December 22, 2017

Changes to regulations in our industry are nothing new. This year, a number of key changes took place ahead of the holiday season. In the final days of 2017, both houses of Congress passed a tax reform bill called the Tax Cuts and Jobs Act, which was then signed into law by President Trump.

In the spirit of the season, we’ll highlight everything you need to know about what tax reform means for employee benefits, with visits from the ghosts of legislation past, present and future (a la the Charles Dickens’ classic “A Christmas Carol”).
Discovery Benefits Tax Reform

Legislation Past

In the past, you were allowed a tax deduction when offering Commuter Benefits to your employees. These benefits, such as Parking and Mass Transit, let employees pay for eligible expenses using pre-tax dollars they’ve set aside. You also could offer employees a Bicycle Benefit, which covered the purchase, improvement, repair or storage of a bicycle.

Legislation Present

One of the new law’s objectives is to simplify the tax code for corporations. The passing of tax reform simplified the tax code by lowering the corporate tax rate from 35 percent to 21 percent while also eliminating a number of corporate deductions, such as the ones for Parking and Mass Transit. With the new law, you can still offer Commuter Benefits, and your employees can still take advantage of them pre-tax. Corporations will have lowered taxes under the reform, and there is not a separate deduction for Commuter Benefits. In 2018, employees can elect up to $260 pre-tax on a monthly basis for eligible transit and parking expenses.

The only change in our benefits offerings for employees, beginning January 1, 2018, is the discontinuation of the Bicycle benefit, which previously covered up to $20 per month in expenses. Discovery Benefits will follow up with additional information as items develop.

Legislation Future

Even with this law removing the employer deduction to Commuter Benefits, the reduction in the corporate tax rate outweighs these deductions, so even without the specific deduction, you’ll see lower taxes than with past legislation. With the new rate down to 21 percent, you should feel more confident than ever in your ability to offer Commuter Benefits to your employees. Looking ahead, here are a few dates to consider:

  • January 1: The new law takes effect for the 2018 tax year.
  • February 1 (approximately): Americans will start to see the impact of the legislative changes.
  • April 16*: The 2017 tax filing deadline will be the last time Americans file taxes under the old tax code. *Note: Because April 15 falls on a Sunday in 2018, the tax filing deadline for 2017 is April 16, 2018.

When it comes to our benefits offerings, commuter plans are the only benefits impacted by tax reform – though you can continue to expect these benefits to serve as a great recruiting and retention tool for your employees. Our FSA, HSA, HRA and COBRA products are not impacted by the recent legislation.

Note: This blog is not intended to convey legal advice, and Discovery Benefits is not able to provide such advice.  

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