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DBS Digest

Navigating employee benefits in an ever-changing regulatory landscape.

Government shutdown averted…tax package possible, but tough

There are two weeks left before Congress says sayonara until the New Year, and a whole lot of work to get done in that time (Israel/Ukraine aid, reauthorizations of the Federal Aviation Administration and the National Defense Act, etc.). There is some guarded optimism that most items could come together in time, with a dose of typical D.C. holiday spirit.

But, as we stand on the brink of 2024, the halls of Congress are also abuzz with pivotal discussions surrounding the possibility of a “significant” tax bill. The committees of jurisdiction – House Ways & Means and Senate Finance – have been working to forge a deal pairing expired business tax breaks* with an enhanced Child Tax Credit since last year. The actual negotiations over the tax policy is the simple part here; in fact, the basic contours of the package ($100+ billion price tag running through 2025) have been in place for months now.

With any major legislative initiative, the political landscape plays a crucial role in shaping the destiny of a tax proposal. In an era of heightened partisanship and ideological differences, finding common ground becomes increasingly challenging. What’s more, the looming 2024 elections further complicates matters, as lawmakers may be hesitant to endorse measures that could be contentious back in their home districts. Unfortunately, if lawmakers are unable to get a tax deal across the finish line within the next three months (February), the next best opportunity for passage will likely slip to the end of 2025…when the individual provisions from the Tax Cuts & Jobs Act are set to expire.

So what? Who cares? Although delving into the intricacies of federal legislation might seem like a lot of inside baseball (and boring to most), there’s an intriguing prospect within this framework. It opens the door, albeit slightly, to key employee benefit provisions that directly impact millions of Americans making their way into the package. Currently DBS is vigilantly monitoring more than 60 individual/standalone federal bills that center on dependent care, fringe benefits, HRAs, HSAs, paid leave, qualified medical expenses and telehealth. The incorporation of any of these measures could signify a substantial victory for both employers and employees, offering financial relief and increased flexibility in healthcare spending.

While the prospects of a Congressional tax bill passing in the coming weeks/months are uncertain, the importance of such legislation to our agent partners and clients cannot be overstated. As the political drama unfolds, rest assured that DBS Digest will be watching to see if/how these policy deliberations shape the benefits administration landscape for the next few years.

*Would bring back more favorable deductions for research costs and interest paid on debt, as well as full expensing of capital investments.