In late 2022, the New Jersey Senate passed Assembly Bill No. 4768. The legislation–signed into law by Governor Phil Murphy earlier this year–implements the state’s Millville Dallas Airmotive Plant Job Loss Notification Act and requires that employers provide their employees with 90 days’ notice and severance pay in connection with a mass-layoff event.
On January 5, 2023, the Federal Trade Commission (FTC) issued a proposed rule that would prohibit employers from using noncompete agreements with their employees or independent contractors. This proposal arises from a preliminary finding by the FTC that noncompetes constitute an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act (FTC Act). It comes on the heels of the FTC’s November policy statement asserting its intention to rigorously enforce and expand the scope of Section 5 of the FTC Act’s ban on unfair methods of competition.
If adopted, this rule would make it illegal for an employer to enter into a noncompete agreement with a worker, maintain a noncompete with a worker or represent to a worker that the worker is subject to a noncompete. Employers would also be required to rescind existing noncompetes and inform workers that they are no longer enforceable.
A US Department of Labor proposal to toughen its independent contractor rule is generating controversy and a lot of interest. Business groups, unions, advocacy organizations and individuals seized the opportunity to comment on the proposed rule, with more than 55,000 comments received by the deadline.
The rules developed by President Biden’s administration will determine who is an independent contractor and an employee. If the government decides that a business is misclassifying workers as independent contractors, it may face fines and legal action.
Section 204 of Title II of Division BB of the Consolidated Appropriations Act, 2021 amended the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 and the Public Health Service Act to add rules governing prescription drug data collection (RxDC). The rules require group health plans, including plans offered to Federal Employees Health Benefits carriers, and health insurance issuers to report certain information related to prescription drug and other healthcare expenditures to the US Departments of Labor, Health and Human Services and the Treasury (collectively, the Departments). Under the statute, the first RxDC reports were due to be filed by December 27, 2021. However, in response to concerns expressed by stakeholders, enforcement was pushed back a full year to December 27, 2022.
In an FAQ issued December 23, 2022 (FAQ About Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 56), the Departments provided relief to group health plans and health insurance issuers who are required to report information relating to prescription drug and healthcare spending.
How can employers manage their workforces during periods of economic uncertainty? In this McDermott webinar, Lindsay Ditlow, Cristell Fortune, Abigail Kagan and Marjorie Soto Garcia offer perspective on the following topics:
On October 11, 2022, the United States Department of Labor (DOL) issued its Notice of Proposed Rulemaking (NPRM) seeking to undo the Trump administration’s 2021 independent contractor regulations and revert to the six-factor economic realities test. While the test factors remain the same (for the most part), the DOL’s NPRM advances interpretations of the various factors that support employment status at every turn.
California companies with more than 15 California-based employees will have to disclose hourly or annual salary ranges for all job postings by January 1, 2023. According to this HR Brew article, McDermott Partner Michelle Strowhiro said she recommends HR professionals review job descriptions with business leaders and legal counsel (preferably, under legal privilege). The goal is to identify and resolve overlap between rules and adjust salary bands accordingly.
The Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2023. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2022 and 2023.*
RETIREMENT PLAN LIMITS (guidance link) 2022 Δ 2023 Annual compensation limit $305,000 ↑ $330,000 401(k), 403(b) & 457(b) before-tax contributions $20,500 ↑ $22,500 Catch-up contributions (if age 50 or older) $6,500 ↑ $7,500 Highly compensated employee threshold $135,000 ↑ $150,000 Key employee officer compensation threshold $200,000 ↑ $215,000 Defined benefit plan annual benefit and accrual limit $245,000 ↑ $265,000 Defined contribution plan annual contribution limit $61,000 ↑ $66,000 Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period $245,000 ↑ $265,000 ESOP limit for determining the maximum account balance subject to the general five-year distribution period $1,230,000 ↑ $1,330,000 HEALTH AND WELFARE PLAN LIMITS (guidance links here and here) 2022 Δ 2023 Health Flexible Spending Accounts Maximum salary reduction limit $2,850 ↑ $3,050 Health FSA Carryover Limit $570 ↑ $610 Dependent Care Flexible Spending Accounts± If employee is married and filing a joint return or if the employee is a single parent $5,000 = $5,000 In employee is married but filing separately $2,500 = $2,500 Excepted Benefit Health Reimbursement Arrangements (EBHRAs) $1,800 ↑ $1,950± Qualified Transportation Fringe Benefit and Qualified Parking (monthly limit) $280 ↑ $300 High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA) HDHP – Maximum annual out-of-pocket limit (excluding premiums): Self-only coverage $7,050 ↑ $7,500 Family coverage $14,100 ↑ $15,000 HDHP – Minimum annual deductible: Self-only coverage $1,400 ↑ $1,500 Family coverage $2,800 ↑ $3,000 HSA – Annual contribution limit: Self-only coverage $3,650 ↑ $3,850 Family coverage $7,300 ↑ $7,750 Catch-up contributions (age 55 or older)± $1,000 ═ $1,000 SOCIAL SECURITY WAGE BASE (guidance link) 2022 Δ 2023 Social Security Maximum Taxable Earnings $147,000 ↑ $160,200
Plan sponsors should update payroll and plan administration systems for the 2023 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.
For further information about applying the new employee benefit plan limits for 2023, contact your regular McDermott lawyer.
* The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.
± Not indexed for cost-of-living adjustments, with the exception of limited guidance issued for certain years.
Employment background checks help employers hire individuals with integrity whom they can trust, and who do not present a risk to the business, other employees, or the customers and clients that the business serves. Buyers in transactions may view target businesses that run background checks as lower risk for employee performance and retention issues. Background checks also constitute an important area for employment diligence in transactions because an employer or background check vendor’s failure to follow the hypertechnical disclosure and authorization requirements of the Fair Credit Reporting Act (FCRA) and other applicable state and local laws risks potentially material class action exposure and $1,000 penalties per violation. This article explores mitigation strategies that buyers may use in due diligence to identify and valuate potential FCRA exposure.
On September 26, 2022, the Internal Revenue Service (IRS) extended the amendment deadline for non-governmental qualified retirement plans, plans covered under Section 403(b) of the Internal Revenue Code (Code) and individual retirement accounts (IRAs). The extensions included many of the amendment deadlines under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Bipartisan American Miners Act of 2019 (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). See our prior On the Subject about this earlier extension. Missing from this earlier IRS extension was a postponement of deadlines relating to certain CARES Act provisions, in particular those related to COVID-related distributions and loan relief, as well as deadlines relating to disaster-related loans or distributions under the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Disaster Act).
NEW IRS EXTENSION
IRS Notice 2022-45 provides a new extension to December 31, 2025, of the special amendment deadlines included in Section 302 of the Disaster Act and in Section 2022 of the CARES Act.
Previously, amendments for these CARES Act and Disaster Act provisions would have been required by the end of the 2022 plan year. The Notice also clarifies that CARES Act and Disaster Act amendments adopted before the new December 31, 2025, deadline will not cause the plan to fail to satisfy the anti-cutback requirements of Code Section 411(d)(6) or of Section 204(g) of the Employee Retirement Income Security Act of 1974 (ERISA).
The extension applies to individual retirement accounts (IRAs), to qualified plans that are not governmental plans and to Code Section 403(b) plans that are not maintained by a public school. The amendment deadlines for Code Section 403(b) plans maintained by a public school, and for governmental plans (including plans covered by Code Section 457(b)), remain slightly different.
ACTION ITEM
Most tax-qualified retirement plans and Code Section 403(b) plans that elected to offer COVID-related distributions and loan relief can now wait to adopt changes required under the CARES Act, SECURE Act, MINERS Act or Disaster Act in a single amendment no later than December 31, 2025.
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