Tax Implications of the Bipartisan Budget Act of 2015
| On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015 (BBA). The BBA raises the federal debt ceiling and increases spending levels for defense and domestic programs. In addition, the BBA contains some important tax provisions and other items that are likely to be of interest to tax professionals. An overview of some of these items follows. | Â |
For a full explanation of all the BBA’s tax provisions, get your copy of the Complimentary BBA Summary.
|
Social Security Benefits - Under the file and suspend strategy, an individual who has reached full retirement age (FRA) could apply for social security retirement benefits and then request to have the payments suspended. This entitled the individual’s spouse to receive a spousal benefit (which is generally half of the higher earner’s benefit) while the worker continued to earn delayed social security retirement benefits at the rate of 8% per year up to age 70. The BBA changes the rules so that if an individual suspends benefits, no one can claim benefits based on that individual’s earnings record. This provision is effective for benefits payable beginning six months after the enactment of the BBA.
Medicare Part B Premiums - The standard monthly Medicare Part B premium is $104.90 in 2015. This premium was expected to increase in 2016 to $159.30 for the Medicare beneficiaries who are not held harmless. The BBA prevents this large premium increase by setting a new 2016 basic Part B premium of $120 for beneficiaries who are not held harmless. The $120 premium is the amount that the Part B premium would otherwise be for all beneficiaries in 2016 if the hold-harmless provision did not apply.
PBGC Premium Rates - The BBA raised the single-employer fixed premium to $68 for 2017, $73 for 2018, and $78 for 2019. After 2019, it will be re-indexed for inflation. The variable rate premium will continue to be indexed for inflation, but will be increased by an additional $2 in 2017, an additional $3 in 2018, and an additional $3 in 2019.
Repeal Of ACA’s Automatic Enrollment Requirement - The BBA repeals the Affordable Care Act provision that would have required employers with more than 200 employees to automatically enroll new full-time employees into a qualifying health insurance plan offered by that employer and to automatically continue enrollment of current employees.
Partnership Audits and Adjustments - Under a BBA provision, the TEFRA and ELP rules are repealed, and the partnership audit rules will be streamlined into a single set of rules for auditing partnerships and their partners at the partnership level. The BBA provision permits partnerships with 100 or fewer qualifying partners to opt out of the new rules, in which case the partnership and partners will be audited under the general rules applicable to individual taxpayers.
Crop Insurance - The BBA amends the Federal Crop Insurance Act to require that the Standard Reinsurance Agreement (SRA) be renegotiated by December 31, 2016, and at least once every five years after that date.Â
