End of Year Legislation that Impacts Benefit Plans

On December 20, 2019, President Trump signed a spending bill and other tax measures that will affect benefit, retirement, and hiring plans.

The spending bill includes a full repeal of the Cadillac tax for high-cost health plans, which was scheduled to go into effect in January of 2022. The repeal is welcome news to employers as the tax was part of the Affordable Care Act (ACA), and the implementation had already been delayed two times previously.

The spending bill also repeals two other (ACA) taxes not paid directly by employers: the health insurance tax (HIT) on fully insured health plans and the ACA’s tax on medical devices. Generally, these taxes were on the health care providers and not paid by employers or employees, but providers frequently passed the cost on in the form of higher premiums.

In addition, the President signed The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which will make it easier for small employers to offer retirement plans. Some of the provisions in the SECURE Act include but are not limited to:

  • Increasing the tax credit for small employer pension plan startup costs. Currently, the credit is $500, and will increase to up to $5000 in some cases. This credit is intended to make it more cost-effective for small employers. Also, the bill encourages small employers to include automatic enrollment in retirement plans by allowing for an additional $500 three-year tax credit for small employers for startup costs for new pension plans that include automatic enrollment.
  • Permitting penalty-free withdrawals from retirement plans for expenses related to the birth of a child or adoption.
  • Increasing from 70-1/2 to 72 the age for mandatory distributions from retirement plans.
  • Simplifying reporting requirements and offers a consolidated Form 5500 for similar retirement plans.
  • Enabling businesses to sign up part-time employees who work either 1,000 hours throughout the year or have three consecutive years with 500 hours of service.

Employers Council encourages you to contact your broker for more information on how these will affect your current health and retirement plans. We will keep you updated as more information comes out.