Tax Bill Makes Few Changes to Employee Benefits
Congress passed the Tax Cut and Jobs Act on December 20, 2017, and it has been signed by the President. The tax changes predominantly affect the tax rates and deductions for businesses and individuals. There were few changes that affect employee benefits. Some of the changes are:
- Effective for calendar year 2019, the bill effectively removes the penalty applied to an individual who is not covered by health insurance as required by the Affordable Care Act (ACA).
- The bill eliminates the employer deduction for qualified transportation benefits (parking, bicycle, transit passes, etc.). However, parking and transit passes can still be pre-tax for employees.
- The bill includes the amount of qualified transportation benefits for bicycles in an employee's income.
- The deduction for employer-provided meals and beverages for employees on or near business premises is reduced to 50 percent.
- The employer deduction for entertainment expenses is eliminated.
- Beginning for 2018, the bill adds an employer tax credit for paid family and medical leave of 12.5 to 25 percent of the wages paid to qualified full-time and part-time employees (i.e., employees earning below a dollar threshold for the prior year, which is $72,000 for 2018).
- The bill prevents the re-conversion of a Roth IRA to a regular IRA (but does not impact the conversion of a regular IRA to a Roth IRA).
- The bill creates a 21 percent excise tax on the compensation of the five highest-paid employees of a tax-exempt organization who have more than $1 million in compensation.
- For the years 2018 through 2025, the bill suspends both the tax exclusion and the tax deduction relating to moving expenses, except for members of the Armed Forces.
We will be reviewing the provisions of the tax bill and the final budget reconciliation bill (which has been put off until January) with respect to employee benefit changes, and cover them in more detail in a future alert.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.