The first session of the 114th Congress wrapped up last week and Members are home for the holidays after having completed the most comprehensive and expensive tax and spending package since the fiscal cliff deal at the end of 2012. President Obama signed the package into law on Friday, December 18, 2015. The package includes three main components: appropriated spending, program authorizations, and changes in tax policy.
On the spending side, the so-called “omnibus” appropriations bill funds the government for the remainder of the 2016 fiscal year (through September 30, 2016) at levels agreed upon in the bipartisan budget agreement that became law in early November. This includes $1.067 trillion in discretionary funding for federal government operations and an additional $73.7 billion in overseas contingency operations (OCO) funding.
Various federal policy changes were included in the legislation. The bill extends the World Trade Center Health Program through 2090 for first responders and survivors of the 9/11 attack, while also funding the September 11th Victims Compensation Fund for an additional five years. The bill contains program authorizations for the various federal intelligence agencies and includes cybersecurity information-sharing legislation. The deal tightens up the visa waiver program (VWP) to better determine that individuals entering the United States through the program do not pose a security risk. The package provides for an increase in Puerto Rican hospital reimbursement rates and would make Puerto Rican hospitals eligible for electronic health records incentive payments. The package removes restrictions on the export of crude oil from the United States except in limited circumstances and increases the authorization for maritime security payments to U.S. flagged vessels. Finally, the legislation reauthorizes the Land and Water Conservation Fund and authorizes a new ocean conservation program for three years. (A policy rider that would block the Department of Labor from finalizing its fiduciary rule was not included in the package.)
The legislative package also addressed a number of tax provisions, the so-called “tax extenders”, many of which expired at the end of last year. The bill permanently extended 22 of these provisions, while also extending a smaller number of tax provisions through 2019. (The provision allowing tax-free rollovers from IRAs to certain public charities was one of the provisions made permanent. These distributions are not to exceed $100,000 per taxpayer per year.) The 30 remaining tax provisions traditionally known as extenders were extended for two years, through 2016.
The package also delayed key Obamacare tax provisions including: suspending the medical device tax for two years, through 2016; providing a one-year moratorium for the annual fee on health insurance providers, through 2016; and suspending the high cost employer-sponsored health coverage excise tax, the so-called “Cadillac tax”, through 2019.
Finally, the legislation included extensions of various energy tax incentives including a five-year extension of the wind production tax credit through 2019, a seven-year extension and phase-out of solar energy credits through 2021 and an independent refiner oil transportation cost exclusion through 2021.
In total, the net cost of this tax package is projected to be $680 billion over the next 10 years. This cost was largely not offset, but for some increased reporting and other compliance changes to increase the program integrity for certain individual refundable credits.
Form 5500 Filing Deadline Fixed
In early December, Congress passed the Fixing America’s Surface Transportation (FAST) Act of 2015 (H.R. 22) which included a repeal of the new extended filing deadline for the Form 5500 included in a July highway bill. This means that the current Form 5500 extended due date (Oct. 15 for calendar year plans) will remain in effect without interruption going forward. As a result of ASPPA membership feedback, the ARA GAC team had worked diligently to get this correction in the FAST ACT. This legislative fix represents a huge victory for the efforts and advocacy of the ARA GAC team.
Other Retirement Policy Changes – Rollovers into SIMPLE IRAs, and Church Plans
Along with the IRA charitable rollover provision, there were a couple of other retirement policy provisions included in the fiscal package. The first provision in the agreement allows individuals to roll over money from an employer-sponsored retirement plan to a SIMPLE IRA plan, provided that the SIMPLE IRA plan has existed for at least two years. This provision has been projected to have a negligible effect on tax revenues.
The package also includes legislation that clarifies certain legal and regulatory issues confronting church retirement plans. The bill establishes rules for aggregation of church-related entities for benefits rules and testing purposes that reflect the unique structural characteristics of religious organizations, essentially giving special testing and coverage flexibility to certain church plans. Another provision allows section 403(b) church defined benefit plans established before 1982 to be subject to the benefit accrual limitations under section 415(b) of the Internal Revenue Code. A third provision encourages church plan automatic enrollment features by pre-empting state wage deduction laws that could prevent automatic enrollment. A fourth provision allows for churches or church-related employers to merge a 401(a) plan into a 403(b) church retirement plan. Finally, a fifth provision allows special tax-exempt investment vehicles, so-called “collective trusts”, to accept pooled church plan assets. In total, this church plan package is projected to cost $104 million over the next ten years.