- Extending the Social Security Payroll Tax Cut. For 2012, the Social Security tax would continue on a reduced basis for employees (i.e., reduced from 6.2 percent to 4.2 percent) and for the self-employed (i.e., reduced from 12.4 percent to 10.4 percent). The reduction would apply to the first $110,100 of taxable wages or self-employment earnings received in 2012. Transfers would continue to be made from the General Fund to the Social Security Trust Fund to hold it harmless for the reduction in payroll taxes.
- A 10 Percent Tax Credit for New Jobs and Wage Increases. Qualified employers would receive a tax credit for increases in wage expense (whether driven by new hires, increased wages, or both). The credit would be equal to 10 percent of the increase in the employer's 2012 OASDI wages over the prior year (up to $106,800 per employee for 2011 and $110,100 for 2012). The maximum increase in eligible wages would be $5 million per employer, for a maximum credit of $500,000. For employers with no OASDI wages in 2011, eligible wages for 2011 would be 80 percent of their OASDI wage base for 2012.
- Automatic Enrollment in IRAs. Employers in business for at least two years that have more than ten employees (but do not have a qualified plan, SEP or SIMPLE plans) would be required to offer an automatic IRA option to their employees. Employee contributions would be made by payroll deduction to either a traditional or Roth IRA, and would qualify for the saver's credit (to the extent the contributor and the contributions otherwise qualify). Small employers (those that have no more than 100 employees) that offer an automatic IRA arrangement could claim a temporary non-refundable tax credit for the expenses associated with the arrangement up to $500 for the first year and $250 for the second year.
- Doubling the Small Employer Pension Plan Startup Credit. Small employers (those that have no more than 100 employees) that adopt a new qualified retirement or SIMPLE plan are now entitled to a business tax credit equal to 50 percent of the employer's expenses of establishing or administering the plan — up to a maximum of $500 credit per year for three years. The proposal would double this tax credit to a maximum of $1,000 per year for three years, and extend it to four years for any employer that adopts a new qualified retirement or SIMPLE plan during the three years beginning when it first offers or is required to offer an automatic IRA arrangement.
- Expanding the Child and Dependent Care Tax Credit. The proposal would permanently increase from $15,000 to $75,000 the AGI level at which the credit begins to phase down. The percentage of expenses for which a credit may be taken would decrease at a rate of 1 percentage point for every $2,000 (or part thereof) of AGI over $75,000 until the percentage reached 20 percent (at incomes above $103,000). As under current law, there would be no further income limits and the phase-down point and the amount of expenses eligible for the credit would not be indexed for inflation.
- Expanding Small Employer Tax Credit for Non-Elective Contributions to Employee Health Insurance. The proposal would expand the group of employers eligible for the credit (i.e., to include employers with up to 50 full-time equivalent employees) and would begin the phase-out at 20 fulltime equivalent employees). There would also be a change in the coordination of the phase-outs based on average wage and the number of employees (using a formula that is multiplicative rather than additive), so as to provide a more gradual combined phase-out. As a result, the proposal would ensure that employers with fewer than 50 employees and an average wage less than $50,000 would be eligible for the credit, even if they are nearing the end of both phase-outs.
- Eliminating MRDs for Small IRAs. The proposal would exempt an individual from the minimum required distribution requirements if the aggregate value of the individual's IRA and tax-favored retirement plan accumulations does not exceed $75,000 (indexed for inflation) on a measurement date. (Benefits under qualified defined benefit plans that have already begun to be paid in any form of life annuity would be excluded.) The MRD requirements would phase-in ratably for individuals with aggregate retirement benefits between $75,000 and $85,000.
- Allowing All Inherited IRAs to Be Eligible for 60-Day Rollover. The proposal would allow a surviving non-spouse beneficiary under a tax-favored employer retirement plan or IRA to move inherited plan or IRA assets to a non-spousal inherited IRA by means of a 60-day rollover (instead of only a direct rollover).
- Worker Classification Certainty.The proposal would permit the IRS to require prospective reclassification of workers who are currently misclassified and whose reclassification has been prohibited under current law. The reduced penalties for misclassification provided under current law would be retained, except that lower penalties would apply only if the service recipient voluntarily reclassifies its workers before being contacted by the IRS and the service recipient had filed all required information returns reporting the payments to the independent contractors. Treasury Department and the IRS would also be permitted to issue generally applicable guidance on the proper classification of workers under common law standards.
- Redress of Worker Classification Errors. The proposal would provide $13.8 million to combat misclassification (consisting of $10 million for grants to the states to identify misclassification and recover unpaid taxes and $3.8 million for additional Labor Department Wage and Hour Division personnel to investigate misclassification). An additional $6 million is proposed for the Wage and Hour Division to provide increased enforcement of the Fair Labor Standards Act and the Family and Medical Leave Act.
- Acceleration of State Innovation Waivers. The proposal would make State innovation waivers (by which States are allowed to develop their own strategies to ensure their residents have adequate access to health insurance) available starting in 2014, which is three years earlier than currently permitted under the Affordable Care Act.
- Risk Adjustment for PBGC Premiums. The proposal would give authority and direct the PBGC to adjust PBGC premiums taking into account the risks that different sponsors pose to their retirees and to PBGC. The proposal is estimated to save $16 billion over ten years.
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