Comey’s Testimony Underscores Need for Strong Whistleblower Protections

For me, the most telling moment of former FBI Director Jim Comey’s June 8th testimony occurred early in the hearing, when Mr. Comey choked up as he recalled the White House’s publicly stating that the President had fired him because the “FBI was in disarray.”

This emotional display seemed out of character for Mr. Comey. While U.S. Attorney for the Southern District of New York, he successfully prosecuted organized crime. As Deputy Attorney General during the George W. Bush Administration, Mr. Comey refused to sign an extension of the warrantless domestic spying program and defied the White House Counsel and Chief of Staff. Mr. Comey can fairly be described as a “tough guy.” So how did he go from leading the most powerful law-enforcement agency worldwide to being labeled a “leaking liar”?

To an experienced whistleblower advocate, Mr. Comey’s predicament is not surprising. Mr. Comey’s experience, unfortunately, is like those of many whistleblowers I have represented over more than a decade. President Trump promised to bring a business approach to government—and his retaliation against Mr. Comey is straight out of the corporate defense playbook. Corporations typically take the following steps of escalating retaliation to silence whistleblowers:

Intimidate and Silence the Whistleblower

In his June 8th testimony, Mr. Comey described in detail how the President had asked him to drop the investigation of Michael Flynn and had conditioned Mr. Comey’s job on “loyalty” to him. Senator Rubio expressed skepticism about Mr. Comey’s feeling intimidated by the President and blamed Mr. Comey for not pushing back. But that type of Monday-morning quarterbacking ignored the power dynamics of the conversation. Mr. Comey wanted to keep his job and was understandably reluctant to accuse the President of obstructing an investigation.

Whistleblowers often confront this intimidation tactic in the workplace. A supervisor or senior company official tells the whistleblower to “let it go,” “mind your own business,” or learn to be a “team player.” And in some cases, the whistleblower is told to shut up if he or she wants to remain employed. Threats of retaliation, whether express or implicit, are powerful tools to silence a whistleblower. When a company officer or senior manager orders a subordinate to do something unlawful or to cover up unlawful conduct, holding firm to one’s ethical values is not an easy avenue to follow. As Mr. Comey learned, refusing to carry out an unlawful order may be career suicide, at least in the short term.

Retaliate Swiftly and Severely Against the Whistleblower

Initially, the bizarre method of firing Mr. Comey seemed surprising for a President who perfected the art of firing on his reality show, The Apprentice. Mr. Comey was not given an opportunity to resign; he was not even notified that he had been fired. But now that we know about the President’s real motive for firing Mr. Comey, it’s clear that his tack was deliberate.

Mr. Comey learned of his firing while addressing FBI agents at a Los Angeles field office when the announcement flashed across a television screen. The White House had announced Mr. Comey’s firing without notifying Mr. Comey himself. President Trump sent a loud and clear message to Mr. Comey and to every senior government official about the consequence of disloyalty.

In the corporate workplace, whistleblower-employees are similarly humiliated as a warning to their colleagues. A whistleblower may be escorted out of the office with security guards while other employees are present, pulled out of a meeting and fired on the spot in front of colleagues, or simply fired via text message. When a corporation fires a whistleblower in this humiliating fashion, it ensures that all other employees know the consequence of whistleblowing.

Badmouth the Whistleblower and Their Work History

Firing Mr. Comey in a humiliating and offensive manner served only as phase one. President Trump then defamed Mr. Comey and asserted that he fired him because of chaos within the FBI, as well as the alleged loss of confidence in Mr. Comey among FBI agents.

These statements stand in stark contrast to the President’s repeated, public praise of Mr. Comey before Mr. Comey refused to comply with the President’s “hope” that Mr. Comey drop the investigation of Flynn. Indeed, if President Trump believed that Mr. Comey’s leadership caused chaos within the FBI, then why did the President invite Mr. Comey to continue to serve as FBI Director?

This patent distortion of Mr. Comey’s performance record is an all-too-common experience of whistleblowers. Prior to blowing the whistle, they receive strong performance evaluations and bonuses; they are valued members of the team. But once they blow the whistle and refuse to drop their concerns, they are suddenly deemed incompetent and unqualified for their position. And when a company realizes that it lacks any existing basis to fire the whistleblower, it creates one by subjecting the whistleblower to heightened scrutiny and setting the whistleblower up to fail. For example, a company might place the whistleblower on a performance-improvement plan that contains impossible objectives, and then fire the whistleblower for not meeting those unattainable goals.

This tactic may backfire and enable a whistleblower to ultimately prevail at trial, but the damage to the whistleblower’s reputation is permanent. Prospective employers are reluctant to hire someone who previously fired for poor performance and are especially reluctant to hire a whistleblower. Many whistleblowers never find comparable employment and must accept lower-level positions, earning a fraction of what they did before their wrongful termination.

Attack the Whistleblower’s Credibility

Apparently, President Trump has no evidence to rebut Mr. Comey’s vivid account of the President’s alleged attempts to obstruct justice. So President Trump called him a “liar.”

Desperate to defend themselves at all costs, corporations frequently employ this tactic—labeling the whistleblower a disgruntled former employee who will say anything to win his or her case. So far, this is not working well for President Trump, whose accusation merely serves to shine a spotlight on his own questionable credibility.

Attacking a whistleblower’s credibility is an effective and pernicious tactic in many whistleblower cases. Once expelled from a company, a whistleblower is marginalized and alienated from former coworkers. The key witnesses continue to work at the company and, fearing retaliation, are reluctant to corroborate the whistleblower’s testimony. Though whistleblowers may still prevail (for example, by using documentary evidence), the attack on a whistleblower’s credibility is odious because the company fired the whistleblower precisely for having integrity.

Create a Post-Hoc Justification for Firing the Whistleblower

Prior to firing Mr. Comey, President Trump papered the file with a post-hoc justification for the firing. After the President decided to fire Mr. Comey, Deputy Attorney General Rod Rosenstein was tasked with drafting a memorandum to the Attorney General outlining concerns about Mr. Comey’s performance. Most of those concerns focus on Mr. Comey’s statements about the investigation of former Secretary of State Hillary Clinton’s use of a private email server. Surely President Trump knew of those public statements when he repeatedly asked Mr. Comey to remain as FBI Director (as long as he could pledge “loyalty” and drop the Flynn investigation).

In this case, the White House’s initial reliance on the Rosenstein memo as the basis for the decision to fire Mr. Comey backfired because President Trump told NBC anchor Lester Holt that he had decided to fire Mr. Comey regardless of the memo. In many whistleblower-retaliation cases, however, these types of pretextual memos may be persuasive. Some judges even rely on such memos, which mask the real reason for a firing or other adverse action, to grant the company summary judgment and deny the whistleblower a jury trial.

On the other hand, creating a post-hoc justification for a retaliatory adverse action sometimes misfires by providing strong evidence of pretext and spurring a jury to award punitive damages. For instance, a former in-house counsel at Bio-Rad Laboratories recently secured more than $11 million in damages at trial in a Sarbanes-Oxley whistleblower-retaliation case. The jury awarded $5 million in punitive damages because Bio-Rad had backdated a negative performance evaluation of the whistleblower that the company drafted after it fired him.

Focus on the Whistleblower’s Alleged Misconduct

To distract attention from what may be obstruction of justice, President Trump and his attorney have focused on Mr. Comey’s leak to the press and have alleged that the leak was unlawful. This accusation seems frivolous because Mr. Comey did not leak classified information, grand jury material, or other sensitive information. Instead, he revealed that President Trump had conditioned his continued service as FBI Director on his agreeing to drop the investigation of Flynn. As a private citizen, Mr. Comey has a constitutional right to blow the whistle to the media about this matter of public concern. Mr. Comey did not reveal to the media information from FBI investigative files or classified information. Yet President Trump and his allies compare Mr. Comey to leakers who illegally disclosed classified information. This is an appalling accusation against the former head of a law-enforcement agency.

But this is another standard corporate defense tactic in whistleblower cases. To divert attention from the wrongdoing that the whistleblower exposed, the company uses its substantial resources to dig up dirt on the whistleblower. The company or its outside counsel examines the whistleblower’s timesheets and expense reports with a fine-tooth comb to find any discrepancy, reviews every email to find some inappropriate communication, and places all of the whistleblower’s work under a microscope to find any shortcoming.

Sue the Whistleblower and Initiate a Retaliatory Investigation

Firing Comey, concocting a pretextual basis for the firing, and branding him a leaking liar apparently was not sufficient retaliation.  So shortly after his testimony, President Trump’s personal attorney announced his intention to sue Mr. Comey and/or file a complaint with the Department of Justice Office of Inspector General (OIG).  I am skeptical that a civil action against Mr. Comey or an OIG complaint poses any real legal threat to Mr. Comey.  To the contrary, such a complaint would likely pose a greater risk for President Trump, including potential counterclaims and the risk of being deposed or questioned under oath by the OIG.

The misuse of legal process against corporate whistleblowers, however, is an especially powerful form of retaliation in that it can dissuade a whistleblower from pursuing their claims.  When I defend against this form of abuse of process, I am always struck at the seemingly endless resources that the company will spend to prosecute claims lacking any merit or value.  Fortunately, these claims can go awry by spawning additional retaliation claims under the whistleblower protection laws.  And a jury can punish the employer for subjecting the whistleblower to abuse of process.

Why Whistleblowers Deserve Strong Legal Protection

In light of Mr. Comey’s distinguished record, he will likely bounce back and rebuild his career. But most corporate whistleblowers never fully recover. Too often they find their careers and reputations destroyed. Even when whistleblowers obtain monetary relief at trial, they are usually blacklisted from comparable positions, especially if they work in a small industry.

Mr. Comey’s experience as a whistleblower is a stark reminder of what can happen to any employee who is pressured by a powerful superior to engage in unlawful conduct or to cover up wrongdoing. When intimidation tactics succeed, the public suffers. The company could be covering up threats to public health or safety, environmental contamination, financial fraud, defective products, or any other conceivable harmful wrongdoing.

Courageous whistleblowers who put their jobs on the line deserve strong protection. As Congress embarks on a mission to gut “job killing” agencies, let us hope it will spare the very limited resources that are spent enforcing whistleblower-protection laws. Without such a large backlog of whistleblower cases, OSHA could have, for example, addressed the complaints of Wells Fargo whistleblowers years ago, potentially curbing or halting the bank’s defrauding of its customers. And Congress should consider filling the gaps in existing whistleblower laws. If Mr. Comey “lacked the presence of mind” to explicitly reject the President’s improper demand for him to drop the Flynn investigation, then surely most employees would also be reluctant to refuse an order to commit an unethical or unlawful act.

After Mr. Comey’s testimony, Speaker Ryan pointed out that “[t]he President’s new at this. He’s new to government.” Mr. Comey’s testimony should be a lesson for the President about how to treat whistleblowers. To make America great again, the President should abandon the Rambo litigation tactics that apparently served him well in New York real-estate disputes, and instead view whistleblowers as allies, not as enemies. As Tom Devine of the Government Accountability Project and I argue in an article in the Emory Corporate Governance and Accountability ReviewDraining the Swamp Requires Robust Whistleblower Protections and Incentives.

This post was written by Jason Zuckerman of Zuckerman Law.

Can Congress Get to “Yes” on Replacing the Affordable Care Act?

Senate Majority Leader Mitch McConnell recently gave a candid assessment of the chances of getting an Affordable Care Act (ACA) replacement bill through the Senate, saying “I don’t know how we get to 50 (votes) at the moment.” That succinctly captures the political dilemma. There has long been broad bipartisan agreement that the nation’s health care system was in need of repair. Something had to be done to contain rapidly rising health care costs, increase the quality of medical outcomes, and to expand coverage. But there was little or no bipartisan agreement on how to do it. Indeed, no major health care initiative since Medicare was enacted in 1965 has enjoyed true bipartisan support.

The most recent effort to overhaul the health care system was no exception. The ACA passed in March 2010 with no Republican votes. That wholly partisan effort, in turn, set off a determined, seven-year-long effort by Republicans to repeal the law. The most recent step on this tortuous journey occurred on May 4, 2017 when the House passed the American Health Care Act (AHCA) by a vote of 217-213. In this case, no Democrats voted for the bill. Twenty Republicans also voted no and the bill passed with just one GOP vote more than the 216 needed to pass.

As we explain below, the ACA and AHCA are “apples and oranges” in their approaches to reforming the healthcare system. Because each proceeds from different philosophical premises, this post briefly examines their key components and primary goals without opining on the merits. Our primary focus is on the political and policy challenges faced by Senate Republicans in getting a bill passed (which remains highly uncertain) and whether such a bill will differ greatly from the House product. In our view, to achieve the GOP’s publicly stated policy objectives, and faced with the constraints imposed by the budget reconciliation rules (explained below), Senate Republicans will be forced to address essentially the same questions as their colleagues in the House—and their solutions likely will differ from those of the House mostly in degree.

What the AHCA Does

In the AHCA, House Republicans singled out a few ACA provisions they had publicly campaigned against—most of which are contained in Title I of the law. These include the mandate that individuals purchase coverage; the narrow, 3:1 modified community-rating corridor that Republicans asserted made coverage prohibitively expensive for younger individuals; and the requirement that plans sold in the individual and small-group market include a comprehensive set of covered medical and related services known as “essential health benefits” (EHBs) The AHCA also would make major changes to Medicaid that go well beyond rolling back the program expansion authorized by the ACA.

The AHCA’s primary purpose is to reduce premium costs and reduce the federal government’s role in health care by giving more authority and flexibility to the states. The ACA’s primary goal, in contrast, was to expand insurance coverage in the individual markets—and it did that, although not as much as had been predicted. Another ACA goal was to make coverage more affordable, at least for low- and moderate-income individuals—and it did that too. But the ACA did little to lower medical costs, and from the available evidence had only a marginal effect on healthcare outcomes. Neither does the AHCA address those issues. It instead focuses mainly on reducing federal expenditures, shifting costs to the states, and constraining the growth of Medicaid. The recently issued report by the Congressional Budget Office and the staff of the Joint Committee on Taxation indicates that the AHCA would achieve significant success in this regard, estimating that the bill would reduce the cumulative federal deficit over the 2017-2026 period by $119 billion.

The GOP Challenge

With their slim 52-48 majority, Republican lawmakers don’t have the votes to repeal the ACA outright. That would require 60 votes to overcome a filibuster. Instead, they must rely on a special budget strategy called “reconciliation.” Created by the Congressional Budget Act of 1974, reconciliation allows certain bills that directly impact federal spending to be passed by a simple majority. For example, reconciliation rules would allow repeal of the ACA’s individual and employer mandates by a simple 51-vote majority because those mandates directly affect revenue; but reconciliation could not be used to repeal the employer reporting rules because those provisions do not directly affect spending. These restrictions severely limit which provisions of the ACA Republicans in the Senate (and by extension the House) can replace without Democratic support. We discuss those provisions below.

The individual mandate

The ACA included an “individual mandate” that requires most U.S. citizens to buy health insurance. The purpose was to ensure broad participation in the individual markets so that there would be enough healthy individuals in the risk pool to subsidize the cost of covering those who are less healthy. Most agree that the ACA penalty for not maintaining coverage was insufficient to induce enough healthy people into the pool. The result has been steep underwriting losses which have prompted major carriers to exit the public exchanges. The AHCA would eliminate the penalty retroactively, to the beginning of 2016. In its place, the bill would impose a “continuous coverage” requirement to induce people to buy coverage and stay covered rather than buying it only when they need it, which drives up costs in the exchanges. Health carriers could assess a 30 percent penalty on individuals who have a gap in coverage of more than 63 days in the prior 12 months. The Health Insurance Portability and Accountability Act (HIPAA) has provided a similar rule for employer-provided group coverage since 1996.

Community rating

Under community rating, premiums can vary by age, among other things. In the case of age rating, actuarial principles dictate that the premiums paid by the oldest subscribers should be about five times what younger subscribers pay. To mitigate the impact on older citizens, the ACA limited the rating range to 3:1. The AHCA allows a ratio of up to 5:1 which actuaries say more closely aligns premiums with the costs associated with age. AHCA proponents assert that the maximum 3:1 ratio dictated by the ACA unfairly penalizes younger, healthier individuals, discouraging them from participating in the individual markets and contributing to the underwriting losses in the ACA exchanges. They also assert that individuals 65 and older are eligible for Medicare and that the workers affected by the 5:1 ratio would be primarily those 54 to 65 years old—generally the highest earning years.

Premium tax credits

The AHCA scraps the ACA’s cost-sharing subsidies, and replaces its premium tax credits. Beginning in 2020, the AHCA would offer credits for U.S. citizens and qualified aliens enrolled in qualified health plans who are not eligible for other sources of coverage. The credit amounts are based on age and adjusted by a formula that takes income into account. Credits would be capped according to a maximum dollar amount and family size. In general, the AHCA subsidies are less generous than those provided by the ACA. According to the CBO report, repeal of the ACA’s tax credits saves some $665 billion while the cost of the AHCA’s tax credits is $375 billion—a net savings of $290 billion.

Medicaid

Medicaid is a health insurance program with shared federal/state authority and financing. Historically, coverage generally was limited to low-income families with children, the elderly, and people with disabilities. The ACA offers states generous federal funding designed to encourage expansion of their programs to cover all Americans under age 65 whose family income is effectively at or below 138 percent percent of federal poverty guidelines ($16,394 for an individual in 2016). Currently, 31 states plus the District of Columbia have expanded their programs.

The AHCA would change the current system of federal funding of Medicaid by placing per capita caps on federal payments to states. Under that approach, each state’s Medicaid spending, beginning in 2020, would be limited based on enrollee categories (i.e., children, disabled, etc.). States that exceed the limits would get less money the following year. Alternatively, states could opt to receive federal block grants (i.e., predetermined fixed amounts) to cover their Medicaid-eligible populations.

The Medicaid changes account for the single largest item of budgetary savings under the AHCA—some $843 billion over 10 years according to the CBO. The savings are important to achieving other GOP objectives such as tax reform, but many of the 16 GOP governors who expanded Medicaid have expressed concerns about the scope and timing of the changes and the impact on their citizens.

States’ ability to opt out

In an effort to persuade House conservatives to support the AHCA, Rep. Tom MacArthur (R-NJ) offered an amendment that would allow states to seek waivers of certain AHCA provisions. The idea was to devolve to those states flexibility to modify their coverage rules to best meet the needs of their constituencies. Under the amendment, states that are granted waivers may:

  • Adopt age-rated premium ratios higher than 5:1 for older individuals buying coverage in the individual and small group markets;

  • Define their own, less generous, “essential health benefits” (EHBs) for plans purchased in the individual and small-group markets instead of the 10 EHBs mandated by the ACA (and which the AHCA otherwise would leave in place); and/or

  • Bypass the 30 percent penalty for individuals who do not maintain continuous health coverage, and instead apply medical underwriting to the pricing of plans in such cases; but states seeking such waivers must have a high-risk pool or participate in the Federal “Invisible Risk Sharing Program” (explained below).

High-risk pools

High-risk pools are state programs that provide funding to cover the health care costs of individuals with catastrophic or pre-existing medical conditions and who are unable to purchase affordable coverage in the individual market. The AHCA embraces state high-risk pools as a way to contain the cost of medical premiums for healthy individuals. It does this by creating two risk pools: one for healthy individuals or those with continuous coverage, and the other for those with high-cost or pre-existing conditions. The idea is to lower premiums for healthy people while at the same time providing coverage for those with serious health conditions using a separate funding mechanism.

To fund coverage for high-risk individuals, the AHCA provides a total of $138 billion over 10 years through various mechanisms as follows:

  • A State Stability Fund in the amounts of $15 billion in 2018 and 2019, and $10 billion each year thereafter through 2026;

  • An additional $15 billion in 2020 that states could use for maternity coverage and newborn and prevention, treatment, or recovery support services for mental or substance use disorders;

  • An additional $8 billion for the period 2018-2023 to states with a “MacArthur waiver” (previously discussed); and

  • A Federal Invisible Risk Sharing Program to help with high-cost medical claims of certain individuals who buy coverage in the individual market.

The MacArthur waivers are not without controversy. The two biggest issues are the potentially large cost increases to older citizens and whether individuals with pre-existing health conditions will be adequately protected. Another question is how many states actually will seek waivers and assume the financial (and political) responsibility for protecting older and sicker workers if the federal dollars under the AHCA prove insufficient. The CBO makes an educated guess as to how many people might be affected by states getting waivers, but they are guesses nonetheless.

Ways to get to Yes

The CBO report estimates that from 2017 to 2026, the AHCA would reduce direct spending by $1.111 trillion and revenues by $0.992 trillion (resulting in a net deficit reduction of $119 billion—and that 23 million fewer people would have health coverage (CBO does not count as health coverage limited benefit plans, including so-called “mini-med” plans and fixed-dollar indemnity plans). These numbers are a direct consequence of the AHCA’s stated goals—to reduce the role of the federal government in regulating and financing health care, specifically in the individual market, Medicaid, and the uninsured.

Senate Republicans broadly share those goals, but they differ on how to achieve them, as did many of their House colleagues. To further mitigate the impact on individuals, the Senate could adjust the AHCA’s spending and revenue levels, as well as the timing of certain provisions—for example, they could push back the phase-out of the ACA’s Medicaid expansion provisions from 2020 to a later date. Similarly, the AHCA’s per-capita caps and block grant provisions could be adjusted to provide more money to the states. The trade-off would be higher spending levels than the House bill, but this could be offset by modifying the AHCA’s tax repeal provisions. For example, the ACA’s so-called “Cadillac” tax on high-cost employer plans, which the House bill delayed until 2026, could be allowed to go into effect earlier, thus generating more revenue. To the same effect, the Senate could push back repeal of the ACA’s Medicare payroll tax on high income individuals. Another step might be to provide additional subsidies for those aged 50 to 64 to mitigate any adverse effect of the increase in the premium age-rating ratio proposed by the House.

We are under no illusions that the policy differences among Senate Republicans can be reconciled—and if they can, that the House and Senate can reach agreement when they go to conference. All we know now is that the GOP is stuck with its seven-year public commitment to creating a better system with still no clear path forward. Democrats may be enjoying the Republicans’ predicament, but neither party is likely to be viewed favorably if the current system continues to falter and ultimately fails. If that happens, the price of our polarized political environment could be steep for both sides.

The sheer magnitude of the dollars at stake should compel policymakers to find a breakthrough. The Centers for Medicare and Medicaid Services reports that national spending on health care grew 5.8 percent to $3.2 trillion in 2015, accounting for 17.8 percent of GDP. Medicare spending alone was $646.2 billion, 20 percent of the total. Medicaid another $545.1 billion, or 17 percent. Thus, the most urgent practical question may not be whose theory of government is more correct, but whether the current rate of health care spending is sustainable. We can’t think of a better answer than economist Herbert Stein’s wry observation that, “if something cannot go on forever, it will stop.”

This post was written by Alden J. Bianchi andEdward A. Lenz of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Key Tax Changes in the American Health Care Act

The American Health Care Act (“AHCA”), passed by the House of Representatives on May 4, 2017, repeals many of the taxes added by the Affordable Care Act (“ACA”) and makes changes to other tax rules.  Some of the notable changes proposed to be made to the Internal Revenue Code are:

            1. The individual mandate to maintain health insurance and the employer mandate to offer health insurance remain in the Code, but the taxes are “zeroed out” effective retroactively to 2016.

            2. The following taxes, fees, credits and limitations are repealed as of the year shown below:

·         The net investment income tax (NIIT) (2017)

·         The 0.9% additional Medicare tax (2023)

·         The small employer health insurance credit (2020)

·         The $2500 limitation on contributions to a health flexible spending account (FSA) (2017)

·         The annual fee on branded prescription drug sales (2017)

·         The medical device excise tax (2017)

·         The annual fee on health insurance providers (2017)

·         The elimination of a deduction for expenses allocable to the Medicare Part D subsidy (2017)

·         The 10% tanning salon tax (June 30, 2017)

            3.         The “Cadillac” tax on high cost health plans is delayed until 2026.

            4.         Individuals may be reimbursed for over-the-counter medications under a health savings account (HSA), health FSA or a health reimbursement arrangement (HRA) (2017).

            5.         The penalty tax on withdrawals from an HSA not used for a qualified medical expense is reduced from 20% to 10% (2017).

6.         The bill would replace the current ACA premium tax credit with a new refundable, advanceable tax credit effective January 1, 2020.  The credit could be applied toward the cost of any eligible health insurance coverage, whether purchased on or off the Exchange.  The credit is age-based as follows:

Age

Annual Credit

Under 30

$2,000

30 – 40

$2,500

40 – 50

$3,000

50 – 60

$3,500

60 and over

$4,000

The maximum credit for a family is $14,000. The credit is adjusted each year by CPI + 1%.

The credit is phased out depending on the individual’s modified adjusted gross income (MAGI) for the year.  It begins phasing out for an individual with income of $75,000 ($150,000 for joint filers) by $100 for every $1,000 in income above those thresholds.  The MAGI dollar limitations are also indexed for inflation beginning in 2021.              To be eligible to claim the credit, the individual must be covered by “eligible health insurance,” not be eligible for “other specified coverage” (including employer coverage or a government sponsored health program) and be a U.S. citizen or a qualified alien.

7.         The bill would make the following changes to health savings accounts, effective in 2018:

§  The maximum contribution to an HSA would be increased to the out-of-pocket maximum (in 2017, $6,550 for self-only and $13,100 for family coverage).  Under current law, HSA contributions are limited to $3,400 for self-only and $6,750 for family coverage.
§  Both spouses could make a “catch-up” contribution to the same HSA.  Under current law, each spouse must have his or her own HSA.
§  If an HSA is established within 60 days after coverage under a high deductible plan begins, the individual could be reimbursed for medical expenses incurred within that 60-day period.  Under current law, an individual cannot be reimbursed for any expense incurred before the HSA is established.

The bill now moves to the Senate where significant changes are expected.

This post was written by Cynthia A. Moore of  Dickinson Wright PLLC.

Congress Poised to Extend EB-5 Regional Center Program Until September 30 Without Changes

EB-5 Regional Center Congress is poised to extend the EB-5 regional center program through September 30, 2017, without any changes. Here is how we got to this point:

On April 28, 2017, the U.S. Congress passed a one-week stopgap funding bill to prevent a government shutdown and the expiration of the EB-5 regional center program. The continuing resolution keeps the U.S. federal government open through May 5, 2017, and U.S. Citizenship and Immigration Services continues to accept Form I-526 petitions based on investments through EB-5 regional centers through that date.

Behind the scenes, members of Congress and their staffs are negotiating an EB-5 reform package to include in the larger funding bill. The key issues concern: (1) raising the minimum investment amount from the current $500,000; (2) revising the definition of what constitutes a “targeted employment area” to allow certain investments at the minimum investment level; (3) establishing visa “set-asides” for investments in certain rural and truly distressed urban areas; and (4) establishing effective dates for the changes.

Congress is close on all these issues. Senator John Cornyn (R-Texas) is circulating one discussion draft; Senators Chuck Grassley (R-Iowa) and Patrick Leahy (D-Vermont) have circulated a similar discussion draft. Neither draft has been officially introduced; thus, they are not public.

It appears unlikely that Congress will be able to finalize an EB-5 reform package in time to include in the larger funding bill. On Sunday night, April 30, congressional leaders announced that they have finalized discussions on the key big-ticket items in the government funding bill, including more money for defense spending and border security. The funding bill is technically called an omnibus appropriations bill. The bill, H.R. 244, is available here. Section 542 of the bill includes a clean extension of the EB-5 program until September 30.

The House of Representatives is expected to vote on H.R. 244 on Wednesday. The bill will then proceed to the Senate with time to meet the deadline for approval by midnight Friday.

Given that the omnibus appropriations bill has already been introduced, it is hard to see how an EB-5 reform package could be included as an amendment to H.R. 244. It is more likely that Congress will extend the EB-5 regional center program without changes until September 30, as the bill already provides. During that time congressional negotiators will try to agree on final changes to the EB-5 program. Stay tuned.

© Copyright 2013 – 2017 Miller Mayer LLP. All Rights Reserved.

Congressional Budget Office Releases Report on American Health Care Act

Trumpcare American Health Care ActThe Congressional Budget Office (CBO) released its cost estimate of the American Health Care Act (AHCA) as reported by the Committees on Ways and Means and Energy and Commerce. CBO estimates that AHCA would reduce federal deficits by $337 billion over ten years. The total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. The outlays would be reduced by $1.2 trillion over the same period, and revenues would be reduced by $883 billion.

CBO and the Joint Committee on Taxation estimate that 14 million more people would be uninsured under the AHCA in 2018. CBO further projects that “following additional changes to subsidies for insurance purchased in the nongroup market and to the Medicaid program, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026.” By 2026, CBO estimates 52 million people would be uninsured, as compared with 28 million who would lack insurance that year under current law.

CBO and JCT estimate that average health insurance premiums in the individual market would be 15 percent to 20 percent higher than under the ACA. This is because the individual mandate penalties would be eliminated, leading to fewer healthy people signing up for insurance.

JCT and CBO estimate that the AHCA would result in private sector mandates totaling $156 million in 2017, adjusted annually for inflation. Finally, CBO is uncertain about part of its estimates as it cannot determine “the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes made by the legislation…”

Next Steps

In accordance with the Congressional Budget and Impoundment Control Act of 1974, the House Budget Committee is scheduled to meet this week to report the reconciliation bill. The Committee’s role is simply to package the two bills from the Energy and Commerce and Ways and Means Committees.

Following the Budget Committee’s action, the House Rules Committee will meet to develop a rule, which would govern floor debate for the American Health Care Act. It is possible the Rules Committee may fold bills reported by the Education and the Workforce Committee into the reconciliation package. The House Majority Leadership plans to take the AHCA to the floor next week.

In the Senate, Majority Leader Mitch McConnell [R-KY] plans to skip the committee process and take up the House-passed bill. As this legislation works its way through the Congress, we will provide further client alerts as necessary.

© Polsinelli PC, Polsinelli LLP in California

Congress Boots “Blacklisting” Regulation and Sends it to President’s Desk

Congress Capitol blacklistingOn March 6, 2017, on a narrow straight party line vote of 49–48, the U.S. Senate passed a Congressional Review Act (CRA) Joint Resolution of Disapproval, which moots Executive Order (EO) 13673, “Fair Pay and Safe Workplaces“—also referred to as government contractor “blacklisting”— and which revoked its implementing regulations and Labor Department guidance. The U.S. House of Representatives passed the joint resolution, H.J. Res. 37 on February 2, 2017. The next step is to send the Joint Resolution of Disapproval to the president for signature.

If signed by the president, the CRA Joint Resolution of Disapproval prohibits the future re-issuance of a federal regulation in the same or substantially similar form without authorization of Congress.

President Obama signed EO 13673 on July 31, 2014, and implementing regulations were issued in final on August 24, 2016. The EO and its implementing regulations would require federal contractors and subcontractors to notify federal contracting officers of violations and “administrative merits determinations” of 14 federal labor and employment laws, and their state equivalents, including wage and hour, discrimination, union organizing, and collective bargaining, and workplace safety and health laws.

Key Takeaways

The resolution of disapproval does not repeal the executive order; it only disapproves of the Federal Acquisition Regulation (published at 81 Fed. Reg. 58562) to implement the EO, which the U.S. Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) finalized on August 25, 2016. Nevertheless, the joint resolution has the effect of essentially repealing the EO or rendering it moot. President Trump is expected to revoke the EO in a separate action

In addition, the resolution will prohibit the paycheck transparency provision of the EO from being implemented. (A district court temporarily enjoined the other provision of the EO; the joint resolution also renders this injunction moot.)

This resolution of disapproval should relieve government contractors of having to implement the provisions requiring them to disclose labor law violations and revamp their payroll systems to meet the requirements of the EO’s paycheck transparency provisions. Not only would we expect the president to sign the resolution, but we also anticipate, at some point, that Executive Order 13673 will be rescinded and that the Labor Department will withdraw its guidance.

© 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Congress Begins to Evaluate Infrastructure Needs, Senate EPW to Hold Hearing this Week

Congress Capitol InfrastructureThe Trump Administration has provided few specifics on its trillion-dollar infrastructure proposal, and it has become increasingly clear that Congress will not act on a broad infrastructure bill in the first 100 days of the new administration. Recently, House Speaker Paul Ryan (R-WI) said the funding levels of any infrastructure proposal are unknown, and won’t be determined until Congress considers infrastructure funding in the greater context of the upcoming budget process this spring. To date, there is no consensus, even among Republicans, on how such infrastructure spending will be paid for.

However, Congress has begun to consider what issues and investments they will prioritize in an infrastructure bill by holding hearings in both the House and Senate. As we noted last week, the Senate Environment and Public Works (EPW) Committee will hold a hearing on “Oversight: Modernizing Our Nation’s Infrastructure” on Wednesday, February 8. The Senate EPW hearing follows last week’s kick-off hearing by the House Transportation and Infrastructure Committee on “Building a 21st Century Infrastructure for America.”

Recently, Senate Democrats have released their own $1 trillion infrastructure proposal. Their plan, “A Blueprint to Rebuild America’s Infrastructure,” would invest $1 trillion in infrastructure projects over ten years and create 15 million new jobs. The plan calls for enormous increases in Federal grant spending for a wide range of transportation and infrastructure projects, including schools, VA hospitals, and broadband service. For transportation, the plan pledges $210 billion on roads and bridges; $110 billion on water and sewer systems; $180 billion on rail and bus systems; $200 billion for a Vital Infrastructure Program (VIP) for mega-projects; $65 billion for ports, airports, and waterways; and $10 billion for new innovative financing tools such as an infrastructure bank.

Sen. Deb Fischer (R-NE) also recently introduced an infrastructure funding proposal, which would divert a total of $21.4 billion in revenues from Customs and Border Patrol fees to the Highway Trust Fund over FYs 2020-2024. Members of the House, including Rep. John Delaney (D-MD), are also advocating for their own infrastructure proposals.

This Week’s Hearings:

  • On Tuesday, February 7, the House Oversight and Government Reform Committee has scheduled a hearing titled “Accomplishing Postal Reform in the 115th Congress – H.R. 756, The Postal Service Reform Act of 2017.” The witnesses will be announced.

  • On Wednesday, February 8, the Senate Commerce, Science, and Transportation Committee has scheduled a hearing titled “A Look Ahead: Inspector General Recommendations for Improving Federal Agencies.” The witnesses will be:

    • The Honorable Peggy E. Gustafson, Inspector General, U.S. Department of Commerce;

    • The Honorable John Roth, Inspector General, U.S. Department of Homeland Security;

    • The Honorable Calvin L. Scovel III, Inspector General, U.S. Department of Transportation; and

    • Allison C. Lerner, Inspector General, National Science Foundation.

  • On Wednesday, February 8, the Senate Environment and Public Works Committee has scheduled a hearing titled “Oversight: Modernizing our Nation’s Infrastructure.” The witnesses will be:

    • William “Bill” T. Panos, Director, Wyoming Department of Transportation

    • Michael McNulty, General Manager, Putnam Public Service District, West Virginia

    • Cindy R. Bobbitt, Commissioner, Grant County, Oklahoma

    • Anthony P. Pratt, Administrator, President

    • Delaware Department of Natural Resources & Environmental Control, American Shore & Beach Preservation Association

    • Shailen P. Bhatt, Executive Director, Colorado Department of Transportation

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