With the New Year just around the corner, small business owners are gathering the information they need to make decisions and finalize plans for the next 12 months. And, few areas impact decisions and plans more than regulations and legislation. With that in mind, Paychex, Inc., a leading provider of payroll, human resource, insurance, and benefits outsourcing solutions for small- to mid-sized businesses, today identified the top 10 regulatory issues that small business owners should know about and prepare for in 2017.
“As the Trump administration begins to implement its legislative agenda, it appears that 2017 will bring many significant changes across the regulatory landscape,” said Martin Mucci, president and CEO of Paychex. “Paychex will keep a close eye on regulations and legislation to help business owners understand what they mean and what changes may be required.”
Here are the top 10 regulatory issues Paychex has identified for 2017:
1. Tax Reform
With the GOP controlling Congress, an early and potentially achievable priority could be tax reform, which may blend the measures outlined by President-elect Trump during his campaign with existing GOP reform proposals championed by House Speaker Paul Ryan. Cuts to business and individual tax rates, a cap of the capital gains rate at 20 percent, elimination of the estate tax, and the permanent ability to write off capital expenses immediately instead of depreciating them over time could all be under consideration. It is speculated that many of these changes could fuel the creation or expansion of small businesses. However, to fund these tax decreases, it is possible some current popular tax breaks and deductions may be eliminated or scaled back.
2. The Affordable Care Act
The ‘repeal and replacement’ of the Affordable Care Act (ACA) was a central theme of President-elect Trump’s campaign message and is expected to be among his administration’s priorities. While numerous political and practical considerations may make immediate full ‘repeal and replacement’ unlikely, significant components of the law could be repealed as early as January. The President-elect has said he’d pursue various market-based reforms as alternatives to the ACA, such as allowing more flexible use of health savings accounts, sale of insurance across state lines, changing Medicaid into block grants for states, allowing people to deduct the cost of insurance premiums on their personal income tax returns, and other measures. A replacement plan will present complexity both in fleshing out policies to support the healthcare markets and in getting the plan through Congress. In the interim, even if legislative action is taken early in the year, many ACA requirements will likely remain, including the Employer Shared Responsibility filing, although the IRS has extended the date for furnishing Forms 1095-B and C to employees and indicated the continued application of the ‘good faith effort’ standard to avoid related penalties for both furnishing statements to employees and filing statements and returns with the IRS.
3. Wage/Hour Compliance
Wage/hour compliance promises to be an area of significant flux for employers in 2017. Uncertainty around the DOL’s Final Overtime Rule after the late-November injunction will persist even if the court ultimately allows it to stand; many employers have already made associated changes. The President-elect has not yet definitively said how he will act on the Overtime Rule. Numerous states and localities have passed or are contemplating minimum wage increases, although some states are considering laws prohibiting cities from enacting minimum wages that differ from the state minimum wage rate. In some states, such as New York and Oregon, minimum wage rates vary based on geographic region (i.e., urban/suburban/rural), providing an additional layer of complexity for employers to manage. President-elect Trump has voiced general support for a federal minimum wage increase.
4. Immigration Reform
Immigration reform was a key part of the President-elect’s platform. He has noted the issue will be a priority during his first 100 days in office, and he will “direct the Department of Labor to investigate all abuses of visa programs that undercut the American worker.” Many employers, especially those in sectors relying on skilled workers, are waiting to see if this will result in changes to the H-1B visa program, the typical route for bringing in highly skilled talent from other countries. Trump also indicated he would implement additional enforcement steps, such as mandating the use of the federal E-Verify system for all new hires, increasing worksite audits, more rigorous Form I-9 compliance (a new form, released last month, must be used by all employers by January 22), and a biometric entry-exit visa system. These measures could suppress the availability of workers in industries such as farming, hospitality, and construction.
The outcome of November’s election has added uncertainty to the retirement industry’s regulatory landscape. The April 10th implementation of the DOL’s fiduciary rule, intended to ensure that financial advisors provide advice in the best interest of their clients, may be delayed or repealed by the Trump administration. The initiatives of many states to create mandated state-sponsored retirement savings programs will likely continue unimpeded; and, as such, businesses not currently offering their employees a retirement plan will need to watch developments closely. There appears to be bi-partisan support for legislation that would extend a more generous tax incentive to small businesses that start a qualified retirement plan; add a new tax credit for small businesses that automatically enroll participants; and ease the creation of multiple employer plans, allowing unrelated employers to pool assets and participants under one open plan, reducing cost and diluting risk for sponsoring businesses. Lastly, Social Security is expected to garner attention and potential adjustments by the Trump administration as the system faces the possibility of future insolvency. Adjustments to certain provisions of the system, including raising the retirement age, cutting benefits, raising the payroll tax cap, or reducing annual Cost of Living Adjustments are expected to be on the table as potential solutions to the system’s problems.
6. Employment Regulations
Several employment-related topics promise to be front-of-mind in 2017. Many states are expected to consider paid sick and family leave laws, and President-elect Trump voiced general support for a federal paid maternity leave program, although the GOP-led Congress may be less than enthusiastic with this proposal. Equal pay will continue to be a hot topic as the EEOC’s new EEO-1 reporting rules, requiring employers with 100 or more employees to report pay data to the federal government to help identify possible pay disparities, will likely be effective next year. Various states are also looking at their own equal pay laws and considering legislation to expand employer restrictions and obligations. The President-elect is likely to scale back some of the pro-union policies and executive orders created under President Obama, as well as recent OSHA workplace-safety regulations on businesses. This general reduction in federal regulation in the employment realm may result in a compensating increase in regulations and legislation at the state and local levels.
The trend towards implementing faster and more secure payments will continue to see momentum in 2017. On the credit card front, although the EMV liability shift occurred in October 2015, many businesses still have not implemented EMV technology used to authenticate chip-card transactions. Thus, small businesses who have not installed new EMV terminals will be held liable for fraudulent transactions made with a chip-enabled card. Small businesses may benefit from faster payments, with some providers expecting to offer near real-time payment solutions in 2017, as well as an expansion of Same Day ACH to include debits in September. Small businesses should work closely with their financial institution, payment processor, and credit card processor to learn more about these developments and their implications.
Although President-elect Trump has indicated an intent to roll back federal regulation, an area which could see greater oversight is cybersecurity. The hacking incidents and e-mail leaks which made news during the campaign, ever-increasing levels of fraud and data breaches affecting many American companies and individuals, and growing national security concerns over foreign cyber activity may lead the new administration to impose stricter requirements on businesses to install stronger security and report breaches. At the state level, businesses need to be aware of more onerous information security regulations, including expansion of the data types which are deemed to be sensitive and thus required to be protected.
Payroll cards, an increasingly popular method of receiving pay for many workers, will continue to be an area of significant regulatory focus in 2017. The Consumer Financial Protection Bureau’s 1,689-page final rule on prepaid accounts will go into effect on October 1. Among other changes, the rule requires employers to provide new disclosures for paying wages via payroll cards. New York also finalized sweeping payroll card regulations, effective on March 7, and a Pennsylvania law regarding this payment method goes into effect on May 3. It is expected that other states may follow suit and introduce legislation regarding payroll cards in 2017. Employers making this option available to staff should confirm their payroll card provider is attentive to the changing regulatory landscape.
10. Infrastructure initiatives and opportunities for small businesses/government contractors
A key election pledge for President-elect Trump was a $1 trillion infrastructure initiative, meant to revitalize the nation’s roads, bridges, broadband networks, and other support systems to boost the economy by providing a multitude of new jobs. While funding sources must be identified and political support rallied for this endeavor, the initiative, should it move forward, could provide an opportunity for small businesses to bid on various aspects of these projects. The new administration may look to scale back some of the recently expanded Office of Federal Contract Compliance Programs requirements for federal contractors and potentially change others to encourage engagement by small businesses.
Paychex is constantly tracking the issues that matter most to small businesses to provide them with the information and resources they need to make the best decisions for their business.
For other helpful tips to advance the long-term success of small businesses, visit http://www.paychex.com/worx/.
Note: The information contained within is not legal advice. These issues are complex and applicability depends on individual circumstances. Businesses should consult legal counsel before taking action on any of the items identified above.
Paychex, Inc. (NASDAQ: PAYX) is a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services. By combining its innovative software-as-a-service technology and mobility platform with dedicated, personal service, Paychex empowers small- and medium-sized business owners to focus on the growth and management of their business. Backed by 45 years of industry expertise, Paychex serves approximately 605,000 payroll clients across more than 100 locations and pays one out of every 12 American private sector employees. Learn more about Paychex by visiting www.paychex.com, and stay connected on Twitter and LinkedIn.