ACA executive order, Benefits Pro, Allison Bell, Jan. 20, 2017. http://www.benefitspro.com/2017/01/20/trump-signs-aca-executive-order?ref=rss&kw=Trump%20signs%20ACA%20executive%20order&et=editorial&bu=BenefitsPRO&cn=20170121&src=EMC-Email_editorial&pt=News%20Alert

 

[2] See, e.g. Trump order declares he’ll seek ‘prompt repeal’ of ACA, Employee Benefits Advisor (EBA), Anna Edney et al, Jan. 22, 2017.  http://www.employeebenefitadviser.com/news/trump-order-declares-hell-seek-prompt-repeal-of-aca?utm_campaign=eba%20daily-jan%2023%202017&utm_medium=email&utm_source=newsletter&eid=2306a20a5e21a4ffbc9df376e91f4537

 

See also, e.g. Unwinding ACA: Impacts & Implications, EBA, Aggregated Sources, Jan. 20, 2017. http://www.employeebenefitadviser.com/news/healthcare-reform-the-sourcemedia-business-issue-scorecard?utm_campaign=eba%20daily-jan%2023%202017&utm_medium=email&utm_source=newsletter&eid=2306a20a5e21a4ffbc9df376e91f4537

 

See also, e.g. 5 ways Trumpcare is likely to change employee benefits, EBA, Craig Hasday, Jan. 20, 2017. http://www.employeebenefitadviser.com/opinion/5-ways-trumpcare-is-likely-to-change-employee-benefits?utm_campaign=eba%20daily-jan%2023%202017&utm_medium=email&utm_source=newsletter&eid=2306a20a5e21a4ffbc9df376e91f4537

 

See also, e.g. Trump may end ACA insurance requirement, Conway says, EBA, Zachary Tracer, Jan. 20, 2017. http://www.employeebenefitadviser.com/news/trump-may-end-aca-insurance-requirement-conway-says?utm_campaign=eba%20daily-jan%2023%202017&utm_medium=email&utm_source=newsletter&eid=2306a20a5e21a4ffbc9df376e91f4537

 

See also, e.g., On First Day, President Trump Issues Executive Order on ACA, Deloitte, Staff article. http://benefitslink.com/articles/Deloitte_TrumpACAorder.pdf

 

[3] How Trump’s First Executive Order Could Affect Employer Health Plans, Society for Human Resource Management (SHRM), Stephen Miller, Jan. 24, 2017. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/executive-order-employer-plans.aspx

[4] For the bio and healthcare related blog of Timothy Jost, see: http://healthaffairs.org/blog/author/jost/

[5] See, e.g., Trump Executive Order On ACA: What It Won’t Do, What It Might Do, And When, Health Affairs Blog, Timothy Jost, Jan. 20, 2017. http://healthaffairs.org/blog/2017/01/20/trump-executive-order-on-aca-what-it-wont-do-what-it-might-do-and-when/

[6] Here’s a copy of the executive order Trump signed on Americans’ retirement money, Business Insider, Rachel Levy, Feb. 3, 2017. http://www.businessinsider.com/trump-executive-order-official-copy-on-fiduciary-rule-retirement-2017-2

[7] Fiduciary rule will live on, despite Trump’s move to delay it, Employee Benefit Advisor, Alexander Assaley, Feb. 6, 2017. http://www.employeebenefitadviser.com/opinion/fiduciary-rule-will-live-on-despite-trumps-move-to-delay-it

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