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Tax Reform Update

As a result of the new tax reform law, the IRS released a new Form W-4 for 2018 along with a new withholding calculator on February 28, 2018.

While employers are not required to obtain new forms from their employees for 2018, because of the new tax law, you may want to encourage your employees to review their withholdings to be sure they are appropriate. As a reminder, the IRS recommends employees review their withholdings and submit a new W-4 at the beginning of each year or when personal circumstances change.

For additional information, please read the IRS news release IR-2018-36 at https://www.irs.gov/newsroom/updated-withholding-calculator-form-w-4-released-calculator-helps-taxpayers-review-withholding-following-new-tax-law.

Elimination of the ACA Individual Mandate Effective 2019

One of the significant updates for the Affordable Care Act, is the elimination of the Affordable Care Act’s individual mandate, effective 2019.

Under the current ACA regulations, the individual mandate requires most Americans to purchase a minimum level of health coverage. Those who fail to do so are liable for a penalty of $695 for an adult or 2.5 percent of household income, whichever is greater. The new Act accomplished the elimination of the individual mandate by reducing the penalty amounts to $0 and zero percent, respectively.

Employer Mandate and Other ACA Features Still in Place

The Act leaves many aspects of the ACA intact, including the individual marketplace, premium subsidies for those earning between 100% and 400% of the federal poverty rate, the ban on insurers charging more or denying coverage based on health factors, and Medicaid expansion.

Most significantly for employers, however, is the employer mandate and reporting requirements, which remain in force. Accordingly, applicable large employers will need to plan around the Code section 4980H(a) (“A”) penalty — which can apply if an employer does not offer minimum essential coverage to at least 95% of its full-time employees and at least one full-time employee buys subsidized marketplace coverage — and the Code section 4980H(b) (“B”) penalty — which can apply if an employer offers full-time employees coverage that is not affordable or does not meet minimum value requirements.

In 2018, A penalty is $2,320 (or $193.33 per month) multiplied by the total number of full-time employees (minus 30). The B penalty is $3,480 (or $290 per month) for each full-time employee who buys subsidized marketplace coverage (capped by the amount of the A penalty).

 

New York Minimum Wage Expanded by Industry

Hospitality Industry


CLICK HERE FOR THE FULL MINIMUM WAGE CHART FOR THE HOSPITALITY INDUSTRY

Fast Food Employee: A Fast Food Employee includes any person employed at or for a Fast Food Establishment whose duties include customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning or routine maintenance.

Fast Food Establishment: A Fast Food Establishment is a business that primarily serves food or drinks, offers limited service, where customers order and pay before eating, and is part of a chain of 30 or more locations nationally.

Food Service Worker: A Food Service Worker is an employee primarily engaged in the serving of food and beverages to guests, patrons or customers in the hospitality industry.

Service Employee: A Service Employee is an employee, other than a food service worker or fast food worker, who customarily receives tips of at least the Service Employee Minimum Tip Threshold amounts listed on the chart here.

 

Building Service Industry


CLICK HERE FOR THE FULL MINIMUM WAGE CHART FOR THE BUILDING SERVICE INDUSTRY

The New York Department of Labor’s building service industry minimum wage order sets forth the regulations that control the payment of wages to persons employed in the building service industry.

The wage order applies to employees working in both residential and commercial buildings, and defines the building service industry to include “any person, corporation or establishment engaged in whole or in part in renting, servicing, cleaning, maintaining, selling or managing buildings or building space and all occupations, operations and services in connection therewith or incidental thereto.”

Farm Workers


CLICK HERE FOR THE FULL MINIMUM WAGE CHART FOR FARM WORKERS

The Minimum Wage Order for Farm Workers applies only to farm workers employed on farms where the total cash remuneration paid all persons employed on the farm exceeded $3,000 in the previous calendar year.

Miscellaneous Industry


CLICK HERE FOR THE FULL MINIMUM WAGE CHART FOR ALL OTHER INDUSTRIES

The Proposed Regulations cover employees subject to the Miscellaneous Wage Order, meaning that they would affect all New York employees, except those in the hospitality industry, the building services industry and farm workers.

Important Deadlines and Penalties for Employers

Distribution of Form 1095C to Employees

  • 1095C Form must be provided to employees no later than January 31st, 2018
  • Forms can either be provided to the employee directly or mailed. Forms being mailed must be postmarked by January 31st. Employers must obtain affirmative consent to furnish a statement electronically.
  • Penalty: Failure to provide employees with a timely and accurate 1095c can result in penalties of up to $260.00 per form.

Filing of Forms 1094c and 1095c with the IRS

  • The IRS established two separate deadlines for the 1094C and 1095C Forms to be filed.
  • Returns filed on paper must be postmarked by February 28th, 2018. Only companies filing fewer than 250 forms are eligible to file the returns on paper.
  • Penalty: Companies filing more than 250 forms can be penalized up to $260.00 for each additional paper form.
  • Returns that are filed electronically must be e-filed by April 2nd, 2018.

Important Forms and Instructions on Reporting for 2017

The Affordable Care Act reporting requires employers with 50 or more Full Time Equivalent Employees to report on the offer of health coverage to full-time employees and their family member, as well as when the offer was made. Additional reporting such as if the coverage offered was affordable and whether the employees enrolled in the offered health care coverage.

Small employers with fewer than 50 full-time employees are exempt from some, but not all of the ACA’s reporting requirements. For example, self-insured small employers must complete and file Forms 1095B and 1094B with the IRS, as well as provide full-time employees with a copy of Form 1095-B.

Below are the links to the final forms and instructions on the IRS website:

2018 Minimum Wage Updates

To assist with your planning, the following indicates states with increased minimum wage rates effective January 1,2018.

Note:   The New York effective date for minimum wage changes is December 31, 2017.

State Non-Tipped Employees Tipped Employees
Alaska $9.84 N/A
Arizona $10.50 $7.50
California $11.00 (Large ER)$10.50 (Small ER) N/A
Colorado $10.20 $7.18
Florida $8.25 $5.23
Hawaii $10.10 $9.35
Maine $10.00 $5.00
Michigan $9.25 $3.52
Minnesota $9.65 (Large Employer)
$7.87 (All others)
N/A
Missouri $7.85 $3.925
Montana $8.30 N/A
New Jersey $8.60 $2.13 (didn’t change)
New York $10.40* N/A
Ohio $8.30 $4.15
Rhode Island $10.10 $3.89
South Dakota $8.85 $4.425
Vermont $10.50 $5.25
Washington $11.50 N/A

*Minimum wage rates may vary by industry and location within New York State.

We are happy to assist you in complying with these new minimum wage rates. Review your payroll to determine if your business and employees are affected by these changes and notify us of any necessary adjustments. Failure to comply with minimum wage laws may result in substantial penalties.

Important: Associated HCM will not make any changes to your employees’ payroll, including rate changes without your express instructions to do so.

 

Congress Reaches Tentative Deal on ACA Cost-Sharing Reduction Payments

President Donald Trump announced via executive order on Oct. 12 that he was ending payments to insurers for subsidizing low-income market participants, saying the payments are illegal because Congress hasn’t appropriated the money. These so-called cost-sharing reduction (CSR) payments, which subsidized health plans purchased on the ACA’s Marketplace exchanges, are sometimes called “extra savings” and are distinct from the premium tax credits that also subsidize policies purchased through an exchange.

Trump’s executive order does not affect the penalties that large employers are subject to when a full-time employee is not offered ACA-compliant coverage and receives a premium tax credit for a policy purchased through a Marketplace exchange.

Shortly after the executive order was issued, a bipartisan agreement was brokered on the Senate Health, Education, Labor and Pensions Committee by Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash. The agreement, if passed by Congress in new legislation, would restore CSR payments to insurance companies for two years and would give states more flexibility from ACA regulations.

Trump and some GOP congress members have indicated that they want any legislative fix to allow for a wider range of plans to be made available under the ACA, among other changes that might sink the deal if Democrats remain opposed.

ACA Penalty Updates

Under the ACA, a large employer must offer “affordable” medical coverage to at least 95%of its full-time employees and their dependent children, age 26 or younger or face stiff penalties.

  • A penalty of $2,260 per full-time employee (minus the first 30) if the employer fails to offer minimum essential coverage to 95 percent of its full-time employees and their dependents and any full-time employee obtains coverage on the exchange.
  • A penalty of $3,390 per full-time employee (minus the first 30) if a full-time employee receives a premium tax credit because the employer offered coverage that was unaffordable or did not provide minimum value.

These penalties, which took effect Jan. 1, 2016, go up in 2018 to $2,320 for the first penalty and $3,480 for the second. An employer may be subject to one of these penalties, not both. Employers that previously defined a full-time employee based on 40 hours of service have had to adjust their definition of full-time to 30 hours to comply with the employer mandate.

Executive Order re: Health Care Plan Options

On October 12th 2017, President Donald Trump signed an Executive Order which directed federal agencies to review regulations surrounding three health care plan options:

  • Association plans
  • Short-term limited-duration insurance (short term health plans)
  • Health reimbursement arrangements (HRA).

This Order does not create any new regulations.  It does not include any specific directive on any of these health options.  It simply instructs federal agencies to review existing regulations and to consider proposing new regulations and guidance.

In particular, the Order requests the agencies to focus on the following:

  • Expanding rules that pertain to association plans so more employers are eligible to participate;
  • Lengthening the period of coverage for short-term health plans and allowing for their renewal; and
  • Offering additional flexibility in how Health Reimbursement Arrangement (HRA) funds can be used, including with non-group coverage.

There is existing law addressing these subjects.  When developing new regulations or guidance, agencies are bound by current law. Given the potential conflict between federal and state law, there is also the possibility of legal challenges arising.  Therefore, developing new regulations surrounding these topics will not be immediate and can take up to a year or longer. Nothing in current law has changed.  The Order merely asks agencies to review existing regulations and develop proposals within the confines of the law.

The executive orders does not make any changes to the employer mandate or the ACA reporting obligations. Employers with 50 or more full-time equivalent employees should continue preparations for 2017 ACA annual reporting.

Congress to Repeal the “Cadillac Tax”

President Donald Trump announced that he will not continue federal subsidies, known as cost-sharing reduction (CSR) payments, to insurance companies that reduce health care costs for low-income enrollees. Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) announced that they have reached a bipartisan agreement to stabilize the Affordable Care Act (ACA) markets.

The bill, known as the Bipartisan Health Care Stabilization Act, would provide CSR payments for two years and would allow states to obtain Section 1332 waivers through a streamlined approval process. These waivers would not exempt states from:

  • covering the minimum ACA requirements
  • guaranteed renewability of coverage
  • elimination of pre-existing condition restrictions
  • coverage of dependent children to age 26
  • the prohibition on annual and lifetime limits

The Bipartisan Health Care Stabilization Act appears to have the necessary 60 votes in the Senate for passage, but it is unclear whether it will be considered by the full Senate absent support from Trump.

As Congress continues negotiations on the CSR payments, this week the U.S. District Court for the Northern District of California heard arguments for a temporary restraining order that would have forced the Trump administration to keep making the payments while a lawsuit works its way through the courts. On October 25, the court ruled against the emergency order, denying the motion for an injunction. To date, more than 10 million Americans are enrolled in the ACA exchanges, and nearly 6 million people receive the CSR subsidies.

Lastly, Speaker Paul Ryan (R-WI) announced earlier this week that House efforts to repeal and replace the ACA are over for the year.

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