Federal News

Health Savings Accounts (HSAs) for 2024

The IRS has announced the 2024 thresholds applicable to HSAs:

• Maximum HSA contributions:

1. Self-only coverage - $4,150 (up from $3,850 in 2023)
2. Family coverage - $8,300 (up from $7,750 in 2023)

• Catch up contributions for individuals age 55 and over - $1,000 (not adjusted for inflation)

1. If an individual turns 55 by December 1 of the calendar year, they are allowed the full annual contribution including the catch up, regardless of the number of months of the year in which the individual was 55+

• Maximum out-of-pocket amount for high deductible health plans (HDHP) in order for the plan to qualify as HSA-compatible:

1. Self-only coverage - $8,050 (up from $7,500 in 2023)
2. Family coverage - $16,100 (up from $15,000 in 2023)

• Minimum deductible for HDHPs in order to qualify as HSA-compatible:

1. Self-only coverage - $1,600 (up from $1,500 in 2023)
2. Family coverage $3,200 (up from $3,000 in 2023)

Cafeteria Plan Reimbursements Must Be Substantiated

If your company’s benefit plan includes flexible spending accounts for medical or dependent care expenses, be sure your employees are providing appropriate documentation to support their reimbursements. The IRS recently issued guidance on this topic, requiring substantiation by an independent third party. “Independent” means the information comes from someone other than the employee, their spouse, or dependents. In addition, the information must describe the service or product, the date of service or sales, and the amount of the expense.

The type of documentation that would qualify includes an explanation of benefits from an insurance company (along with a statement from the employee that the expenses have not been and will not be otherwise reimbursed), a printed purchase receipt, or a receipt from a daycare provider.

In contrast, the types of arrangements that would not qualify include:

• Self-certification – where the employee submits information about the expense without actual receipts. This also includes debit card charges without a substantiating receipt.
• Sampling – where the FSA automatically reimburses expenses to a debit card and only requires substantiation of a random sample of otherwise unsubstantiated charges.
• De minimis expenses – if a charge to an FSA debit card is lower than a specified dollar amount, the plan does not require substantiation.
• Favored providers – the plan does not require substantiation from certain health care providers.
• Advance substantiation of dependent care expenses – if a plan automatically reimburses an employee periodically based on the employee’s submission of a form in advance of receiving the dependent care services anticipating the amount of expenses for the year.

If the IRS finds that reimbursements are made that are not sufficiently documented, those reimbursements would be considered taxable income to those employees.

State News

State-Mandated Sick Leave Programs

Now that the pandemic is over (at least officially), federal paid sick leave rules have also expired. However, many states and localities are either in the process of developing their own paid sick leave rules or have already implemented programs. Funding for some of these programs comes through a combination of both employee and employer contributions.

Our Mize payroll department keeps a close watch on updates in this area. As changes occur, we will notify you of new requirements, either in this newsletter or a dedicated communication. Two states we’re currently watching are:

Colorado

It looks like an expansion of the Colorado mandated sick leave program is coming soon, to include both bereavement and inclement weather. As of this writing, no effective date has been set, so we’ll let you know once it’s firm.

Illinois

Effective January 1, 2024, employers must provide paid leave accrued at the rate of 1 hour for every 40 hours worked, with a maximum accrual of 40 hours for a calendar year. Employers that already offer a paid leave program that provide at least the minimum level of benefits as the state program may opt out. More information from the state’s webpage is here.

Maryland

Implementation of the state’s paid family and medical leave program has been delayed to October 1, 2024.

Minnesota

A state mandated program is set to be implemented in January 2024. We’re currently developing a comparison of the state program to local sick leave programs already in place and will get that information to you later this year.

Washington

A reminder that the WA Cares Long Term Care Program deduction from employees’ checks begins with the first check that is paid on or after July 1, 2023. The 2023 rate is 0.58% of gross wages. For more details, please see our April Payroll Report.

Minnesota, Bloomington

A reminder that if you have a location in Bloomington, MN, we will be setting up the newly mandated Earned Sick & Save Leave (ESSL) beginning with your first check paid in July 2023. The accrual rate is 1 ESSL hour for every 30 hours worked within Bloomington, with a max of 48 ESSL hours per year. For more details, please see our April Payroll Report.

State By State Updates

Colorado

Effective July 1, 2024, Colorado employers will be subject to new restrictions on questions they can ask job applicants. The Job Application Fairness Act (JAFA) prohibits employers from inquiring about an applicant’s:

• Age
• Date of birth
• Dates of attendance at or graduation from an educational institution

However, if age is a bona fide occupational qualification pertaining to public or occupational safety, or if age is required in order to comply with federal, state, or local laws or regulations, the employer may request this information.

This is in addition to existing “ban-the-box” rules restricting employers from asking about an applicant’s criminal history. Colorado employers are also required to include salary and benefits information in job postings.

Florida

As of July 1, 2023, private employers with 25 or more employees are required to use E-Verify to determine the eligibility of new employees to work in the state.

Idaho

The state has revised tax withholding tables effective for wages paid on or after January 1, 2023. Employers should begin using the new withholding tables now but do not need to adjust withholding already taken this year.

Nevada

The state’s minimum wage and daily overtime rates will increase on July 1, 2023. The lower minimum wage (paid to employees whose employers provide qualifying health benefits) will be $10.25 per hour (up from $9.50 per hour). The higher minimum wage (paid to employees whose employers do not offer qualifying health coverage) will be $11.25 per hour (up from $10.50 per hour).

Nonexempt employees are entitled to overtime when they work more than eight (8) hours on any workday if the employee is paid less than $16.875 per hour (employers without health coverage) or $15.375 per hour (employers with health coverage).

MizeCPAS.com