November 10, 2017
Yesterday, November 9, 2017, the Senate Finance Committee released information about the Senate’s tax reform legislation. As with the House version of the legislation, the bill could be significantly amended before it passes the Senate. 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. The Finance Committee is scheduled to mark up the bill on November 13th.
Items of note include:
- No changes to the tax exclusion for employer-provided health care.
- Effective January 1, 2018, certain changes to the tax code that impact contributions to 403(b) plans and 457(b) plans, including repeal of the rule allowing employer contributions to 403(b) plans for up to five years following termination of employment and repeal of the special rules allowing additional elective deferrals and catch-up contributions to 403(b) and governmental 457(b) plans (to make the rules uniform for 401(k) plans and 403(b) and 457(b) plans).
➡ Particularly significant for governmental employers (e.g., cities, counties, school districts). - No changes to Health Savings Accounts.
- No changes to Section 125 cafeteria plans.
- 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.
- Effective January 1, 2008, repeal of the tax exclusion for qualified bicycle commuting expenses.
- Significant changes to the tax rules applicable to nonqualified deferred compensation plans (other than 457(b) plans).
➡ Particularly significant for governmental employers (e.g., cities, counties, school districts).
We will continue to monitor any developments in this area and provide updates as needed.
Please contact us for any questions regarding the legislation.