Federal Tax Credit for Employer-Provided Paid Family and Medical Leave

The Tax Cuts and Jobs Act (Act) includes a new federal tax credit for employers that provide paid family and medical leave (FML) to their employees.

To be clear, the Act does not require employers to provide paid leave. However, eligible employers are allowed a tax credit based on wages paid to employees on FML. If the employer provides paid leave as vacation leave, personal leave, or medical or sick leave, then that leave will not be considered FML for purposes of the tax credit.

The tax credit would apply to employers who have a written policy that provides:

·    Qualifying full-time employees with at least two weeks of annual paid FML;

·    Qualifying part-time employees with an annual paid FML amount that is at least proportionate to the full-time employees’ annual paid FML amount; and

·    A rate of pay not less than 50 percent of the wages normally paid to employees for services performed.

The tax credit would apply to an employer’s qualifying employees who are:

·    Employees as defined under Section 3(e) of the Fair Labor Standards Act of 1938, as amended;

·    Employed by the employer for one year or more; and

·    Not compensated in excess of 60 percent of the amount for highly compensated employees for the preceding year (for example, in 2018, employers may only apply the credit toward employees who earn less than $72,000).

For employers who meet the above criteria and who pay 50 percent of wages, they may claim a tax credit of 12.5 percent of wages paid for up to 12 weeks of FML annually. For each percentage point increase above 50 percent of wages paid, the employer may increase the tax credit by a 0.25 percentage point (not to exceed 25 percent).

The tax credit would apply to wages paid to employees on FML in taxable years beginning after December 31, 2017, and before January 1, 2020.

1/11/2018

 

 

The UBA Compliance Advisors help you to stay up to date on regulatory changes to help simplify your job and mitigate compliance risk.

This information is general and is provided for educational purposes only. It reflects UBA’s understanding of the available guidance as of the date shown and is subject to change. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

   

Recent Insights

February 13, 2018
News

Don’t Forget! Registration Closing Soon! Feb. 20 Compliance Seminar

When Tuesday, February 20, 2018 from 8:00 AM to 9:00 AM EST Add to Calendar Register Now! Where Bim Group 1151 Red Mile Road Lexington, KY 40504 Driving Directions Contact Bim Group & Sturgill Turner info@bimgroup.us   Register Now! How to Manage a Compliant Health Benefit Plan: DOL Audits & Your Fiduciary Duties as Plan Manager […]
Read more
February 9, 2018
News

January 2018 Compliance Recap

January 2018 January was a busy month in the employee benefits world. On January 24, 2018, the U.S. Senate confirmed Alex Azar as the new Secretary of the U.S. Department of Health and Human Services (HHS). The U.S. Department of Labor (DOL) proposed regulations regarding association health plans. HHS released the 2018 federal poverty guidelines. […]
Read more
January 17, 2018
News

IRS Reporting Tip 2

2017 Plan Year Form 1094-C, Line 22 Under the Patient Protection and Affordable Care Act (ACA), individuals are required to have health insurance while applicable large employers (ALEs) are required to offer health benefits to their full-time employees. In order for the Internal Revenue Service (IRS) to verify that (1) individuals have the required minimum […]
Read more
January 17, 2018
News

2018 IRS Reporting Tip 1

Reporting Offers of COBRA Coverage The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to offer covered employees who lose their health benefits due to a qualifying event to continue group health benefits for a limited time at the employee’s own cost. COBRA provisions are found in the Employee Retirement Income Security Act (ERISA), the […]
Read more