Changes Impacting Your Business and Your Employees in 2018
The result of the new tax laws and other regulatory issues
INDIVIDUAL MANDATE PENALTY REPEAL:
One of the major results of the tax bill was the repeal of the individual mandate penalty, beginning in 2019. However, this does not change the filing requirements for the individual mandate by employers. The IRS still requires employers and insurers to report individuals covered by their plan; otherwise, they will be subject to penalties. Applicable large employers (ALEs—those with 50 or more full-time equivalents) and self-insured employers (with fewer than 50 employees) must file the appropriate 1094 and 1095 forms. The deadline for filing these forms with the IRS is April 2, 2018 if filing electronically (or February 28 if you are not.) The forms must be furnished to the employees no later than March 2, 2018.
It is also important to note that no changes have been made to the tax treatment of employer-provided health insurance, at this time.
TAX REFORM’S IMPACT ON 401(K) LOANS AND OTHER EXPENSES:
Currently, employees who have an outstanding loan from their 401(K) must pay back that loan within 60 days of leaving their employer. If they do not, that amount gets deducted from your account balance and it is treated as a taxable distribution. Under the new tax law, they will get until their tax due date in the following year to put that loan amount into a rollover account without it getting treated as a distribution.
Employees can continue to use pre-tax dollars to pay for transit or parking expenses, but employers will no longer get a deduction for any contributions they make towards these expenses.
Current tax law allows employees to deduct unreimbursed expenses related to their jobs if they’re more than 2 percent of income. Beginning in January 2018, if an employer does not reimburse the employee’s business expenses, the employee is no longer able to claim a tax deduction for that expense. However, employers can continue to reimburse employees for business expenses and they are tax-free to the employee.
Qualified moving expenses paid for by the employer, previously tax-free to the employee, will now be included in an employee’s gross pay.
529 EDUCATIONAL SAVINGS PLANS:
The new tax laws allow 529 plans to be used to pay for elementary and high school tuition, in addition to college tuition and related expenses. 529 accounts are funded with post-tax dollars, grow tax-free and withdrawals are tax-free when used for eligible expenses. While this may seem like a positive change, there is concern that these assets may impact financial aid assistance decisions.
PAID LEAVE LAWS:
Currently, federal law provides employees at larger companies up to 12 weeks of leave every year, although employers do not have to pay for that leave. Beginning in 2018, employers that offer paid family and medical leave (FMLA) to their employees are eligible for a federal tax credit. In order for employers to receive the credit—of up to 25% of annual wages, employers must provide at least 2 weeks of leave and give employees a minimum of 50% of their regular earnings. The paid leave is for both full and part-time workers, who have been with their employer at least a year. And it applies to employees who earn less than $72,000 a year.
A revised I-9 form was issued in 2017, with minor changes. In addition, the Legal Workforce Act introduced in 2017 could eventually phase out the I-9 form as we know it today. In its place, the proposed legislation would require the mandatory use of an E-verify system being used by all private employers.
While the new overtime standards did not go into effect last year, there is still a lot of discussion around changes to federal overtime regulations. And the Department of Labor is expected to come out with a new ruling in October 2018.
DATA SECURITY STANDARDS:
In light of the multitude of data breaches in 2017, employers should develop and maintain strong data security policies and procedures. Cyber liability insurance is also necessary in today’s business environment. Consider these statistics: 70% of attacks target small businesses and 75% of employees leave their computers unsecured. Educating employees on the importance of data security is paramount to your business. Increased regulation and enforcement of data security standards are an expected trend on the state and federal levels.
RDA Benefit Services, LLC is a benefits consulting firm that offers comprehensive employee benefit programs.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.