House Mulls Tax Exclusions DOL on ACA Wage Laws Interaction

House Mulls Tax Exclusions DOL on ACA Wage Laws Interaction

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House Mulls Tax Exclusions DOL on ACA Wage Laws Interaction
Calendar15 April 2016

The current employee tax exclusion for employer-provided health benefits came under scrutiny by lawmakers at an April 14 hearing held by the House Ways and Means Committee. Hearing witnesses included experts who argued that capping the employee income tax exclusion and providing universal tax credits would help to raise workforce wages, among other advantages. But a third witness warned that capping or ending the tax exclusion would undermine employer-sponsored coverage by removing a key incentive for employers to offer health plans, and break up employer risk pools that now include participation by younger, healthier workers.

The hearing comes as a House Republican task force continues work on developing an alternative to the Affordable Care Act (including repeal of the law’s “Cadillac” excise tax on high-cost plans). The task force is considering proposals that would cap or end the employee tax exclusion, using the resulting revenue to establish income tax credits or a standard deduction for the purchase of health insurance.

Recent Labor Department guidance clarifies how the ACA interacts with the Service Contract and Davis-Bacon Acts, which require government contract workers to receive prevailing local wages and fringe benefits. The new memorandum to federal contracting agencies addresses several questions, including that employers paying an employer shared responsibility assessment can’t credit that amount against their Service Contract Act or similar obligations.

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