The Paychex Top 10 in 2014: Regulatory Changes Every Small Business Needs to Know About in the New Year

The New Year is already shaping up to be an active one, full of sweeping changes that are sure to have an impact on the country’s small businesses. Paychex, Inc., a leading provider of payroll, human resource, insurance, and benefits outsourcing solutions for small- to medium-sized businesses, has identified the top 10 regulatory issues business owners need to be aware of in 2014.

“Navigating all of the legislative and regulatory changes that occur throughout the course of the year can be challenging – taking business owners away from other important aspects of running their businesses,” said Martin Mucci, Paychex president and CEO. “By identifying these regulatory issues early on and explaining how they can impact businesses, Paychex is helping small business owners prepare for changes that could come in the new year.”

The top 10 regulatory issues for 2014 as identified by Paychex are:

Affordable Care Act: Numerous provisions related to health care reform continue to affect small business owners and their employees. Beginning in 2014, most individuals will be required to carry insurance for themselves and their dependents or potentially pay a tax. While small business owners aren’t required to offer insurance to their employees, those that chose to will need to comply with reforms that take effect in 2014. Although the reporting and enforcement of the Employer Shared Responsibility provision was delayed until 2015, employers should determine their applicable large employer status and ensure that appropriate tracking of employee hours begins in 2014. A significant clarification regarding Flexible Spending Accounts (FSAs) for 2014 is that employers offering a health FSA must also offer group health insurance coverage. Also changing in 2014 is the small business tax credit for employers that offer health insurance coverage. To qualify for the tax credit, coverage must be purchased through the Small Business Health Options Program (SHOP) marketplace or be certified for SHOP-eligible coverage in states that have federally facilitated SHOP marketplaces. For more health care reform resources, visit paychex.com/health-reform.

Federal Government Watch: All business owners should be paying attention to the likely debate around the next increase in the federal debt limit in February to see if there are implications for their businesses. With pressure growing in Washington to address the Federal deficit via tax reform, it promises to be a topic of significant attention in the coming year and one that businesses should follow closely. One specific area of potential activity is the possible change in the current S-Corp structure to reduce an owner’s ability to scale back their payroll tax obligations.

Defense of Marriage Act (DOMA): The Supreme Court’s ruling earlier this year, which expands the federal definition of marriage to include same-gender spouses, has a significant effect on federal laws including payroll taxes and health insurance, and employment laws such as the Family Medical Leave Act (FMLA). Affected employees are now eligible to pay for same-gender spousal benefits such as health insurance premiums and FSA/Section 125 participation on a pretax basis for federal taxes. Individuals whose legal spousal status was changed by the ruling also have the option to claim refunds and/or request adjustments due to overpayment of FICA taxes, and employers may be entitled to a refund of federal unemployment tax on wages paid to legally married same-gender spouses. Regarding state taxes and withholding on the state level, this will vary depending on whether a state recognizes same-sex marriages and chooses to follow federal rules.

Immigration and E-verify: Although the government shutdown and issues with implementation of the Affordable Care Act seem to have slowed its momentum, comprehensive immigration reform remains on the radar of many in Washington. Highlights of proposed legislation that are of interest to businesses include mandatory E-verify requirements for all employers and the potential release in 2014 of a new version of Form I-9. The new Form I-9 is expected to contain enhancements designed to help employers maintain compliance.

IRS Priorities: The United States Supreme Court will begin hearing arguments in January to determine if severance pay should be taxable or exempt from FICA tax. If the Court rules against the IRS, the agency will need to process retroactive refund claims submitted by employers and employees. These claims could reach a total in the billions, and cause the IRS to lose a major source of future revenue. The IRS has also announced its intent to more closely examine the taxation of tips and service charges in 2014. This will be important to industries where tipping is customary such as the hospitality and restaurant industries.

Retirement: There are several items being considered by policymakers that could lead to changes in 2014 for businesses that offer retirement plans to their employees. Business owners should keep an eye on the possible attempt to amend retirement statements to provide lifetime income illustrations to 401(k) plan participants. These illustrations could include a projected monthly income stream based on predetermined variables such as account balance, current contributions, and assumed interest rates. Another retirement-related item to watch out for in 2014 is the long-awaited release of fiduciary regulation by the Department of Labor (DOL). If this is released, it could be more difficult for small investors to access investment advice as some firms look to avoid an increase in fiduciary responsibility.

Employment Regulations: The Department of Labor is expected to remain aggressive in its enforcement efforts under new Secretary Thomas E. Perez. Businesses should be paying attention to the following potential items on the 2014 agenda: a worker’s right to organize; continued enforcement for the misclassification of employees as independent contractors; vigorous enforcement of minimum wage and overtime provisions under the Fair Labor Standards Act; and strong support for an increase to the federal minimum wage.

Privacy and Data Security: A current trend that is expected to continue in 2014 is the implementation of additional measures on the state level to strengthen security and privacy regulations. It has never been more important for businesses of all sizes to protect the personal, financial, and health information of both customers and employees, and to ensure they are adequately protected against the growing threat of cyber fraud.

Mobile Technology: As the use of wireless devices and mobile apps continues to grow, more businesses are adopting Bring Your Own Device (BYOD) or Bring Your Own Technology (BYOT) policies that allow employees to use their own mobile phones and tablets to conduct company business. Businesses could see new regulations and guidance in the new year on how to balance employer software, productivity, and data security demands with the privacy, ownership, and compensation rights of the employee.

Banking: In response to the well-publicized regulatory challenges many banks have recently experienced, some are adopting stricter policies around customer relationships. This increased due diligence may result in changes to the requirements imposed on small businesses, or even the availability of credit and other banking services. Expect payroll card programs to be a specific area of focus. Businesses offering this option to employees should ensure their card provider is well versed in the relevant federal and state regulations.