Speaking during a Washington Update webcast event, Mercer’s Geoff Manville, principal, government relations, observed that the effort in the House and Senate to pass tax cuts is coming to its dramatic conclusion.
According to his sources inside the Beltway, the current plan is for the Senate and House to both vote on final tax cut legislation early next week. The Senate likely will move first, based on what the Mercer team is hearing, with the House moving perhaps one or even two days later.
“Heading into the weekend, the attention of Republican leaders has turned away from crafting a compromise towards winning support for that compromise and getting the votes that are needed, particularly in the Senate,” Manville says. “We hear that Republican Senators Susan Collins, from Maine, Ron Johnson, from Wisconsin, and also potentially Marco Rubio, from Florida, are holding off at this point from actively voicing support or opposition, and for different reasons. Senator Bob Corker, from Tennessee, is already a professed ‘No,’ but the betting is still that they can get the votes to pass both the House and Senate.”
While the full, final text of the combined bill is not yet circulating publicly, the Mercer team is “fairly confident” that few, if any, direct retirement plan taxation reform provisions will make the final proposal.
“The benefits and retirement industries seem to be coming out of this process is good shape,” Manville notes. “We’re not there yet, but it is shaping up this way, based on what is visible to us at this point. Of course, it’s not all good news—the benefits and compensation provisions are always going to be a mixed bag when major tax changes are proposed.”
Manville further warns retirement plan professionals to “prepare for a pretty tricky period in the months ahead,” should this tax cut package ultimately be successful: “Employers will likely have some difficulty in knowing how to handle the January 1, 2018, effective date that has been assigned for many of the bills’ provisions. I know our friends in the payroll department are still scratching their heads about how they should be planning to do withholdings in the early part of next year.”
On the health care side of things, Manville expects the final tax cut bill will likely keep the Senate’s proposed repeal of the Affordable Care Act’s (ACA) individual mandate penalty. This move does not necessarily impact employers directly, but it does represent a potentially disruptive force that could alter the direction of the wider health care marketplace within which employer-sponsored health care plans operate.
“There is a separate push going on outside the tax bill to restore funding for the ACA cost-sharing subsidies the Trump administration stopped paying earlier this year,” Manville notes. “There is also interest in giving states more flexibly here and more help to set up re-insurance program for high-cost patients. However, there are real political barriers standing in the way here, so the prospects aren’t necessarily great on these issues getting stand-alone consideration in 2018.”