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Senate Votes to Repeal The Medical Device Excise Tax!

Congress Approves Sweeping End of Year Legislation

Before adjourning for the holidays, Congress moved swiftly to pass a broad package totaling $1.4 trillion in new spending that includes eight appropriations measures, comprises numerous other bills related to health care, retirement, pharmaceuticals, tax policy, among other things. House lawmakers December 17th voted 297-120 in favor of a measure (H.R. 1865). The Senate approved the bill today, December 19th by a vote of 71-23. President Trump is expected to sign the bill into law on Friday, December 20th.

Below is a summary of key items including changes to health care, retirement, and tax provisions which may be of interest to Dental Trade Alliance members:

Health Care

The measure would permanently repeal three taxes imposed under the Affordable Care Act:

  1. A 2.3% tax on medical devices, which is currently suspended through Dec. 31, 2019. The tax applies to devices sold by a manufacturer, producer, or importer.
  2. 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.
  3. An annual fee imposed on health insurance providers.

The measure also would extend through May 22, 2020, Medicaid Money-Follows-the-Person demonstration grant program and protection against spousal impoverishment when a married individual is receiving home and community-based services.

The measure would increase the minimum age to purchase tobacco products to 21 years of age, from 18.

Retirement

The measure includes provisions that largely reflect the “Setting Every Community Up for Retirement Enhancement Act” or “SECURE Act,” which the House passed 417-3 on May 23, 2019.

The measure’s retirement plan provisions would:

  • Require individuals to begin taking distributions from their retirement accounts generally after they turn 72, instead of 70 1/2. It would also eliminate the prohibition on traditional individual retirement account (IRA) contributions once owners turn 70 1/2.
  • Require employers to include long-term part-time workers in 401(k) plans. They can currently exclude employees who work less than 1,000 hours per year.
  • Establish a “pooled plan” option for two or more companies that aren’t in the same industry to offer defined-contribution plans or IRAs to their employees.
  • Provide relief from the “one bad apple” rule for multiemployer and pooled plans. Plans wouldn’t be treated as failing to meet defined contribution plan or IRA requirements if one employer in the plan didn’t meet its obligations.
  • Increase tax credit for small employer pension plan startup costs, and provide a credit for small employer plans that adopt automatic enrollment.
  • Allow 401(k) plans that automatically enroll employees to escalate elective contributions to as much as 15% of an employee’s salary, instead of 10%, after the first plan year.
  • Bar plans from making loans to participants through credit cards.
  • Allow 529 education savings plans to be used for apprenticeship program expenses. As much as $10,000 over a person’s lifetime could be used for education loan payments.

Tax Extenders

The measure would temporarily renew more than 30 expired or expiring tax provisions.

  • The floor for the medical expense deduction would be temporarily reduced through 2020. Individuals could deduct unreimbursed medical expenses greater than 7.5% of their adjusted gross income (AGI), instead of 10%.
  • A credit for employers that provide paid certain paid family medical leave, which was established for two years under the 2017 tax overhaul (Public Law 115-97).
  • The Work Opportunity Tax Credit for employers that hire individuals from certain groups that face barriers to employment.