On December 20, 2019, President Trump signed H.R. 1865, the “Further Consolidated Appropriations Act of 2020” or the “Act”). The Act also includes a number of retirement and health and welfare provisions of interest to employers and service providers.
The Act would permanently repeal three taxes imposed under the Affordable Care Act:
- Cadillac Tax: The Cadillac tax on high-cost employer health plans, which is scheduled to take effect in 2022. The tax was originally set to take effect in 2018 and apply to employer-sponsored health plans that in that year cost more than $10,200 for individuals and $27,500 for families. The rate is set at 40% of coverage costs that exceed those thresholds, which will be adjusted annually for inflation.
- Medical Device Tax: A 2.3% tax on medical devices, which is currently suspended through Dec. 31, 2019. The tax applies to devices such as hip implants and pacemakers sold by a manufacturer, producer, or importer.
- Insurance Provider Fee: An annual fee imposed on health insurance providers.
The Act contains other health and welfare provisions:
- Smoking: The measure would increase the minimum age to purchase tobacco products to 21 years of age, from 18.
- Reduction in Medical Expense Deduction Floor: The Act extends until December 31, 2020, the lower threshold of 7.5 percent of adjusted gross income for medical expense deductions. The Act keeps the lower (7.5 percent) threshold in place for 2019 and 2020.
- Above the Line Deduction for Qualified Tuition and Related Expenses: Individuals are allowed a deduction equal to their qualified tuition and related expenses, including amounts paid for tuition, fees and other related expense for an eligible student that are required for enrollment or attendance at an eligible educational institution. The deduction was scheduled to sunset at the end of 2017, but the Act retroactively extends the deduction until the end of 2020.
- Employer Credit for Paid Family and Medical Leave: The 2017 Tax Cuts and Jobs Act established new Section 45S of the Code, which provides a business tax credit for certain employer-paid family and medical leave. The paid family and medical leave credit ranges from 12.5 percent to 25 percent of the amount of wages paid to qualifying employees for 2 to 12 weeks of family and medical leave annually, where such wage payments are at least 50 percent of the wages normally paid to an employee. The paid family and medical leave credit was originally available for wages paid in 2018 and 2019. The Act extends the credit through 2020.
- PCORI: The Patient-Centered Outcomes Research Institute would be extended through fiscal 2029. The measure would provide $275.5 million for it in fiscal 2020, increasing to $399 million for fiscal 2029. It also receives revenue from fees on health insurance and self-insured plans.