‘Tax Reform 2.0’ May Include Education Assistance and Retirement Benefit Reform

By Chatrane Birbal May 11, 2018
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Congress' passage last December of the Tax Cuts and Jobs Act was the first time since 1986 and the enactment of President Ronald Reagan's Tax Reform Act that it made significant changes to the tax rates. This year, House Ways and Means Committee Chairman Kevin Brady (R-TX) and the Trump Administration have indicated that they want to continue building on the tax reform momentum and are gearing up to take another bite of the tax reform apple. 

Chairman Brady recently said he wants the next wave of tax reform—dubbed "Tax Reform 2.0"—to be about creating a culture of reform so that the United States does not regress and wait decades to further streamline the tax code. Many of the tax cuts in the Tax Cuts and Jobs Act are temporary and are set to expire in 2025. 

Tax Reform 2.0 discussions are in the early stages, and little details are known at this time. However, given recent comments by Brady and key administration officials, we anticipate the second tax cut package to include retirement, pensions and education—benefits that are extremely valuable to employers and employees alike. SHRM will continue to engage in ongoing tax reform discussions and will advocate for proposals that encourage and support retirement savings. 

In the meantime, SHRM-supported bipartisan proposals to expand education assistance could be included in upcoming Tax Reform 2.0 proposals. Specifically, the Upward Mobility Enhancement Act (S. 2007 and H.R. 4135) and the Employer Participation in Student Loan Assistance Act (H.R. 795) are two such vehicles that could be considered for inclusion. The Upward Mobility Enhancement Act proposes to expand Section 127 of the Internal Revenue Code (IRC) to increase the yearly allowable amount employers can voluntarily provide toward education assistance as a tax-free benefit; the proposal sets the amount at $11,500 per year, per employee. The amount would then be indexed for inflation. The Employer Participation in Student Loan Assistance Act would expand Section 127 of the IRC to include student loan repayment as a tax-free, qualified education expense. Under this plan, employers would be able to voluntarily provide student loan repayment as a tax-free employee benefit, up to $5,250 per year, per employee. 

Currently, Section 127 of the IRC allows an employee to exclude from income up to $5,250 per year in educational assistance provided by their employer for courses at the associate, undergraduate and graduate level. Current law does not allow for the repayment of student loan debt. 

SHRM has long advocated for the expansion of employer-provided education assistance benefits. Over the years, we have strongly supported maintaining and strengthening Section 127 for associate, undergraduate and graduate degrees, along with efforts to expand the monetary limits and scope of Section 127. 

HR professionals can influence Tax Reform 2.0 discussions by directly contacting lawmakers to tell them about the value of employer-provided education assistance. Personal letters from HR constituents will reinforce the importance of this benefit and build support needed to move these proposals forward in the months ahead. 

Visit SHRM's HR Policy Action Center for a template letter, which you can edit, personalize and send directly to your lawmakers' Washington, D.C., offices. Send your letter now in support of expanding Section 127 benefits today! 

As Tax Reform 2.0 discussions continue, SHRM will advocate in support of expansion of and access to benefits, including retirement and employer-provided education assistance. Stay tuned to future editions of HR Issues Update for timely and relevant updates.

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