February 2025 Compliance Updates: Federal Updates and New State Taxes

Federal Updates

Internal Revenue Service (IRS)

ACA Reporting Update

On December 23, 2024, President Biden signed into law two pieces of legislation intended to ease the burden on employers that need to submit information to the IRS and employees on health care coverage.

The Paperwork Burden Reduction Act allows employers to not furnish form 1095-B or 1095-C as long as proper notification is provided to the employees of their right to request a physical copy of their form. The employer must provide “clear, conspicuous, and accessible notice” that employees would need to request a physical copy of the form. The form would in turn need to be provided by January 31^st or 30 days after the request.

The Employer Reporting Improvement Act changes social security number (SSN) / tax identification number (TIN) requirements and sets definite response times and limitation periods for IRS enforcement of Affordable Care Act (ACA) filing requirements. The employee’s full name and birth date can be used in lieu of a SSN or TIN if they are not available. This act also allows employers to provide an electronic copy to their employees, with the employees’ consent. This act allows for a 90-day response period for an employer IRS notice (226-J Letter), rather than the previous 30-day period. The response period for notices of assessment is starting with notices received in 2025. There is a six-year statute of limitations on collecting employer mandate penalties, where previously no statute of limitations was in place. 

This new legislation only applies to the federal furnishing requirements. Employers subject to state reporting and furnishing requirements should continue to plan on providing the required forms unless state agency changes are announced.

See the formal legislations below:

• Paperwork Burden Reduction Act: L. 118-167
• Employer Reporting Improvement Act: L. 118-168

Welcomed Changes to Affordable Care Act Information Reporting for 2025 | Smith Anderson - JDSupra

New Tax Updates

Maryland - Paid Family Leave

PROPOSED DELAY: contributions proposed to be delayed until January 1, 2027 with benefits to begin January 1, 2028. We are monitoring this for final approval.

State Updates

Colorado

Paid Family Leave

FAMLI – headcount reporting required by Feb 28, 2025

All employers with Colorado employees are required to update their employee headcount in My FAMLI+ Employer by February 28, 2025. This is a requirement for all employers with Colorado employees, even those that have been approved to use a private plan to meet their FAMLI obligations. The only exceptions are local government employers who have voted to opt out of the program. This will ensure that you are assigned the correct premium tax rate.

NEW this year: If your Annual Total Employee headcount is not updated by February 28, 2025, the FAMLI Division will assume you have 10 or more employees, and you’ll be required to send in 0.9% of wages each quarter in 2025.

The agency will not carry over your total headcount from the previous year.

Log in to your My FAMLI+ Employer account, and you will find the task on your dashboard. As a TPA, we cannot update this information on your behalf. The Annual Total Employees headcount needs to be completed by employers. Third party administrators are not able to complete this task on behalf of their clients or through bulk upload.

How to establish employee headcount: Your total headcount will be calculated by counting the number of employees you have on your payroll nationwide for a total of 20 or more calendar workweeks in the preceding calendar year.

Employers! Don't forget to update your total employee headcount for 2025 premiums | Family and Medical Leave Insurance

Michigan

Earned Sick Time Act

Michigan enacted a paid sick leave policy effective February 21, 2025. This applies to all employers in Michigan with 1 or more employees.

ACCRUAL: Employees are to accrue 1 hour of sick time for every 30 hours worked:

• Accrual begins on February 21, 2025, or upon the start of the employee's employment, whichever is later
• Frontloading hours not regulated

CAP:

• Businesses with less than 10 employees must allow 40 hours of paid sick time & 32 hours of unpaid sick time
• Businesses with 10 or more employees must allow 72 hours of paid sick time

CARRYOVER: Unused sick time can be carried over in a new policy period, but employers may limit annual use to no more than 72 hours. For earned sick time of more than 3 consecutive days, an employer may require reasonable documentation.

New Mexico - Santa Fe

Minimum wage increase - $15.00 for regular employees, $4.50 for tipped employees effective March 1, 2025

Ohio

Paystub requirements

Effective April 8, 2025, employers in the state must provide employees with a paystub for earnings and deductions each pay period. This is known as the Paystub Protection Act. ProLiant’s standard checkstub meets the requirements of this new law.

Earnings statement must include:

• Employee name & address
• Employer name
• Gross wages earned
• Net wages paid
• Deductions list
• Check date

Hourly employees must also include:

• Pay rate
• Overtime hours
• Hours worked