A host of federal and state legislative changes enacted throughout the pandemic era have significantly impacted businesses concerned with tax and labor law compliance in 2023. In this article, we’ll explore five compliance challenges forthcoming in 2023 and provide you with the resources and actionable recommendations you’ll need to address these concerns in a timely way that prepares your business for compliance in 2023 and beyond.
Updated FMLA Guidance on Mental Health
In mid-2022, the U.S. Department of Labor published new Family and Medical Leave Act (FMLA) guidance designed to clarify policy regarding the permittance of employee FMLA leave for mental health reasons. The DOL’s Wage and Hour Division has created a fact sheet and FAQs page to help employers take proper action in the event that an employee or an employee’s family member must address a serious mental health condition that requires professional care. Be sure to review the qualifying conditions for FLSA-approved leave, as well as the non-compliance consequences for interference or confidentiality violations. We also recommend reviewing how the certification process works should an employee submit a formal request for FMLA leave.
Affordable Care Act (ACA) Compliance Issues
Many policies and conditions of the Affordable Care Act (ACA) have been updated throughout 2022. As just one example, Applicable Large Employers (ALEs) should be aware of a recent IRS issuance, Revenue Procedure 2022-34, which decreases the health coverage affordability calculation from 9.61% to 9.12% for any company with 50 or more full-time employees. In most cases, this IRS action necessitates reductions in required employee contributions in 2023. The new calculation standards are set to impact all offered coverage beginning in January 2023. Overall, this action is designed to ensure that large employers continue to offer affordable, valuable, and minimum essential coverage to at least 95% of all employees within their companies.
Employers should also be aware of specific HSA & HDHP Design Maximum increases set to increase beginning in 2023, affecting minimum annual deductibles, out-of-pocket maximums, and maximum annual HSA contributions per plan year.
State Compliance Challenges in 2023
Due to an extensive number of state legislative changes affecting retirement policy, PTO, overtime, paid breaks, privacy standards, and more, it’s particularly difficult for employers with remote, hybrid or dispersed workforces to stay up to date with the latest changes that apply to their business. In this section, we’ll explore major state-level compliance concerns that are likely to impact your business in 2023.
State-Mandated Retirement Plans
Perhaps the most high-visibility development in the realm of state legislation for employers, over 30 states have now introduced, passed, or officially enacted policies requiring most employers to offer state-sponsored or private qualifying retirement plans for their employees. Generally speaking, employers must enroll employees in the state-sponsored program (typically Roth IRA plans) if they do not offer a qualified retirement plan themselves, such as a 401(k) matching plan. When employers elect to enroll in the state-sponsored plan, they forfeit the benefit of tax-deductible contributions, which are forbidden by most state mandates. To learn more about crafting a retirement plan and benefits strategy that works for you and your employees, please explore our related guide on retirement benefits.
So far, state mandates are active in California, Colorado, Connecticut, Illinois, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Virginia, and Washington, with most (excluding California, which is already underway) set to begin between September 2022 and September 2023. Be sure to investigate the specific stipulations and requirements that apply to the state(s) where your business operates.
2023 State Privacy Laws
Similar to legislation mandating improved retirement plan offerings for small and mid-sized businesses, many states – California, Colorado, Connecticut, Virginia, Utah, and others - are instituting new privacy legislation that will take effect in 2023. As just one example, Virginia’s Consumer Data Protection Act (CDPA) is set to roll out beginning January 1, 2023. The law fuses attributes of the long-standing EU General Data Protection Regulation’s policies, as well as California’s Consumer Privacy Act. The act applies to businesses that earn a significant portion of their revenue from the sale of customer data and/or control or process the personal data of 100,000 or more state residents.
Of course, each state has determined and refined its own terms with regard to privacy legislation, but the general purpose is to deter bulk data collection and increase data protections for consumers.
Other Compliance Challenges to Consider
As your business prepares for compliance in 2023 and beyond, keep several other compliance changes in mind, including but not limited to:
- Updates to COVID testing permissions based on workplace, industry, and/or local/regional public health conditions. In general, employers must provide more concrete evidence that testing is necessary based on the factors mentioned above.
- Social Security Tax Repayment; businesses who capitalized on the deferral program offered by the CARES Act must make the remaining 50% of their deferred payment at the end of 2022 or risk a 10% penalty.
- Ongoing updates to state policies and mandates regarding paid time off (PTO), vacation benefits, healthcare, and other fringe benefits.
Achieve Full Compliance with Payday
With Payday in your corner, adhering to federal, state and local business regulations has never been easier. We know the ins and outs of filings, deadlines, eligibility, reporting, oversight and everything else that compliance can throw your way. Enjoy peace of mind with the awareness that your business is in full compliance and free of any looming penalties, fines, or legal actions that could detract from your company’s core mission and day-to-day operations. Contact us today to start our collaboration.