The fourth quarter is an important time for employers for a number of reasons. There are payroll schedule adjustments for holidays, bonus payrolls, year-end adjustments to accommodate fringe benefits, audits of employee data in preparation for W-2s, benefits plan reviews and open enrollment, and so much more. This year, adding to the usual hubbub, are executive and legislative changes for 2016, both enacted and proposed, that employers need to have on their radar now.
Affordable Care Act Reporting: The Clock Is Ticking
Employers with 50 or more full-time employees, including full-time equivalent employees, are required to distribute IRS forms 1095 to employees and also file them with the IRS via transmittal form 1094. Designed to determine compliance with ACA provisions, this new reporting requirement for 2015 is on the same schedule as the current W-2 schedule and is due early 2016.
The data required to populate forms 1094 and 1095 include payroll, HR, and benefits information, but important conversations with your benefits broker, tax professional and/or attorney are required to determine an overall strategy for ACA compliance first.
If you don’t yet have a solution in place, you should identify one soon as many service providers have upcoming cut-off dates for 2015 reporting.
New DOL Rule Could Extend Overtime Protection to Your Workers in 2016
In July the U.S. Department of Labor issued a notice of proposed rulemaking to extend overtime protections to certain workers. Currently under the FLSA, workers are paid a minimum of 1.5 times the regular rate of pay for any hours over 40 in a workweek. But there is a “white collar” exception for workers classified as executive, administrative, or professional employees meeting certain job duty tests and making $23,660 per year or more.
The DOL is looking to raise the salary level, which was last updated in 2004, and simplify the process of determining whether a worker is exempt. The open comment period closed early September and comments received will help shape the final rule which could take effect sometime in 2016 affecting some 4.6 million workers.
Employers are proactively looking into how to manage labor to minimize overtime if the proposed rule is enacted as well as determining how it would affect the wage line item in their 2016 budgets.
The Crackdown on Employee Misclassification
2015 has seen a concentrated effort to crack down on employee misclassification. Employers who classify workers as independent contractors when they are in fact employees save employer overhead like payroll taxes and benefits expenses, but more and more it means exorbitant fines and legal fees.
Recently FedEx was challenged for their classification of workers resulting in a $228 million settlement. And Uber is facing a California class action lawsuit that includes drivers who directly contracted with the company from 2009 through June 2014, which could be a significant number and could mean significant dollars should Uber lose. The decision could also have implications for other employers in that state.
The IRS provides tools to help employers correctly determine worker status, including Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, which can be filed with the IRS. The agency will review the facts and officially determine the worker’s status on behalf of the employer.
The Paid Sick Leave Movement Heats Up
In September, President Obama signed an executive order requiring federal contractors to offer employees up to seven days of paid sick leave per year. Additionally, three states now have active paid sick leave laws, Connecticut, California and Massachusetts, the latter two adopted sick leave rules just this year. A fourth state, Oregon, has a paid sick leave bill that was signed into law in June and will go into effect in January. Additionally, a number of cities also have their own laws that are currently in effect or will begin soon, including, Washington D.C. and many cities in New Jersey.
These current sick leave laws on the books are just the tip of the iceberg as many states have paid sick leave bills in various stages of the legislative process. Stay tuned to your state’s legislative news for progress on those bills and any city or county initiatives in your area.