Vol. XII, Issue 21

December 22, 2015

Legislative Updates—2016 Consolidated Appropriations Act Approved

2016 Consolidated Appropriations Act
On December 18, 2015, President Obama signed into law the 2016 Consolidated Appropriations and Protecting Americans from Tax Hikes Act (the Act). The Act primarily approves $1.8 trillion of federal spending and funds the government through September 2016. Within its many provisions, the Act makes two major changes that are important to health and retirement plans administered by the General Board.

1) Two-Year Delay of “Cadillac” Tax on High Cost Employer-Sponsored Health Coverage
The Act delays the effective date of the Cadillac tax by two years—it is now scheduled to become effective in 2020. The 40% “Cadillac” excise tax was originally scheduled to apply to high-cost employer-sponsored health plans, effective for tax years beginning in 2018. Plans that cost more than $10,200 for single coverage and $27,500 for non-single (e.g., family) coverage would have been subject to the tax in 2018. In addition to delaying the effective date, the Act also makes the Cadillac tax deductible (for taxpaying organizations) and establishes a study of possible better ways to account for demographic cost differences among plans.

This delay gives plan sponsors more time to prepare for the tax and critics of the tax time to work toward repeal or another delay.

2) Church Plan Clarification Act Adopted
The Act also incorporates the provisions of the Church Plan Clarification Act—a bill authored by the Church Alliance (of which the General Board is a member) to provide tax-related corrections and clarifications critical to church benefit plans. Under these provisions, the IRS is prevented from aggregating certain church plans together for purposes of the non-discrimination rules, which prevent highly compensated participants from receiving disproportionate benefits under the plan, and provides flexibility for church employers in determining which other church employers are in its “controlled group” of employers. This may help churches in ascertaining the applicability of the Affordable Care Act’s large employer shared responsibility rule, for example. Also, certain grandfathered church defined-benefit plans, such as the Clergy Retirement Security Program (CRSP), no longer must meet certain requirements relating to maximum benefit accruals. Church plans are now allowed to offer auto-enrollment in all 50 states, similar to corporate 401(k) plans. Additionally, the provisions make it easier for church plans to engage in certain plan-to-plan transfers and mergers, and allow church plans to invest in collective trusts. These provisions generally are effective on the date of enactment.

The Church Alliance worked diligently during this 114th Congress and the previous two Congresses to push the Church Plan Clarification Act to enactment. This accomplishment is the result of the strong support from the members of the Church Alliance and numerous individuals within the member denominations, including The United Methodist Church.

Implications for HealthFlex Plan Sponsors

HealthFlex intends to pursue plan design strategy for 2016 and 2017 that was outlined at the 2015 HealthFlex Summits in March and November—we do not anticipate any immediate changes in response to this legislation.

The Center for Health will continue to monitor regulatory guidance to determine appropriate action and timing for changes to HealthFlex plan designs and how health accounts are handled in the future. Our objective will continue to be for HealthFlex plans not to be subject to the Cadillac tax.


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