the trump effect: impact to the employee benefits … james...impact to the employee benefits...

The Trump Effect:Impact To The Employee Benefits Industry

James Slotnick, JDSun Life FinancialAVP, Government Relations

INTERNAL USE ONLY 2

Working With The 115th Congress

Looking to 2018

Priorities Of The Trump Administration

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Since 1953…..

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Eisenhower Kennedy Nixon Carter Reagan Bush 41 Clinton Bush 43 Obama Trump

Legislation Passed In First 100 Days After Election

3https://fivethirtyeight.com/features/a-presidents-first-100-days-really-do-matter/

#1

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What Drove His Legislative Success?Congressional Review Act • CRAs must be used with 60 “legislative days” of a new

regulation

• Removes regulation and forbids that Agency from issue a “substantially similar” regulation in the future

• 1996 – 2017: Used 1 time (2001)

• 2017: Used 15 times to roll back “midnight regulations”

• Requires only a simple majority vote – cannot be filibustered

FOR PRODUCER USE ONLY

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Since 1953…..

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Eisenhower Kennedy Nixon Carter Reagan Bush 41 Clinton Bush 43 Obama Trump

Legislation Passed In First 200 Days After Election

#8

5http://www.businessinsider.com/how-many-laws-has-trump-signed-so-far-200-days-obama-clinton-bush-reagan-2017-8

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How Do You Define Legislative Success?President Trump has:

• Passed 47 bills

• Repealed 15 Obama-era Regulations

• Filled 1 Supreme Court Vacancy

• Avoided an October Government Shutdown

• Increased US Debt Ceiling, avoiding an October financial crisis

President Trump has not:

• Signed a “signature” piece of legislation

• Moved ACA Repeal or Tax Reform as quickly as planned


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Senate rules have slowed President Trump With a 52 seat majority in the Senate Republicans:

• Cannot bring most legislation to a vote on the Senate floor because of filibuster and amendment rules⎻ Generally requires 60 votes for “Cloture”

• Certain budget legislation cannot be filibustered⎻ Generally speaking, this legislation can not increase federal

spending or increase deficits


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Recent uses of Reconciliation

• Bush Tax Cuts• Economic Growth &Tax Relief Reconciliation Act of 2001

• Jobs & Growth Tax Relief Reconciliation Act of 2003

• Both leveraged “sunset” provisions

• Affordable Care Act• Health Care and Education Reconciliation Act of 2010

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Can Congress Pass ACA Repeal & Tax Reform?

• ACA Repeal & Replace: Seems Unlikely Before 2019- 9/30 Deadline is Saturday

• Tax Reform: Yes, after 9/30- Reconciliation Instructions for 2018 Fiscal Year will

be used for Tax Reform- Bush Tax Cuts – 10 Year Cut- Could they be used for ACA & Tax Reform?

INTERNAL USE ONLY 10


Looking to 2018


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- Next Steps For ACA

- Tax Reform

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2014 2015 2016 2017

Estimates vs. actual

CBO

High

Ending70% of projection

64% of projection

40% of projection

ACA: Choose Your Own Statistics

Source: http://www.cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf, page 20https://aspe.hhs.gov/sites/default/files/pdf/118601/Target_brief_1014_FINAL.pdf page1https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-06-02.htmlhttps://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-03-11.html

41% of projection

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$0

$100

$200

$300

$400

$500

$600

$700

National Average New Jersey Maine Oregon Louisiana Arizona

Exchange Premium Increases 2013 - 2017

2013 2017

105% Increase55% Increase

190% Increase

110% Increase

123% Increase

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12% Increase

Source: https://aspe.hhs.gov/system/files/pdf/256751/IndividualMarketPremiumChanges.pdf

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0%

5%

10%

15%

20%

25%

18-64

CDC’s Uninsured Rate 2010 - 2016

2010 2016

49 Million

29 Million

14https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201702.pdf

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■ Adopted Expansion ■ Not Adopted Expansion

31 States (and DC) Have Expanded Medicaid Programs

OHWV

VA

PA

NY

ME

NC

SC

GA

TN

KY

IN

MIWI

MN

IL

LATX

OK

ID

NV

OR

WA

CA

AZNM

CO

WY

MT ND

SD

IA

UT

FL

AR

MO

MS AL

NE

KS

AK

DC

Medicaid enrollment has increased 18 million since

2014• Federal government

scheduled to cover 90% of expanded Medicaid costs

Source: Kaiser Family Foundation

Medicaid Expansion Has Grown Insured Population

2013 Medcicaid Enrollment June 2017 Medicaid Enollment

Total: 57 Million Total: 75 Million

Washington: 1.1 Million Washington: 1.8 Million

http://www.kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D

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What Is Next For ACA?Repeal and Replace- No near term viable path forward after 9/30

Bi-Partisan “Fix” For Cost Sharing Reductions- Possible, but difficult path forward

Single Payer- No near term viable path forward – but important to watch

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Next ACA Battleground: Cost Sharing Reductions Two types of ACA financial assistance

1. Premium Subsidy- Available if you earn less than 400% of the FPL- Fully funded by ACA

2. Cost Sharing Reductions- Available if you earn less than 250% of the FPL

- Reduce Deductible and OOP costs- Unclear if properly funded by ACA

- House Lawsuit- President Trump must authorize month to month

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ACA enrollment figures

2017 June Enrollment

10.3M

8.7M

1.6M

Source: Center for Medicare & Medicaid Services https://downloads.cms.gov/files/effectuated-enrollment-snapshot-report-06-12-17.pdf

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Without financial assistance

With financial assistance

8.7 M

5.9M

2.8M

Enrollees With Assistance

With Premium Subsidy & CSR

With Premium Subsidy Only

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Bi-Partisan Proposal Being “Discussed”

Senate Health, Education, Labor & Pension (HELP) Committee

- Fully fund CSRs for a period of time vs month to month

- “Stabilize” insurer participation in the individual market

- Provide more Section 1332 flexibility

- Status: Was dead, but now possible (maybe)

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Senator Sanders’ Single Payer Proposal- Create a single payer system run by Federal Government

- Would end employer based coverage, Medicare, and Medicaid coverages, all combining into this new program

- Eliminate of pocket costs EXCEPT for prescription drug costs

- Plan’s $1.4 Trillion cost paid for through:- 2.2% employee payroll tax- 6.2% employer payroll tax- Targeted tax increases on high income earners

- Plan would be phased in over a 4 year period

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Why Disrupt The Entire Market?

Employment-based48%

Non-group7%

Medicaid 19%

Medicare13%

Military health care4%

Uninsured 9%

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Supporters of Senator Sanders’ ProposalCo-sponsors of the bill:• Kamala Harris (D-CA)• Tammy Baldwin (D-WI)• Cory Booker (D-NJ)• Kirsten Gillibrand (D-NY)• Martin Heinrich (D-NM)• Mazie Hirono (D-HI)• Patrick Leahy (D-VT)• Jeff Merkley (D-OR)• Brian Schatz (D-HI)• Tom Udall (D-NM)

Co-sponsors of the bill:

• Elizabeth Warren (D-MA)

• Ed Markey (D-MA)

• Richard Blumenthal (D-CT)

• Al Franken (D-MN)

• Sheldon Whitehouse (D-RI)

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- Next Steps For ACA

- Tax Reform

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A Tough Choice For RepublicansOption #1: 10 Year Tax Cut – Ignore Revenue Neutrality- Reduce individual and corporate rates- Keep most deductions / exclusions in place- The Pitch: Economic growth will offset lower tax rates

Option #2: Tax Reform – Revenue Neutral- Reduce individual and corporate rates- Offset reduced revenue by eliminating certain tax deductions /

exclusions- The Pitch: Fiscally prudent way to create a pro-growth economy

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Highlights Of “Unified Framework”

Individual Tax Rates Decrease- 7 Tax Brackets Move To 3 Tax Brackets

- 12% / 25% / 35%- AMT Repealed

- Standard Deduction Doubles- $12,000 Individuals / $24,000 Married

- “Eliminates Most Itemized Deductions”- Mortgage Interest & Charitable Deduction will stay in place

- Eliminates Estate & Generation Skipping Tax

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Highlights Of “Unified Framework”Individual Tax Rate Questions- Where do the bracket splits?

- How does this impact those in the 10% bracket today?

- Which deductions go away?- State and local tax deduction?

- What is the impact on Retirement Savings?- Is “Rothification” still on the table?

- Do upper income earners benefit?- “ An additional top rate may apply….”

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Highlights Of “Unified Framework”Corporate Tax Rates Decrease- Top Tax Rate Falls To 20%

- Pass Through / S-Corp Rate Top Rate 25%

- Territorial Tax System & Deemed Repatriation- Pay taxes only in jurisdiction where revenue occurs- Earnings currently oversees are deemed brought back to US

- 5 Year Window For “Full Expensing”- Buy a depreciable asset in the next 5 years, expense immediately

- Examine industry specific tax breaks- “Modernize” to stop tax avoidance

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Highlights Of “Unified Framework”Corporate Tax Questions

- What is the “deemed repatriation” rate?- How long can companies spread out those costs?- Pay taxes only in jurisdiction where revenue occurs- Earnings currently oversees are deemed brought back to US

- What tax exemptions / deductions are changing?

- Does a 10 Year Corporate Tax cut really work?

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Largest 10 Year Tax Expenditures#1. Exclusion For Employer Paid Health Premiums: $2.9 Trillion

#2(Foreign Income) + #3(Net Imputed Rental)= $2.5 Trillion

#4 Capital Gains: $1.1 Trillion

#5 Defined Contribution Plans: $958 Billion

#6 Mortgage Interest: $895 Billion

#7 Local Tax Deductibility: $783 Billion

#8 Defined Benefit Plans: $655 Billion

INTERNAL USE ONLY 30


Looking to 2018


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Sources: Charlie Cook, “Will History Hold in 2018 Midterms?” The Cook Political Report, January 9, 2017, National Journal Research, 2017.

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VA

NY

ME

NC

SC

GA

TN

KY

IL

LATX

OK

ID

OR

WA

CA

AZNM

CO

WY

MT

SD

IA

UT

AR

MS AL

NE

KS

AK

WI

OH

PA

IN

ND

WVMO

FL

MI

MN

NV

MD

MA

RI

CT

DC

DE

NJ

HI

2018 Is A Difficult Map For Democrats

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Sources: Opensecrets, 2017, National Journal Research, 2017.

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$9.3

$6.0

$5.7

$5.5

$5.0

$4.9

$4.3

$3.9

$3.8

$3.7

$3.6

$3.5

$3.5

$3.2

$3.1

Elizabeth Warren (MA)

Bob Corker (TN)

Kirsten Gillibrand (NY)

Tim Kaine (VA)

Sherrod Brown (OH)

Ted Cruz (TX)

Debbie Stabenow (MI)

Bernie Sanders (VT)

Bob Casey (PA)

John Barrasso (WY)

Bill Nelson (FL)

Orrin Hatch (UT)

Chris Murphy (CT)

Jon Tester (MT)

Amy Klobuchar (MN)

Following The Money….

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Sources: Opensecrets, 2017, National Journal Research, 2017.

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$3.1

$3.1

$2.8

$2.6

$2.6

$2.6

$2.5

$2.0

$2.0

$1.8

$1.8

$1.5

$1.4

$1.0

$0.9

$0.8

$0.8

$0.3

$0.1

Dianne Feinstein (CA)

Claire McCaskill (MO)

Bob Menéndez (NJ)

Dean Heller (NV)

Martin Heinrich (NM)

Joe Donnelly (IN)

Tammy Baldwin (WI)

Heidi Heitkamp (ND)

Roger Wicker (MS)

Jeff Flake (AZ)

Sheldon Whitehouse (RI)

Maria Cantwell (WA)

Deb Fischer (NE)

Mazie Hirono (HI)

Ben Cardin (MD)

Luther Strange (AL)

Angus King (ME)

Tom Carper (DE)

Joe Manchin (WV)

Following The Money….

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2014 2016 2018

Democratic seats Republican seats

Republicans gained 9 seats

Democrats gained 2 seats

?????

What to watch for in mid-terms

Senate seats in play, by election year

Source: Cook Political Report.


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Follow The Trump Trail?

Indiana (+6)Missouri (+16)Montana (+4)

North Dakota (+1)West Virginia

(+24)

Florida (+13)Ohio (+5)

Michigan (+13)Pennsylvania (+9)

Wisconsin (+6)

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Summary

- Senate Rules Make It Hard To Pass Legislation Without 60 Votes

- ACA Repeal Will Become ACA Fix

- On To Tax Reform – Will Be Difficult As Well

- 2018 Is Around The Corner

INTERNAL USE ONLY

Questions?James R. Slotnick, [email protected]

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This communication is intended to provide general information only and should not be construed to be legal advice. Sun Life Financial, its distributors, and its respective representatives do not provide tax, accounting, or legal advice. Any tax statements made are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Clients should consult their own independent advisors about any tax, accounting, or legal statements.

© 2016 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. Sun Life Financial and the globe symbolare registered trademarks of Sun Life Assurance Company of Canada. Visit us at www.sunlife.com/us.

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