This year has been the year of change in employee pay and benefits, particularly if you are an employer practicing in more than one locality. Due to the federal government’s failure to pass wage and benefit legislation, a wave of action has spread across the country at the state and local level. Additionally, the Tax Cuts and Jobs Act (H.R. 1) that is expected to be signed by President Trump in the coming days contains additional changes to benefits that will impact companies and workers. Although the following list is not exhaustive, it contains some important measures to note as you head into 2018.  

Increases in 2018 Minimum Wages: 

  • Federal Contractor Minimum Wage: Increases to $10.35/hour on January 1, 2018. 
  • State and Municipal Minimum Wage Increases: Employers in 17 states and many localities within those states will experience increases to the minimum wage in 2018. Employers should make sure to check the minimum wages rates for the states and localities where they have employees. Some of these rates go as high as $15.00/hour.

Tax Bill Benefits:

  • Federal Commuting Benefits: Pre-tax eligible dollar limits for transportation and parking will be $260 per month in 2018. The tax bill eliminates the business deduction for qualified mass transit and parking benefits, except as necessary to ensure safety. Biking benefits will not be excluded from gross income starting in 2018.
  • Paid Leave Credit: The tax bill puts in place a federal tax credit for employers that provide paid family and medical leave to employees beginning in 2018 from 12.5 to 25% of the cost of each hour of paid leave. Eligible employers can claim a credit equal to the percentage of wages paid to employees that qualify for Family and Medical Leave Act protection. A minimum of two weeks of paid leave must be provided and employees must be paid at least half of their regular rate of pay. Essentially, the government will provide at least 12.5% of the benefit costs with that percentage increasing to 25% if workers receive their entire regular earnings. This credit would only apply to workers who earn less than $72,000 per year. Details will be contained in forthcoming regulations. 
  • Moving Expenses: Starting in 2018, employer provided moving expenses may no longer be deducted and will be treated as taxable income.
  • Onsite Gyms: The deduction will be repealed. Expenses will be treated as unrelated business taxable income. 
  • Employee Meals: The deduction will be repealed although employees can still exclude these costs from income. For onsite eating facilities, employers can continue to take a tax benefit until 2025. 
  • Retirement Plan Loans: Currently, participants who take loans from a plan must repay the loan within 60 days. If the participant defaults, he can avoid tax liability by making an equal contribution to another qualified plan within 60 days of separation of employment. It is essentially treated as a rollover to offset the loan after separation of employment. The tax bill extends the deadline to the latest date on which the participant can file a tax return for the year of the loan default. 

Changes to Sick Leave Laws 

  • Federal Contractor Sick Leave: Qualifying solicitations issued on or after January 1, 2017 should have included FAR 52.222-62 requiring paid sick leave.  More and more contractors are being subject to this requirement, which affects the administration of health & welfare on these contracts. 
  • State Paid Sick Leave: In 2016, Arizona and Washington State joined several other states in passing state sick leave laws.  Beginning January 1, 2018, employees in Washington State must be provided 1 hour of sick leave for every 40 hours worked. The Arizona law went into effect on July 1, 2017. 
  • New York Paid Family Leave:  Beginning January 1, 2018, the New York State Paid Family Leave Program will go into effect.  This program is set up as an insurance coverage program whereby the benefit will be added to an employer’s existing disability benefits policy.  It entitles employees to up to 8 weeks of paid time off in 2018, increasing to 12 weeks by 2021. 
If you have any questions regarding these changes or how to comply with them, contact counsel or a trusted expert. Failure to apply new rules and regulations appropriately can lead to substantial wage and benefit liability. 

About the Author: Nichole Atallah is a partner and heads the Labor & Employment Law Group. She may be reached at [email protected], or at 202.857.1000.