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Forms 1095 Due to Employees by March 2nd

Employers subject to the Affordable Care Act’s (ACA) information reporting requirements are reminded that the deadline to furnish Forms 1095-B and 1095-C are quickly approaching. The reporting deadlines in 2018 are for reporting information on the 2017 calendar year, and are as follows:

  • Applicable large employers (ALEs)—generally those with 50 or more full-time employees, including full-time equivalents—must furnish a Form 1095-C to all full-time employees by March 2, 2018.
  • Self-insuring employers that are not considered ALEs, and other parties that provide minimum essential coverage, must furnish a Form 1095-B to responsible individuals (which may be the primary insured, employee, former employee, or other related person named on the application) by March 2, 2018.

For more on employer information reporting requirements, check out our comprehensive section on Information Reporting.

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New Tax Law Repeals Individual Mandate, Eliminates Tax Breaks for Several Fringe Benefits

President Trump has signed into law the Tax Cuts and Jobs Act, which, among other things, effectively repeals the Affordable Care Act’s individual mandate beginning in 2019, eliminates tax breaks for several fringe benefits, and creates a new tax credit for employers offering paid family and medical leave.Individual Mandate Repeal Effective in 2019
Under the Affordable Care Act, individuals are currently required to have minimum essential health coverage, qualify for an exemption from the requirement, or pay a penalty tax. This ACA provision is known as the “individual mandate.” Effective in 2019, the individual mandate is effectively repealed, as the penalty tax for noncompliance with the mandate will be reduced to $0.

Tax Breaks for Several Fringe Benefits Eliminated
Effective in 2018, the tax treatment of certain fringe benefits will be impacted as follows:

  • Employer contributions to an employee’s qualified transportation fringe benefits (including those for employees’ transit passes and parking) will no longer be deductible from the employer’s gross income.
  • Qualified moving expense reimbursements made by an employer will generally no longer be excludable from an employee’s gross income.
  • Qualified bicycle commuting reimbursements made by an employer will no longer be excludable from an employee’s gross income.
New Employer Tax Credit for Paid Family and Medical Leave
For tax years 2018 and 2019, employers that offer paid family and medical leave (as defined under the federal Family and Medical Leave Act [FMLA]) to employees may qualify for a newly established tax credit of up to 25% of the annual wages paid to those employees.To learn more about the tax consequences of various employer-provided benefits, visit our Employee Benefits section.

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IRS to Begin Mailing ‘Pay or Play’ Penalty Letters

The IRS has announced that it will begin mailing employers letters informing them of their potential liability for a “pay or play” penalty for the 2015 calendar year in late 2017. However, before any penalty is assessed and notice and demand for payment is made, employers will have an opportunity to respond to the agency.

What Will the Letter Contain?
The IRS plans to issue Letter 226J to applicable large employers (ALEs)—generally those with at least 50 full-time employees, including full-time equivalent employees, on average during the prior year—if it determines that, for at least one month in the year, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee). Letter 226J will include, among other things:

  • A penalty payment summary table, itemizing the proposed payment by month;
  • An “employee premium tax credit list” which lists, by month, the ALE’s employees who for at least one month in the year were full-time employees allowed a premium tax credit and for whom the ALE did not qualify for an affordability safe harbor or other relief;
  • A description of the actions the ALE should take if it agrees or disagrees with the proposed penalty payment; and
  • A response form.

The response to Letter 226J will be due by the response date shown on the letter, which generally will be 30 days from the date of Letter 226J. Letter 226J will also contain the name and contact information of a specific IRS employee that the ALE should contact if the ALE has questions about the letter.

How Does an ALE Make a Pay or Play Penalty Payment?
If, after correspondence between the ALE and the IRS, the IRS determines that an ALE is liable for a penalty payment, the IRS will assess the payment and issue a notice and demand for payment, Notice CP 220J. That notice will instruct the ALE on how to make a payment, if any. Notably, an ALE will not be required to include a payment on any tax return that it files or make a payment before notice and demand for payment.

Click here for more information from the IRS.

Visit our “Pay or Play” (Employer Shared Responsibility) section for more on pay or play compliance.

Matt Hollister No Comments

2017 Forms 1094 & 1095 Now Available

The Internal Revenue Service (IRS) has released the final forms and instructions for Forms 1094 and 1095 for calendar year 2017 reporting. Employers are required to report in early 2018 for calendar year 2017.

2017 Forms and Instructions
The following calendar year 2017 reporting forms and instructions are now available:

Information Reporting Deadlines

The deadlines for submitting Forms 1094 and 1095 are as follows:
  • Applicable large employers (ALEs)—generally those with 50 or more full-time employees, including full-time equivalent employees (FTEs)—must file Forms 1094-C and 1095-C with the IRS no later than February 28, 2018 (or April 2, 2018, if filing electronically). ALEs must also furnish a Form 1095-C to all full-time employees by January 31, 2018.
  • Self-insuring employers that are not considered ALEs must file Forms 1094-B and 1095-B with the IRS no later than February 28, 2018 (or April 2, 2018, if filing electronically). A Form 1095-B must also be furnished to “responsible individuals” (who may be the primary insured, employee, former employee, or other related person named on the application) by January 31, 2018.

Visit our Information Reporting section for more on the information reporting requirements.

Matt Hollister No Comments

IRS Announces Retirement Plan Limits for 2018

401(k) Contribution Limit Increases to $18,500

The IRS has announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2018. Highlights include:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), and most 457 plans is increased from $18,000 to $18,500.
    • The catch-up contribution limit for those aged 50 and over remains unchanged at $6,000.
  • The limit on annual contributions to an individual retirement arrangement (IRA) remains unchanged at $5,500.

The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have adjusted gross incomes between $63,000 and $73,000, up from $62,000 to $72,000.

  • For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $101,000 to $121,000, up from $99,000 to $119,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $189,000 and $199,000, up from $186,000 to $196,000.

Click here for more information.

To learn more about retirement planning, please visit our section on Retirement Plans.

Matt Hollister No Comments

Rate for Tipped Employees Rises to $7.25 Per Hour

The U.S. Department of Labor (DOL) has announced that the minimum wage for workers performing work on or in connection with certain federal contracts will rise to $10.35 per hour ($7.25 per hour for covered tipped employees) beginning January 1, 2018.

Background 
Executive Order 13658 established a minimum wage requirement for federal contractors and subcontractors. The Order applies to four major categories of contractual agreements:

  • Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
  • Service contracts covered by the Service Contract Act (SCA);
  • Concessions contracts, including any concessions contract excluded from the SCA by DOL regulations; and
  • Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

Note: Certain workers are excluded from coverage under Executive Order 13658. Click here for more information.

Click here to read the DOL announcement.

Our Compliance Assistance for Federal Contractors section features helpful resources for federal contractors and subcontractors.

Matt Hollister No Comments

New employer penalty for employees covered by Medicaid and subsidized health plans

Last month, on August 1st, Governor Charlie Baker signed into law S. 3822<https://malegislature.gov/Bills/190/H3822> “An Act Further Regulating Employer Contributions to Health Care.”  This new law which will take effect in 2018 will apply to all employers with 6 or more employees residing in Massachusetts.  It imposes a penalty of up to $750 for each active employee who is enrolled in either Mass Health or who receives subsidized coverage through the Mass Health Connector.  In addition, it raises the Employer Medical Assistance Contribution (“EMAC”) from it’s current annual maximum fee of $51/worker up to $77/worker.

This change is a temporary increase in fees and penalties to help offset the approximately $300 million budget deficit faced by the state’s Medicaid and Children’s Health Insurance Programs (CHIP).  Together the increased EMAC fee and penalty are expected to generate approximately $200 million, far less than what is needed to fix the shortfall.  Other proposals, including limiting the eligibility rules for MassHealth to restrict people who have coverage available through their employer were considered but not adopted.  As this will not solve the Medicaid budget deficit, we expect that the legislature will look to other areas for cost control in the future.  The additional fee and penalty will apply for two years, ending on December 31st, 2019.

Both the EMAC fee and the penalty are going to follow Mass unemployment insurance contributions, and the assessments are likely to be paid through the Department of Unemployment Assistance.  The EMAC will be based on .51% of wages up to $15,000, while the penalty (only for those workers covered by either Medicaid or a subsidized Health Connector plan) will be assessed 5.00% up to $15,000 in wages.  Based on the wage caps that could result in fees of $77 and $750 per worker, respectvely.

Please let us know if you have any questions.

Sincerely,

Matt Hollister, L.I.A., M.P.H.

Matt Hollister No Comments

Reminder: Medicare Part D Notice Due Before October 15

In preparation for the Medicare fall open enrollment period, employers sponsoring group health plans that include prescription drug coverage are required to notify all Medicare-eligible individuals whether such coverage is creditable (i.e., that the coverage is expected to pay, on average, as much as the standard Medicare prescription drug coverage).

Written Disclosure to Individuals
This written disclosure notice must be provided annually, prior toOctober 15, and at various other times as required under the law, to the following individuals:

  • Medicare-eligible active working individuals and their dependents;
  • Medicare-eligible COBRA individuals and their dependents;
  • Medicare-eligible disabled individuals covered under an employer’s prescription drug plan; and
  • Any retirees and their dependents.

Model notices are available from the Centers for Medicare & Medicaid Services (CMS).

Online Disclosure to CMS Also Required 
Additionally, employers are required to complete an online disclosure to CMS to report the creditable coverage status of their prescription drug plans. This disclosure is also required annually, no later than 60 days from the beginning of a plan year, and at certain other times.

Visit our section on Medicare for more information about how the law affects employer-provided group health plans.

Matt Hollister No Comments

USCIS Releases New Form I-9 and Form I-9 Instructions

U.S. Citizenship and Immigration Services (USCIS) has released a new version of and instructions for Form I9Employment Eligibility VerificationBy September 18, 2017, employers must use only the new version.

Compliance Dates for New Form I9
The new Form I9 features a revision date of July 17, 2017 (07/17/17 N). While employers may continue using a Form I9 with a revision date of November 14, 2016 (11/14/16 N) through September 17, 2017, as of September 18, 2017, employers must use only the new version.

Changes to Form I9
The following revisions have been made to the List of Acceptable Documents section of the new Form I9:

  • The Consular Report of Birth Abroad (Form FS-240) has been added to List C. Employers completing Form I9 on a computer are now able to select Form FS-240 from the drop-down menus available in List C of Section 2 and Section 3.
  • All the certifications of report of birth issued by the U.S. Department of State (Form FS-545, Form DS-1350, and Form FS-240) are now combined into selection C#2 in List C.
  • All List C documents have been renumbered except the Social Security card. For example, the employment authorization document issued by the U.S. Department of Homeland Security on List C has changed from List C #8 to List C #7.

Changes to Form I9 Instructions
The following revisions have been made to the new Form I9 instructions:

  • The phrase “the end of” has been removed from the phrase “the first day of employment.”
  • The name of the Office of Special Counsel for Immigration-Related Unfair Employment Practices has been changed to its new name, Immigrant and Employee Rights Section.

The new Form I9 and instructions can be downloaded here.

For more information on complying with the employment eligibility verification requirements, please visit our HR360 client section on Form I9.

 

Sincerely,

 

Matt Hollister

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Employer’s Guide to Tax-Exempt Fringe Benefits

We are pleased to present the attached Tax Treatment of Common Fringe Benefits Chart, which summarizes whether certain types of fringe benefits are exempt from federal income, FICA, and unemployment taxes. Fringe benefits discussed include:

  • Accident and health benefits
  • Transportation benefits
  • Group-term life insurance coverage
  • Moving expense reimbursements

Click on the image below to view and download the chart.

 

 

Please contact me if you have any questions about this report.

Regards,

Matt Hollister
President