IRS Releases 2019 Instructions for Form 8994: Employer Credit for Paid Family and Medical Leave

The IRS recently released the 2019 Instructions for Form 8994: Employer Credit for Paid Family and Medical Leave. Employers who provide family and medical leave to their employees may complete Form 8994 in order to claim a credit for tax years 2018 and 2019. In order to claim the leave, employers must have a written policy that provides at least two weeks of paid leave to full-time employees (prorated for part-time employees), and the paid leave must be at least 50% of the wages normally paid to the employee.

Family and medical leave, for purposes of this credit, is leave granted by the employer in accordance with written policy for one or more of the following reasons:

  • Birth of an employee’s child and to care for the child
  • Placement of a child with the employee for adoption or foster care
  • To care for the employee’s spouse, child, or parent who has a serious health condition
  • A serious health condition that makes the employee unable to do the functions of their position
  • Any qualifying exigency due to an employee’s spouse, child, or parent being on covered active duty (or having been notified of an impending call or order to covered active duty) in the Armed Forces
  • To care for a service member who’s the employee’s spouse, child, parent, or next of kin

The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year. The applicable percentage falls within a range from 12.5% to 25%. In certain cases, an additional limit may apply. An employer can claim credit only for leave taken after the written policy is in place, and the credit is scheduled to expire for tax years beginning after 2019.

Employers seeking to claim this credit should work with their accountants or tax professionals to do so.

Source: NFP Benefit Partners Compliance and Regulatory Federal Health Updates; December 10, 2019

Can an employer choose not to allow mid-year changes to employees’ HSA contribution elections?

While an employer could choose to limit employees’ HSA contributions in some ways, they have to allow employees the chance to change their HSA contribution amount at least monthly.

As background, pre-tax HSA contribution election changes must be allowed at least monthly and upon a loss of HSA eligibility. This requirement correlates with the HSA monthly eligibility rules. Although an employer could choose to place other restrictions on HSA contribution elections under its cafeteria plan (such as only allowing one election change per month), the same restrictions must apply to all employees.

So the employer would essentially have to allow employees to change their HSA contribution elections on at least a monthly basis. Keep in mind, though, that many employers just allow open-ended prospective election changes to employees’ HSA contributions.

Ultimately, the circumstances under which mid-year election changes will be allowed for HSA contributions should be addressed in the cafeteria plan document and in participant communications.

Source: NFP Benefit Partners Compliance and Regulatory Frequently Asked Questions; May 29,2019