1997 Ushers In a Fresh Batch of Federal Rules

Overshadowed by the major political battles of 1996, a host of new federal policies quietly goes into effect today that will make a difference in the health and livelihoods of several segments of the U.S. population--particularly those who work for small businesses, are stay-at-home spouses or have an elderly relative who will need nursing home care.

The provisions, refined over recent months inside government agencies and in deals struck between the Clinton administration and Congress, involve changes in the tax code and in arcane regulations buried inside the massive federal rule books. Despite the often impenetrable legal language that surrounds them, the new rules can have a profound daily impact, saving some people thousands of dollars and costing others dearly.

While the bulk of the new policies should affect the way Americans work and spend their earnings, a few will change the way they play. Starting with the new year, many national parks will begin increasing their entry fees in an effort to raise more money for maintenance. At the most popular parks--Grand Canyon, Yellowstone and Grand Teton--entrance fees will go from $10 to $20 a carload, and at Yosemite in California, from $5 to $20 per car.

At home, television viewers will see the effect not of new government regulation but of a threat to regulate. In January, the television industry plans to start issuing ratings on its programs in an effort to get a jump on federal regulators. Regulators from the Federal Communications Commission are expected to review the scheme to see if it meets the terms of a sweeping telecommunications law enacted in February.

For many Americans, the concrete effects of the new policies may outweigh those flowing from the highly charged ideological debate that consumed much congressional and partisan attention during the election year. While lawmakers wrangled over balanced budget measures and presidential candidates debated the state of the economy and personal character, executive agencies continued to churn out thousands of pages of rules that will affect the day-to-day lives of millions.

And in the final months of the 104th congressional session, President Clinton and GOP lawmakers--both fearing voters’ ire if they did not cooperate--dropped much of their most divisive rhetoric and agreed on a raft of legislation.

Among the new rules are ones to get more workers into company pension plans. Currently only 43% of American workers have access to such plans, and many wind up reaching their retirement years with paltry assets. Many small businesses had been deterred from creating such plans because of complex federal rules and reams of paperwork. But starting today, companies with fewer than 100 employees may follow simpler rules to establish pension accounts for their workers.

On another front, a new law will let spouses who are homemakers have a much larger participation in tax-deferred individual retirement accounts. These spouses now will qualify to put as much as $2,000 a year into IRAs--the same amount as a spouse who works outside the home. The homemaker deduction before today was limited to $250 annually.

Current income rules still apply, limiting tax-deferred IRAs to families with annual incomes of less than $50,000 and who are not part of a work-related pension plan.

Yet another government provision will crack down on middle-class families who disperse the assets of parents and grandparents so that the elderly relative can get Medicaid-subsidized nursing home care. Although Medicaid is known as the government health care program for the poor, an increasing number of middle-income families are looking to it for help in paying the huge long-term care bills that elderly relatives are incurring.

Starting today, the federal government will be able to bring criminal charges against individuals for Medicaid fraud, including the elderly patients themselves, their relatives or their attorneys. Someone who “knowingly and willingly disposes of assets” specifically to appear poor and qualify for Medicaid can face a misdemeanor charge that can bring up to a year in prison and a $10,000 fine, or a felony charge carrying a maximum five-year term and $25,000 fine.

Until the law is enforced, nobody knows how tough the government will be, or how many Americans will be affected. But advocates for the elderly are nervous about it. This marks the first time that Medicaid applicants could be accused of misdemeanors or felonies in connection with transferring assets.

“I would be surprised if it is vigorously enforced and we would see any 90-year-old widows incarcerated,” said Howard Bedlin, legislative representative for the American Assn. of Retired Persons. “But we are worried that the new law will cause a lot of confusion and concern. We are already receiving phone calls.”

The U.S. tax code also will look much different in 1997, thanks to “the most sweeping series of changes” in a decade, says Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee.

For the first time, people who adopt a child will get federal recognition of the financial burden, a tax credit of up to $5,000 to offset the costs of adoption. For a “special needs child” with mental or physical disabilities, the maximum credit is $6,000. The credit is available for those with annual incomes up to $115,000.

People who are age 65 to 69 will get a break in the revised tax code. Beginning this year, they will be allowed to earn up to $13,500 a year without losing any of their Social Security benefits. The limit was $12,500 last year. By the year 2000, seniors will be free to earn as much as $30,000 without forfeiting any benefits. Above the ceiling, a person loses $1 in benefits for every $3 in earnings.

For those with terminal illnesses, including AIDS, advance payments from life insurance policies are declared tax-free with the new year. The change was spurred by the growth of a “viatical” industry, in which victims of terminal illness--those whose doctors say they have less than two years to live--can get money before dying. The tax status of the money was unclear, but starting today, it will be unequivocally free of taxation.

Early in the new year, one of Clinton’s most visible campaign promises comes to life. Unless a court challenge stops the regulation from taking effect, every state must adopt and enforce the age minimum of 18 for the purchase of tobacco starting Feb. 28. The new rule is part of a larger package designed by the Food and Drug Administration to stem the availability of cigarettes and other tobacco products to minors. In the long run, the FDA has declared it will seek to regulate tobacco products on the same basis that it oversees over-the-counter drugs.

While there remains plenty of federal regulations taking effect this year, some in Congress believe the current crop is a bit smaller than usual.

GOP lawmakers who were swept to power in 1994 took direct aim at the federal government’s regulatory functions and sought at every turn to stem what they saw as a torrent of costly and unnecessary government rules.

The House voted in February 1995 to freeze all new regulations pending a comprehensive congressional review. While the Senate failed to adopt the measure, many believe the vocal criticism of GOP lawmakers put the administration and its federal agencies on the defensive.

That is nowhere more evident than in the agency that traditionally has been one of the federal government’s most prolific generators of regulations--the Environmental Protection Agency.

Starting early this year, the EPA will require about 6,400 more U.S. industrial facilities to monitor and report the volume of their toxic emissions, bringing the number of reporting facilities nationwide to 31,000.

But that is a modest step for an agency that GOP lawmakers have accused of massive overreaching and sought to pare back at every turn.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

New Federal Rules

New federal policies taking effect on New Year’s Day include:

* Pensions: Rules to get more workers into company pension plans.

* IRAs: A legislative provision allowing homemaker spouses to participate in individual retirement accounts on par with those in the paid work force.

* Nursing home care: New criminal penalties for middle-class families who disperse their assets so that they can get Medicaid-subsidized nursing home care for an elderly parent or grandparent.

* Park fees: Fee hikes taking place throughout the year at most national parks, raising more money for park maintenance.

* Social Security: Increases in the amount of annual pay seniors may earn without losing any benefits.

* Adoption: A new tax break for families who adopt, and a slightly larger credit for those who adopt “special needs” children.

* Insurance: Rule allows people with terminal illness to receive life insurance payouts, tax-free, while they are still alive.

Source: Times Washington Bureau