While we can’t profess to have read through all of the President’s recently released budget proposal (we are practicing lawyers, after all), much of the discussion on its retirement policies focuses on only a few select provisions. While many of them are unlikely to see the legislative light of day in a Republican-controlled Congress, it is interesting to note the parallels in some of these proposals to the Affordable Care Act and their perhaps unintended effects.
Below, we have set out a chart that lists a few of the items from the budget, compares them to similar provisions in the ACA, and gives a brief note on the likely effect:
|2016 Budget||ACA||Possible Effects|
|- Mandate that employers with 10 or more employees offer a workplace retirement plan or participate in the government’s auto IRA program.||- Mandate to offer insurance coverage to “full-time” employees or pay a penalty if those employees receive subsidies for buying insurance through a government-sponsored website.||- Has the potential to expand coverage by “encouraging” employers to adopt plans|
|- Impose a $3 million cap on retirement savings.- Impose double-taxation on retirement contributions for individuals earning over $250,000||- 40% excise tax on so-called high cost health plans (which may not turn out to be so high a cost)||- Discourage sponsorship of plans by employers, causing them or their employees to utilize the government-run program.|
The latter proposals are re-runs of what the President proposed in his last budget, and we have written before about how misguided they are. But the interesting aspect of what you see in the proposed chart is that the proposals seem to be working at cross purposes. On the one hand, some of the policies appear to be designed to encourage employer participation in the retirement or health plan space. However, at the same time, other policies that are part of the very same legislation/legislative proposals will discourage employer participation.
Whether the cross purposes are intentional or merely confused are impossible for anyone outside the Administration to know. The apparent lack of intellectual consistency, however, is troubling for those on the ground who understand how these systems actually work.
The views of this post do not necessarily reflect the views of Bryan Cave LLP or anyone other than the authors.