THE ACA and
FUN ITEMS TO START OFF
YOUR 2015
www.ryan.com
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ACA: What payroll needs to know
On January 1, 2015 employers averaging or expected to average
100 or more FT employees (or FT equivalents) will be subject to
the coverage mandate. Payroll and HR will be dealing with data
collection around:
– Control group aggregation
– FT time status
– Look back periods
In 2016, the mandate drops to 50 FT or FT equivalents
Reporting the cost of healthcare on a W2 (code DD)
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ACA Employer Reporting
Form 1095-C requires the following information, which you must
report separately by month:
– The months during which the employee was covered
– The months during which coverage was available
– The employee’s monthly premium for the lowest-cost, self only
coverage
– Whether minimum essential coverage was offered to the employee
only or also to dependents and /or spouse
– Whether coverage was not offered to the employee and any reason
that the employer is not subject to a penalty; i.e. the employee was
in an initial measurement period or waiting period, was not a full
time employee, or not employed during the month
– Whether the employer met an affordability safe harbor for the
employee
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ACA Employer Reporting
There are three simplified alternatives that may be used in lieu of
the general method described earlier
– Certification of Qualifying Offers-An employer can use this alternative for
any employee who received a “qualifying offer’ during the year.
Simplified Employee statements
– Instead of issuing Form 1095-C , employers can certify on Form 1094-C
that they have mad e qualifying offer to at least 95% of their full time
employees and to their spouses and dependents and are permitted to
provide a general statement in a format prescribed b y the
IRS
98% offers
– This alternative provides that if at least 98% of full time employees are
offered qualifying coverage Form 1094C and 1095C do not need to include
the month to month full time status of employees or the monthly total
number of full time employees for the employer
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ACA and Payroll
New Forms
– 1095 A
– 1095 B
– 1095 C-Must be filed with the IRS for each employee who was full
time for at least one month during a year. Employers must also
furnish a statement to affected employees by January 31
– 1094 A
– 1094 B
– 1094 C
W2 Box 14, Code DD
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Reporting Sick Pay Paid by Third Parties
IRS Notice 2015-6
– Form 8922 Third Party Sick Pay recap
– Used for filing third party sick pay recaps to reconcile reporting of
sick pay paid by a third party on behalf of employers to employees
in situations in which the FICA taxes on the sick pay is split between
the employer and the third party under applicable regulations
– Previously, a Form W-2 and W-3 was filed with the SSA
– Form 8922 will now be filed with the IRS
 Recaps to the SSA will no longer be filed
– Change only affects reporting of the recap. All other rules remain
the same
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Reporting Sick Pay Paid by Third Parties
SSA and IRS match amounts reported on Forms 941 and on the
aggregate W2s to reconcile FICA.
– If liability for ER FICA on sick pay is transferred from the third party
to the ER, the sick pay wages and liability for the ER FICA are
reported on the ER 941 and the sick pay wages and the EE FICA
are reported on the third party’s Form 941.
– The sick pay wages are reported on Forms W-2 filed by one party
– Because of the split reporting, the Forms 941 and W-2 of the third
party may have differing wage totals and tax. Same with the ER W2
and 941.
– The Form 8922 is designed to reconcile the differences between
wages and taxes reported on Form W2 and Form 941
– If the sick pay is reported on the W2 of the third party, the employer
files the Form 8922
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Reporting Sick Pay Paid by Third Parties
The requirement to file Form 8922 exists when
– A third party is required to file the Form 8922 when the third party is
liable for the employee FICA tax but the liability for the ER FICA tax
and for reporting the sick pay on Forms W-2 has been transferred to
the ER
– An ER is required to file Form 8922 when the third party is liable for
the EE FICA and income tax withholding and the liability for the ER
FICA has been transferred to the ER and the ER and the third party
have entered into an agreement to have the third party act as the
ER’s agent for reporting on Forms W-2
– A third party that is an agent is required to file Form 8922 when the
agency agreement provides that (a) the agent will withhold and pay
EE FICA and report the taxes on its Form 941 and (b) the employer
will pay the employer FICA tax, report the ER FICA on Form 941
and report the employee’s wages on Form W-2
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IRS Releases Guidance on Severance Pay
On February 17, the IRS issued guidance regarding the
application of the Quality Stores decision
– The IRS will disallow all refund claims
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President Obama’s 2016 Federal Budget Proposal
The income tax credit for FICA taxes an employer pays on tips
would be repealed, effective for taxable years beginning after
December 2015
– Current law: Tip income is treated as employer-provided wages
subject to income and employment taxes under FICA
The FUTA .2% surtax would be reinstated and made permanent for
wages paid after January 1, 2016
The FUTA wage base would be increased in 2017 to $40,000 per
work paid annually and the net federal UI tax would be reduced
from .8% to .165%.
State wage bases would have to conform to the federal minimum
of $40,000
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President Obama’s 2016 Federal Budget Proposal
Employers would be required to report the amount contributed to
an employee’s account under a defined contribution plan on the
employee’s Form W-2 starting in 2016
Code Section 6051 would be revised to require employers to
include an “identifying number” for each employee, rather than an
employee’s SSN, on Form W2
The IRS would be permitted to require prospective reclassification
of workers who are currently misclassified and whose
reclassification has been prohibited under current law
– Safe harbor, Section 530 relief
WOTC would be permanently extended
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CA SUI Fund still insolvent
The Unemployment Insurance (UI) fund has a revised projected
deficit of $8.1 billion by the end of 2014, according to a new report
released by the Employment Development Department.
The FUTA credit for CA was reduced to 5.1% for 2011, 4.8% for
2012, 4.5% for 2013, and 4.2% for 2014
FUTA costs are anticipated to increase by an additional .3%
annually until the UI Trust Fund regains solvency
Sacramento has a number of groups interested in changing UI
wagebase and in ways to pay off the debt
– Increase the taxable wage base
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Unemployment insurance integrity
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CA Payroll Tax Deposits
SUI and ETT are due quarterly.
SDI and SIT are deposited based on each employer’s federal
schedule
A penalty of 15% as of Q4 2014 plus interest will be charged on
late payroll tax payments. Prior to Q4 2014, the penalty is 10%
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CA New Hire Reporting
The EDD now has the ability to track both NEW HIRE reports and
INDEPENDENT CONTRACTOR reporting
Audit Section has stated that they will now track the submission
of the forms
Potential penalties can be instituted
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CA Healthy Workplace Healthy Family Act of 2014
AB 1522
– An employee who, after July 1, 2015, works in CA for 30 hours or
more days within a year from the beginning of employment, is
entitled to paid sick leave
– Employees, including part time and temporary employees, will earn
at least one hour of paid leave for every 30 hours worked
– Accrual begins on the first day of employment or July 1, 2014
whichever is later
– An employer may limit the amount of paid sick leave an employee
can use in one year to 24 hours or 3 days.
– Accrued paid sick leave may be carried over to the next year but it
may be capped at 48 hours or 6 days
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CA Healthy Workplace Healthy Family Act of 2014
An employee may use accrued paid sick days beginning on the
90th day of employment
An employee may request paid sick days in writing or verbally.
An employee cannot be required to find a replacement as a
condition for using paid sick days
An employee can take paid leave for employee’s own or a family
member for the diagnosis, care or treatment of an existing health
condition or preventive care or for specified purposes for an
employee who is a victim of domestic violence, sexual assault, or
stalking
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CA Healthy Workplace Healthy Family Act of 2014
Employers must do the following to comply:
– Display poster on paid sick leave
– Provide written notice to employees with sick leave rights at the time
of hire
– Provide at least 24 hours or three days of paid sick leave for each
eligible employee to use per year
– Allow eligible employees to use accrued paid sick leave upon
reasonable request
– Show how many days of sick leave an employee has available.
This must be on a pay stub or a document issued the same day as
a paycheck
– Keep records showing how many hours have been earned or used
for three years
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Labor Code Section 2810.5
At the time of hiring, an employer shall provide to each employee
a written notice, in the language the employer normally uses to
communicate employment-related information to the employee,
containing the following information:
– Rate of pay
– Allowances claimed as part of minimum wage
– Regular payday
– Name of the employer
– Physical address of the principal place of business
– Phone number of the employer
– Name address and phone of employer’s worker’s comp company
– Information relating to the accrual of sick leave
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Email mindy.mayo@ryan.com
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