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How Will Tax Reform Impact Employee Benefits Plans?

Florida Employee Benefits

Tax reform was a major focus for the federal government towards the end of 2017. The final bill that passed in December includes a considerable reduction in the corporate tax rate and tax cuts for many individual taxpayers. It also includes several implications for employer-sponsored benefits programs. Here are a few of the ways the new tax reform legislation may impact employee benefit plans, specifically fringe benefits and healthcare plans.

  1. Family Medical Leave Tax Credit

For 2018 and 2019, if you’re paying any portion of wages for certain individuals who are using the Family Medical Leave Act (FMLA) benefit, you can claim a tax credit. This is an exciting change that many employers are not focused on, so it’s a good idea to learn more about this tax credit that can bring money to the table for a benefit you’re already offering.

  1. Repeal of the Affordable Care Act (ACA) Individual Mandate

Starting in 2019, there will no longer be a tax penalty for individuals who do not have qualifying health insurance. While there may be a few employees that decide to waive their health benefits, for the most part this isn’t expected to have a major impact on employers. Also, employers are commonly asking if this means that ACA reporting is being rescinded as well, which is not the case. You will still need to complete Form 1095 for the year.

  1. Fringe Benefit Suspensions

Here are two fringe benefit deductions that are being suspended beginning in 2019.

  • Moving expenses will no longer be a tax deduction. If employers cover the cost of moving an employee, the benefit will now be included as taxable income for the employee, and the deduction will now be eliminated for individual taxpayers. However, moving expenses will remain tax-free for military personnel who are on active duty or who move as part of a military order. Since top talent is very valuable in today’s market, it is likely that employers will decide to bear the cost of moving and will not pass this cost on to employees.
  • Commuter benefits will no longer be able to be deducted. This includes bicycle commuting expenses, employees’ transit and parking. Employers will need to decide if commuter benefits will be critical for attracting top talent. In some geographic areas, smaller employer tax breaks like commuter benefits are no longer a necessity, but in some areas they may still be pivotal benefits to offer to recruit or retain qualified employees.
  1. Employee Achievement Awards

The tax reform law created a new tax category called “Tangible Personal Property.” This refers to cash, cash equivalents, gift cards, gift certificates, vacations, meals, lodging or tickets to the theater, concerts or sporting events. This will impact employer awards programs. Employers will most likely decide to bear the costs of these types of benefits as they will not want to pass those costs along to employee recipients.

It is likely that Congress will continue to pass tax reform provisions in the future. But regardless of any future legislative changes, employers in today’s environment of escalating healthcare costs have a strategic imperative to continue to seek out ways to provide competitive benefits at sustainable levels and engage employees to help them gain the most value from their benefits plan.

The experts at Lanier Upshaw, Inc. help companies understand the current employee benefits climate and help them design and implement strategies that will mitigate rising plan costs and promote a healthier workforce. Contact us here to learn more.