2017 is in the books and 2018 is now upon us. A dramatic close to 2017 on Capitol Hill ushered in sweeping changes to the tax code that will begin to impact both employers and employees in a number of ways – some more immediately – from employers losing deductions for sexual harassment settlement payouts, to penalties for high nonprofit executive compensation, to tax deferral on exercise of stock options for public company executives, to employee benefit plans. Wage and leave-related issues are also likely to dominate in 2018, as more states (and employers on their own initiative) increase wage thresholds and broaden employee paid and unpaid leave entitlements (even for some smaller employers). Salary history bans, such as those already enacted in New York City, Massachusetts, and California, will continue to get traction in 2018 as more states and municipalities jump on that bandwagon. We also expect to continue to witness a significant shift in the NLRB’s enforcement policy and decision-making; the NLRB’s new General Counsel has already announced a number of changes that are sure to make employers sigh with relief. Also in 2018, employers could continue to face rising uncertainty with respect to health plans in the wake of the tax bill’s repeal of the individual mandate that was central to keeping health plans affordable under the Affordable Care Act. Finally, so that we can help keep you accountable to the five New Year’s resolutions we made for you over the holidays (that we know you were eager to adopt as your own), we have collected them for you here: (1) review and refresh your non-harassment policies and training; (2) update your leave policies; (3) make sure your job applications comply with new state ban-the-box laws and salary history inquiry bans; (4) assess the strength and enforceability of your post-employment covenants under changing state law; and (5) make sure your employee benefit plans are compliant.
Happy New Year! It’s that time when we all vow to better ourselves in the months ahead. Resolutions abound, and they need not be limited to individual self-improvement. Employers too have many opportunities for betterment in the New Year. In the area of employee benefits, we offer these four goals for 2018.
After a long delay, the IRS has begun enforcing the Affordable Care Act’s rules governing shared employer responsibility (a/k/a the “employer mandate”). This mandate imposes “assessable payments” on Applicable Large Employers (i.e. those with 50 or more full-time and full-time equivalent employees in the prior calendar year) that either fail to offer coverage, or offer unaffordable or insufficiently robust coverage, and where at least one employee qualifies for subsidized coverage from an ACA exchange/marketplace. Demand letters have been issued for 2015 to a number of employers, and in many instances, the assessable payment amounts are substantial. But as Alden Bianchi and Christopher Condeluci argue in Why the IRS May Be Unable to Assess ACA Employer Shared Responsibility Penalties for 2015, a recently published article by Bloomberg/BNA, the IRS may be on shaky ground as it endeavors to assessable payments for 2015, due to the Department of Health and Human Services’ failure to provide notices required by the statute. To read the full article, please click here.
Prior to the effective date of the tax bill recently signed by the President, Section 164 of the Internal Revenue Code permitted individuals who itemized deductions to deduct state and local income and other designated taxes (SALT) in calculating their Federal taxable income. Congress amended Section 164 for years beginning after 2017 and prior to 2026 to limit SALT deductions to $10,000 per year and, as a practical matter, to sharply reduce the number of taxpayers who will be itemizing deductions and thus able to take advantage of even this limited deduction. By contrast, the new tax legislation does not restrict the ability of employers to deduct payroll taxes to which they are subject.
The Tax Cuts and Jobs Act makes some notable, though targeted, changes to the employee benefits landscape. We summarize some of the more significant changes in the Question and Answers set out below.
The “intermediate sanctions” rules under Section 4958 of the Internal Revenue Code have long governed the payment of compensation to executives of public charities. While these rules are highly prescriptive, if followed, they offer taxpayers a significant advantage in the form or a rebuttable presumption of reasonableness. While there was concern among tax-exempts that the tax bill might reduce or even eliminate the presumption of reasonableness, that turned out not to be the case. But the final version of the legislation for the first time imposed a tax on certain excess compensation and excess parachute payments, which we discuss in more detail below.
Taking note of the #MeToo movement, Congress included a new provision in the tax code overhaul bill — Section 13307 – which is titled “Denial of Deduction for Settlements Subject to Nondisclosure Agreements Paid in Connection with Sexual Harassment or Sexual Abuse.” While the title of the section makes its purpose clear, the provision raises more questions than it answers.
The Internal Revenue Service has for some time made available a comprehensive set of Questions & Answers covering the Affordable Care Act’s (ACA) employer shared responsibility rules. (These are the rules that are codified in Section 4980H of the Internal Revenue Code, the compliance with which is reported on IRS Forms 1094-C and 1095-C, etc.) Entitled, “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act,” this web-based resource provided generally useful information about how the rules worked. Until recently, however, the IRS’ Questions and Answers merely said that the IRS “expects to publish guidance of general applicability describing the employer shared responsibility payment procedures in the Internal Revenue Bulletin before sending any letters to ALEs [Applicable Large Employers] regarding the 2015 calendar year” (Q&A 57). On November 2, that changed. This post explains what happened, and what it means for employers.
The blood remaining in the umbilical cord after childbirth contains stems cells which may be used in a variety of medical treatments. Many parents of newborns are seeking to save this “cord blood”, either with the hopes of curing known ailments, as insurance against future illnesses, or for use in yet-to-be-discovered therapies.
My internet surfing (assign whatever level of reliability you see fit) reveals that cord blood storage costs about $1000-2000 for the initial collection and $150-$250 per year for the storage. Perhaps not insurmountable in a vacuum, but more prohibitive when added to all the other costs of having children (Diapers! Clothes! Lessons! Child care! Downloads! Theme parks in Florida!). So it’s no surprise that many employees are wondering – can I pay for cord blood storage with the money in my health reimbursement account (HRA), health care flexible spending account (FSA) or health savings account (HSA)?
With its “employer mandate”—i.e., the requirement that applicable large employers make an offer of group health coverage to substantially all full-time employees or face the prospect of a penalty—the Affordable Care Act (ACA) opened a fault line in the previously monolithic market for group health insurance. There is large cohort of American workers who, before the ACA, were not offered major medical coverage under an employer-sponsored group health plan. These employees are sometimes referred to as the “contingent” workforce. They include part-time, seasonal and temporary employees, as well as employees whose work schedules are generally irregular or intermittent. Found predominantly though not exclusively in industries such as staffing, restaurants, media and advertising, transportation and hospitality, among others, these workers tend to be on the lower end of the pay scale. They also often have significant “deferred” health issues (a euphemism for undiagnosed conditions owing to lack of previous access to health care). The ACA provided “applicable large employers” (those with 50 or more full-time and full-time equivalent employees) with an incentive to cover these workers.