The Trump Effect: Impact To The Employee Benefits Industry. James Slotnick, JD Sun Life Financial AVP, Government Relations

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1 The Trump Effect: Impact To The Employee Benefits Industry James Slotnick, JD Sun Life Financial AVP, Government Relations

2 Working With The 115 th Congress Priorities Of The Trump Administration Looking to 2018 INTERNAL USE ONLY 2

3 Since Legislation Passed In First 100 Days After Election # Eisenhower Kennedy Nixon Carter Reagan Bush 41 Clinton Bush 43 Obama Trump 3

4 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 : Used 1 time (2001) 2017: Used 15 times to roll back midnight regulations Requires only a simple majority vote cannot be filibustered 4 FOR PRODUCER USE ONLY

5 Since Legislation Passed In First 200 Days After Election #8 0 Eisenhower Kennedy Nixon Carter Reagan Bush 41 Clinton Bush 43 Obama Trump 5

6 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 President Trump has: Passed 47 bills Repealed 15 Obama-era Regulations Filled 1 Supreme Court Vacancy Avoided an October Government Shutdown Increased US Debt Ceiling, avoiding an October financial crisis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 6 FOR PRODUCER USE ONLY

7 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 7 FOR PRODUCER USE ONLY

8 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

9 Can Congress Pass ACA Repeal & Tax Reform? ACA Repeal & Replace: Seems Unlikely Before /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? 9

10 Working With The 115 th Congress Priorities Of The Trump Administration Looking to 2018 INTERNAL USE ONLY 10

11 Priorities Of The Trump Administration - Next Steps For ACA - Tax Reform 11

12 ACA: Choose Your Own Statistics Estimates vs. actual 40% of projection 41% of projection 20 CBO % of projection 64% of projection High Ending Source: page 20 page

13 ACA: Choose Your Own Statistics $700 Exchange Premium Increases $600 $ % Increase 12% Increase 55% Increase 110% Increase 123% Increase 190% Increase $400 $300 $200 $100 $0 National Average New Jersey Maine Oregon Louisiana Arizona Source: 13

14 ACA: Choose Your Own Statistics 25% CDC s Uninsured Rate % 15% 49 Million 10% 29 Million 5% 0%

Medicaid Expansion Has Grown Insured Population 31 States (and DC) Have Expanded Medicaid Programs CA OR AK WA NV ID UT AZ MT WY CO NM ND SD NE KS TX OK MN IA MO AR LA WI IL MS MI TN GA NC SC NY PA

15 Medicaid Expansion Has Grown Insured Population 31 States (and DC) Have Expanded Medicaid Programs CA OR AK WA NV ID UT AZ MT WY CO NM ND SD NE KS TX OK MN IA MO AR LA WI IL MS MI TN GA NC SC NY PA OH IN WV VA KY AL FL ME DC Medicaid enrollment has increased 18 million since 2014 Federal government scheduled to cover 90% of expanded Medicaid costs 2013 Medcicaid Enrollment June 2017 Medicaid Enollment Total: 57 Million Total: 75 Million Washington: 1.1 Million Washington: 1.8 Million Adopted Expansion Not Adopted Expansion Source: Kaiser Family Foundation 15

16 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 16

17 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 17

18 ACA enrollment figures 10.3M 8.7 M 8.7M With financial assistance 5.9M With Premium Subsidy & CSR 2017 June Enrollment 1.6M Without financial assistance 2.8M With Premium Subsidy Only Enrollees With Assistance Source: Center for Medicare & Medicaid Services

19 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) 19

20 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 20

21 Why Disrupt The Entire Market? Military health care 4% Uninsured 9% Medicare 13% Employment-based 48% Medicaid 19% Non-group 7% 21

22 Supporters of Senator Sanders Proposal Co-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) 22

23 Priorities Of The Trump Administration - Next Steps For ACA - Tax Reform 23

24 A Tough Choice For Republicans Option #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 24

25 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 25

26 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. 26

27 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 27

28 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? 28

29 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 29

30 Working With The 115 th Congress Priorities Of The Trump Administration Looking to 2018 INTERNAL USE ONLY 30

31 2018 Is A Difficult Map For Democrats WA OR MT ND MN ME ID WY SD WI MI NY AK CA NV AZ UT CO NM NE KS OK TX IA MO AR LA IL MS PA OH IN WV VA KY NC TN SC AL GA FL DC MA RI CT NJ DE MD HI Sources: Charlie Cook, Will History Hold in 2018 Midterms? The Cook Political Report, January 9, 2017, National Journal Research,

32 Following The Money. Elizabeth Warren (MA) $9.3 Bob Corker (TN) Kirsten Gillibrand (NY) Tim Kaine (VA) $5.5 $5.7 $6.0 Sherrod Brown (OH) Ted Cruz (TX) $5.0 $4.9 Debbie Stabenow (MI) $4.3 Bernie Sanders (VT) Bob Casey (PA) John Barrasso (WY) Bill Nelson (FL) Orrin Hatch (UT) Chris Murphy (CT) Jon Tester (MT) Amy Klobuchar (MN) $3.9 $3.8 $3.7 $3.6 $3.5 $3.5 $3.2 $3.1 Sources: Opensecrets, 2017, National Journal Research,

33 Following The Money. Dianne Feinstein (CA) Claire McCaskill (MO) $3.1 $3.1 Bob Menéndez (NJ) Dean Heller (NV) Martin Heinrich (NM) Joe Donnelly (IN) Tammy Baldwin (WI) $2.8 $2.6 $2.6 $2.6 $2.5 Heidi Heitkamp (ND) Roger Wicker (MS) $2.0 $2.0 Jeff Flake (AZ) Sheldon Whitehouse (RI) $1.8 $1.8 Maria Cantwell (WA) $1.5 Deb Fischer (NE) $1.4 Mazie Hirono (HI) Ben Cardin (MD) $0.9 $1.0 Luther Strange (AL) Angus King (ME) $0.8 $0.8 Tom Carper (DE) $0.3 Joe Manchin (WV) $0.1 Sources: Opensecrets, 2017, National Journal Research,

34 What to watch for in mid-terms Senate seats in play, by election year 21 Republicans gained 9 seats Democratic seats Democrats gained 2 seats 24????? 25 Republican seats 8 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) Source: Cook Political Report. FOR PRODUCER USE ONLY 34

35 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 Is Around The Corner 35

36 Questions? James R. Slotnick, JD INTERNAL USE ONLY

37 Thank you 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 Sun Life Assurance Company of Canada, Wellesley Hills, MA All rights reserved. Sun Life Financial and the globe symbol are registered trademarks of Sun Life Assurance Company of Canada. Visit us at GGPPT-6376a SLPC /16 (exp. 11/18) 37

Cost and Coverage Implications of the ACA Medicaid Expansion: National and State by State Analysis

Cost and Coverage Implications of the ACA Medicaid Expansion: National and State by State Analysis Report Authors: John Holahan, Matthew Buettgens, Caitlin Carroll, and Stan Dorn Urban Institute November