Navigating New Administration Policies: Impacts on Labor, Tax and Technology
Navigating the first 100 days of a new administration is pivotal for businesses as it sets the direction for policy and regulatory changes that impact operations and compliance.
With a new administration that also holds a Congressional majority, there is significant potential for advancing various policy agendas. This period is characterized by executive actions, legislative initiatives, and regulatory reviews that businesses must closely monitor to remain compliant and strategically aligned. Understanding these early actions is essential for businesses to adapt and thrive.
A recent webcast, Beyond the Ballot: Navigating the First 100 Days, featured insights from three ADP subject-matter experts, Mary DeYoung, Melissa Kelly and Amy Miller, all senior directors of government affairs. The complimentary one-hour session detailed what employers might expect during this critical period in terms of labor policies, tax reforms, health care and technological advancement regulation. An overview of their insights are below.
Tax reforms and their implications for businesses and individuals
The priorities of current Tax reforms aim to exempt overtime and tips from federal income taxes while making the 2017 tax cuts permanent. However, balancing these tax cuts with the need to manage the federal budget and debt limit presents a significant challenge. Businesses must navigate this complex landscape to remain compliant and optimize their financial strategies.
Recent discussions about tax policy have highlighted key areas that could significantly impact businesses and individuals, including:
- Potential changes in tax incentives
- New disaster relief provisions
- Strategies for managing tax compliance
- Opportunities for optimizing financial strategies
- Implications of the federal budget and debt limit on tax policies
Understanding these developments will support organizations with effective strategic planning.
State-level tax reforms and federal labor policies
State-level tax reforms are gaining traction, with Alabama setting a precedent by exempting overtime from state income tax beginning in 2024. This initiative has inspired similar proposals in at least 15 other states, aiming to exempt overtime, tips, and/or bonuses from state income tax. These proposals' varying definitions and effective dates present challenges for employers, particularly in configuring payroll systems and handling potential retroactive changes. Agency guidance will be crucial for navigating these complexities and ensuring compliance.
Another area of interest is the incoming administration's stance on worker classification and overtime rules. Under President Trump, the Department of Labor is expected to favor a more flexible test for classifying workers as independent contractors, potentially reversing the 2024 rule introduced by the Biden administration that made it harder to classify workers as independent contractors.
Similarly, the 2024 overtime rule, which raised the minimum salary threshold for exempt employees and has already been struck down nationwide by a federal court, may not be pursued by the incoming administration. The outcome of these changes will have significant implications for businesses regarding compliance and labor costs.
Health care
The new administration and Republican-led Congress will likely look to make incremental changes to the Affordable Care Act (ACA) such as issuance of the streamlined ACA reporting requirements and the potential for states to establish their own health coverage rules as alternatives to the ACA mandates.
There is potential for renewed interest in expanding Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs), with proposals aimed at increasing flexibility for employers and enhancing portability for employees.
Other healthcare issues to monitor include:
- Potential prescription drug pricing reforms
- Increased transparency for health providers, drug manufacturers and health insurers
- Continued bipartisan efforts to regulate Pharmacy Benefit Managers (PBMs)
- Proposed Medicaid funding reductions
- Mental Health Parity and Addiction Equity Act regulatory reforms
AI and technological advancements
Artificial intelligence (AI) and technological advancements are also high on the administration's agenda. The new administration is likely to promote innovation while addressing privacy, security. Businesses leveraging AI and other emerging technologies must carefully navigate this evolving regulatory landscape. Ensuring compliance with new regulations while capitalizing on opportunities for innovation and growth will be key to staying ahead in a rapidly changing technological environment.
Next steps
Shifts in administration and legislative priorities drive significant changes in compliance requirements and enforcement priorities. Employers must monitor developments in health care reform, paid leave, Equal Employment Opportunity Commission (EEOC) and National Labor Relations Board (NLRB) activities, and non-compete agreements to remain compliant and navigate the regulatory environment effectively. Staying informed and proactive is crucial in managing the risks and opportunities presented by these changes.
For additional details and insights, register for and replay this on-demand webcast anytime: Beyond the Ballot: Navigating the First 100 Days.
