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More compliance relief for employers

Cadillac tax eliminated, retirement plan burdens lessened, WOTC, E-Verify, and paid FMLA tax credit extended

Posted December 31, 2019

The federal government’s holiday spirit continues in earnest, as more employer-friendly changes have been made. As part of the federal budget/spending bill, signed on December 20, Congress included some alterations that employers will likely find attractive. They include the following:

  • The Affordable Care Act’s Cadillac tax, which was to be imposed on group health plans that provided rich benefits and was to become effective January 2020, was totally repealed. While the target was high-cost plans, even moderate-cost plans would eventually have been caught up in the tax.
  • The Setting Every Community Up for Retirement Enhancement SECURE) Act, which was also included in the spending bill, eases compliance burdens on defined-contribution and defined-benefit retirement plans by increasing the business tax credit for plan startup costs to make setting up 401(k) plans more affordable for small businesses, allowing unaffiliated employers to offer their workers a 401(k) through a multiple employer plan (MEP) with eased compliance requirements compared to current MEPs, delaying required retirement distributions from 401(k) plans to age 72, up from age 70 ½, allowing automatic-enrollment safe-harbor 401(k) plans to increase the cap on automatically raising payroll contributions, creating a 401(k) safe harbor from liability for offering in-plan annuities, and reducing annual testing requirements on "frozen" defined-benefit pension plans closed to new hires.
  • The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. It has been extended to December 31, 2020.
  • E-Verify has been extended until September 30, 2020.
  • The tax credit for employers providing paid family and medical leave has been extended through 2020.

While these are all generally good news, employers might not be as happy about one aspect of the bill. The annual PCORI fee, which had been set to expire for plan years ending after September 30, 2019, was extended for another 10 years. The fee, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the applicable group health policy or plan.

Given all these changes, employers should review their current offerings to see if they would like to make any changes.

This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.

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