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Last month, the Inflation Reduction Act of 2022 was signed into law, leaving employers concerned and unclear how the new bill might impact future operations.
Employers will have obligations as well as opportunities to benefit from many of the Act’s features, which are designed to reduce healthcare costs, combat climate change, and revitalize American manufacturing.
Inflation Reduction Act Highlights for Employers:
AFFORDABLE CARE ACT EXTENSION
Employer benefits and responsibilities will continue with the extension and enhancement of the Affordable Care Act subsidies, which will now go through 2025. This includes those with incomes up to 400 percent of the federal poverty level.
GOVERNMENT-NEGOTIATED PRESCRIPTION DRUG COSTS
The new bill allows the government, for the first time beginning in 2026, to negotiate Medicare prescription drug prices. This will impact employers in several ways.
Individual Policies
Individual policies will likely improve retention and curb healthcare costs for enrollees in the individual plans and public option when implemented.
Employer Plans
As Medicare negotiates lower drug prices with pharmaceutical companies, savings may shift to employer-sponsored health plans, leading to higher costs for individual plans in the years ahead. A major challenge for the employers will be to avoid overpaying for healthcare.
Complications Beginning in 2026
Drugs prices negotiated by Medicare must have no generic equivalent or biosimilar products. Small-molecule drugs must have been on the US Food and Drug Administration’s (FDA) approved list for nine years to be eligible for negotiation, while biologics have to have been approved for 11 years. This loophole may allow pharmaceutical companies to shift costs to consumers with private or employer-sponsored health insurance.
CLEAN ENERGY JOBS
Employers across the country will be impacted by new business opportunities.
Make It in America
The Inflation Reduction Act establishes provisions for the use of American-made equipment for clean energy production. The law provides expanded clean energy tax credits for wind, solar, nuclear, clean hydrogen, clean fuels, and carbon capture, including bonus credits for businesses that pay workers a prevailing wage and use registered apprenticeship programs. Employers will be eligible for targeted tax incentives.
Specifically, employers should be sure to evaluate clean energy efforts. These could mean big tax credits, as much as10%, for projects established in communities that have previously relied upon the extraction, processing, transport, or storage of coal, oil, or natural gas as a significant source of employment.
Domestic Sourcing of American Jobs
The expanded tax credits for energy-efficient commercial buildings, new energy-efficient homes, and electric vehicle (EV) charging infrastructure will include bonus credits for businesses ensuring local wages are met. For example, clean energy tax credits are increased if the amount of American steel used in wind projects meets the domestic content threshold, and bonus credits for apprenticeships, ensuring that federal tax policy supports good-paying, high-skilled jobs.
The Inflation Reduction Act will penalize companies that promise to pay prevailing wages but don’t follow through, and workers who are owed prevailing wages will receive the difference, plus interest.
NEW TAX PROVISIONS
Employers can take advantage of the Inflation Reduction Act’s new tax provisions beginning in 2023, when the tax code will change. Employers should familiarize themselves with the many new features to ensure they can meet their new responsibilities while taking advantage of several areas of potential tax credits.
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A New Path to HR Bliss – Trusted for more than 30 years, Employer Advantage frees you from the administrative and compliance burdens of having employees so you can focus on your business success. Versatile enough for companies of all sizes, our unique service combines comprehensive management of your employee administration and compliance with the latest software solutions, tailored to meet your individual needs and company culture. Our full-service management of Human Resources, payroll, health and benefits, workplace safety, and more enhances your profitability while reducing the costs and risks associated with employment law compliance. We provide your employees with top-notch assistance and benefits that help you increase productivity, save time and money, and attract and retain a talented workforce. And for small and mid-sized businesses, we bring you economy of scale with access to Fortune 500-level benefits, specialty assistance, and savings that would not be possible to attain on your own. Headquartered in the Midwest and serving more than 500 companies and 10,000 worksite employees throughout the country, Employer Advantage is an IRS-Certified Professional Employer Organization (PEO) (CPEO). Experienced, certified, and trusted. www.EmployerAdvantage.com
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