What Potential Payroll Changes Are Expected in 2024?

Posted by Bennett/Porter & Associates on December 12, 2023 at 10:29 AM

As we report each year, with a new year come a lot of new changes and updates to payroll requirements. 2024 is no exception and quickly approaching. We compiled the following extensive list of items that may initiate some payroll changes in your organization. We understand that this is a very long list to review, but we hope it provides a valuable reference guide for your organization. You might start thinking about these and act sooner than later.

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As we report each year, with a new year come a lot of new changes and updates to payroll requirements. 2024 is no exception and quickly approaching. We compiled the following extensive list of items that may initiate some payroll changes in your organization. We understand that this is a very long list to review, but we hope it provides a valuable reference guide for your organization. You might start thinking about these and act sooner than later.

FICA Tax Rate Increase

The maximum amount of earnings subject to the Social Security payroll tax beginning January 1, 2024, will increase from the current $160,200 to $168,600. The 7.65% employee tax rate remains unchanged and is the combined rate for Social Security (6.2%) and Medicare (1.45%). These rates do not include the additional 0.9% individuals with earned income of $200,000 and more pay.

State Unemployment Tax Act (SUTA)

The current Oregon SUTA base for 2023 is $50,900. The 2024 base will be $52,800. The Washington State base for 2023 is currently $67,600. The base rate for 2024 will be $68,500. The base rate is the maximum amount of wages per employee for which unemployment tax is applicable each year and is the same for all employees within a state, while the unemployment rate is specific to each individual company.

Federal Unemployment Tax Act (FUTA)

The current FUTA rate is 6.0% of the first $7,000 of employee wages. Employers generally get a credit of up to 5.4% (state tax credit) if unemployment taxes are paid in full and on time. The FUTA rate after the credit is 0.6%.

401(k) Limit Increase

The contribution limit for employees who participate in 401(k) and 403(b) plans in 2024 will increase from the current $22,500 to $23,000. Employees age 50 and over will have the 'catch-up' contribution limit of $7,500 which remains unchanged from 2023. The maximum contributions from all sources (employer and employee combined) will rise by $3,000 in 2024 to $69,000.

Flexible Spending Account (FSA) / Parking and Transit Limits

Employee pre-tax deductions for FSA health reimbursement accounts will increase for the 2024 plan year to $3,200. This is an increase of $150 over 2023. For health FSA plans that contain the carryover feature, the maximum carryover amount for 2024 is increasing to $640. Parking and transit limits for 2024 are also increasing slightly to $315 per month. The dependent care reimbursement remains unchanged at $5,000 ($2,500 if married and filing separate taxes).

Health Savings Account (HSA) Contributions

For 2024, the IRS increased pre-tax deductions for HSAs to $4,150 for individual coverage ($300 increase) and $8,300 for family coverage ($550 increase). This is for members that have high deductible medical coverage that qualifies to be paired with a Health Savings Accounts.

ACA

Applicable Large Employers (ALEs) that choose to paper file the annual ACA 1095-C forms for 2023 must do so by February 28, 2024. A big change for reporting this year is the paper filing option is only available for employers with 10 (down from 250) or fewer 1095-C forms. The electronic filing deadline is April 1, 2024. The benefits of electronic filing include instant IRS acknowledgment or submission and immediate response if the submission was accepted or rejected. ALEs must provide 1095-C forms to full-time employees by no later than March 1, 2024.

Workers’ Compensation

Workers’ Compensation pure premium rates are the base rates before insurer costs are added. The pure premiums rates for 2024 are expected once again to decrease by 6.7% from 2023. This marks 11 years of average decreases in the pure premium rate. The pure premium is the portion employers pay to cover claims and to maintain workplace safety programs. The pure premiums are combined with an assessment rate which is expected to remain unchanged from 2023 at 9.8% of premiums paid.

Oregon Paid Family and Medical Leave

Paid Leave Oregon is a family, medical, and sick leave insurance program that was created to provide eligible employees paid time off work for qualifying reasons. Contribution requirements under Paid Leave Oregon began January 1, 2023, and benefits began September 3, 2023. Employers will continue to be responsible for 40%, and employees 60%, of the contribution rate, which is 1% for 2024. This contribution percentage applies to up to $168,600 of wages (the Social Security taxable maximum wage). Employers with 25 or more employees are required to submit the employee and employer contributions. Employers with fewer than 25 employees do not need to make the employer contributions but are still required to submit the employee portion.

Oregon Local Taxes

In calendar year 2024 the Lane Transit District tax will be increasing from the current .0078 to .0079. The Eugene Employee Payroll Tax rate table was released for 7/1/2023 to 6/30/2024. Rates are 0.0030 for wages less than $31,221 and 0.0044 for equal to and more than $31,221. The Wilsonville transit tax will remain unchanged at .005. The TriMet transit tax rate for 2024 is .008137, an increase from the current .008037.

Oregon Statewide Transit Tax

The Statewide Transit Tax remains unchanged from its inception in July of 2018 at one-tenth of 1 percent or .001. This tax applies to wages of Oregon residents (regardless of where work is performed) and wages of nonresidents who perform services in Oregon. For additional information and filing instructions please reference the Oregon.gov website.

Oregon Workers’ Benefit Fund

There is a slight decrease in the current 2023 2.2 cents to 2024 2.0 cents per hour worked for the Oregon Workers’ Benefit Fund. Employers must continue to pay at least half of the amount (1.0 cents) and deduct no more than 1.0 cents from employees' wages. Payments must continue to be made directly to the state with other state payroll taxes on a quarterly basis. This fund pays for benefits to injured workers and their beneficiaries. The fund also helps injured workers return to work.

Oregon Metro Supportive Housing

In May 2020, voters approved a new regional supportive housing services program funded by personal and business income taxes. The personal income tax is 1% on taxable income above $125,000 for individuals ($200,000 for those filing jointly). The business income tax is 1% on net income with gross receipts above $5 million. Tax filers that have income from business activity both within and without the Metro district must apportion that income to determine the amount earned within the Metro district. Oregon residents within the Metro jurisdiction are subject to this tax as are non-residents with wages paid for work performed within the Metro District. Metro’s boundaries do not align with Clackamas, Multnomah, and Washington Counties. To determine if a residence or workplace are within Metro’s jurisdiction it is advised to use the Find your councilor tool on Metro’s website. Taxes are owed beginning with the 2021 tax year and expire in 2030 unless renewed by voters.

Preschool For All (PFA) Tax

On November 3, 2020, Multnomah County voters approved Tax Measure 26-214 establishing a tuition-free preschool program. The PFA program is funded by a personal income tax of 1.5% on taxable income over $125,000 for individuals ($200,000 for joint filers), and an additional 1.5% (3% total) on taxable income over $250,000 for individuals ($400,000 for joint filers). Residents of Multnomah County have 100% of their Oregon Taxable Income subject to the tax thresholds. For non-residents of Multnomah County, income sourced within the County is subject to the tax withholdings. The rate will increase by 0.8% in 2026. The withholding became mandatory for all employees and employers that meet requirements in 2022 and going forward. For additional information, please reference the Multnomah County FAQ.

OregonSaves

OregonSaves was rolled out in October 2017 and is a mandatory state retirement program. The program is applicable to all size employers. Back in March of 2023, businesses with at least 3 employees became required to offer a qualified retirement plan. Effective July 31, 2023, the final OregonSaves update was put in place, requiring all businesses with at least one employee to offer a qualified plan. Employers that do not offer an employer-sponsored retirement plan are required to facilitate OregonSaves. Employees make contributions to personal IRAs through payroll deduction starting at 5% of gross pay and increases 1% each year of participation (employees can choose additional amounts) up to 10%. Employers that are out of compliance are subject to fines and penalties.

Washington Paid Family and Medical Leave

Paid Family and Medical Leave is an insurance program funded through premiums paid by employers and employees which began January 1, 2019. Effective January 1, 2024, the premium amount will decrease to 0.74% for gross wages up to the 2024 Social Security cap of $168,600. The premium is shared by the employer (28.57%) and the employee (71.43%) for employers with over 50 employees. An employer can choose to pay the employee portion of the premium. Employers with fewer than 50 employees are not required to pay the employer portion of the premium but are still required to collect and remit the employee portion. For additional information you can visit the Washington Paid Family & Medical Leave website.

Washington Long Term Care

Workers began contributing to WA Cares Fund on July 1, 2023. Washington workers’ contribute 0.58 percent of their gross wages towards the Washington Cares Fund. Employers won’t pay any share of the contribution for their employees unless they choose to. Employers are responsible for collecting and remitting payments. Unlike the Washington Paid Family and Medical Leave program contributions do not top out at the Social Security maximum. For additional information please reference the Washington Cares Fund website.

Washington Minimum Wage Increases

Effective January 1, 2024, the Washington state minimum wage will be increased from $15.74 to $16.28 per hour (a 3.4% increase). Seattle, Tukwila, and The City of SeaTac have their own local minimum wage rates that exceed the state minimum wage. To find the correct wage for your organization and to download the most recent minimum wage poster please visit the Washington State Department of Labor & Industries website.

Topics: People. Ideas. Technology., Human Resources, HR Compliance, HR, PeopleSavvy

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