Capitol Benefits Group News & Updates

IRS Releases Final 2022 Forms for Reporting Under Internal Revenue Code Sections 6055 and 6056

The IRS released the final 2022 forms for reporting under Internal Revenue Code (Code) Sections 6055 and 6056. No major substantive changes were made to the forms for 2022 reporting. Employers should become familiar with these forms for reporting for the 2022 calendar year. Additional information regarding these forms may become available once the IRS finalizes its instructions for the forms. This Legal Update explains this development.

On Oct. 11, 2022, the IRS released a final rule that changes the eligibility rules for the premium tax credit (PTC). Effective for 2023, the affordability of employer-sponsored coverage for family members is determined based on the cost of family coverage. This Legal Update summarizes this development.

Biden Administration Issues Final Rule to End the “Family Glitch”

The Biden Administration issued a final regulation and a new IRS notice on October 11, 2022, which eliminate the Affordable Care Act’s (ACA) “family glitch” beginning on January 1, 2023. The “glitch” refers to the fact that the ACA’s current affordability standard is based on what a single person pays for employer-sponsored coverage in all circumstances. This results in many people with employer-sponsored group health insurance paying far more for family coverage than the ACA’s coverage affordability threshold (9.5% of their household income, as adjusted annually for inflation).

Under this final regulation, if the employee’s cost for dependent coverage exceeds the ACA’s affordability threshold, then the affected dependents may be eligible for subsidized coverage through an exchange. The accompanying IRS notice allows employers to amend their Section 125 Cafeteria Plans to permit eligible dependents to drop their group coverage midyear in favor of subsidized individual exchange coverage.

Importantly, the final rule makes it clear that this change will not affect the coverage affordability requirements for applicable large employers (ALEs) subject to the ACA’s employer shared responsibility provisions (i.e., the employer mandate). The general rule that ALEs offer their full-time employees affordable coverage and the associated affordability safe-harbors remain in place. ALEs will NOT be required to offer affordable coverage to dependents.

What Employers Need to Do

Moving forward, employers need to be aware of the change to the affordability standard for family coverage, be prepared to communicate with employees about the new rule, and be very clear about the exchange’s open enrollment deadline.

Additionally, it is more imperative than ever that ALEs ensure they are offering affordable, minimum value coverage to their full-time employees. While the ACA’s affordability requirements under the employer mandate (and associated penalty liability) continue to only apply to the employer’s lowest-cost offer of self-only, minimum value medical coverage, the existence of the new regulation means that more employees will seek exchange-based coverage. With more employees participating in the exchange, the likelihood that an ALE will receive a penalty when they fail to offer employees affordable coverage increases, too.

Finally, employers with non-calendar plan years should consider adopting the changes to their Section 125 Cafeteria Plan that this new IRS guidance permits.

For plan years beginning in 2023, an extra year is permitted to complete the amendment (e.g., if a plan year begins April 1, 2023, the plan has until March 31, 2025 to complete the amendment).

IRS Releases 2023 Cost of Living Increases for Tax-Advantaged Plans

The IRS has released Revenue Procedure 2022-38, which includes cost-of-living adjustments for employee qualified transportation fringe benefits for the 2023 taxable year, along with annually adjusted numbers for 2023 for other tax provisions. The combined monthly limit for transportation in a commuter highway vehicle and a transit pass will increase to $300 in 2023, up from the 2022 limit of $280. The monthly limit in 2022 for qualified parking will also increase to $300 from $280.

DHS Extends Form I-9 Flexibilities Until July 31, 2023

On Oct. 11, 2022, the U.S. Department of Homeland Security (DHS) announced it is extending updated flexibilities for Form I-9 due to the continued safety precautions related to COVID-19 until July 31, 2023.

2023 Social Security Cost-of-Living Adjustment Will See Highest Increase in 40 Years

On Oct. 13, 2022, the U.S. Social Security Administration announced that Social Security beneficiaries can expect an 8.7% increase in benefits next year. This increase surpasses the 5.9% cost-of-living adjustment (COLA) in 2022, which, at the time, was the highest in four decades. On average, Social Security benefits will increase by more than $140 per month for beneficiaries beginning in January. This change is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.

The announced COLA increase comes as many beneficiaries have struggled with increasing prices due to inflation. The COLA applies to approximately 70 million Social Security and Supplemental Security Income beneficiaries. Most beneficiaries rely on Social Security benefits for the majority of their income. Consequently, the COLA provides beneficiaries with inflation protection to help individuals maintain their standard of living.

Medicare B premiums and taxes may impact the amounts beneficiaries receive next year. The standard Medicare B premium will decrease by $5.20 next year, according to the Centers for Medicare & Medicaid Services. Accordingly, beneficiaries will likely be able to keep all COLA increases. However, the 2023 COLA could increase some beneficiaries’ tax returns in future years.

What This Means

Individuals who decide to claim Social Security benefits now will receive the record-high COLA. However, the COLA adjustment shouldn’t influence individuals claiming benefits because they will receive every COLA when they decide to claim benefits. Experts generally recommend individuals delay as long as possible before claiming benefits, as it can increase the size of their monthly check.

Beneficiaries can expect to see the 2023 COLA in their benefits checks starting in January. Beneficiaries are normally notified by mail starting in early December about their new benefit amount. The fastest way for beneficiaries to find out their new benefit amount is to view the COLA notice online via their “my Social Security” account.

The content herein is provided for general information purposes only, and does not constitute, legal, tax, or other advice or opinions on any matters. This information has been taken from sources which we believe to be reliable, but there is no guarantee as to its accuracy.

Webinar Archive

Open enrollment can be a stressful time for employers.

In case you missed it last month, listen to the on-demand recording playback with Zywave’s Legal Content Attorneys to learn more about rules for benefit plan enrollment, upcoming changes for plans in 2023 and providing information to employees to help with all of their open enrollment questions.

Watch Last Month’s Webinar HERE