Reinvest Your TCJA Savings in People

Ed O'Malley, Executive Vice President, Head of Insurance Brokerage and Consulting

The Tax Cuts and Jobs Act of 2017 (TCJA) has shifted – and in many cases eased – the tax burden on companies across the country. Organizations everywhere are finding themselves with an exciting influx of new money thanks to the new tax reductions.

There are a lot of ways businesses can choose to spend those dollars. Some may choose to build up their cash reserves, others may decide to repurchase company shares, and others still may choose to divert resources to technology, inventories or infrastructure. Smart organizations, though, may decide this is an opportune time to reinvest in their talent.

Meanwhile, net job growth remains slow and employers are reporting an alarming shortage of qualified candidates for open positions – particularly in technology – and jobs remaining unfilled.

So what can employers do as a result of the TCJA? Stay competitive and:

  1. Recruit the best available talent
  2. Retain that talent by giving them tangible reasons to stay, like competitive compensation and non-monetary benefits
  3. Provide a prosperous path to Retirement for all employees, so they can leave the organization when the time is right


To get the best talent on their team, businesses need to double down on competitive compensation and benefits. With the TCJA, some traditional incentives are disappearing and companies will need brand new ways to attract talent and show existing employees they care. 170,000 new jobs are created each month, and 3 million people are quitting their jobs each month — evidence that competition in the labor market is one of the toughest business challenges in 2018.

Some corporations are already sharing the cash increase with their employees: AT&T gave bonuses to 200,000 union-represented and non-management employees; Fifth Third Bank and others raised their minimum wage to $15 an hour and gave out bonuses; companies like Boeing are committing millions to workforce development in the form of training, education and other personnel development; and FedEx and CVS reported plans to create thousands of new jobs.

Offering perks to employees on-site, like more flexible work schedules, open telecommuting policies, paid parental leave, free on-site refreshments, mentoring programs and more, can also help create a people-centric culture that's attractive to employees, especially millennials. And using technology to find and hire the best talent can help make the process easier for prospects as well as simpler and more sophisticated for hiring managers. Don't forget the power of social media, either. Would-be employees of all ages are plugged in to Facebook, Twitter, LinkedIn, Instagram and myriad other sites. More than ever, businesses should be involved and savvy about the way they present themselves and engage with clients, employees and prospects throughout the digital world.

Good employee health benefits will always be immensely important to both incoming and existing employees. The individual mandate penalty will disappear starting in 2019, which means that individuals have no tax incentive to maintain minimum essential health coverage. However, employers of a certain size still need to offer coverage. The cash influx from tax savings could be just the thing a business needs to beef up its health plan for existing employees and to attract new employees and to keep top talent and their families happy, healthy, wealthy and at the top of their game.

To that same effect, consider enhancing death and disability benefits to protect employees' families and income when the unexpected occurs. You can always improve upon existing plans that currently cap life insurance and disability benefits. Income replacement benefits have been fairly static over the last decade or so, making this a great place to stand out when it comes to attraction policies.

Employment is a partnership, and it's important for a workplace to show their employees they care at the very beginning — from the first interview to the first day and beyond.


Once a business has the talent on board, they have to keep them; other companies won't be resting on their laurels in the light of that tax savings, either. Keep existing employees happy – or make them even happier – and they'll continue to deliver successes and be more excited to do it.

Employees are under incredible financial stress today. Most don't even know how much stress they're under; they just recognize it's beyond their understanding and thus their control. Employers can take steps to help rid them of this stress, which, in turn, will make their employees happier and more productive.

There are plenty of ways to ease concerns about today and tomorrow:

  • Revamp Matching Contributions. Offer employees more by investing in their retirement now by increasing retirement plan contributions and match percentages.
  • Offer Employee Engagement. Use the money for employeelevel education/programs. You can engage your advisor for a full financial wellness program that goes beyond the 401(k)/403(b)/457 plan needs and helps employees understand and plan for debt reduction, succession planning, insurance needs, etc.
  • Invest in Employees on a Personal Level. Work with each employee to build a "living" development plan. Include their strengths, weaknesses, goals, career aspirations and potential paths forward. NFP's HR Services team can help you engage and support your employees through a variety of customized programs.
  • Offer More Bang for Their Buck. Make sure you're still making the right compensation moves. Changes to different parts of the Internal Revenue Code are reducing the amount highly compensated employees can be compensated without being taxed. This means you might just offer higher base salaries and less creative compensation. Between life insurance, nonqualified retirement plans and other options, there are plenty of ways to compensate your best talent and help them keep most of their hard-earned money. Work with the NFP Executive Benefits team to find the right recipe.
  • Treat Employees at All Levels Fairly. Taking care of your people and keeping a mindful eye toward the entire compensation playing field is probably the most important part of keeping your employees happy — and sometimes it's the easiest way to use your money wisely. One way to do so is to move your retirement plan to a safe harbor plan design. Due to the makeup of their workforce, some employers struggle with passing their annual nondiscrimination testing, necessitating refunds of deferrals to their highly compensated employees. Safe harbor design allows plans to be deemed to pass the nondiscrimination testing, thereby allowing the highly compensated employees to max out their deferrals. This, of course, has to be paid for through required contributions by the employer, but what better way to use those "new" dollars than to assist your employees at all levels to save effectively. It's a win for everyone.


Planning well for your employees' retirement is an important way to both show them you care and to make sure your workforce is always in its prime. After all, if there's incentive to retire – and retire well – that frees up space for fresh-faced young talent to come in with new ideas and less significant salary histories.

With some TCJA money burning a hole in your business's pocket, get creative with the ways you tend to your and your employees' futures:

  • Implement and/or enhance automatic features. While auto features were popular before 2008, they fell out of favor thanks to the economic downturn. Now is a great time to use that extra capital to reintroduce them. Make saving easier for employees by doing it for them. This includes auto enrollment in 401(k)/403(b)/457 plans at a set percentage of income. Doing so gives participants who aren't saving now a head start toward retirement. Be sure to set the automatic enrollment at a high enough level to be impactful, perhaps with a default of 6 percent of compensation. Studies show that a 6 percent rate doesn't increase opt-outs.
  • If your employees are already automatically enrolled in the plan, add or increase automatic escalation. Once participants are in the plan, march them forward on an annual basis to get them to a meaningful savings rate. Most plans start their automatic escalation at 1 percent annually, but studies show no greater opt-out rate among employees if they're escalated at 2 percent annually. Coordinating the annual escalation with annual merit increases assists in maintaining a low opt-out rate. For plans that already escalate 1 percent annually, raise it to 2 percent.
  • Make an impactful matching contribution. Not only does it add to employees' savings; it incentivizes them to save for themselves. Implementing a match should be strategic. Design the matching program to encourage greater deferrals. If your goal is to provide 2 percent of compensation, design it to be $0.25 on the dollar up to 8 percent of compensation. It will drive superior savings efforts by employees.
  • Add or fund a profit-sharing contribution. If your plan already provides a well-designed matching contribution that drives great participant behavior and you just want to add to their savings, add a profit-sharing contribution. To use your dollars efficiently, explore some more sophisticated contribution designs that allow you to differ among groups — within reason. Explore tiered or new comparability profit-sharing designs.
  • Create a new cash balance or defined benefit plan. If you've considered adding an expensive defined benefit or cash balance plan to your retirement program, new TCJA money may be just the tipping point to help you actually do so. Though these plans are much more complicated in design than typical 401(k)/403(b)/457 plans, they offer an additional way for employers to greatly enhance the retirement horizons of their employees.


New legislation is making many businesses more cash flush, and it will be interesting to see how that new capital flows throughout the economy. These are just some of the ways many businesses can attract, keep and steward the careers of the best workers in the industry. By staying educated about the nuances of how the Tax Cuts and Jobs Act of 2017 affects each piece of the insurance brokerage and consulting industry – and how those pieces interact – decision-makers at all levels of the organization can make the best choices to protect their employees, their personal wealth and their futures.

This material was created by NFP Corp. (NFP), its subsidiaries or affiliates for distribution by their agents, registered representatives or investment advisor representatives. This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. Neither NFP, its subsidiaries or affiliates offer legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation. Insurance services provided through licensed subsidiaries or affiliates of NFP.