Category Archives: Tax Cuts and Jobs Act

IRS Gifts Large Employers an ACA Reporting Extension

Under the ACA, Applicable Large Employers (ALEs) must comply with annual reporting and disclosure duties under Section 6056 of the Internal Revenue Code (“Code”). These include filing, with the IRS, a Form 1094-C transmittal form, together with copies of Form 1095-C individual statements that must also be furnished to full-time employees (and to part-time employees who enroll in self-insured group health plans).

In a holiday-time gift to ALEs, the IRS just extended the deadline to furnish Form 1095-Cs to employees by 30 days, from January 31, 2018, to March 2, 2018. ALEs must still file Form 1095-C employee statements with the IRS by the normal deadline of February 28, 2018 (paper) or April 2, 2018 (e-file). However, due to the across-the-board extension to March 2, 2018, the IRS will not be granting any permissive 30-day extensions to furnish Form 1095-C to employees. And, while granting the extension, the IRS still encourages ALEs to furnish the 2017 employee statements as soon as they are able, and also to file or furnish late rather than not file or furnish at all, where applicable. ALEs may still obtain an automatic extension on the filing deadlines by filing Form 8809, and may obtain an additional, permissive 30-day filing extension upon a showing of good cause. In summary, the deadlines for 2017 ACA reporting are as follows:

File 2017 Form 1094-C with IRS:           February 28, 2018 (paper); April 2, 2018, (e-file)

File 2017 Form 1095-Cs w/IRS:               February 28, 2018 (paper); April 2, 2018 (e-file)

Furnish 2017 Form 1095-Cs to Employees:       March 2, 2018

Additionally, the IRS extended, for another year, the transition relief that has been in place since ACA reporting duties first arose in 2015. Under the transition relief, the IRS will not impose penalties on employers who file Forms 1094-C or 1095-C for 2017 that have missing or inaccurate information (such as SSNs and dates of birth), so long as the employer can show that it made a good faith effort to fulfill information reporting duties. There is no relief granted for ALEs who fail to meet the deadlines (as extended) for filing or furnishing the ACA forms, or who fail to report altogether.

This news is be welcome given that all U.S. employers will be grappling with new income tax withholding tables early in 2018 given the passage of the Tax Cuts and Jobs Act of 2017, which President Trump signed in to law on December 22, 2018. We’ll be providing more information on the Act’s impact on employment benefits after the Christmas holiday.

 

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Filed under Affordable Care Act, Applicable Large Employer Reporting, Health Care Reform, Minimum Essential Coverage Reporting, Payroll Issues, Post-Election ACA, PPACA, Tax Cuts and Jobs Act

Proposed Tax Reform Targets Executive Deferred Compensation

Buried deep within the 429 pages of the tax reform proposal, titled the “Tax Cuts and Jobs Act,” is a provision that would significantly change the landscape for executive deferred compensation plans. Specifically, Section 3801 of the Act, titled “Nonqualified Deferred Compensation,” would move the point of taxation of most forms of deferred compensation from the time of actual payout to the executive, which is generally the case under the current rules, to the point at which the executive need no longer perform substantial services in order to receive the compensation; e.g., the point at which the funds “vest.”  Other changes are proposed, but this single timing issue would remove much of the appeal of deferred compensation plans. The changes, if they become law, would affect not just deferrals of cash compensation, but also equity forms of compensation such as stock options and stock appreciation rights.

The Act would also repeal the current compliance regime for nonqualified deferred compensation, known as the “Enron rules” (because they were inspired by manipulation of deferred compensation by certain Enron executives), and codified at Code Section 409A, which have been in place since 2005.  The new rules, if passed into law, will be set forth under Section 409B of the Code.

This is not the first time that Congress has proposed these changes to deferred compensation; a version of them appeared in the Tax Reform Act of 2014, also under Section 3801 of that bill.  An excellent and detailed overview of the those earlier proposed changes appeared in the Summer 2014 issue of the Benefits Law Journal.  The article deserves re-reading now that deferred compensation reform is back on the table under the Tax Cut and Jobs Act.

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Filed under Deferred Compensation, Section 409A, Section 409B, Tax Cuts and Jobs Act, Top-Hat Exemption