2017 Tax Cuts and Jobs Act: Comparison of Senate and House Bills on Executive Compensation and Employee Benefits

December 11, 2017

Our thanks to Sidley Austin LLP

On December 2, 2017, the United States Senate passed its version of the Tax Cuts and Jobs Act (the Senate Bill), taking a significant leap forward as lawmakers seek to enact comprehensive reform of the U.S. tax code for the first time since 1986. The Senate vote comes just two weeks after the House of Representatives passed its version of the Tax Cuts and Jobs Act (the House Bill). The House and the Senate will now attempt to produce a conference bill that will be acceptable to both chambers of Congress.

For resources summarizing the major proposed changes to the U.S. tax code, please see our U.S. Tax Reform: Developments and Insights webpage.

Below is a summary of the material provisions in each of the House Bill and the Senate Bill that relate to executive compensation and employee benefits. If enacted, these proposed changes will be effective for taxable years beginning after December 31, 2017, unless otherwise noted below. We will continue to monitor this legislation and provide updates of any material developments.

Executive Compensation

Excessive Compensation of Public Company Executives — Section 162(m)

Excise Tax on Excessive Compensation for Executives of Tax-Exempt Organizations

Deferred Taxation on Option/RSU Shares Issued to Employees of Start-up Corporations

Alternative Minimum Tax — Incentive Stock Options

Retirement Plans

Timing of In-Service Distributions – Qualified Defined Benefit Plans

Timing of In-Service Distributions – Governmental Section 457(b) Eligible Deferred Compensation Plans

Hardship Withdrawals – Resulting 6-Month Suspension

Hardship Withdrawals – Amounts Eligible for Hardship Withdrawals

Hardship Withdrawals – Participant Loans as a Prerequisite

Rollover Rules as Applicable to Loan Amounts

Exclusions from Section 457(f) Deferred Compensation Rules

Welfare, Fringe Benefit and Leave Changes

As an initial matter, the bills are notable for health items that are not included in the bills—most significant, the bills do not change the exclusion from income of employer-provided health coverage. The bills also do not include proposals related to the Affordable Care Act’s employer mandate or Cadillac tax or, except as described below with respect to the individual mandate, otherwise alter the Affordable Care Act’s provisions in any material respect.

Affordable Care Act Individual Mandate

Fringe Benefits

The House bill also includes other fringe benefit changes that would impact employers and/or employees, such as changes to the tax treatment of contributions to an Archer Medical Savings Account; on-premises athletic facilities; certain fringe benefits provided by tax-exempt employers; employer-provided child care; and employer-provided housing.

Paid Leave Credit for Employers

Veritas Executive Compensation Consultants, ("Veritas") is a truly independent executive compensation consulting firm.

We are independently owned, and have no entangling relationships that may create potential conflict of interest scenarios, or may attract the unwanted scrutiny of regulators, shareholders, the media, or create public outcry. Veritas goes above and beyond to provide unbiased executive compensation counsel. Since we are independently owned, we do our job with utmost objectivity - without any entangling business relationships.

Following stringent best practice guidelines, Veritas works directly with boards and compensation committees, while maintaining outstanding levels of appropriate communication with senior management. Veritas promises no compromises in presenting the innovative solutions at your command in the complicated arena of executive compensation.

We deliver the advice that you need to hear, with unprecedented levels of responsive client service and attention.

Visit us online at www.veritasecc.com, or contact our CEO Frank Glassner personally via phone at (415) 618-6060, or via email at fglassner@veritasecc.com. He'll gladly answer any questions you might have.

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