On today’s episode of Healthcare Simplified we are extremely lucky to have employee compliance benefits extraordinaire, Sandy Krauer. She’s back, and this time, Sandy’s here to talk about the new compliance laws that you need to be aware of going into 2020.
New HR & Benefit-Related Legislation
As 2019 drew to a close, Congress enacted the Further Consolidated Appropriations Act of 2020, which includes significant benefit-related provisions.
Additionally, various HR/employment related laws went into effect on January 1st. Employers will want to take note and make any appropriate changes to their current employment practices.
ACA annual reporting (Forms 1094/1095) is fast approaching.
Although the deadline to file the forms with the IRS has not been extended (still Feb. 28th for paper filing/Mar. 31st for electronic filing) the deadline for furnishing Form 1995-C (for ALE’s) has been extended like it was the last several years.
The due date for furnishing Form 1095-C to employees is extended from January 31, 2020, to March 2, 2020 for the 2019 calendar year. Since that date is what it would be if an extension were requested, no additional discretionary extensions will be granted.
The IRS will not impose a penalty for failure to furnish Form 1095-C to any employee enrolled in an ALE member's self-insured health plan who is not a full-time employee for any month of 2019 if certain conditions are met.
The IRS will not impose a penalty for failure to file Form 1095-C with the IRS or failure to furnish Form 1095-C to employees if you make a good faith effort to comply with the information reporting requirements.
Certain Taxes Repealed – ACA-related
The Act repeals the excise tax on high-cost health coverage (often called the Cadillac tax). The Cadillac tax would have imposed a 40% tax on the cost of employer-sponsored health benefits exceeding specified statutory thresholds starting in 2022 (twice delayed from original 2018 effective date).
Annual Fee on Health Insurance Providers
Not applicable for self-funded plans. The Act repeals the annual fee on health insurance providers (defined to include health insurers, HMOs, and MEWAs), effective January 1, 2021. The fee, which took effect in 2014, was apportioned among covered providers based on their relative U.S. health insurance market share. The 2020 moratorium is $15.5 billion.
Other Tax Provisions Modified or Extended
The Act modifies or extends certain tax provisions, including:
Reinstatement of PCOR Fees.
The ACA created the Patient-Centered Outcomes Research (PCOR) Institute, funded in part by fees from certain health insurers and self-insured health plan sponsors, to support clinical effectiveness research. Under the ACA provision, PCOR fees were collected for plan years ending before October 1, 2019. The Act reinstates the PCOR provision and continues the fee requirements through plan years ending before October 1, 2029. Appropriations for research are extended through the government’s 2029 fiscal year.
Although it is called a “fee”, it is reported on Form 720 for excise tax payment; deductible business expense for employers/businesses.
Employer Tax Credit for Paid Family and Medical Leave.
The TCJA created a tax credit for eligible employers providing paid family and medical leave to their employees for 2018 and 2019. The Act extends it through 2020.
Eligible employers may claim the credit, which is equal to a percentage of wages they pay to qualifying employees while they’re on family and medical leave.
Eligible Employers for the Tax Credit
FUTA Tax credit is 12.5%-25% of wages paid to qualifying employees for up to 12 weeks paid FMLA leave.
Employers must have a written policy in place that meets certain requirements, including providing:
At least two weeks of paid family and medical leave (annually) to all qualifying employees (FT and PT) who work full time (prorated for employees who work part time), and
The paid leave is not less than 50 percent of the wages normally paid to the employee.
Employers don’t need to be FMLA-covered employers. They must just offer FMLA-like leave that is paid. STD benefits (self-funded or insured) may qualify (if STD benefits are taxable to the employee).
Employees can’t make more than 60% of the HCE highly paid limit under Code 414(q) ($75,000 in 2019) in prior year to qualify.
Two big changes that employers hopefully are already aware of, but to recap:
New W-4 Tax Withholding
Federal tax law changes in 2018 created the need to revise the Form W-4 to better be able to capture realistic income reporting v. tax withholding – no longer able to claim personal and dependent exemptions. Basically, since only one standard deduction can be claimed per tax filing regardless of the number of jobs that make up the total household income, this needed to be taken into consideration for more accurate tax withholding.
New W-4 Design
It looks different. There are major revisions and it even has a new name. The Employee's Withholding Certificate.
Do all employees have to complete the NEW W-4?
New employees hired as of January 1st must complete this new W-4. If they do not, or do not provide a new W-4, then employers are required to withhold as single filer/no adjustments.
Employees don’t need to complete the additional worksheet areas, but they should complete Step 1 (name/address/ssn and filing category; e.g., single/married filing separately, head of household, or married filing jointly) and Step 5 (sign the form). The employer would just then withhold based on what filing category the employee checked.
What if an employee doesn’t want to share all this information with their payroll department?
They can go online to do a new calculation to make any changes to their withholding instructions to their employer. Just go to www.ires.gov/W4App.
What’s the 2nd major change?
FLSA Overtime Rule – final ruling takes effect.
The Department of Labor issued a final rule on Sep. 24, 2019 increasing the salary-level threshold for white-collar exemptions. The final rule is effective Jan. 1.
Under the Sep. 2019 final rule:
Workers who do not earn at least $35,568 a year ($684 a week) would have to be paid overtime, even if they’re classified as a manager or professional.
Nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.
The special rule for highly compensated employees would require workers to earn a total annual compensation of at least $107,432 (from $100k) ($684 of which must be paid weekly on a salary or fee basis).
No changes to the duties tests.
The Department of Labor intends to propose updates to the salary threshold regularly to ensure that these levels continue to provide useful tests for exemption. Updates would not be automatic and would continue to require notice-and-comment rulemaking.
This post is based on a podcast interview with Sandy Krauer from Total Focus HR Solutions.