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Employee Benefit Changes in the Tax Cuts and Jobs Act of 2017

On December 22, 2017, President Trump signed what is popularly known as the Tax Cuts and Jobs Act (H.R. 1) (the “Bill”), overhauling America’s tax code for both individuals and corporations and providing the most sweeping changes to the U.S. Tax Code since 1986. The House and Senate Conference Committee provided a Policy Highlights of the major provisions of the Bill, and the Joint Committee on Taxation provided a lengthy explanation of the Bill.

Compared to initial proposals, the final Bill generally does not make significant changes to employee benefits. The chart that follows highlights certain broad-based health and welfare, fringe and retirement plan benefit provisions of the Bill (comparing them to current law). Notable changes include:

  • Repeal of the Individual Mandate penalty beginning in 2019;
  • Elimination/changes of employer deductions for certain fringe benefits, including qualified transportation fringes, moving expenses, and meals/entertainment;
  • New tax credit for employers that pay qualifying employee while on family and medical leave, as described by the Family Medical Leave Act;
  • Extended rollover periods for deemed distributions of retirement plan loans; and
  • Tax relief for retirement plan distributions to relieve 2016 major disasters.

In addition, the Bill makes certain narrowly-tailored changes (which we did not include in the chart that follows) impacting only certain types of employers or compensation. For instance, the Bill:

  • modifies the $1 million compensation deduction limitation under Code Section 162(m) for publicly traded companies (expanding the type of compensation which will be applied against the limitation, the individuals who will be considered covered employees, and the type of employers that will be subject to the limitation), with transition relief for certain performance-based compensation arrangements pursuant to “written binding contracts” in effect as of November 2, […]
By |January 4th, 2018|Employee Benefits, Human Resources, Legislation, Private Health Care Exchange|Comments Off on Employee Benefit Changes in the Tax Cuts and Jobs Act of 2017

Massachusetts Releases Proposed Regulations on EMAC Supplement; HIRD Form Returns

On August 1, 2017, Massachusetts Governor Charlie Baker signed H.3822, which increases the existing Employer Medical Assistance Contribution (EMAC) and imposes an additional fee (EMAC Supplement) on employers with employees covered under MassHealth (Medicaid) or who receive subsidized coverage through ConnectorCare (certain plans offered through Massachusetts’ Marketplace). The increased EMAC and the EMAC Supplement are effective for 2018 and 2019 and are intended to sunset after 2019.

On November 6, 2017, the Massachusetts Department of Unemployment Assistance (DUA) released proposed regulations on the EMAC. Also on November 6, Governor Baker signed H.4008, which includes a provision that requires Massachusetts employers to submit a health insurance responsibility disclosure (HIRD) form annually.

The increased EMAC and the EMAC supplement are intended to be offset by a reduction in the increase of unemployment insurance rates in 2018 and 2019. The unemployment insurance relief is estimated to save employers $334 million over the next two years.

The EMAC itself is relatively new, having been created in 2014 after the repeal of Massachusetts’ “fair share” employer contribution. The EMAC applies to employers with six or more employees working in Massachusetts and applies regardless of whether the employer offers health coverage to its employees. Currently, the EMAC is .34% of wages up to $15,000, which caps out at $51 per employee per year. For 2018 and 2019, it will increase to .51%, or $77 per employee per year. In 2018, the EMAC and EMAC Supplement are expected to raise $75 million and $125 million in revenue, respectively.

Proposed Regulations on EMAC Supplement

The EMAC Supplement applies to employers with 6 or more employees in Massachusetts. Under the EMAC Supplement, employers must pay 5% of annual wages up to the annual wage cap […]

By |November 22nd, 2017|Disability, Employee Communications, Legislation, Medical, Private Health Care Exchange|Comments Off on Massachusetts Releases Proposed Regulations on EMAC Supplement; HIRD Form Returns

Legal Alert: IRS Updates Employer Mandate FAQs: Indicates that Penalty Letters are Imminent

The Internal Revenue Service (IRS) has updated its list of frequently asked questions (FAQs) on the Affordable Care Act’s employer shared responsibility provisions – also known as the “pay or play” mandate. In particular, questions 55 through 58 provide guidance for employers who may be subject to shared responsibility payments.   The FAQs indicate that the IRS will begin sending penalty letters to applicable large employers (ALEs) that owe penalties for calendar year 2015 “in late 2017.” Around this time last year, the IRS had indicated that penalty letters for 2015 would be coming “in early 2017;” however, those letters never materialized.   Based on the latest update to its FAQs, it appears that the IRS has worked out the kinks in its systems and is prepared to begin sending penalty letters.

Background

Starting in 2015, the ACA requires ALEs to either “play” by offering affordable health coverage to their full-time employees, or “pay” a penalty if the employer fails to provide affordable health coverage and at least one full-time employee receives a premium tax credit to help purchase coverage through the Health Insurance Marketplace. ALEs are generally those with 50 or more full-time employees, including full-time equivalent employees. Transitional relief was available for 2015 (and, for non-calendar year plans, any portion of the 2015 plan year that fell in 2016) for ALEs with fewer than 100 full-time employees that satisfied the conditions of such transitional relief.

In general, there are two potential penalties (both non-deductible for tax purposes) that could be imposed on an ALE for failure to satisfy the mandate. The first penalty, known as the “no coverage” penalty, is based on whether an ALE fails to offer group health plan coverage to […]

By |November 7th, 2017|Compliance, Employee Benefits, Human Resources, Legislation, Medical, Uncategorized|Comments Off on Legal Alert: IRS Updates Employer Mandate FAQs: Indicates that Penalty Letters are Imminent

IRS Increases Health FSA Contribution Limit for 2018, Adjusts Other Benefit Limits

On October 20, 2017, the Internal Revenue Service (IRS) released Revenue Procedure 2017-58, which raises the health Flexible Spending Account (FSA) salary reduction contribution limit by $50 to $2,650 for plan years beginning in 2018. The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain sections of the Internal Revenue Code.   The following summarizes other adjustments relevant to individuals and employer sponsors of welfare and fringe benefit plans.

Qualified Commuter Parking and Mass Transit Pass Monthly Limit Increase

For 2018, the monthly limitation for the qualified transportation fringe benefit is $260, as is the monthly limitation for qualified parking (in both cases, a $5 increase from the 2017 limit).

Small Employer Health Insurance Tax Credit Average Annual Wage Limit Increase

For 2018, the maximum average annual wages of employees used for determining who is an eligible small employer for purposes of the credit is $53,400 (a $1,000 increase from the 2017 threshold). The average annual wage level at which the tax credit begins to phase out for eligible small employers is $26,700 (a $500 increase from the 2017 threshold).

Adoption Assistance Tax Credit Increase

For 2018, the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $13,840 (a $270 increase from the 2017 limit). The maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $13,840 (a $270 increase from the 2017 limit). The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of […]

By |October 25th, 2017|Employee Benefits, Employee Communications, Health Care Reform|Comments Off on IRS Increases Health FSA Contribution Limit for 2018, Adjusts Other Benefit Limits