Update 12/22/2017: President Trump has signed the Tax Cuts and Jobs Act on 12/22/17.
After months of debate on tax reform, today the House by a vote of 224-201, passed the “Tax Cuts and Jobs Act” (H.R. 1) to overhaul the tax code. The House had originally passed the legislation yesterday by a margin of 227-203 and the Senate passed the legislation early this morning by a margin of 51-48; however, due to the need for 3 small technical corrections to stay in line with Senate rules, it required a second House vote today. The bill now heads to the White House where President Trump says that he will sign it into law. We anticipate that the bill will be signed before Christmas. With the legislation going into effect in January, many will start to see the impact of the legislation as early as February 2018.
A few of the notable items of interest to employers regarding tax advantaged benefits are as follows:
Dependent Care Flexible Spending Accounts
- Proposed changes to Dependent care assistance flexible spending arrangements were not adopted as part of the final legislation and remain as they are in current law.
- Proposed changes to Adoption Assistance were not adopted as part of the final legislation and remain as they are in current law.
Education Assistance Programs
- Proposed changes to Education Assistance Programs were not adopted as part of the final legislation and remain as they are in current law.
- Qualified transportation fringe benefits, such as parking and transit passes, can continue to be offered on a pre-tax basis for employees.
- Employers can no longer deduct expenses for qualified transportation fringe benefits effective for tax years beginning after December 31, 2017.
- Qualified bicycle commuting expenses will no longer be tax exempt to employees effective for tax years beginning after December 31, 2017.
Individual Mandate under the ACA
Also of note, the tax reform legislation eliminates the Affordable Care Act (ACA) mandate for individuals purchasing health insurance for months beginning after December 31, 2018.
Other provisions of the ACA, including the excise tax on high cost health insurance (a/k/a the “Cadillac Tax”), tax treatment of employee contributions to 401(k), 403(b) and 457 plans, or the employer exclusion on employer-provided health care benefits were not addressed in the tax reform legislation. It remains to be seen whether the current Congress will pass any further changes to the ACA prior to the 2018 election cycle.
We will continue to update you with any other year end legislation that may affect employer-sponsored benefits or health care reform efforts.