Thank you to all who have tuned in to our blog throughout this past year. To wrap up our year of melodic insights into benefits, we’re again sharing a playlist of the songs referenced in the titles of our 2022 Benefits Dial blog posts. Enjoy the sounds, and we look forward to having you dial in again in 2023!
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-12-28 09:47:262022-12-28 09:47:26Celebrate Good Times…With the Sounds of the Holland & Hart’s Benefits Dial
A new interpretation by the Colorado Department of Labor and Employment (CDLE) could have significant tax impacts under Internal Revenue Code Section 409A (409A). Many bonus and incentive programs require that the intended recipient remain employed with the employer through the date of payment. If the employee quits before the payment date, the employee is not entitled to receive the bonus. In fact, many bonuses are granted specifically in order to retain the employee.
In Interpretative Notice and Formal Opinion (INFO) #17, the CDLE interprets the Colorado Wage Act as prohibiting an employer from requiring the employee be employed on a certain date in order to receive a bonus, if all other conditions to receive the bonus have been met. See my colleague’s article here for more discussion about the new guidance in general.
If the CDLE interpretation is applied to retention bonuses, the bonuses might not, in fact, be forfeitable if the employee quits before the payment date. Since these bonuses are typically designed to be exempt from 409A tax rules under the “short term deferral” exception which requires there to be a “substantial risk of forfeiture,” this could mean that there is no longer a substantial risk of forfeiture. The amount could be considered deferred compensation that is subject to 409A – and all of 409A’s restrictions and an extra 20% tax for any violation. Earlier “vesting” and disregard of “substantial risk of forfeiture” could have other tax and accounting impacts as well, including the timing of federal/state income taxation and FICA taxation, and which taxable year is allocated the company deduction under the “all-events test” for liabilities. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-12-09 13:27:022022-12-09 13:27:02Oh Won’t You Stay…Until the Bonus is Paid
Plan sponsors are ultimately responsible for compliance with the Prescription Drug Data Collection (RxDC) required reporting for their group health plans—and there’s no time to waste since the reporting is due by December 27, 2022. But information to complete one of the data files, the D1 (premium/cost information), may not be available to the Third Party Administrator (TPA) filing the report and, thus, may be incomplete. What’s a plan sponsor to do?
As background, the Consolidated Appropriations Act, 2021 (CAA) requires group health plans and health insurance issuers to submit certain information about health care and prescription drug spending to the Department of Health and Human Services, Department of Labor, and Department of the Treasury (collectively, the Departments) annually. The reporting consists of a plan identifier file, eight separate data files, and a narrative response. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-12-01 09:21:342022-12-01 09:21:34I Want a New Drug…Prescription Drug Data Collection Reporting is Due December 27th
One of the key remaining features of the Affordable Care Act (ACA) is that certain employers must offer their employees medical coverage, or else pay a penalty. The details of that “employer shared responsibility payment” (ESRP) are many. One of those details is that the employer coverage must be “affordable.” Affordability looks at how much of an employee’s household income goes toward premiums.
As originally implemented, affordability was measured by reference to the premiums charged for employee-only coverage. The premium cost for family or other tiers of coverage wasn’t taken into account. Some critics called this the “family glitch.” Starting in 2023, that changes. New IRS regulations require that in 2023, affordability is measured by looking at the employee’s premium cost for family coverage. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-11-14 10:39:522022-11-14 10:39:52We Are Family – IRS Regulations Fix the “Family Glitch” in Connection with ACA Coverage
As we approach year end, employers should give some thought to reviewing their PTO policies for the coming year. One of the most common tax traps that we see is employers offering employees the right to cash out their PTO.
“It’s their PTO, and if they have accumulated a large balance, then we want to encourage them to get the large PTO accrual off the books,” is a common explanation we hear from employers.
Not so fast. Giving an employee a choice between current cash and rolling over PTO hours accelerates the taxation of the employee’s PTO hours (even if the employee never elects to cash them out). Many employers are surprised to learn that an obscure IRS rule known as “constructive receipt” generally requires an employer to treat PTO as taxable wages at the earliest time the employee is able to elect to cash out the PTO. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-11-07 13:13:002022-11-07 13:13:00You Can’t Touch That: Permitting Cashouts of PTO May Create Tax Traps for Employees and Employers
Sponsors of self-funded group health plans are required to notify enrollees about the availability of the plan’s notice of privacy practices and how enrollees can obtain a copy of such notice. This must be done at least once every three years. However, many sponsors satisfy this obligation on behalf of their group health plans by including information regarding the availability of the notice in their plan’s annual enrollment materials. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-10-27 09:34:122022-10-27 09:34:12Gimme, Gimme, Gimme, My Required Notices
The IRS has announced the 2023 cost of living adjustments to qualified plan limits. As expected, many of the limits increased substantially compared with prior years. Below are the highlights, and our full historical chart can be found here for easy reference.
2023
2022
2021
Annual Compensation
330,000
305,000
290,000
Elective Deferrals
22,500
20,500
19,500
Catch-up Contributions
7,500
6,500
6,500
Defined Contribution Limit
66,000
61,000
58,000
ESOP Distribution Limits
1,330,000
265,000
1,230,000
245,000
1,165,000
230,000
Defined Benefit Limit
265,000
245,000
230,000
HCE Threshold
150,000
135,000
130,000
Key Employee
215,000
200,000
185,000
457 Elective Deferrals
22,500
20,500
19,500
Taxable Wage Base
160,200
147,000
142,800
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-10-24 10:55:122022-10-24 10:55:12It’s All About the Benjamins…2023 IRS Limits Announced
Celebrate Good Times…With the Sounds of the Holland & Hart’s Benefits Dial
/in UncategorizedThank you to all who have tuned in to our blog throughout this past year. To wrap up our year of melodic insights into benefits, we’re again sharing a playlist of the songs referenced in the titles of our 2022 Benefits Dial blog posts. Enjoy the sounds, and we look forward to having you dial in again in 2023!
Oh Won’t You Stay…Until the Bonus is Paid
/in Equity Compensation, Executive Compensation, State Benefits Lawsby Brenda Berg
A new interpretation by the Colorado Department of Labor and Employment (CDLE) could have significant tax impacts under Internal Revenue Code Section 409A (409A). Many bonus and incentive programs require that the intended recipient remain employed with the employer through the date of payment. If the employee quits before the payment date, the employee is not entitled to receive the bonus. In fact, many bonuses are granted specifically in order to retain the employee.
In Interpretative Notice and Formal Opinion (INFO) #17, the CDLE interprets the Colorado Wage Act as prohibiting an employer from requiring the employee be employed on a certain date in order to receive a bonus, if all other conditions to receive the bonus have been met. See my colleague’s article here for more discussion about the new guidance in general.
If the CDLE interpretation is applied to retention bonuses, the bonuses might not, in fact, be forfeitable if the employee quits before the payment date. Since these bonuses are typically designed to be exempt from 409A tax rules under the “short term deferral” exception which requires there to be a “substantial risk of forfeiture,” this could mean that there is no longer a substantial risk of forfeiture. The amount could be considered deferred compensation that is subject to 409A – and all of 409A’s restrictions and an extra 20% tax for any violation. Earlier “vesting” and disregard of “substantial risk of forfeiture” could have other tax and accounting impacts as well, including the timing of federal/state income taxation and FICA taxation, and which taxable year is allocated the company deduction under the “all-events test” for liabilities. Read more
I Want a New Drug…Prescription Drug Data Collection Reporting is Due December 27th
/in DOL, ERISA, Health & Welfare Plans, IRSby Becky Achten
Plan sponsors are ultimately responsible for compliance with the Prescription Drug Data Collection (RxDC) required reporting for their group health plans—and there’s no time to waste since the reporting is due by December 27, 2022. But information to complete one of the data files, the D1 (premium/cost information), may not be available to the Third Party Administrator (TPA) filing the report and, thus, may be incomplete. What’s a plan sponsor to do?
As background, the Consolidated Appropriations Act, 2021 (CAA) requires group health plans and health insurance issuers to submit certain information about health care and prescription drug spending to the Department of Health and Human Services, Department of Labor, and Department of the Treasury (collectively, the Departments) annually. The reporting consists of a plan identifier file, eight separate data files, and a narrative response. Read more
We Are Family – IRS Regulations Fix the “Family Glitch” in Connection with ACA Coverage
/in Health & Welfare Plans, IRS, Legislationby Elizabeth Nedrow
One of the key remaining features of the Affordable Care Act (ACA) is that certain employers must offer their employees medical coverage, or else pay a penalty. The details of that “employer shared responsibility payment” (ESRP) are many. One of those details is that the employer coverage must be “affordable.” Affordability looks at how much of an employee’s household income goes toward premiums.
As originally implemented, affordability was measured by reference to the premiums charged for employee-only coverage. The premium cost for family or other tiers of coverage wasn’t taken into account. Some critics called this the “family glitch.” Starting in 2023, that changes. New IRS regulations require that in 2023, affordability is measured by looking at the employee’s premium cost for family coverage. Read more
You Can’t Touch That: Permitting Cashouts of PTO May Create Tax Traps for Employees and Employers
/in Executive Compensation, Fringe Benefits, IRS, State Benefits Lawsby Bret F. Busacker
As we approach year end, employers should give some thought to reviewing their PTO policies for the coming year. One of the most common tax traps that we see is employers offering employees the right to cash out their PTO.
“It’s their PTO, and if they have accumulated a large balance, then we want to encourage them to get the large PTO accrual off the books,” is a common explanation we hear from employers.
Not so fast. Giving an employee a choice between current cash and rolling over PTO hours accelerates the taxation of the employee’s PTO hours (even if the employee never elects to cash them out). Many employers are surprised to learn that an obscure IRS rule known as “constructive receipt” generally requires an employer to treat PTO as taxable wages at the earliest time the employee is able to elect to cash out the PTO. Read more
Gimme, Gimme, Gimme, My Required Notices
/in Cafeteria Plans, ERISA, Health & Welfare Plansby Leslie Thomson
Sponsors of self-funded group health plans are required to notify enrollees about the availability of the plan’s notice of privacy practices and how enrollees can obtain a copy of such notice. This must be done at least once every three years. However, many sponsors satisfy this obligation on behalf of their group health plans by including information regarding the availability of the notice in their plan’s annual enrollment materials. Read more
It’s All About the Benjamins…2023 IRS Limits Announced
/in 401(k) Plans, 403(b) plans, 457(b) plans, Defined Benefit Plans, ESOPs, IRS, Retirement Plansby Lyn Domenick
The IRS has announced the 2023 cost of living adjustments to qualified plan limits. As expected, many of the limits increased substantially compared with prior years. Below are the highlights, and our full historical chart can be found here for easy reference.
265,000
245,000
230,000