End of Year: HR Updates
December 13, 2022
We’ve made it to the end of 2022, a year which began with a considerable amount of uncertainty around COVID and is ending with what might be considered more traditional end of year updates and more traditional uncertainties.
As with any of our Highlights, CIP is here to answer any questions you may have and as we head into the uncertainty of 2023, you can be assured that CIP will make your mission ours.
Sexual Harassment Policies
Massachusetts law requires employers with six or more employees to adopt a written policy against sexual harassment. This is a friendly reminder that under state law, employers are required to provide annually to all employees an individual written copy of the employer’s policy against sexual harassment; provided, however, that a new employee shall be provided such a copy at the time of his employment.
The employer’s policy must include notice to employees that sexual harassment in the workplace is unlawful and that it is unlawful to retaliate against an employee for filing a complaint of sexual harassment. The policy should also assert the employer’s commitment to investigate any complaint of sexual harassment. The Massachusetts Commission Against Discrimination (MCAD) has prepared a Model Sexual Harassment Policy.
While training is not required in Massachusetts, the MCAD recommends employers provide training because “an employer’s commitment to providing anti-harassment training to its workforce may be a factor in determining liability or the appropriate remedy.” In cases “where punitive damages may be sought, evidence of training may also mitigate damages.” See MCAD Guidelines on 151B: Sexual Harassment in the Workplace at 8-9 and fn. 89.
Paid Family and Medical Leave Changes
The new average weekly wage in Massachusetts effective 1/1/23 is $1,765.34
- the benefit is calculated based upon the employee’s average weekly wage that is less than or equal to 50% of the MA average weekly ($1,765.34/2 =$882.67) covered at 80%; and the part of the employee’s average weekly wage that is greater than 50% is covered at 50% up to the maximum allowable benefit
- The maximum total benefit effective January 1, 2023 is $1,129.82
- The new contribution rate for an employer with 25 or more employees will be .63% off eligible wages (this is down from .68% of eligible wages in 2022)
- The new contribution rate for an employer with fewer than 25 employees will be .318% of eligible wages (this is down from .344% of eligible wages in 2022)
This means that for January, employers will be required to distribute employee notices with the updated rates and posters with new rates will have to be posted. Please be mindful that there are several versions of each notice, the appropriate one is dependent on the company size.
The Massachusetts Department of Family and Medical Leave published its 2023 Paid Family and Medical Leave (“PFML”) workforce notifications on November 15, including the poster, notices, and rate sheets, all available here. We recommend notifying employees as soon as possible and ensure your payroll system is updated.
On November 14, 2022, the IRS released Notice 2022-59 with the 2023 adjusted applicable dollar amount—$3 per enrollee—for the Patient-Centered Outcomes Research Institute (PCORI) Trust Fund fee for plan years that end on or after October 1, 2022, and before October 1, 2023. The fee will continue through 2029. Of note, in 2022 it was $2.79.
The PCORI was established under the Affordable Care Act (ACA), which imposes a fee on specific health insurance policy issuers and applicable self-insured health plan sponsors to help fund the institute. The fee, required to be reported only once a year on the second quarter Form 720, Quarterly Federal Excise Tax Return and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.
EEOC Releases New Poster
In October 2022, the U.S. Equal Employment Opportunity Commission updated its mandatory workplace poster from EEO is the Law to Know Your Rights: Workplace Discrimination is Illegal. Employers should update their poster with the new version (dated 10/20/22) and display it in the workplace.
The poster should be placed in a conspicuous location in the workplace where notices to applicants and employees are customarily posted. In addition to physically posting, covered employers are encouraged by the EEOC to post the notice digitally on their websites in a conspicuous location. In most cases, electronic posting supplements the physical posting requirement. In some situations (for example, for employers without a physical location or for employees who telework or work remotely and do not visit the employer’s workplace on a regular basis), it may be the only posting.
IRS Retirement Plan Limit Changes
On October 21, 2022, the IRS announced the following changes for 2023:
- The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans increases to $22,500, up from $20,500
- The limit on annual contributions to an IRA increases to $6,500, up from $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost of living adjustment and remains at $1,000
- The catch-up contribution limit—for employees 50 and older who participate in 401(k), 403(b), and most 457 plans—increases to $7,500, up from $6,500. Participants in 401(k), 403(b), and most 457 plans who are 50 and older can contribute up to $30,000, starting in 2023. The catch-up contribution limit for employees 50 and older who participate in SIMPLE plans increases to $3,500, up from $3,000
- The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2023
- Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) The phaseout ranges for 2023 are as follows:
- For single taxpayers covered by a workplace retirement plan, the phase-out range increases to between $73,000 and $83,000, up from between $68,000 and $78,000
- For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range increases to between $116,000 and $136,000, up from between $109,000 and $129,000
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range increases to between $218,000 and $228,000, up from between $204,000 and $214,000
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000
- The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000
- The amount individuals can contribute to their SIMPLE retirement accounts increases to $15,500, up from $14,000
Details on these and other retirement-related cost-of-living adjustments for 2023 are in IRS Notice 2022-55.
IRS Flexible Spending Benefits Changes
Each year in the fall, the IRS announces new limits for several types of benefits that have maximums subject to annual indexing. You can find the full list of the recently released amounts for 2023 in IRS Revenue Procedure 2022-38, but these are the most common items employers ask about.
Health Flexible Spending Account (FSA)
For plan years beginning in 2023, the salary reduction contribution limit is $3,050. For health FSAs that include a carryover feature, the maximum carryover is $610.
Qualified Commuter Plans—Mass Transit and Parking
For 2023, the monthly limits are increased to $300 for both qualified parking and mass transit.
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
For 2023, QSEHRAs may not reimburse more than $5,850 per year for single coverage and $11,800 for family coverage.
Adoption Assistance Programs
For 2023, the maximum tax credit and employer-provided adoption assistance that can be excluded from wages is increased to $15,960. Individuals with a modified adjusted gross income above $239,230 may not take the full exclusion amount.
The dependent care FSA contribution maximum is not subject to annual indexing and remains $5,000 (or $2,500 each if the employee and spouse file separate income tax returns) for calendar year 2023.
The limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) are traditionally released earlier in the year. The limits vary based on whether an individual has self-only or family coverage under an HDHP; the 2023 limits are as follows:
|Annual HSA Contribution Limit||Self-only: $3,850
Catch-up: $1,000 (age 55 or older)
|Minimum Annual HDHP Deductible||Self-only: $1,500
|Maximum HDHP Out of Pocket||Self-only: $7,500
If the HDHP is a non-grandfathered plan, a cost-sharing limit of $9,100 for self-only coverage or $18,200 for family coverage will apply to Affordable Care Act (ACA) essential health benefits. These limits were announced at the end of 2021 and represent an increase of $400 and $800, respectively, over 2022 limits.