11/03/2017
Yesterday, November 2, 2017, The Tax Cuts and Jobs Act (H.R. 1) was introduced in the House of Representatives, the first step in an attempt by Congress to reform the Internal Revenue Code. The bill could be significantly amended before it passes the House and the prospects of the bill (or something similar) passing in the Senate are unclear. Nevertheless, we wanted to highlight some information about the proposed legislation’s impact on employee benefits, in part due to the fact the legislation, if passed, would require many employers to make changes to their benefits effective January 1, 2018.
Items of note include:
- No changes to the tax exclusion for employer-provided health care.
- No changes to the tax-deferred amounts that can be contributed to 401(k) plans, 403(b) plans, and 457(b) plans.
- No changes to Health Savings Accounts (although enhancements to HSAs may be made through other legislation).
- No direct changes to Section 125 cafeteria plans (but see notes below regarding dependent care and adoption assistance).
- Effective January 1, 2018, repeal of the tax exclusion for dependent care assistance plans. This provision would effectively put an end to all dependent care FSAs that are part of Section 125 cafeteria plans.
- Effective January 1, 2018, repeal of the tax exclusion for adoption assistance programs. This provision would effectively put an end to all adoption assistance benefits that are part of Section 125 cafeteria plans and would eliminate the tax advantages of employer-funded programs provided outside of a cafeteria plan.
- Effective January 1, 2018, repeal of the tax exclusion for various other fringe benefits, including tuition reimbursement and employee achievement awards.
- Effective January 1, 2018, elimination of the employer’s tax advantages for offering qualified transportation fringe benefits. The benefits would remain non-taxable for employees, but employers would lose the ability to take a tax deduction with respect to the benefits.
- Significant changes to the tax rules applicable to nonqualified deferred compensation plans (other than 457(b) plans).
We will continue to monitor any developments in this area and provide updates as needed.
Please contact us for any questions regarding the Order.