Social Security tax Archives - EMPLOYEE BENEFITS BLOG

IRS Announces Cost-of-Living Adjustments for Health and Welfare Plans

by Jacob Mattinson and Jeffrey Holdvogt | Oct 19, 2022 | Employee Benefits, Fiduciary and Investment Issues, Health and Welfare Plans

On October 18, 2022, the Internal Revenue Service (IRS) announced cost-of-living adjustments to the applicable dollar limits for certain account-based health and welfare plans (see Rev. Proc. 2022-38). The maximum salary reduction limit for a health flexible spending account (Health FSA) increased to $3,050 for 2023 (from $2,850 in 2022), and the Health FSA carryover limit for plans that have adopted that feature increased to $610 for 2023 (from $570 in 2022). In addition to these increases, the monthly limit for contributions to a qualified transportation fringe benefit and qualified parking program increased to $300 for 2023 (from $280 in 2022). The IRS previously announced (see our article here) cost-of-living adjustments to the applicable dollar limits for health savings accounts (HSAs), high-deductible health plans (HDHPs) and excepted benefit health reimbursement arrangements (HRAs) for 2023 for which we also saw substantial increases.

The Social Security Administration also recently announced that the maximum amount of earnings subject to the Social Security tax will increase to $160,200 for 2023 (from $147,000), resulting in a larger chunk of income being subject to the Social Security tax.

The IRS has yet to announce the 2023 cost-of-living adjustments for retirement plans.

These announcements are timely, if not late, given that many employers are already in the middle of open enrollment for 2023. Plan sponsors should act quickly to update payroll and plan administration, along with open enrollment communications, to account for the changes. For further information about applying the new employee benefit plan limits for 2023, contact one of the authors or your regular McDermott lawyer.

CARES Act Payroll Tax Forum: IRS Weighs in on High-Profile Employee Retention Tax Credits

by Andrew Liazos, Brian Tiemann, David Fuller, Rachel B. Cowen and Sarah L. Engle | May 4, 2020 | Employee Benefits, Employment

Decisions aimed at preserving your workforce in response to the COVID-19 pandemic can have a long-term impact on your business. As you prepare to emerge from government shutdown orders, recall that your workforce is your single most valuable asset.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides employee retention tax credits to help employers defray the cost of keeping their workforces intact in the post-COVID business environment. At the same time, taking advantage of these credits requires careful, upfront planning, particularly in light of the recent FAQs issued by the IRS.

During our interactive discussion, we will address the critical matters that you need to understand when planning for these credits, including:

What constitutes a partial suspension of business operations, and how government shutdown orders impact those suspensions under the FAQs
Which types of compensation and benefits are considered “qualified wages” under the FAQs, including the treatment of health expenses
How the FAQs differ from the Joint Committee on Taxation Bluebook
How aggregation rules can defeat or enable an employer’s qualification to qualify for employee retention tax credits
What you should do to claim and report the credits on IRS quarterly tax reporting forms
Which employment law matters you should consider before taking employee retention tax credits

Have an (anonymous) question that you would like us to answer? Be sure to submit it via the registration link.

Wednesday, May 6, 2020

11:00 am – 12:00 pm PDT
12:00 pm – 1:00 pm MDT
1:00 pm – 2:00 pm CDT
2:00 pm – 3:00 pm EDT

Register now.

View From McDermott: Conduct Regular Reviews to Ensure Compliance with FICA Tax Withholding Rules

by Joseph K. Urwitz and Ruth Wimer | Apr 28, 2016 | Employment, Retirement Plans

Sponsors of nonqualified deferred compensation plans should pay close attention to the special tax withholding rules under the Federal Insurance Contributions Act (FICA) to avoid paying interest and penalties, and potentially being sued by plan participants. FICA tax on nonqualified deferred compensation must be withheld when compensation vests, not later when actually paid out. Failure to withhold FICA tax at the time of vesting will cause the compensation plus any earnings to be subject to FICA tax later as it is distributed to the participant, potentially resulting in higher overall FICA taxes for both the employer and the participant. As shown by the case of Davidson v. Henkel, employees may even successfully sue the employer for causing them to receive lower benefits due to the higher tax burden created by a failure to follow the correct withholding rules.

This article explores the common FICA and Additional Medicare Tax withholding errors and the potential remedies that may be available to employers who fail to timely withhold FICA and/or Additional Medicare Tax on nonqualified deferred compensation.

Read the full article.