We previously reported how the initial Tax Reform bill introduced in the House of Representatives contained dramatic changes to the taxation of deferred compensation that would drastically affect executive compensation. However, the provisions were dropped by amendment in committee but re-surfaced in the Senate’s version of tax reform legislation.
Since then, the House approved its version of the bill on November 16. Additionally, the Senate dropped the deferred compensation changes by amendment in their current version of the bill. However, other differences between the House and Senate versions regarding deferred compensation and employee benefits still remain. . However, amendments can still be made when the full Senate debates the bill. If the Senate passes its version with differences from the House bill, the differences will have to be reconciled by a joint committee and then the bill sent back to both houses to be passed before going to the President.
Individual Health Mandate Repealed. Probably the most controversial difference between the two bills is that the Senate bill now repeals the Affordable Care Act’s individual health coverage mandate that requires most individuals to have health insurance coverage or pay a penalty. Repealing the mandate may save people who don’t purchase health insurance the penalty but could cause a dramatic increase for indviduals who do purchase insurance from the public exchanges. The reason being that healthy individuals could opt out of coverage leaving the exchanges covering only unhealthy people causing premiums to rise.
Family Medical Leave Act Credit. The Senate Bill also creates a partial tax credit for employer who pay wages to employees on family medical leave during 2018 and 2019 if the rate of pay is at least 50% of the wages normally paid to the employee. The credit is 12.5% of the first 50% of normal wages paid and increases .25% for each percentage point the pay rate exceeds 50% up to a maximum of 50% credit.
Given the current state of Washington, D.C., whether tax reform will pass is anyone’s guess. The Senate will be addressing their bill after the Thanksgiving break. We will continue to monitor developments as they occur and will address the affects of tax reform on employee beneftis at our upcoming HR Update seminar on December 6. Download the seminar flyer for more information. Click here to register now.