Alert / Employee Benefits
Senate Passes Tax Overhaul

Update:

It was a late night, but the Senate did pass the tax overhaul package. The final vote was 51- 49, with only Bob Corker, R-Tenn. joining Democrats opposing the bill. It appears the House and Senate bills will go to conference committee next week, with Republican leadership hoping for final votes in both chambers the week of Dec. 11. 

Dec. 1, 2017 Legislative Update:

The Senate was on the precipice of passing a tax bill last night, but the vote was delayed when it became clear the objections of a handful of GOP senators would need to be addressed before the required 50 favorable votes could be assured. Reports this morning indicate those objections have been addressed, and a vote later today appears likely. The specific changes being made to the tax overhaul remain unclear; however, Washington insiders we have spoken to believe it is unlikely that these last minute changes will negatively impact health or retirement benefits.

Much work remains even if the Senate does pass its version of the tax bill. Both the House and Senate must pass identical legislation before it goes to the president for signature into law. The Senate bill differs in some key respects from the previously passed House bill.

Assuming the Senate passes a bill, one of two scenarios is expected to play out:

  • The House could pass the Senate bill as is. This seems unlikely, as there were pieces of the House bill crucial for it to pass that chamber. One key difference is the deductibility of state and local taxes for taxpayers who itemize their deductions.
  • The House and Senate will establish a formal conference committee. Designated members of each chamber will iron out the differences in the current House and Senate bills, and then each chamber will hold another vote on the compromise legislation.

Lockton comment:  Early proposals to negatively impact health, retirement and nonqualified deferred compensation plans were met with significant opposition. We are optimistic that those proposals will not resurface during conference committee discussions. We will continue to monitor the process and press upon conference committee delegates the importance of protecting employer-sponsored benefits.

Republican lawmakers hope to have the entire process wrapped up before Dec. 22; however, Democrats have a number of procedural tools at their disposal, which might stretch the GOP’s preferred timeline. Most significantly, Congress must work out a government funding bill before Dec. 8 to avoid a government shutdown. Passage of the funding bill requires Democrat support in the Senate, so a shutdown will occur if Democrats withhold their votes.

A shutdown appears more likely in light of Democrat leaders walking away from a meeting to negotiate the funding measure after President Donald Trump tweeted earlier this week that he did not see the possibility of a deal being worked out.

Lockton comment: One reason the Dec. 22 deadline is so important is because that is the day a new senator from Alabama will replace current Sen. Luther Strange, R-Ala. Strange is on the record as supporting the bill, and there is good reason to believe either candidate to replace him would vote against the bill. Any final package is expected to pass by a narrow margin, so swapping Strange’s “yes” vote for a “no” vote could doom the legislation.

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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