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How Year-End HR Responsibilities Have Changed in 2020

HR Question:

This year has created many new HR requirements. Is there anything, in particular, I should be aware of as I prepare to tackle my year-end HR responsibilities?

HR Answer:

As we approach the end of 2020, there are many upcoming reporting requirements to prepare. It’s important to recognize that each organization’s situation may be different depending on their number of employees, benefits offered as fully insured or self-insured, and differences among state rules and regulations.  However, below are some common reporting requirements and tips to consider to make sure you are providing a good-faith effort.

TIP: Create an HR Calendar and use it as a checklist.  This will help with compliance and preparing for the following year.

W-2 / 1099 Reporting and Communication to Employees

W-2 reporting is typically a standard process, however, there are a few details to consider:

  • For reporting of FFCRA sick and family leave wages on Form W-2 in Box 14, or in a statement provided with the W-2, refer to the guidance provided in the IRS Notice 2020-54.
    • TIP: Utilize the IRS Model language for employee instructions on pages 8-9 of the Notice.
  • For reporting of Employer-Sponsored Health Coverage – under the Patient Protection and Affordable Care Act (ACA), certain employers are required to include the cost of providing health coverage on Form W-2. If your number of W-2’s processed in the previous year (2019) was under 250, you are NOT required to provide this information. For more information on this, visit the IRS guidance on Reporting Employer-Sponsored Health Coverage.
  • Run reports with preliminary W-2 information, cross-check with payroll data, and correct any errors.
  • Reminder: this is the time to send out 1099 statements to your independent contractors who earned over $600 in compensation. Work with your accounting/finance department to make sure these important tax forms are not missed.

TIP: Create a communication piece for employees that provides guidance on how to read the Form W-2 along with when and how the W-2 Forms will be available.  Create this communication as you work through your process, and include a link or copy of the communication in your HR calendar/checklist.

ACA Reporting

IRS 2020 Instructions for Forms 1094-B, 1095-B, 1094-C, and 1095-C indicate the deadline has been extended from January 31, 2021 to March 2, 2021.

NOTE:  The deadline for filing Forms with the IRS remains unchanged at February 28, 2021 for paper copies and March 31, 2021 for electronic filing.

As you prepare your ACA reporting, keep in mind the following:

  • If you are an employer that falls under the NON-Applicable Large employer (ALEs) AND you have self-insurance health coverage, the IRS has provided Transition Relief.
  • On Form 1095-C, you are now required to include the “Plan Start Month” box.
  • Become aware of the new additions made to the 1095-B and 1095-C relating to individual coverage HRAs (ICHRAs).
    • On the Instructions provided by the IRS on the “What’s New” section, it indicates that a new code of G must be used on 1095-B, line 8 to identify an individual coverage HRA – refer to this IRS publication for details.
  • ACA identifies its full-time employees based on each employee’s hours of service and what they are entitled to payment for, such as vacation, holidays, leave of absence, etc.
    • FFCRA requires two new types of leave – the Public Health Emergency Leave (PHEL) and Emergency Paid Sick Leave (EPSL) that will continue to count for ACA purposes.
  • Be sure to check the affordability of your plan under ACA for 2021 as the affordability threshold has changed for 2021.

TIP: For further assistance, check out the Affordable Care Act Tax Provisions for Employers.

Limits for FSA, HSA, and Retirement for 2021

The following limits have been set for 2021:

  • The IRS has announced that the contribution limit for Health Flexible Spending Arrangements (Health FSAs) will remain at $2,750 in 2021. For 2020, the contribution limit was also set at $2,750.
  • HSA contribution limit (employer and employee): Self Only: $3,600 / Family: $7,200
  • HSA catch-up contributions (age 55 or older): $1,000
  • High Deductible Health Plan (HDHP) deductibles minimum: Self Only: $1,400 / Family: $2,800
  • HDHP out-of-pocket maximum amounts: Self Only: $7,000 / Family: $14,000

TIP: Create a communication to go along with the 1st paycheck reminding employees to check for changes made during Open Enrollment and include these limits as a reminder.  You should also make sure your payroll system is updated to stop all contributions that exceed these maximums.

Our Virtual HR Support Center has many tools you can use to create your specific checklist as you take care of your year-end HR responsibilities. Please contact us if you would like more information.

Special thanks to Janine Cummings, PHR, SHRM-CP for contributing to this edition of our HR Question of the Week! 

strategic HR inc. knows that keeping abreast of legal compliance issues can be daunting, especially when the laws keep changing. We can help you stay compliant by fielding your questions and offering resources to help you identify and mitigate compliance issues. Visit our Legal Compliance and Recordkeeping page to learn about our auditing services which can help you identify trouble spots in your HR function.