On December 19, 2017, the Senate voted to approve the Tax Bill and, on December 20, 2017, the House also voted to approve it, which lead to President Trump signing into law the Tax Cuts and Jobs Act on Friday, December 22, 2017.
"While it's hard to predict exactly what the impact of the reform will have on corporate America, some provisions in the new tax law could have a noticeable impact on employees."
Tax Rate Cuts
One of the most immediate and impactful results of the Trump Tax Reform is individual and business tax rate cuts. Not only will employees be receiving more take home money due to reduced income taxes, but upon the finalization of the bill passing several companies - such as Walmart, Fifth Third, Comcast, and Bank of America - have announced that they will use the extra funds from the business tax reductions to give employee bonuses and increase employee pay. The biggest challenge that this will have company internal administration procedures will be on payroll. Companies and third-party payroll administrators will need to overall their current structure to incorporate the new tax brackets and withholding rates into their systems before paychecks will reflect the new rates. The tax law retained its seven income brackets but lowered the tax rates applied to each bracket and modified some of the income levels. This will, or already has, imposed challenges to payroll systems that are less flexible to incorporate these changes.
Provisions Impacting Benefits
In addition to the tax rate cuts there a number of provisions that will affect FMLA, 401Ks and retirement benefits, executive compensation, and fringe benefits.
ACA Individual Mandate Repeal
Perhaps the most notable provision of the new tax reform, is the ACA’s Individual Mandate Repeal. This legislation does not change the obligation of qualifying large employers to offer ACA-compliant insurance to their full-time employees and to report on the offer. However, it does effectively eliminate the individual mandate by eliminating the penalty for not purchasing individual healthcare insurance beginning in 2019. While this provision on the surface doesn’t appear that it would have much impact on employers and HR procedure, there is one aspect it could affect, and that’s Federal COBRA. Under the current ACA Individual Mandate an individual will owe a fee for certain durations that you, your spouse, or your tax dependents don't have qualifying health coverage. Learn more about Federal COBRA by calling and speaking with one of our professional and knowledgeable representatives.
For more information about Open Enrollment, Federal COBRA, the Trump Tax Reform, and Tax Cuts, call us today!