The results of the 2024 U.S. presidential and congressional elections are already starting to shape the future of employee benefit, compensation and tax policy. Republicans will hold majorities in both the House and Senate for the 119th Congress (2025 – 2026), which helps smooth the path for policy priorities put forth by President-elect Donald Trump during his election campaign. Incoming Senate and House leaders are beginning to set the legislative calendar and outline plans for moving top priorities through Congress in 2025.
Congress is expected to consider a significant tax bill in 2025, which could hold implications for benefit and compensation programs. Details will be negotiated after the Congress convenes on January 3, 2025.
President-elect Donald Trump has announced nominees for key cabinet posts and positions as the new administration prepares to take office on January 20.
Tax legislation is a high priority in 2025 because many provisions of the 2017 tax cuts and some other provisions are scheduled to expire on December 31, 2025. During his election campaign, President-elect Trump proposed permanently extending the expiring provisions of the 2017 tax law. He also proposed eliminating taxes on tips, overtime and Social Security benefits and reducing the corporate tax rate. Congressional Republicans are expected to support these provisions and may seek additional tax cuts.
Congress is expected to use the budget reconciliation process for tax legislation. Budget reconciliation would help ensure enactment because it allows Senate approval with 51 votes rather than the 60 votes typically needed, but it limits the provisions that can be enacted. The size and scope of a tax bill could prompt lawmakers to seek offsetting revenue, which could be raised by increasing taxes in other areas or reducing tax exclusions or other tax preferences. A broad tax bill could be a vehicle for a wide range of retirement, health and other benefit-related provisions. Details of the expected tax legislation, including any health, retirement and compensation provisions that may be included, will be determined after negotiations get underway in the early months of the next Congress.
Incoming Senate Majority Leader John Thune (R-SD) has expressed interest in using the budget reconciliation process twice in 2025: first for border security (likely using the fiscal 2025 budget resolution) and then for tax legislation (likely using the fiscal 2026 budget resolution).
Healthcare was under discussion during the campaign. President-elect Trump’s campaign proposals included:
Some changes could be enacted through legislation, and others may be implemented through regulations and guidance.
The timing, focus and outlook for legislative action on healthcare is not yet clear. Budget reconciliation legislation could provide a vehicle for some healthcare provisions, but other proposals may not meet budget reconciliation parameters and could face legislative obstacles in a narrowly divided Congress. A range of healthcare issues — including pharmacy benefit manager (PBM) reform and prescription drug pricing, expansions to health savings accounts, telehealth provisions and other proposals — have been under discussion during the 118th Congress and could return to the agenda during the 119th Congress.
Executive orders, new regulations and other administrative changes could be an early pathway for healthcare changes. For example, the new administration could return to healthcare policies issued during President-elect Trump’s first term, such as expanding the coverage period under short-term limited duration insurance coverage. The new administration will determine whether to modify, reverse or implement some guidance issued under President Biden’s administration. For example, the new administration will decide whether to finalize the recent Centers for Medicare & Medicaid Services proposal to permit coverage of anti-obesity medications by Medicare (and require coverage by Medicaid).
State and local activity on PBM reform and other healthcare issues seems likely to continue. Many employer-sponsored plans are governed by ERISA, which preempts some state and local laws. However, a growing patchwork of state and local laws has created compliance, reporting, communication and other burdens for employers.
Enhanced ACA premium tax credits are scheduled to sunset on December 31, 2025. House and Senate Republicans, including Senate Finance Committee Chair Mike Crapo (R-ID) and House Ways and Means Committee Chair Jason Smith (R-MO), have been critical of the expanded subsidies and would be reluctant to enact additional extensions.
Retirement policy received little attention during the campaign but has received attention in Congress. Lawmakers continue to introduce legislation aimed at improving retirement savings and security, and technical corrections to SECURE 2.0 are awaiting legislative action. Budget reconciliation could serve as a vehicle for some retirement legislation during the 119th Congress, though specific details will be determined when lawmakers begin negotiating and drafting the legislation next year.
Regulatory changes are expected, including changes to regulations issued under President Biden. The new administration could reverse the Department of Labor’s (DOL’s) fiduciary rule and environmental, social and governance (ESG) rule if pending litigation does not do so first. If the new administration does not withdraw or replace the rules, it could decline to defend them during the current legal challenges.
President-elect Trump’s campaign proposals did not include paid leave, but Trump supported efforts for paid family and medical leave during his first term. He included proposals for six weeks of paid family and medical leave in several of his annual budget submissions, signed an employer tax credit for paid family and medical leave as part of the 2017 tax law, and signed provisions for emergency paid family and medical leave in pandemic relief legislation.
The employer tax credit is scheduled to expire at the end of 2025 and could be under consideration during 2025 tax discussions. The outlook for discussion of other paid leave proposals is unclear and could be limited by competing priorities and a crowded agenda.
State and local activity on paid leave seems likely to continue. The growing range of differing paid leave laws continues to create challenges for employers that operate in multiple jurisdictions.
While currently there are no direct proposals to change taxation on compensation matters beyond tips, overtime and Social Security, movement is likely on the Federal Trade Commission’s (FTC’s) ban on non-compete agreements, the Securities and Exchange Commission’s (SEC’s) climate change disclosure rules, and the DOL’s expansion of overtime pay eligibility. Each of these matters is moving through the courts and could be struck down as a legal matter. If that does not take place, a Trump-appointed majority on the FTC and SEC and a Trump-nominated secretary of labor could withdraw many of these proposals.
The new administration is expected to impose an immediate regulatory freeze on regulations that are not published in the Federal Register by Inauguration Day and regulations that were published but have not taken effect. This regulatory freeze is typical when there is a change in administration. Rules subject to the freeze may be withdrawn or delayed.
The new administration will control the regulatory agenda. It will adopt regulatory and enforcement approaches that reflect the new administration’s agenda and policy priorities. The new administration also will have jurisdiction over rules that were issued under President Biden. In some cases, the new administration may issue regulations that override prior regulations or decline to finalize proposed rules. For example, the departments of Labor, Health and Human Services, and Treasury could opt not to finalize proposed regulations addressing coverage of over-the-counter contraception.
Congress may use the Congressional Review Act (CRA) to disapprove some agency regulations issued under President Biden’s administration. The CRA includes a lookback provision that allows a new Congress to disapprove regulations issued during the last months of the prior Congress. During President-elect Trump’s first term, Congress used the CRA to nullify 16 regulations that had been issued in 2016 by President Obama’s administration. The 2024 regulations that will be subject to the CRA in 2025 will be determined after the 118th Congress adjourns, though not all regulations that fall into the CRA window will be subject to legislative action.
In addition to a shift in the Senate majority, other changes in Congress could affect the discussion for benefit and compensation policy. The Senate will have a new majority leader, and several committees with jurisdiction over employee benefits will have new committee chairs.
Cabinet and other agency officials will play an important role in implementing the new administration’s agenda. Nominees for positions with significant jurisdiction over benefits and compensation include:
Nominees for other positions with important jurisdiction over benefits and compensation — such as heads for the Employee Benefits Security Administration and the Pension Benefit Guaranty Corporation — have not yet been named as of this writing.
Cabinet secretaries and many other positions will require Senate approval, so it could take several months to move nominees through the Senate’s approval process.
Changes are possible but not certain. Tax and budget legislation may affect benefit and compensation programs; executive, regulatory and enforcement changes are also possible. The timing, details and direction of such changes are not yet clear.
