The IRS has updated Notice 931 (Deposit Requirements for Employment Taxes) to include the tax deposit rules for the 2023 year.
The deposit schedule employers must use (i.e., monthly or semi-weekly) is based on the total tax liability they reported during the lookback period. For employers filing Form 941 (Employer’s Quarterly Federal Tax Return), an employer’s deposit schedule for 2023 is based on the lookback period beginning July 1, 2021 and ending June 30, 2022. An employer reporting $50,000 or less of Form 941 taxes for the lookback period is a monthly depositor, and an employer reporting more than $50,000 of Form 941 taxes is a semiweekly depositor.
An employer with a Form 941 tax liability of less than $2,500 during the current or preceding quarter, who does not incur a $100,000 next-day deposit obligation during the current quarter, is not required to make monthly or semiweekly deposits if the taxes are paid in full with a timely filed return. An employer accumulating a tax liability of $100,000 or more on any day during a deposit period must deposit the tax by the next “business day,” regardless of whether the employer is a monthly or semiweekly depositor. A “business day” is any day other than a Saturday, Sunday, or a “legal holiday.” The term “legal holiday” means any legal holiday in the District of Columbia.
The IRS considers a new employer’s tax liability to be zero, which makes a new employer a monthly depositor for the first year of business.
The lookback period for annual return filers (Forms 943, 944, 945, or CT-1) is the calendar year preceding the previous year. The lookback period for 2023 tax deposits is the 2020 tax year.
Adjustments: The lookback period is based on the tax liability as originally reported. If an employer subsequently files Form 941-X, 943-X, 944-X, 945-X, or CT-1X to correct errors on the original return, the corrections are not taken into consideration for purposes of the lookback period computation.
Source: Thomson Reuters
A number of key tax figures are adjusted each year for inflation based on the average chained Consumer Price Index (CPI) for all-urban customers for the 12-month period ending the previous August 31. The August 2022 CPI summary has been released by the Labor Department. Using the chained CPI for August 2022 (and the preceding 11 months), here are the calculated 2023 indexed amounts.
Qualified transportation fringe benefits: For 2023, an employee will be able to exclude up to $300 ($280 in 2022) a month for qualified parking expenses, and up to $300 a month ($280 in 2022) of the combined value of transit passes and transportation in a commuter highway vehicle.
Long-term care premiums: Amounts paid for insurance that covers qualified long-term care services are treated as medical expenses up to specified dollar limits that vary with the age of the taxpayer at the end of the tax year. For 2023, the dollar limits will be:
- $480 for a taxpayer age 40 or younger ($450 in 2022)
- $890 for a taxpayer age 41-50 ($850 in 2022)
- $1,790 for a taxpayer age 51-60 ($1,690 in 2022)
- $4,770 for a taxpayer age 61-70 ($4,510 for 2022)
- $5,960 for a taxpayer age 70+ ($5,640 in 2022).
Payments received under qualified long-term care insurance: Amounts received under a qualified long-term care insurance contract are generally excludable as amounts received for personal injuries and sickness, subject to a per diem limitation, which will be $420 in 2023 ($390 in 2022).
Archer MSAs: For Archer medical savings account (MSA) purposes, in 2023, a “high deductible health plan” will be a health plan with an annual deductible of:
- $2,650 – $3,950 in the case of self-only coverage ($2,450 – $3,700 for 2022)
- $5,300 – $7,900 in the case of family coverage ($4,950 – $7,400 for 2022)
- If annual out-of-pocket expenses are required to be paid (other than for premiums) covered benefits cannot exceed $5,300 for self-only coverage ($4,950 for 2022) and $9,650 for family coverage ($9,050 for 2022).
Limit on health FSA salary reduction contributions under a cafeteria plan: For purposes of determining whether a health FSA benefit will be a “qualified benefit” for the 2023 plan year, the cafeteria plan must provide that an employee may not elect to have salary reduction contributions exceeding $3,050 made to the health FSA ($2,850 for 2022).
Small employer health insurance credit: An eligible small employer may claim, subject to a phaseout, a credit equal to 50% of non-elective contributions for health insurance for its employees. The credit is reduced under certain circumstances, including if the average annual full-time equivalent wages per employee are more than $30,700 ($28,700 for 2022).
Qualified small employer HRA: For 2023, a qualified small employer HRA is an arrangement which, among other requirements, makes payments and reimbursements for qualifying medical care expenses of an eligible employee that does not exceed $5,850 ($5,450 for 2022), or $11,800 in the case of an arrangement that also provides for payments or reimbursements for family members of the employee ($11,050 for 2022).
Property exempt from levy: The value of property exempt from levy (fuel, provisions, furniture and other household personal effects, as well as arms for personal use, livestock, and poultry) may not exceed $10,810 for levies in 2023 ($10,090 for 2022). The value of property exempt from levy (books and tools necessary for the trade, business, or profession of the taxpayer) may not exceed $5,400 for levies issued in 2023 ($5,050 for 2022).
Wage levy. The weekly amount of an individual’s salary, wages, etc. exempt from levy for 2023 is $4,700 ($4,400 for 2022) multiplied by the number of the taxpayer’s dependents for the tax year of the levy, plus the taxpayer’s standard deduction, divided by 52.
Source: Thomson Reuters
Congress has passed, and the President has signed, the Inflation Reduction Act of 2022. While the legislation largely focuses on climate change mitigation and deficit reduction, several provisions are of interest to group health plan sponsors and their advisors. Here they are as followed:
Enhanced Premium Tax Credit: The favorable premium tax credit rules adopted in the American Rescue Plan Act (ARPA) will now remain in effect through 2025. As background, the Affordable Care Act (ACA) created a refundable premium tax credit, which is available on a sliding-scale basis for individuals and families who are enrolled in an Exchange health plan and who are not eligible for other qualifying coverage or affordable employer-sponsored health insurance plans providing minimum value.
The ACA limits the credit to taxpayers with household income between 100% and 400% of the federal poverty line who purchase insurance through an Exchange health plan. ARPA eliminated the upper income limit for eligibility and increased the amount of the premium tax credit by decreasing, in all income bands, the percentage of household income that individuals must contribute for Exchange coverage. The adjusted percentage ranges from zero to 8.5%.
Medicare Prescription Drug Cost Reductions: Several cost reduction measures will benefit enrollees in Medicare Part D prescription drug coverage. Beginning in 2023, cost-sharing for insulin will be capped at $35 per month. Annual Part D out-of-pocket prescription drug costs will be capped at $2,000 starting in 2025. For the first time, the United States Department of Health and Human Services (HHS) will be authorized and required to negotiate certain Medicare drug prices with manufacturers beginning in 2026. In addition, starting in 2023, manufacturers must pay Medicare a rebate if average prices of certain drugs increase faster than inflation.
Note: Because the legislation does not include comparable prescription drug cost reductions for private plans, there is some concern that reduced costs for Medicare enrollees will result in increased costs for employer plans and participants as price increases are shifted to private plans to make up for lost revenue.
Insulin-Related HDHP Safe Harbor: The legislation amends to provide that plans will not lose their HDHP status by reason of failing to have a deductible for certain insulin products. This provision is effective for plan years beginning after December 31, 2022.
Note: The provision codifies and expands IRS guidance that allows HDHPs to provide insulin on a no-deductible or low-deductible basis under specified circumstances without adversely affecting HSA eligibility.
Source: Thomson Reuters
The IRS has extended the deadlines for adopting retirement plan amendments to reflect certain provisions of the SECURE Act and the CARES Act. As background, under the SECURE Act, the plan amendment deadline for most plans is the last day of the first plan year beginning on or after January 1, 2022 (2024 for governmental and applicable collectively bargained plans). Similarly, the plan amendment deadline under the CARES Act is the end of the first plan year beginning on or after January 1, 2022.
For most plans, the notice extends the deadline to adopt applicable amendments until December 31, 2025. Later deadlines apply for governmental plans, but not collectively bargained plans. The notice revises previous guidance for certain required and discretionary SECURE Act amendments and for SECURE Act changes affecting safe harbor 401(k) plans. The extended deadlines also apply to amendments by defined contribution plans (including 401(k) plans) reflecting the waiver of required minimum distributions for 2020 under the CARES Act. Timely adopted amendments will not cause a plan to fail to satisfy the anti-cutback rules or ERISA so long as, in the interim, the plan operates as if a retroactive amendment were already in effect.
EBIA Comment: This notice does not extend the deadline for adopting retroactive amendments reflecting the CARES Act’s optional coronavirus-related distribution and loan relief—that deadline remains the last day of the first plan year beginning in 2022 (2024 for governmental plans). Keep in mind that, unlike the original deadline, which was determined with reference to the plan year, the extended deadline for most plans is a specific date, so non-calendar year plans receive less time than the general three-year extension. (Governmental plan deadlines are generally based on legislative sessions.)
Source: Thomson Reuters
In connection with the move to all-electronic filing of Form 5300 as of July 1, 2022, the IRS has updated related forms and instructions. Form 5300 is no longer available through the IRS forms and publications database; instead, filers are directed to the pay.gov website, where a search for “5300” will lead to a page that includes an option to preview the form. Updates to the form’s instructions include details about electronic filing such as limitations on uploaded attachments and a note that Form 8717 is not needed for submissions through the website. The updated Form 8717 instructions specify that this form should no longer be used for Form 5300 (or Form 5310, for which electronic filing has been required since August 1, 2021) unless an additional payment for an insufficient user fee is needed. The IRS’s About Form 5300 page has also been updated to reflect the electronic filing requirement.
EBIA Comment: Electronic filing of Form 5300 is now mandatory for all determination letter applications, as the brief transition period during which paper submissions were still accepted has ended.
Source: Thomson Reuters