December 2023 Compliance Update: Keeping You in the Loop

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December brings a flurry of compliance updates and we’re here to help you gear up. Let’s navigate through the latest tax and compliance updates with ease. 

Legislation: What’s New and Next?

Illinois Publishes Proposed Regulations for Paid Leave for All Workers Act 

Illinois has introduced its Paid Leave for All Workers Act, granting up to 40 hours of paid leave for any reason, starting on January 1, 2024. Ahead of the effective date, Illinois published proposed regulations implementing the new law. Please note that these regulations are proposed at this time. The final regulations will be published after the January 1 effective date. 

New York to Require Written Agreement with Independent Contractors 

On November 21, 2023, New York’s governor enacted the Freelance Isn’t Free Act, slated to take effect on May 20, 2024. This law mandates that any business engaging with a freelancer for services worth $800 or more—or cumulative services reaching that value within 120 days—must formalize the arrangement with a written contract. The definition of a freelancer covers any individual or single-person entity providing services as an independent contractor. To assist in this transition, the New York Department of Labor will provide sample contracts on its website. Furthermore, it’s essential for organizations to maintain these contracts on file for a period of six years. This legislative move is set to bolster protection and transparency in freelance engagements.

Chicago Passes Paid Sick Leave Ordinance 

Chicago's business landscape is set to change with the November 9 passage of the Paid Leave and Paid Sick and Safe Leave Ordinance. Slated to come into effect on July 31, 2024, this ordinance broadens the scope of the city's paid sick leave laws by mandating that any business with at least one employee must grant up to 40 hours of paid sick leave and an additional 40 hours of paid leave that employees can use for any purpose annually. Employees will accrue one hour of paid leave for every 35 hours worked, with businesses having the option to accrue this time or frontload it.

The ordinance also casts a wider net on who qualifies for leave, encompassing any employee who works 80 hours within the City of Chicago in a 120-day period.

Additionally, the Council approved a one year “cure” window, during which employees will not have a private right of action for an employer’s failure to provide paid sick leave. Under the revised ordinance, employees will have the right to bring suit as of July 1, 2025.

Minnesota Releases Sample Employee Notice for Earned Sick and Safe Time Act

As of May 2023, Minnesota's new Earned Sick and Safe Time Act, allows employees to accumulate up to 48 hours of paid leave annually. Employers are obliged to inform their employees about this entitlement by January 1, 2024, or from the employee’s initial day of work. The notification should be provided in English and the employee's primary language. It's also necessary to include details of this act in the company's employee handbook to ensure all staff have ready access to this information. The agency has also put together a sample notice to assist employers.

Changes to Québec Pension Plan

The Québec Pension Plan (QPP) is getting a tune-up, giving those 65 and older the option to stop contributions, and automatically halting contributions for workers over 72. Here are the details:

As of January 1, 2024, workers can stop contributing to Québec Pension Plan (QPP) if: 

  • They are at least 65 and less than 73 at the end of the year. 
  • They are receiving their QPP or Canada Pension Plan (CPP) pension. 
  • They complete an Election to Stop Contributing to the Québec Pension Plan, or Revocation of an Election (form RR-50-V), send it to Revenu Québec and provide a copy to their employer. 

Form RR-50-V clarifies that: 

  • The election must not be made until the day after the employee turns 65. 
  • It is generally advantageous to continue contributing to the QPP beyond the age of 65 as no pension supplement is allocated or counted for the period covered by the election. 
  • The form can only be completed once per year (no going back and forth). 
  • The form does not apply to self-employed individuals as they will make this election when filing their annual income tax returns. 
  • As of 2024, workers will no longer be required to contribute to the QPP starting the first day of the year in which they turn 73. 
  • Workers who turned 72 on or before December 31, 2023, will not contribute to QPP as of January 1, 2024. 

End of obligation to contribute to QPP for workers over 72 

As of 2024, workers will no longer be required to contribute to the QPP starting the first day of the year in which they turn 73. Workers who turned 72 on or before December 31, 2023, will not contribute to QPP as of January 1, 2024. 

CPP Enhancements 

Before 2019, the contribution rate was 4.95%. This is now referred to as the BASE contribution. The first additional contribution was phased in between 2019 and 2023. It was treated as a rate increase and received the same tax treatment as the base contribution (non-refundable tax credit). As of 2023, it was referred to as first additional contribution and was treated as a deduction from taxable income (similar to an RRSP/pretax). 

For 2024, the CPP get a second phase of enhancements:

  • The second additional contribution will begin in 2024 and be treated as a deduction from taxable income. 
  • The contribution will begin when the employee reaches their prorated yearly maximum pensionable earnings (YMPE) and will stop when the employee reaches their prorated yearly additional maximum pensionable earnings (YAMPE).

Before 2023, employees began contributing to CPP/QPP the month following their 18th birthday and stopped contributing to CPP the month following their 70th birthday. Contributions ended based on these dates, or upon reaching the annual maximum contribution. In 2023, a value representing pensionable months was introduced and the yearly maximum pensionable earnings (and contributions) were prorated. 

Additionally, UKG is introducing four new tax codes. These codes will be available on January 1, 2024.

  • CNCPP2EE – CPP 2nd Additional EE 
  • CNCPP2ER – CPP 2nd Additional ER 
  • CNQPP2EE – QPP 2nd Additional EE 
  • CNQPP2ER – QPP 2nd Additional ER 

The Canada Revenue Agency and Revenu Québec require that these contributions be reported separately on employee tax forms. 

The Canada Revenue Agency has added two new boxes to the T4: 

  • 16A – Employee’s second CPP contribution
  • 17A – Employee’s second QPP contribution

Note: These boxes should remain blank for tax year 2023. Pensionable earnings for all components of CPP/QPP will continue to be reported in T4 Box 26.

British Columbia Pay Transparency Requirements in Effect 

In British Columbia, pay transparency has become the law of the land, effective November 1, 2023. Employers will be required to put their pay ranges on display for job postings. Companies will also be required to post a pay transparency report to be phased in based on the employer’s size. The first deadline was November 1, 2023, for British Columbia government agencies and crown corporations; the second deadline is November 1, 2024, for employers with 1,000 employees or more. 

U.S. Federal Fast Facts

2024 Flexible Spending Account Contribution Limit Released 

For 2024, the IRS dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,200, an increase from $3,050 in 2023. 

2024 Federal Deferred Compensation Limits Released

On November 1, 2023, the IRS released the following deferred compensation amounts that can be contributed in 2024

  • Annual contribution limit for 401(k), 403(b) and most 457 plans - $23,000, up from $22,500 in 2023 
  • Annual catch-up contribution limit for employees aged 50 and over - $7,500, same as 2023. 
  • Annual limitation for combined employee and employer contributions for 401(k), 403(b), and most 457 plans - $69,000, up from $66,000 in 2023 

Customer Communications 

Year-end is here and that means many jurisdictions have updated tax rates for January 1, 2024. Be sure to keep your eye on the Compliance Connection community group and your inbox for updates.

There you have it, a quick lap around the compliance track. Stay tuned for more updates next month.

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