The recently enacted Tax Cuts and Jobs Acts (the “Tax Reform Act”) made significant changes to the Internal Revenue Code. Although there was a lot of press coverage about potential changes that could significantly impact employer-provided retirement, welfare, and fringe benefits, the reality is that most of the changes did not make it into the final version of the law and, as a result, tax reform did not make any sweeping changes in this area. Notwithstanding that this was much ado about (almost) nothing, nearly all employers, including public, private, and non-profit, need to know and become familiar with what has changed in the new rules and where the status quo remains the same for employer-provided retirement, welfare, and fringe benefits.
The Tax Reform Act made significant changes to public company executive compensation.
Provisions Related to Retirement Plans |
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No Mandatory “Rothification” of Retirement Plan Contributions: The Tax Reform Act does not include any requirement to further limit the amount of pre-tax contributions that may be made to retirement plans. Aggregation Rules for Determining 415(c) Limit: The Tax Reform Act does not include the proposal to aggregate all contributions to any defined contribution retirement plan (401(k), 403(b), and 457(b)). |
Deadline to Make Loan Offset Payments Extended: Additional Relief for Taxation of 2016 Disaster Withdrawals: |
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Provisions Related to Health and Welfare Benefits |
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Employer Mandate Under the Affordable Care Act (ACA): Employers must continue to comply with the employer mandate and its related tax reporting. |
Elimination of the Individual Mandate Under the ACA: |
Provisions Related to Fringe Benefits
Effective January 1, 2018
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Exclusion for Educational Assistance Programs: The proposal to repeal the income exclusion for educational assistance programs was not adopted. |
Limitations Related to Employee Fringe Benefits:
Practical Insights: Some of these items are effective tax increases included within a tax cut bill, i.e., while nominal tax rates decline, the definition of income that is subject to tax increases. Employers should ensure that tax and payroll systems are programed correctly. Employees, especially executives, may start to request tax gross-ups for moving expenses. |