After President Trump signed the Tax Cuts and Jobs Act into law in December, the impact of the new tax law on plan sponsors, administrators, and participants are now coming into focus. There are two primary ways the tax bill could lead to employee benefit changes: The end of the individual mandate to purchase health coverage, and changes to tax deductibility of executive compensation.
The end of the individual mandate for healthcare coverage may lead to an increase in the number of employees and their family members who will not buy health insurance. If an employer does not offer healthcare benefits to all employees or restricts eligibility to certain employees who work a minimum number of hours, employers may consider expanding eligibility as a benefit to attract and/or retain workers.
However, the changes to the individual mandate do not affect an employer's requirement to provide health insurance under the Affordable Care Act. Employers with 50 or more full-time employees must still offer the minimum coverage requirements or face potential penalties. Employers are also still required to comply with the ACA's reporting obligations.
tThe tax law will also change executive compensation for some companies by eliminating the tax exemption for commission-based and performance-based pay. This change applies to the company CEO, CFOs, and three top salaried employees. Companies that previously took advantage of this significant tax exemption may want to re-evaluate their executive compensation packages for 2018.
Employees with employer-provided health coverage may not have enrolled their spouse or children in prior years because their family could have obtained coverage at a lower rate through some other program.
As insurance coverage rates change and program eligibility changes, family members may see a benefit in getting covered under their spouse's employer benefit plan. Employers may see a significant change in the number of participants during open enrollment periods in the coming year.
Look out for higher premiums
Healthcare premiums will increase for a number of employers and employees in the coming year. For some employees, the increased cost of health insurance may lead to a change in healthcare plans during open enrollment. Increased costs in health benefits may also lead some employees to decrease contributions to retirement plans, life insurance or other employee benefits.
Before the New Year, many benefit plans send out notices to participants regarding changes that will go into effect. Unfortunately, when employees get too many e-mail updates and notifications throughout the year, they often disregard these important notices.
As a result, employees may later lodge complaints regarding a change in benefits they were otherwise unaware of. Employers should be ready to field questions from employees regarding changes to their individual benefit plans and know where to direct employees to get the answers they need.
With each New Year come the inevitable changes to employee benefits that affect plan sponsors, administrators, and participants. Employers and plan administrators should review all relevant changes to make sure they understand the new rules and the impact of employee benefit changes in 2018.
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