Leap Year’s Impact on Compliance Requirements in 2024
Jan 29, 2024
Leap Year’s Impact on Compliance Requirements in 2024

In 2024, leap day will occur on Thursday, Feb. 29. A leap year can create administrative and compliance challenges for organizations every four years. For example, a leap year can impact payroll processing or tax reporting obligations by adding an extra payday to the year. This can increase the number of pay periods from 26 to 27 for employees paid biweekly or from 52 to 53 for employees paid weekly, potentially altering how employees are paid. As a result, it’s essential that employers understand their compliance obligations and assess how an extra day in 2024 may impact any compliance requirements and deadlines.


This article explores how the 2024 leap year can impact compliance deadlines and how employers can proactively prepare and navigate any potential changes. However, the compliance considerations presented in this article are only examples. Employers should consult with their legal counsel to address any specific issues.


Payroll Considerations

Adding an extra day in February 2024 can create an additional pay period for employees who are paid on a weekly or biweekly basis. In 2024, there will be 53 Mondays and 53 Tuesdays. Therefore, weekly or biweekly salaried employees paid on either of these days will have an extra pay period. However, salaried employees paid monthly or semimonthly and employees paid hourly will not be impacted.


When faced with an extra pay period, most employers decide not to change how they pay employees each pay period despite the additional cost. As a result, impacted employees receive an additional pay period for the year, resulting in slightly higher salaries. Other organizations may opt to change their pay frequency or date to account for a leap year.


Some employers may decide to keep employees’ total annual salary the same but spread it out over the entire year. Employers can do this by counting the number of pay periods that will occur during the year and adjusting employee paychecks to account for an extra pay period. However, because of the extra pay period, employees would receive slightly less each paycheck, even though their total annual salary will remain the same. This can create confusion or negatively impact employees unless employers explain ahead of time why workers will receive slightly less each pay period, allowing employees time to prepare. Additionally, employers can explain that an extra pay period may impact employee deductions for benefits and contributions to retirement or health savings plans.


IRS tax withholding requirements do not change when there’s an additional pay period during the year. Therefore, employers must adjust their withholding calculations to ensure they withhold sufficient federal, state and local income taxes. To help avoid errors and ensure accurate payroll calculations, employers can review their payroll systems to ensure they can address leap-year payroll correctly. This can include accounting for an additional pay period, if applicable; withholding taxes correctly; and reviewing pay dates so employees are paid on time. Organizations can also prepare for an additional pay period by ensuring proper budgeting and cash flow to avoid any issues.


Benefits Considerations

Health plan deductions are typically determined by the number of pay periods. As a result, a leap year may force employers to recalculate health plan deductions. Additionally, a leap year can impact employee contributions to 401(k)s, health savings accounts and flexible savings accounts, requiring employees to adjust how much is deducted from each paycheck to ensure they contribute the maximum amount by the end of the year. Therefore, it’s important employers communicate how a leap year may impact employee contributions and allow employees sufficient time to adjust.


The IRS recently finalized reporting regulations under the Affordable Care Act that established a permanent 30-day automatic extension from Jan. 31 for employers to furnish Form 1095-C to employees. According to IRS guidance, applicable large employers must furnish Forms 1095-C to their employees no later than March 2. However, because of the 2024 leap year, the deadline this year is March 1, 2024.


Moreover, the Medicare Modernization Act requires organizations whose health care policies include Medicare prescription drug coverage to notify Medicare-eligible policyholders whether their prescription drug coverage is creditable. These entities must report the credible coverage status of their prescription drug plan to the Centers for Medicare (CMS) no later than 60 days from the beginning of a plan year. If a plan year starts at the beginning of the year, employers typically have until March 1 to report to the CMS. In 2024, however, the reporting must be done by Feb. 29.


Employer Compliance Considerations

The 2024 leap year may also impact certain employer compliance requirements. Employers should review their compliance obligations to ensure they avoid any potential violations.


While many laws are silent on the impact of a leap year, employer obligations are not altered. For example, the Fair Labor Standards Act (FLSA), which establishes minimum wage, overtime pay, recordkeeping and youth employment standards, does not specifically address leap-year considerations. However, since a leap year can create 27 or 53 pay periods (rather than 26 and 52), an employee’s weekly salary may drop below the federal or state-exempt salary threshold in certain circumstances. If this occurs, that employee would lose their FLSA exempt status, which could result in wage and hour violations if not properly addressed. Calculating any pay period adjustments at the start of the year can help employers prepare and avoid potential FLSA overtime and meal and rest break violations that may occur if employees lose their FLSA exempt status due to the additional pay period.


Additionally, employers can review offer letters and other compensation-related documents, including collective bargaining agreements, to determine how best to account for any extra pay periods. In some instances, these documents may state how frequently employees must be paid (e.g., weekly, biweekly). Reviewing these documents can help organizations comply with their legal obligations when determining how to adjust employee compensation during a leap year.


Summary

The additional day in 2024 may present various administrative and compliance challenges for some organizations. Understanding how a leap year impacts compliance requirements can enable employers to prepare and help them avoid costly mistakes. By taking a proactive approach and reassessing timelines, employers can help ensure they meet any compliance requirements and mitigate any potential legal risks.



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DOL Issues Guidance on AI-related Wage and Hour Risks

11 May, 2024
On April 29, 2024, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) published Field Assistance Bulletin (FAB) No. 2024-1 on the use of artificial intelligence (AI) in the workplace. The FAB follows a statement released by the White House announcing key AI-related actions following President Joe Biden’s executive order issued on Oct. 30, 2023, on establishing standards for AI safety and security. Guidance on AI-related Wage and Hour Risks Employers are increasingly using AI tools to generate timecards, set schedules, monitor performance, track employee hours and process payroll. As such, the FAB highlights certain compliance risks under the Fair Labor Standards Act (FLSA) for employers using these tools. These risks include: Tracking employee work time; Monitoring employee break and waiting time; Using location-based monitoring for individuals performing work at multiple geographic locations; Calculating employees’ regular rate of pay and overtime compensation; and Violating the FLSA’s antiretaliation provisions To aid employers in addressing these compliance risks, the WHD identifies recommended practices, including exercising proper human oversight, to help ensure that AI systems and tools do not violate the FLSA. Additional AI-related Guidance In addition to addressing FLSA compliance risks, the FAB also examines certain AI-related risks that may arise under other laws, including the Family and Medical Leave Act (FMLA), the Providing Urgent Protections for Nursing Mothers Act (PUMP Act) and the Employee Polygraph Protection Act (EPPA). For example, using AI tools to administer FMLA leave can create potential risks for violating the law’s certification requirements when determining whether an employee’s leave is FMLA-qualifying. Employer Action Items While FABs are not necessarily legally binding, they offer insight into how the DOL interprets laws it enforces and how agency officers will analyze workplace conditions and circumstances to enforce compliance.  Using AI systems for scheduling, timekeeping and calculating rates of pay and overtime may increase an employer’s risk under the FLSA. Therefore, employers should ensure that their AI systems and tools comply with all federal laws and regulations by examining potential legal and business risks associated with AI, implementing AI usage policies and establishing internal best practices.

Nurturing Your Mind: Embracing Mental Health Awareness Month

30 Apr, 2024
As we step into May, we're reminded of the importance of mental health and well-being. May marks Mental Health Awareness Month, offering us an opportunity to renew our commitment to nurturing our minds and fostering supportive environments, both in and out of the workplace. In this blog post, we'll explore practical strategies for enhancing mental health, including small tips that can refresh you mentally during the workday. Embracing Self-Care Amid life's hustle and bustle, it's crucial to carve out time for self-care. Whether it's practicing mindfulness, engaging in hobbies, or simply taking a moment to breathe deeply, prioritizing self-care nurtures mental resilience and fosters a sense of inner peace. Cultivating Work-Life Balance In today's fast-paced world, achieving a healthy work-life balance is essential for mental well-being. Set boundaries between work and personal life, establish a routine that includes breaks and leisure activities, and strive to unplug from technology during downtime. Remember, balance is key to sustaining productivity and happiness. Fostering a Supportive Workplace Culture Employers play a pivotal role in promoting mental health in the workplace. Encourage open dialogue about mental health, offer resources such as counseling services or mental health days, and prioritize flexibility to accommodate employees' well-being needs. By fostering a supportive culture, organizations cultivate environments where employees feel valued, understood, and empowered to prioritize their mental health. Supporting Loved Ones If someone you care about is struggling with mental health challenges, your support can make a significant difference. Listen without judgment, offer empathy and reassurance, and encourage them to seek professional help if needed. Remember, your presence and understanding can provide comfort and strength during difficult times. Practicing Gratitude Gratitude is a powerful tool for enhancing mental well-being. Take time each day to reflect on moments of gratitude, whether it's appreciating the beauty of nature, expressing gratitude for supportive relationships, or acknowledging personal achievements. Cultivating a mindset of gratitude fosters resilience and enhances overall happiness. Small Tips to Refresh Your Mind During the Workday  Take short breaks: Step away from your desk for a few minutes to stretch, walk around, or simply gaze out the window. These brief pauses can rejuvenate your mind and boost productivity. Practice deep breathing: Incorporate deep breathing exercises into your day to reduce stress and promote relaxation. Close your eyes, inhale deeply through your nose, hold for a few seconds, and exhale slowly through your mouth. Connect with nature: Spend time outdoors during your lunch break or coffee breaks. Even a brief stroll in a nearby park or green space can invigorate your senses and clear your mind. Listen to music: Create a playlist of soothing music or uplifting tunes to listen to during work breaks. Music has the power to uplift your mood, reduce anxiety, and enhance focus. Stay hydrated: Drink plenty of water throughout the day to stay hydrated and maintain mental alertness. Dehydration can impair cognitive function, so keep a water bottle handy and sip regularly. Practice mindfulness: Take a few moments to practice mindfulness or meditation exercises. Focus on your breath, observe your thoughts without judgment, and cultivate a sense of presence and calm. Declutter your workspace: A clutter-free workspace can promote mental clarity and productivity. Take a few minutes to tidy up your desk, organize files, and create a calming environment conducive to focus. Engage in positive self-talk: Replace negative self-talk with affirming and encouraging statements. Remind yourself of your strengths, accomplishments, and capabilities, and cultivate a mindset of self-compassion and resilience. Connect with colleagues: Build supportive relationships with coworkers by engaging in meaningful conversations, sharing experiences, and offering mutual support. A sense of camaraderie and connection can foster a positive work environment and bolster mental well-being. As Mental Health Awareness Month unfolds, let's commit to nurturing our minds and supporting those around us. By embracing self-care, fostering work-life balance, promoting workplace well-being, and offering compassionate support to loved ones, we contribute to a culture of mental health awareness and resilience. Remember, you are not alone. Reach out for support if you need it, and let's journey toward better mental health together.

DOL Announces Final Overtime Rule Increasing Salary Levels for White-collar Employees

30 Apr, 2024
On April 23, 2024, the U.S. Department of Labor (DOL) announced a final rule to amend current requirements employees in white-collar occupations must satisfy to qualify for an overtime exemption under the Fair Labor Standards Act (FLSA). The final rule will take effect on July 1, 2024. Increased Salary Level The FLSA white-collar exemptions apply to individuals in executive, administrative, professional, and some outside sales and computer-related occupations. Some highly compensated employees may also qualify for the FLSA white-collar overtime exemption. To qualify for this exemption, white-collar employees must satisfy the standard salary level test, among other criteria. This salary level is a wage threshold that white-collar employees must receive to qualify for the exemption. Starting July 1, 2024, the DOL’s final rule increases the standard salary level from: $684 to $844 per week ($35,568 to $43,888 per year); and $107,432 to $132,964 per year for highly compensated employees. On Jan. 1, 2025, the standard salary level will then increase from: $844 to $1,128 per week ($43,888 to $58,656 per year); and $132,964 to $151,164 per year for highly compensated employees. Automatic Updates The DOL’s final rule also includes mechanisms allowing the agency to automatically update the white-collar salary level thresholds without having to rely on the rulemaking process. Effective July 1, 2027, and every three years thereafter, the DOL will increase the standard salary level. The agency will apply up-to-date wage data to determine new salary levels. Impact on Employers The first salary level increase in July is expected to impact nearly 1 million workers, while the second increase in January is expected to affect approximately 3 million workers. Employers should become familiar with the final rule and evaluate what changes they may need to adopt to comply with the rule’s requirements. Legal challenges to the rule are anticipated, which may delay the final rule’s implementation.

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