House Republican leaders today unveiled their long-awaited tax reform bill, H.R. 1, and started a fierce race to see which insurance and tax policy followers can read, and understand, a 429-page PDF the fastest.
House Speaker Paul Ryan and Rep. Kevin Brady, R-Texas, the chairman of the House Ways and Means Committee, have given the bill its own website: //fairandsimple.gop, complete with the full text of the bill, a summary, and other supporting information.
A copy of the text is available here.
To make H.R. 1 law, supporters must get the bill through the House and the Senate. The text could be amended in either the House or the Senate.
The sponsors' summary is aimed mainly at members of the general public, and it does not say much about some of the provisions of interest to financial professionals who sell life insurance, annuities, major medical insurance or health products other than major medical insurance.
The full text of the bill is written in dense language that, in many cases, describes precisely how the bill would change short sections of existing laws, rather than what the changes would do.
In recent weeks, some observers had suggested that H.R. 1 might eliminate the group health tax exclusion, or put much tighter limits on workers' ability to deduct retirement plan contributions from taxable income.
Because of the nature of H.R. 1, many major insurance and benefits groups are reacting today mainly by saying they are still studying the text. There's still a possibility that some major change that seems to be missing could be lurking in one of the hard-to-understand provisions talking about the elimination of one subsection of a paragraph in some other section of the Internal Revenue Code.
Bill Pinheiro, the head of the business and finance department at Ballard Spahr LLP, a law firm, said in an email interview that he does not believe the current text of H.R. 1 would have any effect on the group health tax exclusion.
Similarly, the bill includes provisions related to retirement plan hardship distributions, but it does not appear to include any new limits on worker contributions.
The American Benefits Council believes that the effects of the bill on 401(k) plans and other defined contribution retirement plans would be modest. James Klein, the group's president, put out a positive statement about the bill.
"We are gratified today's proposal lets workers save for retirement in the way that best meets their financial needs," Klein said in the statement.
Rep. Kevin Brady, R-Texas (Photo: House)
Here's a look at five sets of proposed changes the bill does include, along with PDF page numbers agents and advisors can use to read the provisions for themselves, or start a conversation with their tax and legal advisors.
1. Medical expense deduction elimination: Page 113
The drafters of H.R. 1 said they wanted to make the tax system simpler and more fair, and to make filing income tax returns easier.
They have tried to accomplish that by eliminating some tax breaks and making up for those changes by increasing the size of the standard deduction.
One of the deductions H.R. 1 could eliminate would be the medical expense deduction, including the deduction for long-term care insurance premiums now available to people who have high enough medical bills that they can itemize their medical expenses.
Today, the federal rules for deductibility of employer-sponsored health benefits use the care definitions given in the law that governs medical expense deductions. The drafters of H.R. 1 would save the current definitions but move them into the law that governs employer-sponsored health benefits.