Proposed Regulations Would Substantially Expand Mandatory Electronic Filing of Information Returns
The IRS has proposed regulations that would substantially expand mandatory electronic filing of information returns, reflecting statutory changes made by the Taxpayer First Act of 2019 (TFA). Historically IRS Code prohibited the IRS from requiring electronic filing for taxpayers filing fewer than 250 returns. Additionally, current regulations provide that the 250-return threshold applies separately to each type of information return a taxpayer is required to file – a threshold the IRS proposed aggregating in 2018, but was never finalized.
These new proposed regulations would establish much lower thresholds for mandatory electronic filing of the following returns affecting employee benefit plans:
Form 1094 series; Forms 1095-B and 1095-C; Form 1099 series; and Form 5498 series
Generally, the new thresholds would be 100 returns for due dates during calendar year 2022 and 10 returns for subsequent calendar years. To calculate these thresholds, the proposed regulations would require aggregation of most information returns—including the forms mentioned above and Forms W-2.
The requirement to aggregate returns when calculating the total number of forms expected to be filed in conjunction with the lower thresholds themselves could very possibly eliminate paper filings for all but the smallest employers. The regulations will be especially impactful for smaller applicable large employers (ALEs) subject to the ACA, who have historically been able to file Forms 1094-C and 1095-C on paper. Since ALEs by definition have at least 50 full-time plus full-time-equivalent employees, they will most likely exceed the 100-return threshold when taking into account both their Forms W-2 and 1095-C. Given the proposed 2022 effective date, ALEs should monitor this development carefully and prepare for mandatory electronic filing as soon as the next 1095-C filing deadline of March 31, 2022.
DOL Rescinds 2020 Rule on FLSA Joint Employer Determinations
On July 29, 2021, the U.S. Department of Labor (DOL) announced that it is rescinding its 2020 Joint Employer Determination Rule (the 2020 Rule), effective Sept. 28, 2021. The DOL had previously proposed rescinding the rule in March 2021.
Joint employment or co-employment situations arise when two or more organizations share the control and supervision of one or more employees. Joint employers are equally and individually responsible for compliance with labor and employment laws, including the Fair Labor Standards Act (FLSA).
The DOL makes joint employment determinations to prevent scenarios where one employer uses another as a “shield” to avoid compliance obligations.
According to the DOL, rescinding the 2020 Rule was necessary because its tests for joint employment contradict longstanding agency interpretations and court rulings. For example, while the 2020 Rule requires using a four-part test that focuses on an employer’s exercise of control, “all courts consistently use a totality-of-the-circumstances economic realities approach to determine the scope of joint employment under the FLSA,” according to the DOL.
The DOL also considered the fact that a federal court had already vacated most of the 2020 Rule in September 2020. In that case, the court held that the rule deviated from prior guidance without explaining why.
Employers should continue to comply with the 2020 Rule until its rescission takes effect on Sept. 28, 2021. After that date, employers should look to agency guidance and court rulings for direction on using the totality-of-circumstances to determine joint employment status under the FLSA.
2022 Open Enrollment Checklist
To prepare for open enrollment, group health plan sponsors should be aware of the legal changes affecting the design and administration of their plans for plan years beginning on or after Jan. 1, 2022. Employers should review their plan documents to confirm that they include these required changes.
In addition, any changes to a health plan’s benefits for the 2022 plan year should be communicated to plan participants through an updated summary plan description (SPD) or a summary of material modifications (SMM).
Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, when applicable—for example, the summary of benefits and coverage (SBC). Some participant notices must also be provided annually or upon initial enrollment. To minimize costs and streamline administration, employers should consider including these notices in their open enrollment materials.
For more information, download our 2022 Open Enrollment Checklist.
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