by admin | Nov 1, 2022 | Blog
The IRS has announced the 2023-dollar limits and thresholds for retirement plans, which reflect the latest cost-of-living adjustments.
Note: Dollar limits and thresholds primarily affecting health and welfare plans were announced last week. Here are the limits most relevant to 401(k) plans:
- Annual Additions: The limit on annual additions (i.e., contributions) to 401(k) and other defined contribution plans will increase to $66,000 (up from $61,000).
- Compensation: The annual limit on compensation that can be taken into account for contributions and deductions will increase to $330,000 (up from $305,000).
- Effective Deferrals: The annual limit on elective deferrals will increase to $22,500 (up from $20,500) for 401(k), 403(b), and 457 plans, as well as Salary Reduction Simplified Employee Pension Plans (SARSEPs), and to $15,500 (up from $14,000) for Savings Incentive Match Plan for Employees (SIMPLE) plans and SIMPLE IRAs.
- Catch-Up Contributions: The annual limit on catch-up contributions for individuals aged 50 and over will increase to $7,500 (up from $6,500) for 401(k) plans, 403(b) contracts, 457 plans, and SARSEPs, and to $3,500 (up from $3,000) for SIMPLE plans and SIMPLE IRAs.
- HCE: The threshold for determining who is a highly compensated employee (HCE) will increase to $150,000 (up from $135,000).
- Key Employee: The threshold for determining whether an officer is a “key employee” under the top-heavy rules (as well as the cafeteria plan nondiscrimination rules) will increase to $215,000 (up from $200,000).
- SEP Participation: The threshold for determining participation in a SEP or SARSEP will increase to $750 (up from $650).
- Saver’s Tax Credit: The upper income limit for determining whether certain individuals are eligible for the saver’s tax credit (also known as the retirement savings contributions credit) will increase to $73,000 (up from $68,000) for married filing jointly; to $54,750 (up from $51,000) for head of household; and to $36,500 (up from $34,000) for all other taxpayers.
The IRS has also announced that the amounts for determining who is a “control employee,” a classification relevant to the valuation of company fringe benefits, will increase to $130,000 (up from $120,000), and to $265,000 (up from $245,000) for other employees. In addition, the Social Security Administration separately announced the annual adjustment to the Social Security taxable wage base, which is relevant for various benefit purposes.
There are notable increases in the retirement plan contribution limits for 2023 compared to recent years. Plan sponsors, administrators, and advisors will want to carefully note when the new limits and thresholds apply. Employee communications, plan procedures, and administrative forms should be reviewed and updated as necessary to reflect these changes.
Source: Thomson Reuters
by admin | Oct 20, 2022 | Blog
The IRS has announced the penalty amounts for failure to file correct 2023 information returns, and failure to furnish correct 2023 payee statements in 2024.
IRS Code 6721 imposes a penalty on a taxpayer for failing to file a correct information return (any 1099 series form or a Form W-2). Code 6722 imposes a penalty for failure to furnish a payee statement (employee’s copy of Form W-2, recipient’s Form 1099) on time, failure to include all information required to be shown on the statement or including incorrect information. The maximum penalty is lower if the taxpayer is a small business. A small business is a taxpayer with average annual gross receipts for the most recent three tax years of $5 million or less.
The amount of the penalty depends on when the return or statement is corrected.
- The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are corrected within 30 days, is $60 per return/statement (currently $50), up to a maximum penalty of $630,500 ($220,500 for small businesses). The maximum penalty is $588,500 on 2022 information returns and payee statements ($206,000 for small businesses).
- The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are corrected later than 30 days after the due date but before August 1st, is $120 per return/statement (currently $110), up to a maximum penalty of $1,891,500 ($630,500 for small businesses). The maximum penalty is $1,766,000 on 2022 information returns and payee statements ($588,500 for small businesses).
- The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are not corrected by August 1 (or if no return or statement is filed at all), is $310 per return/statement ($290 for 2022 information returns), up to a maximum penalty of $3,783,000 ($1,891,500 for small businesses). The maximum penalty is $3,532,500 on 2022 information returns and payee statements ($1,177,500 for small businesses).
Intentional disregard penalty: The intentional disregard penalty for 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, is $630 per return/statement, or if greater, 10% of the amount required to be shown on the return/statement (without any limit on the maximum penalty in a calendar year). The intentional disregard penalty for 2022 information returns required to be filed in 2023, and 2022 payee statements required to be furnished in 2023, is $580 per return/statement, or if greater, 10% of the amount required to be shown on the return/statement (without any limit on the maximum penalty in a calendar year).
Lastly, for tax returns filed in 2023, the minimum penalty for failure to file a tax return within 60 days of the due date is $485 ($450 for tax returns filed in 2022).
Source: Thomson Reuters
by admin | Oct 18, 2022 | Blog
Health Reimbursement Arrangements (HRAs) are tax-advantaged, employer-funded accounts geared to help pay for qualified medical expenses not covered by a health plan. Months ago, NueSynergy explained the benefits of an HRA. Now, it’s time to discuss five frequently asked questions relating to this account.
FAQ #1: How much can an employer contribute to an employees’ HRA?
An employer can contribute any dollar amount, so long as it’s above a minimum annual commitment of $250 per employee. This commitment is a promise-to-pay, with funds allocated only if and when an eligible claim is incurred.
FAQ #2: When does an HRA start paying for an employee’s expenses?
The employer has two options. They can either allow the HRA to pay before the employee meets any deductible, or they can set it up so an employee has to meet a certain amount of out-of-pocket expenses before an HRA begins to pay.
FAQ #3: Does an HRA provide a tax benefit for employees?
Yes. HRA funds are contributed to employees on a pre-tax basis. This means disbursements aren’t included when calculating taxable income. For this reason, employees cannot claim an income tax deduction for expenses that haven’t been reimbursed under an HRA.
FAQ #4: Do HRA contributions have to be made in equal amounts each month?
They can be, but an HRA can also make contributions available Day 1 of the plan. Regardless of which method, an employer holds the money until qualified expenses are incurred and then reimbursed.
FAQ #5: What happens to HRA funds if an employee leaves the company?
Since funds are funded by an employer, any funds go back to them if an employee terminates for any reason.
by admin | Oct 17, 2022 | Blog
An Adoption Assistance Flexible Spending Account (FSA) allows participants to set aside pre-tax dollars for eligible domestic (in U.S.) or foreign adoption expenses; notably court costs, attorney fees and agency fees. Below are five facts regarding this account.
Fact #1: For 2022, participants can choose an annual election amount of up to $14,890. The money is placed in a participant’s account via payroll deduction, equally, and then used to pay for eligible adoption expenses incurred during the plan year.
Fact #2: Expenses incurred in a prior plan year plus fees to adopt a stepchild and for legal guardianship are not eligible for reimbursement.
Fact #3: There’s an income limit for an Adoption Assistance FSA. It’s based on modified adjusted gross income (MAGI). For 2022, if your MAGI was:
- More than $223,410 = will not be able to contribute to full $14,400 to FSA
- More than $263,410 = can’t use the FSA
Fact #4: Any unused funds that remain in an account at the end of the plan year will be forfeited.
Fact #5: Participants cannot change election amounts during the plan year unless they experience a change in status or qualifying event (such as marriage or divorce).
by admin | Oct 13, 2022 | Blog
NueSynergy’s COBRA team is proud to assist employees and their families with the right to maintain group health benefits for limited periods of time. With 25 years of industry experience, NueSynergy’s COBRA administrators have the knowledge to help employees in the following areas:
- Track, document and update all COBRA-related events
- Provide and maintain the necessary documentation to respond to an IRS audit of any COBRA practices
- Issue administration manuals, establish and collect all plan information, rates, and new plan setups
- Mail educational COBRA packages to employees, covered spouses and dependents, which includes notification letters, election forms, enrollment forms and beneficiary forms
- Help with open enrollment and account termination
To learn even more about our COBRA team – whether it’s account set-up or other services – read here.
by admin | Oct 12, 2022 | Blog
Two months ago, NueSynergy wrote about when carryover funds are available for new FSA members. Now, we are here to provide a more detailed look into what a carryover is, how it works and any questions you may have.
What it is and how it works
Starting on October 31, 2013, the U.S. Department of Treasury adjusted the “Use It or Lose It” rule, providing employers the option to offer a carryover plan to their employees. This option allows up to $570 of remaining FSA balances at a plan year’s end to carryover for use during the next plan year. This is available with Healthcare and Limited Purpose FSAs only.
Funds carried over into the following plan year will be available on the first day of the year unless enrolled in a Health Savings Account (HSA). If that’s the case, then those funds must be carried over into a Limited Purpose FSA.
Keep in mind, carryover funds are non-transferable. This means that if employees with a carryover are terminated mid-year, funds will be treated as any normal election and will be forfeited if COBRA is not elected.
Questions to consider
What happens if a participant has a carryover balance, but does not re-elect a Healthcare FSA?
Employers can choose to allow participants who do not enroll in the new plan year to either forfeit their previous plan year balance or default their carryover into an FSA for the new plan year.
What is the difference between a Healthcare FSA and a Limited Purpose FSA?
A Limited Purpose FSA can only be used for vision and dental expenses. It is intended to work in conjunction with an HSA. A Healthcare FSA covers all eligible medical expenses.
Is additional time offered to participants following the end of the plan year to incur expenses against the previous plan year?
Yes. This is called the grace period. It allows employees additional time, usually 2.5 months, to use remaining funds. If the carryover option is elected, it will replace the grace period option.
Can employers give participants the option of both a carryover and a grace period?
No. An employer can only provide one option within the same plan year.
