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What is your company doing to address the 2018 US tax reform law and the growing trend of lump sum only programs?
Why It’s Important
When the US tax reform law took effect in 2018, household goods and auto shipment, 30 days of storage and final travel expenses were no longer considered tax excludable in most states. This drove up the cost of relocation (either for the employee or for the employer). As a reaction to this, many companies have resorted to offering their relocating employees a lump sum of cash as a means of controlling costs.
Because the traditional market has a special interest in homeowners and making money off of home sale benefits, many RMCs don’t have a fully supported solution for lump sum populations. And with the majority of millennials not buying homes, companies must think of ways to offer a great relocation experience for someone who is not seeking to buy a home. You’ll want to find a relocation partner that can service these populations with a managed lump sum solution.
A managed lump sum is like a credit that an employee has to use for relocation benefits and is usually managed by a relocation partner. Let’s say someone has a managed lump sum amount of $10K. The employee doesn’t get $10K in their bank account. However, they can either use the relocation partner’s network of suppliers, (like moving companies, realtors and hotels) and have those expenses direct billed against their lump sum. They can also pay for services themselves and submit receipts for reimbursement against their lump sum.
Historically, managed lump sum didn’t work well because mobility professionals or RMCs would have to manually track invoices and manually keep a balance (similar to a checkbook). And because the bills didn’t come in real-time, there was little bandwidth to do this.
This is why it’s so important to look for a relocation partner that is a technology-first company with a managed lump sum tool. With a managed lump sum tool in place, you can apply it to programs with ten moves a year to 500 moves a year—and provide your employees with the flexibility and support they need to have a stress-free relocation.
Next Steps for Your Relocation RFP
The relocation RFP process can seem daunting, and honestly, it can be! RFPs may not always be the best way to determine a relocation partner, however, if your company requires one, you must consider including the 3 RFP questions listed above.
If you are on the lookout for a relocation partner, download our Ultimate Guide to Evaluating Relocation Partners. Your mobility program (or lack thereof) can be a true liability to your company’s bottom line. So, in this guide, you’ll learn the signs of a deficient relocation program and important questions to ask when evaluating and selecting the best relocation partner for your business.