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IRS reg alert: ACA waiting periods, FICA/FUTA exemptions

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in Office Management,Payroll Management

The IRS has been busy adding to its regulatory agenda. Here’s the latest news from the regulations front.

1. Final regs on orientation periods for health benefits. Under final Affordable Care Act (ACA) regulations, you may require a new hire who is eligible for health coverage to complete a one-month orientation period before his or her 90-day waiting period commences. Waiting periods then begin on the first day after the end of the orientation period. Flip side: New variable-hour employees who are subject to an initial measurement period can’t be subject to an orientation period.

One month is determined by adding one calendar month and subtracting one calendar day, measured from a new hire’s first day of work. If there isn’t a corresponding date in the next calendar month, the orientation period ends on the last day of the next calendar month. Key: The regs clarify that, not­withstanding the one-month orientation and 90-day waiting periods, new full-time employees must be offered coverage by the first day of their fourth full calendar month of work. Employers that fail to offer coverage by that date may be liable for a free-rider penalty.

Example: Janet is hired on Jan. 6. Her orientation period ends Feb. 5. However, to satisfy the orientation period, waiting period and employer play-or-pay requirements, an offer of coverage must be made to her by May 1. Contrast: If coverage starts on May 6 (i.e., one month, plus 90 days after her date of hire), her employer may be liable for a free-rider penalty.

The regs are effective beginning with the 2015 plan year. Until then, you may rely on the proposed regs. (79 F.R. 35942, 6-25-14)

2. Final regs on FICA/FUTA exemptions for family employment. Final regs, which replace temporary regs, restore the traditional FICA and FUTA exemptions for family employment for businesses that are organized as single-member limited liability companies and other disregarded entities.

The regs also clarify that, with the exception of qualified Subchapter S subsidiaries, owners of disregarded entities are responsible for backup withholding and filing Forms 1099-MISC.

The regs apply to wages paid on or after Nov. 1, 2011, but you may apply them to wages paid beginning Jan. 1, 2009. (79 F.R. 36204, 6-26-14)

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