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January 2024 HR Update

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Upcoming ACA Reporting Deadlines

Employers subject to Affordable Care Act (ACA) reporting under Internal Revenue Code Sections 6055 or 6056 should prepare to comply with reporting deadlines in early 2024. For the 2023 calendar year, covered employers must:

  • Furnish statements to individuals by March 1, 2024 (an alternative method of furnishing statements to covered individuals is available in certain situations); and
  • File returns with the IRS by Feb. 28, 2024, or April 1, 2024, if filing electronically.

Beginning in 2024, employers that file at least 10 returns during the calendar year must file electronically. Penalties may apply if employers are subject to ACA reporting and fail to file returns and furnish statements by the applicable deadlines.

Individual statements for 2023 must be furnished within 30 days of Jan. 31, 2024. Because 2024 is a leap year, the deadline for individual statements is March 1, 2024. In addition, electronic IRS returns for 2023 must be filed by March 31, 2024. However, since this is a Sunday, electronic returns must be filed by the next business day, which is April 1, 2024.

Covered Employers
The following employers are subject to ACA reporting under Sections 6055 and 6056:

  • Employers with self-insured health plans (Section 6055 reporting)
  • Applicable large employers (ALEs) with either fully insured or self-insured health plans (Section 6056 reporting)

ALEs are employers with 50 or more full-time employees (including full-time equivalent employees) during the preceding calendar year. Note that ALEs with self-funded plans are required to comply with both reporting obligations. However, to simplify the reporting process, the IRS allows ALEs with self-insured plans to use a single combined form to report the information required under both Sections 6055 and 6056.

Alternative Method of Furnishing Under Section 6055
As of 2019, the individual mandate penalty has been reduced to zero. As a result, an individual does not need the information on Form 1095-B to calculate their federal tax liability or file a federal income tax return. Beginning with the 2021 calendar year, the IRS has provided an alternative manner for a reporting entity to furnish statements to individuals under Section 6055. This alternative method applies for all years when the individual mandate penalty is zero. Under this alternative manner of furnishing, the reporting entity must post a clear and conspicuous notice on its website stating that responsible individuals may receive a copy of their statement upon request. The notice must include an email address, a physical address to which a request may be sent and a telephone number to contact the reporting entity with any questions. Reporting entities must post the notice by the due date for furnishing ACA statements and must generally retain the website notice until Oct. 15.

New Electronic Filing Threshold
As we have mentioned previously, there is a new electronic filing threshold for information returns required to be filed on or after Jan. 1, 2024, which has been decreased to 10 or more returns (originally, the threshold was 250 or more returns). Specifically, the instructions for 2023 returns (filed in 2024) provide the following clarifications and reminders: The 10-or-more requirement applies in the aggregate to certain information returns. Accordingly, a reporting entity may be required to file fewer than 10 of the applicable Form 1094 and 1095, but still have an electronic filing obligation based on other kinds of information returns filed (e.g., Forms W-2 and 1099). The electronic filing requirement does not apply to those reporting entities that request and receive a hardship waiver; however, the IRS encourages electronic filing even if a reporting entity is filing fewer than 10 returns.

State Mandate Reporting
Though the Federal individual mandate is no longer in place, many states have enacted state-level individual mandates. Massachusetts has had a state individual mandate (with associated employer reporting requirements) in effect for many years, even prior to the ACA and four additional states (California, New Jersey, Rhode Island and Vermont) and the District of Columbia have followed suit in recent years. The first new employer reporting was required in early 2020 for employers with employees in New Jersey and the District of Columbia. In 2021, reporting requirements in California and Rhode Island took effect. Vermont currently does not have an employer reporting requirement associated with its individual mandate. Luckily, 1095-Bs or 1095-Cs prepared for ACA purposes will also be sufficient for most state-level reporting requirements. Please see our State Reporting Guide if you have employees that reside in these states.

Employer Takeaway
ALEs should be used to e-filing by now. However, smaller employers with self or level-funded plans will find this requirement new to them. Please see our reporting cheat sheet for more information, and reach out to your Higginbotham representative if you need assistance procuring an e-filing vendor.

Final Rule: Employee or Independent Contractor Classification Under the FLSA

On Jan. 9, 2024, the U.S. Department of Labor (DOL) announced a final rule, effective March 11, 2024, revising the Department’s guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). This final rule rescinds the Independent Contractor Status Under the Fair Labor Standards Act rule, which was published on Jan. 7, 2021, and replaces it with an analysis for determining employee or independent contractor status that is more consistent with the FLSA as interpreted by long-standing judicial precedent.

The misclassification of employees as independent contractors may deny workers minimum wage, overtime pay and other protections. This final rule aims to reduce the risk of employees being misclassified as independent contractors while providing a consistent approach for businesses that engage with individuals who are in business for themselves.

Economic Realities Test Factors
The final rule applies the following six factors to analyze employee or independent contractor status under the FLSA:

  1. Opportunity for profit or loss depending on managerial skill;
  2. Investments by the worker and the potential employer;
  3. Degree of permanence of the work relationship;
  4. Nature and degree of control;
  5. Extent to which the work performed is an integral part of the potential employer’s business; and
  6. Skill and initiative
Employer Takeaway
The final rule is effective on March 11, 2024 – employers utilizing independent contractors should familiarize themselves with it as soon as possible. Please see our FAQs, available here.

2024 DOL Civil Penalties Released

The DOL has released its updated 2024 civil penalty amounts. As such we thought it would be a good idea to resend an updated 2024 compliance calendar. Please use it at your convenience.

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