Alert / Employee Benefits
Republican’s Tax Bill Continues to Cook

Republican lawmakers are thankful for continued progress on their tax bill this week. Thursday, the House passed its version of the legislation, and the Senate Finance Committee voted to move its version of the bill to the full Senate floor. The Senate is expected to vote on the measure the week after Thanksgiving. Despite this week’s developments, the bill has a long way to cook before it’s done.

The version of the bill that passed through the Senate Finance Committee is substantially similar to the version originally proposed last week (see Update). Significant changes for plan sponsors include elimination of both a proposal to accelerate taxation of deferred compensation and the Affordable Care Act’s (ACA) individual mandate.

Lockton comment: Elimination of the individual mandate is unlikely to have a significant impact on employers. The Congressional Budget Office analysis does suggest that some employers may see fewer health plan enrollees if the individual mandate is repealed. That may be the case, but the ACA employer mandate will remain, which means large employers will still need to offer coverage meeting minimum standards to avoid penalties.

Repeal of the individual mandate is already causing disruptions at the GOP dinner table, as some Republican senators voiced concerns this week about mixing health reform and tax reform on the same plate. As we saw with the attempts at health reform this fall, opposition by three GOP senators will sink the bill. Sen. Ron Johnson (R-WI) has publically stated that he will oppose the bill on grounds that it does too much for large corporations relative to individuals and small businesses. It would take only two more ‘no-votes’ to derail the tax bill.

Lockton comment: It’s entirely possible for the individual mandate repeal to eventually be dropped from the tax bill. Repeal of the individual mandate is only one of the many differences between the House and Senate bills. Eventually, the Senate and House bills will have to be identical before the legislation moves to the president’s desk for signature. Next week’s recess gives Senate Republicans time to further modify their proposal to both ensure it can receive the votes necessary to pass and begin to reconcile substantive differences with the House bill.

Amendment to Repeal Cadillac Tax Rejected in Senate Finance Committee

Democrats in the Senate Finance Committee proposed an amendment to the tax bill that would have repealed the Cadillac tax – the 40 percent excise tax on the value of employer-provided coverage exceeding certain thresholds that is set to begin in 2020. The amendment was eventually rejected because the proposal did not provide a way to offset the lost revenue that would result from repeal.

Lockton comment: Both Republicans and Democrats have opposed the Cadillac tax, but finding a way to pay for its repeal has always presented a challenge. It seems increasingly unlikely that the tax will be repealed this year. We understand Congress is still considering a year-end proposal to further delay other ACA taxes like the medical device tax and health insurer tax. Lockton, along with other members of the Alliance to Fight the 40, have been pressing members of Congress to include delay of the Cadillac tax as part of that bill. More information about the Alliance, including a ‘take action’ link, is available here.

Programming Note

In light of the Thanksgiving holiday, we will not be publishing a Legislative Update next week – because, really, who wants to talk politics over Thanksgiving? ...

Scott Behrens, JD
Lockton Compliance Services

Not Legal Advice: Nothing in this Alert should be construed as legal advice. Lockton may not be considered your legal counsel and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.

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