What U.S. employers can expect during a Biden presidency

While the outcome of the U.S. presidential election has presumably been decided in favor of Joe Biden, the makeup of the Senate has not been finalized, leaving open the possibility of a divided government and potential legislative gridlock. And while there remains uncertainty around what the next four years will bring, there are early indications of how a Biden administration will address healthcare and retirement plans and tax rates.

Alight convened a panel of experts to discuss the key issues that could impact employers under a Biden presidency:

Healthcare

Karen Frost, VP of health strategy & solutions

Affordable Care Act. President-elect Biden favors maintaining and expanding coverage under the ACA, as well as subsidizing ACA coverage for Americans even if their current employer-sponsored medical coverage is “affordable.” He supports restoring ACA funds for consumer outreach and enrollment and rolling back access to short-term medical plans promoted by the Trump administration as an alternative to ACA coverage.
Public option. In the short-term, a public insurance option is unlikely to have a large impact on the number of employees opting out of employer-sponsored coverage due to the sub-optimal user experience in the ACA markets. In the long-term, assuming private plans continue to compete on cost and quality, it could spur interest and investment in the ACA individual markets, which may prompt a decrease in enrollment in employer-sponsored plans.
Medicare age. In lieu of “Medicare for All,” President-elect Biden has supported lowering the eligibility age for Medicare from 65 to 60. This may be beneficial for self-insured employer plans and carrier risk pools — especially those under current age-based price controls — although it would depend heavily on the number of eligible employees that choose to enroll in Medicare.

Retirement

Greg Long, leader of public policy & defined contribution sector

"Equalizing" 401(k) tax benefits. President-elect Biden proposes changing the tax benefit of 401(k) plan contributions so it applies equally across income levels, although it’s not currently clear how this would affect current contribution trends.
Automatic coverage vs. automatic enrollment. President-elect Biden and other prominent Democrats have previously supported proposals to mandate that employers offer a 401(k) or similar plan to their employees. While it’s unlikely such a proposal would be passed by a Republican Senate, a divided government opens the door for legislation with bipartisan support. The recently introduced Securing a Strong Retirement Act of 2020 is one example of such bipartisan legislation. Since most large employers already offer retirement plans, the impact would likely be nominal. However, such a mandate would certainly increase plan participation among small and mid-sized employers.
Fiduciary rules. While a Biden administration may be limited legislatively, it could yield regulatory power to replace multiple Trump administration regulations, including the U.S. Department of Labor’s recently issued fiduciary rules concerning investor guidance. As cross-selling and rollover practices continue to be scrutinized, it’s increasingly likely that a Biden administration will propose rules to ensure that participants receive trusted and unbiased guidance when they’re making investment decisions.

Tax reform

Wilson Silva, SVP of outsourcing delivery

Corporate rates. President-elect Biden campaigned on a corporate rate increase to 28% — which would still be lower than what it was in 2016 — while also putting forth plans to provide and expand tax credits for lower- and middle-income families. This would likely force companies that have planned for the 21% rate to adjust.
Individual rates. While a divided government would make it extremely difficult, the more aggressive components of the tax plan, including raising the top individual income tax rate to 39.6% from its current level of 37%, could move forward.
Payroll taxes. Under a Biden administration, while earnings immediately above the current taxable maximum would continue to be exempt from Social Security taxes, earnings above $400,000 could be taxed at the 12.4% rate. However, the new taxes on earnings above $400,000 would not trigger additional benefits.