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Benefit Beat, December 2013

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In this issue of Benefit Beat: AGENCIES RELEASE 2013 FORM 5500: FORM M-1 FILERS NOW REQUIRED TO FILE FORM 5500; SAN FRANCISCO’S HCSO: MORE FAQS ON HRAS AND 2014 RESOURCES; MORE LOCAL GOVERNMENTS ENACTING LEAVE LAWS; SOCIAL SECURITY AND MEDICARE TAX REFUNDS FOR SAME-SEX MARRIAGE COUPLES; CONTRIBUTIONS TO SAFE HARBOR 401(K) PLANS

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Benefit Beat, December 2013

  1. 1. December 9, 2013 15 In This Edition:  AGENCIES RELEASE 2013 FORM 5500: FORM M-1 FILERS NOW REQUIRED TO FILE FORM 5500  SAN FRANCISCO’S HCSO: MORE FAQS ON HRAS AND 2014 RESOURCES  MORE LOCAL GOVERNMENTS ENACTING LEAVE LAWS  SOCIAL SECURITY AND MEDICARE TAX REFUNDS FOR SAME-SEX MARRIAGE COUPLES  CONTRIBUTIONS TO SAFE HARBOR 401(K) PLANS AGENCIES RELEASE 2013 FORM 5500: FORM M-1 FILERS NOW REQUIRED TO FILE FORM 5500 The Internal Revenue Service (IRS), Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC) have consolidated certain returns and report forms in an effort to reduce the filing burden for plan administrators and employers. These agencies have recently released informational copies of the 2013 Form 5500 annual return/report and related instructions. Of particular note, the 2013 Form 5500 includes a new section called, “Form M-1 Compliance Information” that requires certain information to be completed by plans subject to the Form M-1 filing requirement. As background, the Form M-1, “Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs)” is an annual report filed with the DOL that is used by plans to attest compliance with HIPAA and related federal laws, as well as the Affordable Care Act (ACA). Earlier this year, the DOL issued final regulations relating to Form M-1 changes required by ACA (see CBIZ Health Reform Bulletin, Final Rules Relating to Multiple Employer Welfare Arrangements and Form M-1, 3/8/13). The ACA strengthens the regulation of MEWAs primarily by increasing reporting and disclosure requirements and creating a cross-reference between the Form M-1 required to be filed by MEWAs, and the Form 5500 required of plans subject to ERISA. page 1
  2. 2. Continued from Page 1 And now, the 2013 edition of the Form 5500 is modified accordingly. Thus, all welfare benefit plans required to file a Form M-1 are now required to file the Form 5500 regardless of the plan size or type of funding. The exemption from filing for small unfunded, fully insured, or combination unfunded/fully insured plans no longer applies to plans required to file the Form M-1. According to the Form 5500 Instructions, affected plans must provide an attachment to the 5500 filing with “Form M-1 Compliance Information” clearly marked at the top. The attachment must indicate whether the plan was subject to the Form M-1 filing requirement during the plan year; and if so, whether it has completed its Form M-1 filing. In addition, the plan must include its receipt confirmation code relating to the 2013 Form M-1 filing. SAN FRANCISCO’S HCSO: MORE FAQS ON HRAS AND 2014 RESOURCES Following last month’s Benefit Beat article discussion of recent updates relating to San Francisco’s Health Care Security Ordinance (HCSO), the Office of Labor Standards Enforcement (OLSE) posted additional FAQs specifically addressing Health Reimbursement Arrangements (HRA). Of particular note, the OLSE affirms, and consistent with the Affordable Care Act (ACA), that funds from a stand-alone HRA contributed prior to December 31, 2013, and in accordance with the plan that was in place as on January 1, 2013, can continue to be used to satisfy the HCSO obligation. No new contributions can be made to a stand-alone HRA after December 31, 2013. Generally, an HRA is considered “minimum essential coverage” as defined by ACA; thus, disqualifying an individual from governmentprovided premium assistance (available to qualifying individuals, specifically those who fall between 100 and 400% of Federal Poverty Level and who purchase coverage through the December 9, 2013 marketplace). The FAQs affirm that an individual can waive his/her HRA account balance, i.e., forfeit the funds, to preserve the right to premium assistance; however, the HCSO requires that HRA funds be available for at least 24 months from the date of contribution, as well as satisfy additional criteria. The FAQs affirm that if an individual waives HRA coverage prior to the exhaustion of 24 months, the employer will not have satisfied its HCSO obligation; and therefore, the employer would have to find another way to satisfy this obligation (see FAQ #3 for examples of health care expenditure options). Additional 2014 Resources The OLSE has made several 2014-related documents available on their website:  2014 Official Notice which is required to be posted at workplaces beginning January 1, 2014;  2014 Two-Page HCSO Summary of Employer Obligations; and the  2014 Employer Spending Calculator together with Q&As and Line-by-Line Instructions for the 2014 Calculator. In addition, employers covered by the San Francisco HCSO are also required to submit an Annual Reporting Form by April 30th each year. The 2013 Annual Reporting Form is expected to be available on the OLSE’s website in March 2014. MORE LOCAL GOVERNMENTS ENACT LEAVE LAWS For several years now, local government jurisdictions such as cities and municipalities, have been enacting ordinances or laws that require private employers doing business in that particular jurisdiction to provide certain leave benefits to their employees. Recently, New York City and the City of Portland, Oregon have recently passed paid sick leave ordinances similar to those enacted in Jersey City, City of Philadelphia, Milwaukee and Seattle, among others. page 2
  3. 3. NEW YORK CITY  Earned Sick Time. Effective April 1, 2014, the New York City Earned Sick Time Act requires employers employing 20 or more employees to provide one hour of paid sick leave for every 30 hours an employee works. Employers employing 15 or more employees or who employ a domestic worker are required to provide paid sick time to their employees beginning October 1, 2015; until then all employers employing 15 to 19 employees are required to provide unpaid sick leave. Employees eligible for the earned sick time include those working a minimum of 80 hours per calendar year within the city of New York on a full or part-time basis. An employee may use this sick time to care for his/her own mental or physical illness, injury or health condition; or to attend to the medical care of a family member.  Reasonable Accommodations Relating to Pregnancy, Childbirth or Related Medical Conditions. The New York City Human Rights Law has been expanded to provide job protections for employees who need reasonable accommodations relating to pregnancy, childbirth, or related medical conditions. This law impacts all businesses in New York City with four or more workers, counting both employees and independent contractors. Employers must provide reasonable work accommodations to pregnant women and those who suffer medical conditions related to pregnancy and childbirth. Such a reasonable accommodation may include bathroom breaks, leave for a period of disability arising from childbirth, breaks to facilitate increased water intake, periodic rest for those who stand for long periods of time, and assistance with manual labor. The law takes effect on January 30, 2014. PORTLAND, OREGON: PROTECTED SICK TIME ORDINANCE Beginning January 1, 2014, employers employing 6 or more employees are required to provide at least one hour of paid sick time December 9, 2013 for every 30 hours of work performed by the employee within the City of Portland. Those employers with 5 or fewer employees must provide a minimum of one hour of unpaid sick time for every 30 hours of work performed by the employee within the City. All employees who work for the employer are counted for the purposes of determining the number of employees an employer has, including full-time employees, temporary employees, part-time employees, and employees who work outside the City of Portland or outside the State of Oregon. Employees who perform work in the City or telecommute to the City for work are covered by the ordinance regardless of where their employer is located. Employees, who perform work outside the City, even if the employer is based in the City, are not covered by the ordinance for hours worked outside the City. The employee may use the sick leave in such instances as to attend to his/her own medical care or to the medical care of a family member. It can also be used following instances of domestic violence or sexual assault; as well as following closure of school or day care as a result of public health emergencies. Employers with sick leave or paid time off policies in place providing comparable benefits can be deemed to be compliant with the Ordinance. SOCIAL SECURITY AND MEDICARE TAX REFUNDS FOR SAME-SEX MARRIAGE COUPLES In September, the IRS issued guidance (Notice 2013-61) that provides simplified procedures for employers to claim refunds or adjust overpayments of FICA taxes applicable to certain benefits and remunerations provided to same-sex spouses (see IRS – Optional Simplified Methodologies for FICA Claims or Refunds in our October Benefit Beat article, More Agency Guidance Issued on SameSex Marriage). Contemporaneous with the Notice, the IRS posted several FAQs for page 3
  4. 4. Same-Sex Married Couples. Of relevance to employers, the IRS recently added two new FAQs (see FAQs 21 and 22) addressing the refund of Social Security and Medicare taxes. An employee in a same-sex marriage is directed first to ask his/her employer for a refund of over-held Social Security and Medicare taxes. If the employer indicates that it will not be seeking the refund, the employee can file a Form 843, Claim for Refund and Request for Abatement, marked “Windsor Claim”. If an employer is seeking a refund, two methodologies are provided, as more fully described in our Benefit Beat article. If the employer follows the second methodology, wherein the employee files a Form 941-X for the full year, the employer must obtain written confirmation from the affected individual that he/she will not be seeking a refund on his/her own merit; this, of course, is to ensure, no double dipping. Matters relating to same-sex marriage continue to evolve and employers are welladvised to work closely with their tax advisors to ensure compliance. CONTRIBUTIONS TO SAFE HARBOR 401(K) PLANS A number of years ago, a law was passed allowing a defined contribution plan to be designed as a safe harbor plan. The benefit of a safe harbor plan is that the plan is deemed to meet certain discrimination tests, specifically the Actual Deferral Percentage (ADP) test and the Actual Contribution Percentage test (ACP) test. In order to qualify as a safe harbor plan, the plan must comply with certain design requirements, most significant of which is making either a safe harbor matching contribution or a safe harbor non-elective contribution, which is binding for the 12-month plan year. In 2009, regulations were proposed allowing certain circumstances that the safe harbor contribution could be suspended due to business hardship (see 401(k) Safe Harbor Plans: Limited Relief, Benefit Beat, 7/8/09). December 9, 2013 A few weeks ago, final IRS regulations were issued clarifying the circumstances under which the safe harbor non-elective contribution could be suspended (also see related IRS fact sheet, Reducing or Suspending Safe Harbor 401(k) Matching and Nonelective Contributions Midyear). Specifically, the final regulations change “business hardship” to “economic loss”. For both the non-elective contributions and matching contributions, the suspension can occur if the employer can prove economic loss. Alternatively, the safe harbor notice which is required to be provided between 30 and 90 days prior to the first day of the plan year to which the safe harbor applies, must state that the plan may be amended to reduce or suspend the non-elective or matching contribution, as applicable. For the matching contributions, the safe harbor notice rule applies to plan years beginning on or after January 1, 2015. Employers sponsoring a safe-harbor plan may want to reserve their right to make modifications in the advanced notice rather than having to depend on the “economic hardship” provision. For calendar year plans, it is too late to make this change for the 2014 plan year, as the safe-harbor notice must have been issued by the end of November. But, this could be something to consider for the 2015 plan year. The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the IRS. page 4

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