PB&J (Pension, Benefits, and Jokes) Tax Reform Update


The pension and benefits landscape has a new look in 2018 following the recent enactment of tax overhaul legislation. Signed into law Dec. 22 by President Donald Trump, the measure includes a number of provisions that will influence the compensation and benefits packages offered by employers. 

One of the biggest changes comes in the area of executive compensation. The tax plan eliminates companies’ ability to deduct performance-based bonuses to managers who are paid more than $1 million. And for executive compensation at nonprofits, the tax measure imposes a new excise tax on compensation in excess of $1 million.

For the First Slice of the Sandwich: Pension

In the pension and retirement arena, meanwhile, lawmakers floated the possibility of drastically reducing the annual cap on tax-deferred 401(k) contributions. Such a change could have caused major upheaval for retirement plans, but the idea was scrapped before the tax package was finalized.

And on the Other Slice: Benefits 

A number of fringe benefits items did make it into the final package. One such provision prohibits businesses from deducting the cost of entertainment expenses, and another provision suspends the exclusion of moving expenses from an employee’s taxable income.

The tax plan also affects transportation fringe benefits. It eliminates tax incentives for employers to offer employees up to $260 per month in commuter and parking benefits, and it removes deductions for employer-provided bicycle commuter benefits. 

For more details on the various provisions of the tax overhaul measure, see Bloomberg Law’s Tax Reform Roadmap on the Benefits and Executive Compensation Practice Center (subscription required).

The Final PB&J Ingredient

And now for the jokes. They may not get you laughing out loud, they are sure to make you smile.

Here’s joke number one: Regular naps prevent old age, especially if you take them while driving. 

And if that didn’t work for you:  My partner and I have started aggressively planning for our retirement, and by that I mean we're playing the lottery 3-4 times per week.

 

Gain a deeper understanding of the legal complexities of employee benefits and executive compensation with a free trial to  Bloomberg Law: Benefits and Executive Compensation.