What Brokers Should Know About the New CAA Guidelines
Quick look: New legislation under the Consolidated Appropriations Act (CAA) was enacted late last year, affecting employee retirement benefit and health plan laws for 2023 and beyond. As brokers take into account these changes and how it will impact their clients, a PEO partnership can help to ease the transition.
On December 29, 2022, the Consolidated Appropriations Act (CAA 23) was enacted with several new measures regarding employee benefits and retirement plans in place. Provisions were largely implemented in favor of employees and to keep employers accountable. However, business leaders may not fully be aware of the scope of their options.
Brokers can help eliminate confusion and direct their clients down the right path by working with a professional employer organization (PEO). PEO brokers gain an advantage by connecting clients with services like risk and compliance management and benefit administration. It adds knowledge and expands resources to a team of HR experts to ensure the balance of what’s legally required and what employees want is maintained.
Here are a few of the notable CAA regulations which illustrate how benefits may become more valuable in the eyes of employees and where brokers may want to prioritize attention.
Employee benefit laws changing under CAA 23
The continuation of telehealth coverage is one of the new laws under CAA 23, which promotes accessibility and convenience, and mirrors current workforce demands. With more people working remotely, having the opportunity to seek out healthcare needs online has become a desired norm. Meanwhile, many of the other CAA guidelines follow and reiterate preparation for changes under the Setting Every Community Up for Retirement Enhancement (SECURE 2.0) Act of 2022. Financial wellness has become a crucial part of employee benefits, and eligibility updates speak to this growing importance.
Updates to Employee HSA Eligibility & Telehealth
Employees who wish to open a health savings account (HSA) may do so only when covered under a qualifying high-deductible health plan (HDHP) which meets a minimum deductible and maximum out-of-pocket threshold for the qualifying year. Ordinarily, an employee would be ineligible to contribute to their HSA if they received telehealth and/or other remote care services before meeting the established HDHP deductible.
However, the new CAA guidelines extend a provision first established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020. This has authorized employers to provide pre-deductible coverage for telehealth services with HDHPs during a time when in-person visits were limited. And, under the CAA 23 legislation, this allowance will continue for another two years (through December 31, 2024) without making the employee ineligible from HSA contributions.
Automatic enrollment for retirement plans
After December 31, 2024, employers with more than 11 employees and in existence more than three years will be required to automatically enroll employees into their company’s 401(k) or 403(b) plan. This extends to all eligible employees unless an employee expressly opts out.
Employees who do not wish to participate in their company’s retirement plan may choose to opt out after 90 days and recoup any contributions sans penalty. The required enrollment will start at no less than 3% of earnings, with an automatic 1% increase every year, up to a maximum contribution limit between 10% and 15%.
Introduction of the starter 401(k)
Starter 401(k) retirement plans will be available starting on or after January 1, 2024. Also referred to as a “deferral-only arrangement,” this plan is also sponsored by eligible employers. The starter 401(k) option is available as long as both the employer and predecessor employer maintain an alternative qualified retirement plan in the same year.
Additionally, the entirety of the workforce must be allowed participation (with exception for those who don’t meet the age or service requirements). Eligible employees must be treated as having elected to make plan contributions equaling at least 3%, though not more than 15%, of compensation. And maximum employee contributions for the calendar year cannot exceed $6,000.
Part-time employee retirement plan participation
Retirement plan eligibility will be extended to qualified part-time workers as established by SECURE 2.0. Effective starting on or after January 1, 2025, the new CAA guidelines reduce the years of service requirement. This means any employee, 21 years and older, who has worked a minimum of 500 hours per year for a consecutive two years (reduced from the previous requirement of three) will be eligible to enroll in a company’s 401(k) plan.
Employee access to emergency savings account
The availability of an emergency savings account within a retirement plan will be effective starting January 1, 2024. Employers may provide this option to non-highly compensated workers who initiate after-tax contributions up to $2,500.
These contributions can still be matched with employer contributions, though deposited into the employee’s retirement account. Employees will have access to their emergency savings funds without penalty for the first four withdrawals in any given plan year, providing the flexibility and easier access employees seek.
Your competitive advantage as a PEO broker
Though there are a few months to prepare before many of the CAA 2023 laws go into effect, it’s important to review the changes now as you determine client health and retirement plan options. SMBs lean on their broker relationships for guidance to learn what’s new and most optimal when it comes to employee benefits.
As a PEO broker, you serve as the bridge between SMBs and PEOs to fulfill some of the missing components needed to be successful. Through this type of partnership, you provide clients the time, HR expertise, and resources which most simply don’t have. At ExtensisHR, we offer cost-effective, premium benefits, HR services, and tailored support to champion your clients’ business growth.
Additionally, our risk management and compliance services ensure SMBs stay up-to-date on the latest legislative changes and constant industry updates. ExtensisHR is ESAC, CPEO, and IRS certified, giving you and your clients confidence in our capabilities.
If you’re looking for a trusted partner to streamline efforts and expand offerings, together, we can strengthen your portfolio. Contact ExtensisHR today.
