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Tax Cuts and Jobs Act – Affordable Care Act Changes


As we explained in our first article in this series, the Tax Cuts and Jobs Act (the “Act”) made several key changes to the tax treatment of employee benefit plans.  This is the third in a series of articles by which the Spencer Fane Employee Benefits Practice Team will explain many of these key changes.  This article addresses how the new rules affect (or don’t affect) several aspects of the Affordable Care Act (“ACA”).

Key Changes

Contrary to wide-spread media reports, the Act did not repeal the ACA in its entirety.  It did, however, reduce (to $0) the ACA penalty imposed on individuals who fail to obtain health insurance, starting in 2019.  The individual mandate penalty remains in effect for 2018.  For individuals who fail to obtain coverage in 2018, the penalty is $695 per adult or 2.5% of household income, whichever is higher.

The ACA employer mandate, the ACA preventive care mandates, and the much-detested ACA reporting obligations all survived.  Indeed, the IRS has been busy enforcing those rules.  As we reported in our December 20, 2017, article, the IRS recently started issuing notices to employers of proposed penalty assessments under the employer mandate covering calendar year 2015.  The IRS also recently extended the deadline to give individuals the required ACA statements on full-time employee status and health coverage for 2017 (Forms 1095-C and 1095-B) to March 2, 2018. Good-faith relief from penalties has also been extended to 2017 reporting (see our December 13, 2017, article).

Options for Employers

Some have speculated that elimination of the individual mandate penalty will ultimately cause the ACA to unravel entirely.  This is based on the belief that, without the individual penalty, healthy individuals will be more likely to gamble with their health rather than purchase insurance.  As a result, the cost of insurance for those who are sick and really need it will go up, and the ACA will enter a death spiral.  Whether that happens remains to be seen.  In the meantime, employers should continue to comply with their obligations under the ACA. The Spencer Fane Employee Benefits Practice Team will continue to monitor this situation and provide updates as needed.

View the other articles in the Tax Cuts and Jobs Act series here.

This blog post was drafted by Julia Vander Weele, an attorney in the Spencer Fane LLP Kansas City, MO office. For more information, visit spencerfane.com.