Taxes Reformed, Now What?
2017 has been a whirlwind year, and, not to be outdone, the Trump administration has ended it with a bang by passing the tax reform bill. Though Trump and the GOP are celebrating, much is still left to be discussed, such as how will the tax reform impact employers?
According to Geoff Manville, government relations leader at Mercer, a global HR consulting firm, “As the sweeping Republican tax bill heads to enactment, its healthcare and fringe benefit provisions present a mixed bag to employers. Under the legislation, the Affordable Care Act’s individual mandate penalty will be repealed beginning in 2019, potentially taking millions of people out of the individual health care market. The bill will also do away with the employer deduction for qualified transportation fringe benefits and offer a two-year trial program offering tax credits to employers providing certain paid family leave.”
Beginning in the new year, employers can no longer deduct money provided to employees for commuter benefits, including qualified parking and mass transit. Additionally, employers can no longer deduct employees’ pre-tax contributions to these commuter plans.
“The January 1 effective date does not leave much time for employers to decide whether or how to modify their transportation programs given that most employees have already made their elections for this benefit for 2018,” says Tracy Watts, Mercer’s US leader for healthcare reform and senior partner at its Washington D.C. office.
Also suspended starting in 2018 is qualified bicycle commuting expenses and employee tax exclusion for moving expenses, paid or reimbursed by the employer.
Come 2019, individuals will no longer pay a penalty if they’re uninsured. For now, this means employers who sponsor self-funded healthcare plans are required to send 1095s to employees at the end of January 2018 and will be required to report for 2018 in early 2019, says Watts.
Though the reform has many gray areas left to be addressed, there are some things that remain unaffected. These include the following:
- Affordable Care Act’s 40 percent tax on high-cost employer-provided healthcare plans
- Employer-provided healthcare coverage exclusion from employee income
- Adoption- and dependent-care assistance
- Educational expenses
- Employer child-care tax credit
- Employer tax deduction for on-site fitness facilities.
As everyone gets ready to ring in the new year, HR leaders are tasked with reviewing and amending benefits and tax policies impacted by the reform.
Watts suggests: “You will want to consult with your tax adviser and make appropriate payroll changes for all tax status changes effective January 1, 2018… In addition to notifying employees, you will need to make revisions to benefit communication materials, plan documents, online resources and other collateral that reference the impacted benefits.”