Regulatory Roundup September 2023

Temperatures weren’t the only thing to drop in September, as several legislative updates were announced at both the federal and state levels. The Internal Revenue Service (IRS) released two updates, one regarding Employee Retention Credit (ERC) claims and one for catch-up contributions under the Secure 2.0 Act. Meanwhile, the Equal Employment Opportunity Commission (EEOC) announced when employers can begin submitting EEO-1 component data for Q4 2022, and the Department of Labor (DOL) proposed an amendment to the Fair Labor Standards Act (FLSA) on the salary thresholds used to determine an employee’s eligibility for overtime wages. At the state level, Colorado and Indiana also released updates regarding various taxes and program definitions. Learn about these updates and more below in this month's Regulatory Roundup.

ERC Claim Processing Paused 

The IRS announced a pause on the processing of new Employee Retention Credit (ERC) claims through at least the rest of 2023. This is a response to concerns about fraudulent claims targeting employers, and the agency advises organizations to work with a tax professional when looking into ERC eligibility. The agency also released a Q&A guide to provide additional eligibility guidance and will continue to process ERC requests that had already been submitted before this pause went into effect.

Secure 2.0 Act Contributions 

The Secure 2.0 Act of 2022 included new catch-up contribution requirements for high-earning employees, one of which stated contributions must be made to a Roth account. In the IRS’ recent announcement, the transition period to the act’s requirements will be extended to last two years, starting January 1, 2024. During this transition period, non-Roth contributions, and accounts that don’t allow for Roth contributions, will be treated as if they satisfy that Roth account requirement. The announcement also clarified that employees aged 50 or older can continue to make catch-up contributions after 2023, regardless of their income.

2023 EEO-1 Filing Dates 

The EEOC announced the opening of the 2022 EEO-1 Component 1 data collection window starting October 31, 2023. Submissions must be made by December 5, 2023, or employers may receive a notice about their failure to file. For more information, an instruction booklet, fact sheets, FAQs, and submission requirements, employers can refer to the EEOC’s EEO-1 Component 1 Data Collection page. The submitted information should be collected from a payroll period in the 4th quarter of 2022.

Overtime Exemption Notice

The DOL recently announced a proposed amendment to the FLSA that would change the salary thresholds used when determining an employee's eligibility for overtime wages. The amendment would raise the current minimum wage limit from $684 per week to $1,059 (or from $35,568 annually to $55,068). The threshold for highly compensated workers would also increase from $107,432 to $143,998 annually. These changes would apply to all states and minimum wage employees in U.S. territories, excluding American Samoa. Finally, the agency also proposed these limits be automatically updated every three years.

Updated Definition of Wages for FAMLI in 2024 

Colorado’s Family and Medical Leave Insurance (FAMLI) program is set to change its definition of wages for 2024. The new rules will expand the scope of wages to include gross wages, such as salaries, hourly wages, overtime, tips, bonuses, and commissions. It won’t, however, include severance payments, profit sharing, employer contributions to a deferred compensation plan, and expense reimbursements. Colorado residents and employers can find more information about this update and the FAMLI program on the state’s website.  

Colorado Unemployment Taxes 

Governor Jared Polis signed S.B. 232 into law, enacting several changes to Colorado’s State Unemployment Insurance (SUI) program for 2024:

• Support surcharges will be added to the 2024 SUI tax rate. The surcharge won’t be classified as a certified contribution and therefore won’t be reported on the employer’s Form 940.
• Employers will no longer have to file Form UITR-1 or a quarterly premium report. They still need to report wage information, but it must be filed electronically unless the employer receives an exemption from the state.
• A new employer portal, MyUI + Employer, allows employers better oversight and management of their SUI account and easier access to information for Third Party Administrators.
• Account numbers will be reformatted to align with the new employer portal, though employers can still use the current formatting until the transition is complete.

Indiana Income Tax Guidance

Indiana’s Department of Revenue recently released additional materials to help employers calculate county income taxes for their employees. The departmental notice also included deduction tables and a list of all current county tax rates. Employers should use the tax rate for the employee’s county of residence, not county of employment. The only exemption to this would be for out-of-state residents who work in Indiana, in which case the tax rate for the county of employment can be used.

Additional Information

Get more details on the compliance updates from September here:

• IRS Pauses Processing New ERC Claims
• IRS Guidance on Secure 2.0 Act Catch-Up Contributions
• 2022 EEO-1 Filing Dates Announced
• Department of Labor Notice of Proposed Rulemaking on Overtime Exemption
• Colorado FAMLI Changes Definition of Wages for 2024
• Colorado Passes Unemployment Tax Changes for 2024
• How to Compute Withholding for State and County Income Tax

Bookmark our resource library and come back monthly for Regulatory Roundups of tax and compliance alerts you need to know. For any other frequently asked questions or general assistance, refer to our Administrator Support page for support contact information, quick how-to guides or training courses, important PEAK articles, and more. Remember to follow us on Facebook, LinkedIn, and Twitter for urgent updates.

This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney, or Advisor.