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5 Things HR Pros Should Know About the New Tax Bill

By Maren Hogan:

If anyone knows change management, it’s Human Resources. And things are about to change dramatically, due to our new tax code. It’s now law and some of the changes are going to affect companies and employees THIS year!

So how do HR Pros need to prepare for this brave new world of tax reform? Here are a few tips:

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Get your health offerings solidified. Just when we had figured out how to navigate the ACA, and help our employees do so, it’s been changed again! For 2019, the individual mandate has been repealed, so anticipate some shifts in what coverage is offered. Employees that decided against healthcare coverage through their employers may change their minds. Small businesses will be affected even more. Now is a great time to call your insurance reps and figure out what, if anything, will be changing for your coverage options. Once you have figured out if there are any changes to healthcare coverage for your employees, focus on communicating those changes and any new options to them.

Payroll might be a nightmare. Because of the changes to tax law, the IRS will make new withholding tables, which means all payroll companies and administrators will have to recalculate a whole lot of formulas. In short, paychecks will be updated and it will probably take some hard work on payroll’s part and some explanation to employees on HR’s part.

Assess leave policies for employees making under $72,000 per year. If you provide paid family and medical leave of at least two weeks, and pay at least 50% of the employee’s regular earnings, your company will receive a tax credit ranging from 12.5% to 25% of the cost of each hour of paid leave.

Retirement plans may change for former employees and younger employees. Employees using a 401(k) plan and are currently paying a loan must have it paid completely by the latest date on which the former employee can file their tax return for the year of the loan default. If not, the person is considered to have defaulted on the loan and must pay income tax on the balance. Those under 50.5 years of age must also pay a penalty.

Benefits “lite” will be affected. Some of the things your employer offers may not even be considered benefits by your employees. Until you tell them they can longer be reimbursed for “X”. Work with your tax team and benefits administration team to mitigate and communicate, especially if you offer the following:

  • Transit benefits: Currently, programs can allow employees to use pretax dollars and employers to deduct contributions, these will go up slightly for both employees and employers. Also, businesses will no longer be allowed deductions for qualified mass transit and parking benefits EXCEPT when it ensures employee safety (the employee can still claim this exemption on their own.) And if you reimburse for employees who bike to work?  Those expenses will be taxable and subject to payroll and income tax withholdings.
  • Relocation: Moving benefits will also be affected. The business deduction and the exclusion from taxable income for recipients of employer-paid relocation or moving expenses will be suspended through 2025. Some active-duty military are exempted.
  • Physical Fitness: Wave goodbye to your deduction for an onsite gym. It is now unrelated business taxable income.