The Association for Responsible Alternatives to Workers’ Compensation (ARAWC) strongly supports HB 5545 (LaHood) / SB 2989 (Schwertner), legislation aimed at removing an unnecessary federal tax burden on Texas employers and their injured workers.
Currently, wage replacement benefits paid by Texas employers who provide their own injury benefit plans are subject to federal income and employment taxes, unlike the exact same benefits under the state workers’ comp system. This reduces the net pay for injured workers and increases costs for responsible employers.
This bill simply clarifies that these voluntary wage replacement benefits are “in the nature of” workers’ compensation solely for federal tax purposes. This aligns with existing federal tax exemptions.
Key Benefits
- **Protects Injured Workers:** Ensures they receive their benefits without federal tax withholding.
- **Supports Texas Employers:** Reduces costs for businesses voluntarily caring for injured employees.
- **Encourages more employers to pay wage replacement:** By providing tax-free treatment for ALL Texas employers and injured workers, we believe more employers will step up to care for their injured workers.
- **Boosts Texas Economy:** Delivers an estimated $50 million annual economic impact for Texas .
- **No Cost to Texas:** Does not impact the state budget.This bill ONLY addresses federal tax treatment. It does not change employer liability laws or affect the legal principles decided in the recent East Texas Medical Center case (more on that later).
Supported by ARAWC and a growing coalition of business and policy groups, this common-sense bill strengthens Texas’ pro-business and pro-worker environment. ARAWC urges the Subcommittee’s favorable consideration.
Supporters:
- [Association for Responsible Alternatives to Workers' Compensation (ARAWC)](/)
- [Texas Conservative Coalition Research Institute (TCCRI)](https://www.txccri.org)
- [Texas Public Policy Foundation (TPPF)](https://www.texaspolicy.com)
- [Texas Retailers Association (TRA)](https://www.txretailers.org)
- [Walmart](https://www.walmart.com)
- [Sysco](https://www.sysco.com)
- [Jamak Fabrication](https://www.jamak.com)
- [Owner Operator Services, Inc. (OOSI)](https://www.owneroperatorservices.com)