For employers committed to staying compliant with the most up-to-date regulatory developments, the following are several to make note of:
Social Security Wage Base Increases to $160,200 for 2023
On October 13, 2022, the Social Security Administration (SSA) announced that the 2023 social security wage base will increase from $147,000 to $160,200 in 2023, higher than the $155,100 high-cost and low-cost estimate previously published in the June 2022 Annual Report of the Board of Trustees. This 8.7% increase is derived from the annual adjustment to the Social Security wage and is based on the increase in average wages.
Business Standard Mileage Rates Increased for Second Half of 2022
On June 10, 2022, the Internal Revenue Service announced that the business standard mileage rate for transportation expenses paid or incurred will be $62.5 cents per mile effective July 1, 2022. This is a 4% increase from the first half of 2022.
Affordable Care Act (ACA) Lowers Affordability Threshold for Applicable Large Employers (ALEs)
Under ACA, ALEs that offer qualifying healthcare coverage to their full-time employees wherein the employee share of the costs for the lowest tier, self-only coverage option, is deemed unaffordable, have an employer shared responsibility payment (ESRP). For 2023, the affordability threshold has been lowered from 9.61% in 2022 to 9.12% in 2023. ALEs should make note of this change as it will affect how much they can charge employees for health coverage and still avoid an ESRP.
Another ACA change for ALEs
Also required under ACA is the additional change for ALEs. Those ALEs that do not offer minimum essential coverage (MEC) or offer it to less than 95% of their full-time employees (and their dependents) will owe an employer shared responsibility payment equal to the number of full-time employees (not full-time equivalents) employed for the year (minus up to 30) multiplied by$2,880 for 2023. This rate is adjusted annually for inflation, with the caveat that at least one full-time employee gets health insurance through an Exchange and receives the premium tax credit. The ESRP penalty for ALEs that fail to make offers of group health coverage to at least 95% of its full-time employees can expect the IRS to levy an ESRP penalty which, for 2023 will be $2,880/year or $240/month. Those employers that present an offer which is not affordable or fails to meet ACA’s minimum value standard will incur an ESRP penalty of $4,320/year or $360/month. To avoid these substantial penalties, ALEs are urged to make sure their coverage is broad enough for their full-time employees and include at least one affordable self-only option that provides minimum value benefits.
Employers should reach out to their benefit plan consultants or employment lawyers to ensure their compliance with these and other important regulatory changes.